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Customer Acquisition Strategies in the UK Personal Lending Market

Published by: Datamonitor

Published: Apr. 20, 2007 - 30 Pages


Table of Contents


DATAMONITOR VIEW

CATALYST

SUMMARY

ANALYSIS

The typical personal loan customer has a number of traits Personal loan holding differs by age group and income band Age group segmentation highlights that customers in the 25 to 34 age bracket are those most likely to hold a personal loan Income band segmentation highlights that low income earners are the least likely to have a personal loan The typical personal loan customer is likely to take out a loan of between £5,000 and £9,999 Customers aged between 18 and 24 years old tend to apply for smaller ticket loans Unsurprisingly, higher income groups have a higher tendency to borrow greater amounts The overwhelming majority of personal loan customers have only one personal loan There is no clear trend in terms of age segmentation The higher the household income, the higher the probability of the personal loan customer holding more than one loan The typical length of a personal loan is five years It is worth highlighting that many personal loan customers do not see their loan commitment to the end Unsecured personal loans are used for a vast array of purposes Car purchase, home improvements and debt consolidation remain the major reasons given by customers for taking out a personal loan Car purchase remains the most mentioned purpose of an unsecured personal loan Home improvements and debt consolidation came second and third respectively in terms of most mentioned usage Analysis by age group and income band highlights a few interesting trends in terms of usage A number of lenders do design their marketing material based on the specific uses of a personal loan Lloyds TSB went one step further by producing a used car buyers' guide to attract unsecured personal loan customers A number of factors drive customers when choosing a particular lender While the majority of customers do not shop around, a significant proportion do so before purchasing a personal loan Analysis by age group highlights that those aged above 65 are the least likely to research the unsecured personal loan market The wealthier customers are, the more likely they are to shop around Given that a significant number of customers do shop around, it is crucial for lenders to understand the reasons why customers choose a particular lender Brand awareness provides a competitive advantage in the unsecured personal loan market Direct channels, other than face-to-face, are increasingly being used by customers Face-to-face distribution remains the channel of choice for a significant number of customers Most personal loan providers with a branch presence follow a multi-channel strategy Further analysis of the data highlights that young customers and the lower income households are more likely to visit the lender Young customers and the elderly are more likely to visit a branch Lower income households have a higher tendency to visit a lender to take out a personal loan

APPENDIX

Supplementary data Research methodology Ipsos MORI consumer survey Further reading European consumer credit reports UK consumer credit reports UK consumer credit briefings Forthcoming consumer credit briefings Ask the analyst Datamonitor consulting Disclaimer


List of Tables


Table 1: Value of personal loan when originally taken out, split by age group, January to June 2006

Table 2: Value of personal loan when originally taken out, split by income band, January to June 2006

Table 3: How many personal loans do you currently have?, by age group, January to June 2006

Table 4: How many personal loans do you currently have?, by income band, January to June 2006

Table 5: Usage of an unsecured personal loan, January to June 2006

Table 6: Usage of an unsecured personal loan, split by age group, January to June 2006

Table 7: Usage of an unsecured personal loan, split by income band, January to June 2006

Table 8: How did you actually arrange this loan?, split by age group, January to June 2006

Table 9: How did you actually arrange this loan?, split by income band, January to June 2006

Table 10: How many other companies did you obtain information from before choosing your current personal loan provider?, split by age group, January to June 2006

Table 11: How many other companies did you obtain information from before choosing your current personal loan provider?, split by income band, January to June 2006

Table 12: Can you tell me why you chose this institution for this loan?, January to June 2006



List of Figures


Figure 1: Customers between the age of 25 and 44 are most likely to take out a personal loan, January to June 2005 and 2006

Figure 2: Customers earning less than £15,499 are the least likely to hold a personal loan, January to June 2005 and 2006

Figure 3: Nine per cent of unsecured personal loan holders have more than one personal loan, January to June 2006

Figure 4: Five years is the most likely term for a typical personal loan, January to June 2006

Figure 5: Barclays and Northern Rock promote the specific uses of unsecured personal loans, 2006

Figure 6: Lloyds TSB has produced a used car buyers' guide to aid its acquisition of personal loan customers, 2006

Figure 7: Customers in the age bracket 65+ are the least likely to research the unsecured personal loan market before taking out an unsecured personal loan, January to June 2006

Figure 8: The wealthier customers are, the more likely they are to shop around, January to June 2006

Figure 9: Having an existing relationship remains the major reason for choosing a personal loan provider, January to June 2006

Figure 10: Halifax is the most mentioned lender by surveyed customers when asked about providers they would consider taking a new personal loan with, January to June 2006

Figure 11: Face-to-face remains the channel of choice for customers, January to June 2006

Abstract

Introduction

With lesser growth opportunities in the market place, customer acquisition continues to be a major focus for lenders, including unsecured loan providers. Undoubtedly, to be able to design suitable customer acquisition strategies, there is a need for lenders to understand personal loan customers, particularly their behavior and needs.

Scope

Uses Ipsos MORI data to understand the needs and requirements of personal loan customers. Provides data analysis split by age groups and income bands. Provides examples of lenders' acquisition strategies. Focus on UK consumers.

Highlights

The typical size of an unsecured personal loan is likely to fall between £5,000 and £9,999. Indeed, 32 per cent of the sample surveyed stated that the original size of the loan fell within this size range. In recent years, as consumer debt has increased and unsecured lending has become more of a burden, a number of lenders have reduced the number of new customers they are taking on board. Many have opted to put more emphasis on their existing customer base, particularly for those lenders servicing a customer base of significant size. With 37 per cent of responses, car purchase is the major reason for taking out a personal loan. This is slightly down on 2005 results where 39 per cent stated 'car purchase / motorbike' as the reason. Interestingly, personal loans are taken out more often for used car purchases than for new car purchases.

Reasons to Purchase

Gain access to consumer data to understand the behavior and needs of personal loan customers. Learn the importance of the various factors influencing the customer buying decision. Learn what players are doing to acquire customers in the UK personal loan market.

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