Targeting the over 50s is a tricky business for the
financial services industry. As a generation they embrace credit,
are comfortable managing debt, and have enormous spending power.
But, says Louise Naughton, they can spot a sales pitch at 500 yards
and do not respond well if they feel they are being
patronised.
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The over 50s
population is a tough nut to crack for financial services. It is a
segment that cannot be generalised. It encompasses millions of
people at very different stages of their lives and, as such, need a
range of financial products to assist them.
For some, the autumn years are
dedicated to doing all the things they did not have the time or the
money to do earlier in their lives. Whereas many other people find
themselves unable to step back from the competitive and relentless
nature of their working lives. Some can even still have relatively
young families.
The financial services market has
been slow to properly analyse the true make-up of this demographic.
The industry has consistently treated the over 50s as a single
group, without developing products to meet their specific
needs.
“I certainly think banks have taken
the over 50s segment for granted,” says Ann Ehlan, vice-president
for MasterCard Europe.
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By GlobalData“The over 50s are being targeted
like never before, which is making them ask questions as to what
makes a bank’s offering better. Their eyes are being opened to the
competition in the market and they will change when they need to
change.
“Banks cannot rely on people to be
loyal; they have to give them a reason to stay.”
The over 50s are an attractive
market to exploit says MasterCard. The European Union has the
highest percentage of over 50s than any other region in the world.
Estimates from market research firm Euromonitor show there are 181m
people above 50 in the EU and the US, meaning there are fewer
people under 20 than over 60.
Moreover, MasterCard expects the 50
plus population to own 80% of the world’s wealth by 2016.
Shift in
attitude
Ehlan says the
over 50s have reached a time in their lives when they will build up
the most level of cash and have significant deposit potential. This
can be through a pay-out from their work place when they retire,
cashing in pension plans, selling homes or a inheritance from
parents.
Thanks to the financial crisis,
banks have curbed their focus on revolving behaviour and re-ignited
their interest in building their capital requirements. Hence the
over 50s are looking particularly promising.
“All of a sudden the over 50s are
accumulating assets, which the banks claim should be theirs,” says
Ehlan.
With this market potential in mind,
and after a research drive into the female segment (see CI
447-448), Isabelle Lodde, head of consumer core credit
products for MasterCard, began to delve into the minds of the
elusive over 50s.
It is important to note that
MasterCard’s research is product agnostic and can be leveraged onto
an immediate debit product or a charge/revolving credit card.
The demand for MasterCard’s
research into the over 50s segment came from a number of French
banks facing retention issues.
Lodde spoke of one unnamed bank,
located in Eastern France, who noticed its best clientele started
moving to warmer climates once they retired and as such wanted help
on how to retain them. Other banks and insurance companies were
also starting to pick up on this trend of consumers cashing in
their pension plan and walking away.
Lodde says French banks are
advanced in terms of their horizontal and affinity segmentation.
They are adopting a new way of thinking and a novel banking
approach in seeing payment cards as a communicative tool and a
tangible way of addressing the needs of specific segments.
Consumer focus
MasterCard conducted focus groups
in countries such as France, Sweden, the UK, Portugal and Denmark,
in order to get a feel for what the over 50s want.
The message the participants of the
focus groups wanted to get across was clear. They have spent all
their lives being a parent and worker, but now it is their time – a
time to be filled with self indulgence and new experiences such as
sport, culture and travelling.
“The focus groups had so much to
tell us, we almost had to push them out of the room to accommodate
the next group,” says Lodde.
“There was a strong awareness among
the over 50s that they are probably in a spoilt segment where they
have money to spend rather than investing in the future
generations.”
It soon became apparent to
MasterCard, however, that the over 50s segment is not a homogenous
one.
Some over 50s are in a “comfortable
zone” when it comes to work and family. For these people a lot more
free time is generated as their work life is still demanding but
they are experienced enough to know what they are doing coupled
with their children having grown up and left home, leaving the
group as “anti-nesters”.
Yet, as women are now increasingly
leaving it later and later to have children, the chances are a
healthy proportion of over 50s are still caring for young children.
Some of these families may also be caring for older relatives,
leading them to be known as the ‘sandwich segment’. This sets this
group apart dramatically from other over 50s who are living
dramatically different lives to them.
For Lodde, the age of retirement is
an important factor banks should use when considering the tailoring
of financial products to the older segment.
“Fifty is really a product code,”
says Lodde. “It cannot be a magic figure as you have so many
different people at 50. But a common feature running throughout the
older population is that they are all really willing to get the
best of out their retirement.”
She says the over 50s segment needs
to be split further and this split should occur in accordance with
an individual bank’s strategy.
No fools
The over 50s are certainly no fools
when it comes to choosing financial products. The baby boomer
generation (now aged 60) created the notion of consumer reason,
making them cynical enough to take the time to read the small-print
to make an evaluation.
