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MP65157

MAPS FINANCIAL SERVICES MARKETING TO SELF EMPLOYED AND CONTRACT WORKERS 1997

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EXECUTIVE SUMMARY

Industry regulations have created a new environment for financial providers, with three key results.

The first is the breaking down of product and service categories by industry sub-sector. Traditionally, banks have offered banking services, insurance companies insurance and building societies household policies and savings accounts. This is no longer the case. The individual areas have blurred due to the impact on the industry of such regulations as the Building Societies Act 1986. Now, each player in these traditional industry sub-sectors can offer a wide range of products and services, and thus overlap with players in other sub-sectors. Competition has become fierce and even overseas companies are attempting to obtain a piece of the UK financial services business.

Secondly a number of corporate developments have been brought about as a result of this state of flux. The market is, in some ways, becoming more narrow and tighter. Large financial services providers have created acquisition strategies, to take over their smaller competitors. The market share of large players is on the increase and that of the small players is decreasing.

The third key industry result, from the changing regulations, is a broadening of the market players. Non-financial services providers are starting to get heavily involved in providing financial products and services alongside their conventional business activities. Companies such as Tesco, Marks and Spencers, Virgin and Kwik Fit have developed strategies to compete head-on with traditional suppliers such as the banks and building societies. These are primarily retail companies and, as such, use more dynamic marketing ways of targeting customers, obtaining business and retaining it.

Thus, the financial services sector is experiencing perhaps its toughest environment yet. Each of the players needs to understand their audience base and identify customers which are lucrative for them. Each needs to appreciate the most effective channels to market and each needs to succeed against extraordinary competition.

The self-employed and contract workers could be one way of developing extra lucrative business. To date, very few of the providers have seriously targeted this category of customer. Yet, they are an excellent category of target audience, with general and special needs, requirements the self-employed themselves feel must be met.

The economy has also promoted a self-employed environment. It has created a situation where companies are seeking to outsource work more and more, offering it to smaller companies. This is coupled with a changing job market. Permanently employed staff can no longer expect long term employment guarantees, as in the past and short term contracts are often introduced.

The self-employed have financial services needs like any other consumer. They have mortgage requirements, the need for car insurance and banking, and so on, as do standard individuals. However, they also have a whole range of business financial services requirements. Yet, they cannot successfully be treated like a large corporation. For example, someone who operates their own business from home should not be categorised with a UK based company with multiple international outlets. Furthermore, the self-employed have more pressing requirements for some types of policy, such as sickness salary protection or life cover, which must be taken into account.

However, many financial services providers simply see the self-employed either in the guise of a traditional consumer or a standard business operation. As a result, the self-employed often do not stand up to the stringent criteria set by providers. Providers need to tailor their products and services for this specific segment, if they are to win this business in the future.

Most of the self-employed make all their personal and business financial decisions themselves, unlike other categories of customer who are responsible for purchasing one kind of financial services product only. Thus, in one person, a whole range of financial services sales can be achieved. Financial providers should offer a ‘one-stop-shop’ benefit. Yet research has shown that the self-employed typically have to obtain their policies and services from a whole plethora of different financial services providers.

Matters of importance to the self-employed are quality, clarity and quantity of information, speed of transaction and efficiency of procedures. All these need to be addressed by the financial services providers.

Technological advances are benefiting all categories of customer, although perhaps they are especially of use to the self-employed. ATMs, telephone banking and the increasing use of the internet as a way of managing financial affairs address areas such as speed of transaction and efficiency of procedure.

One of the ways in which the self-employed are being targeted specifically, is in the area of information provision. Some institutions, primarily traditional banks, have recognised the need for information, guidance and advice. Despite the trend for developing ATMs and telephone operations to the detriment of branch networks, some local bank branches have launched small business centres, which are of excellent use to the self-employed.

Despite the possibility of excellent focus, direct mail is not used by the main players as a way of reaching the self-employed. Yet, in conjunction with database marketing, it provides suppliers with an excellent opportunity to do so. It should be noted, however, that a small number of niche providers do use direct mail in a more targeted manner. 29.2 percent of direct mail is sent by financial services providers.

Neither PR nor press advertising campaigns are used to offer a tailored approach to the self-employed. TV advertising is also only used for either corporate branding or direct policy selling such as car insurance. Yet, TV and press advertising make up the majority of marketing expenditure, 82.2 percent in 1996.

One marketing tool which does focus on the self-employed is that of support literature. Those providers who do offer focused products and services, such as business banking or business insurance, put together packages of information literature.

Text © 1997 MAPS

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