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MP65197

MAPS FINANCIAL SERVICES MARKETING TO ABC1s OCTOBER 1997

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Table of Contents

Executive Summary

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EXECUTIVE SUMMARY

The traditional ABC1 classification has been superseded by custom classifications based on demographic, economic, locational, lifestyle and psychographic (behavioural) variables. Advances in computing power have made possible the mining of vast databases to extract and synthesise data to yield information of value for Very Direct Marketing (VDM).

Broad advertising remains essential to increase the public’s perception of an organisation’s worth and trustworthiness, and to develop the corporate brand image. Advertising needs to focus on the organisation and not on specific products.

Very Direct Marketing is appropriate for products, once the potential purchasers are aware of and trust the organisation which is supplying them. Marketing costs are reduced when product information is closely directed to those most likely to buy. The VDM industry has made rapid strides, due to advances in information and communications technology.

The ABC1C2DE classification, used for market research and agreed by the National Readership Survey and Research Services Ltd, has substantial correlation with the socio-economic classification derived form the government’s Standard Occupational Classification. Both classify people according to occupation, with professionals at the top and labourers at the bottom. The classification also includes people in households where no one works.

Financial services are savings, loans, investments, insurances, and mechanisms for payments and accessing cash. Institutions offering financial services include High Street retailers, finance companies, and other diversified companies with strong brands such as Virgin; the traditional providers such as banks, building societies, insurance companies are facing ever stiffer competition.

The savings ratio has exceeded 10 percent every year since 1991, and in 1996 was 11.6 percent. Despite a rise in consumer credit and other personal sector borrowing, (£76 billion at the end of March 1997) it was less than 3 percent of the personal sector’s net wealth, including dwellings, of £2,830 billion.

Life assurance and pension funds accounted for 34 percent of the net wealth at the start of 1996; National Savings, notes, coin and bank deposits for 10 percent; and shares and deposits with building societies for 7 percent. The building societies’ share has declined since the start of 1996 because so many have become banks, or have been absorbed into banks.

The elderly prefer National Savings, and all forms of saving are more popular with the 55-74 age group than with any other. The 55-74s have, in the main, paid off their mortgages; children have mostly left home; and many have inherited from the previous generation.

The 16-34 age group has the most unfavourable balance between income and commitments, across the social scale.

The top 10 percent of households by weekly income receive more than one quarter of all income, and the top 30 percent receive more than half.

There is considerable fluidity up and down the income ladder; in the three years between 1991 and 1994, only 7 percent of adults stayed put in the 20 percent of households lowest-ranked by income.

Only the top 10 percent of households by income save enough to accrue a pension fund capable of sustaining them comfortably in retirement - although the figure excludes contributions paid by employers.

Experian Marketing’s MOSAIC classification (formerly CCN) integrates psychographic, cultural, lifestage, lifestyle and financial data; and relates them to individual postcodes. MOSAIC is a powerful tool for direct marketing.

Direct marketing is the prime means of bringing financial service products to the attention of upper-income groups. Tiered services are developing, with higher service levels for the most profitable customers. Call centres are taking over from traditional bank branches, but branches are still important for the great majority of customers, especially women and the 45-54 age group.

The ethical business stance taken by companies is of growing importance to customers, especially ABs. Twenty per cent of ABs surveyed did not have a bank account; 25 percent did not have a savings account with a bank or building society; 32 percent did not have a credit card. For ABs, mortgages peak between ages 35-44; loans from banks and building societies are most prevalent at 45-55; credit and store card penetration is highest between 55 and 64. The 65+ group has most savings accounts. Only 6 percent of all adults have private medical insurance policies.

By the year 2000, savings and investments are expected to total £4,230 billion at 1997 prices. Additional insurance premiums are forecast to total more than £13 billion.

Combined savings and investment products are forecast to proliferate; products will be closely targeted and sold with the help of VDM. Medical insurance will lag in growth rate because of the public presumption that the Labour government will reinvest in the National Health Service (NHS). Motor premium income will exceed the growth in insurance income overall because of a rise in the numbers of cars per 100 people, from 35 towards the German and Italian levels of between 48 and 50. Financial service providers will need to build up public confidence and to provide general financial education, as well as promoting individual products to targeted customers.

Text © 1997 MAPS

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