Banks are reminded by Lodde to be
open, transparent and genuine in their approach to the over
50s.
Ehlan says the internet has had a
major influence on the over 50s and their attitude towards card
products.
While their trust in banks has
dropped since the financial crisis, banks can win them back by
developing one-on-one, face-to-face relationships with consumers
over 50. But instead of visiting bank branches to cultivate such
relationships, more and more over 50s are migrating onto the web to
shop around for better value.
This will be a complex issue for
banks looking to target this market and, unfortunately for them,
there is no easy answer.
In marketing payment card products,
banks should also be mindful of the need to be subtle when
referencing age. They are advised not to draw any attention to age
– so a person with grey hair is out, says Lodde – as nobody wanted
to be reminded of the aging process.
A firm recommendation from
MasterCard to banks when recruiting an advertising agency to create
the marketing material to compliment a tailored over 50s product is
to ensure an individual from the segment participates in the
process.
“This segment is obsessed with
freedom and having the impression they have absolute choice and
total control,” says Lodde.
“Any hint they are being patronised
or influenced and they will totally reject you and effectively kill
your product.”
The over 50s in the UK grew up with
credit cards and are, as such, still great advocates of the payment
method today.
Ehlan claims, while younger people
use credit cards to borrow funds and debit cards for everyday
spending, older people continue to use credit cards as a financial
management tool.
The segment is a great lover of
rewards and feels angry when they are taken away. Therefore as the
rewards of a credit product plays a great part in its success or
failure, Ehlan argues it is still attractive for banks to offer
rewards based on the broader relationship of their account holders,
regardless of interchange and interest tensions that have arisen in
recent years.
“MasterCard investigated whether
the rewards for over 50s tailored credit cards should be health
orientated – for example spa vouchers, golf/tennis etc,” says
Ehlan.
“We received feedback from our
focus groups that the over 50s are looking to banks to offer
tangible, financial and security related rewards.
“They are looking for banking
features not yoga coaches.”
Freedom of
choice
MasterCard says banks should adopt
an a la carte strategy to rewards, so an over 50s consumer
can choose the rewards and benefits that apply to them.
While the majority of banks are
only just starting to wake up to the potential and challenges the
over 50s segment can bring, one bank is already streets ahead of
its competition – Banco Santander in Chile.
Banco Santander launched its
MasterCard ‘Forever’ credit card tailored specifically to over 60s
in February in a market first.
Chile has 1.2m people over 60 in
the socioeconomic segments A, B and C, with an average monthly
income of $1,200. They are deemed as being “excellent customers”,
with 38% in possession of a credit card and are 20% more of a
frequent user than the average.
Santander recognises Chile’s over
60 population is an untapped market, partly due to the lack of
opportunity for the over 80s to obtain a credit card as life
insurance only covers those up to the age of 80. As per its name,
the bank’s over 60s credit card has no limit on age and is
forever.
Santander Chile’s research on the
whole ties in with MasterCard’s findings.
Marco Castagnola, head of cards for
the bank, observed, via international and local research, the main
needs for the senior segment in Chile. This is the dedicating of
free time to travel and entertainment, health and wellness, family
and friends and the fact that they value quality of life at this
time.
Such characteristics led the bank
to the development of the benefits and rewards of its newly
launched credit card.
The Forever card is co-branded with
Latin American airline Lan. A user of the card can accumulate
LanPass kilometres with every spend via the airline’s frequent
flyer programme while also being eligible for a 20% discount on
redemption tickets for domestic flights in its off-peak season.
The credit card also has no annual
fees, free access to Pacific’s VIP salon network in Chile, double
points accumulation on transactions made in selected health
merchants and hospital benefits.
Marketing the card came very easy
to the bank, says Castagnola. It provided its advertising agency
with a specific brief, detailing exactly what it wanted to
communicate to the public.
Targeting a financial product to
the over 50s, as MasterCard found out, is a minefield, but
Santander Chile has got the balance just right. The people featured
in its marketing material are over 50 but this is a subtle
positioning. They are represented as active, happy and youthful and
the strapline compliments this, reading ‘Lo major está punto de
comenzar’ – the best is yet to come.
Booming market
Santander says it has already
issued 8,000 Forever credit cards to Chile’s over 60s market and
while the bank has no immediate plans to launch a similar product
in other markets, it will analyse the card’s position and wider
potential in the future.
Castagnola also tells CI
the bank has ruled out the idea of an over 60s financial products
portfolio, saying one card that contains the main characteristics
of the value offer is sufficient.
“We are satisfied we can fulfil the
needs of the over 60s segment with just the Forever credit card,”
he says.
Una Farrell, spokesperson for the
UK-based Consumer Credit Counselling Service (CCCS) says it is not
all plain sailing when it comes to the over 50s and their finances,
however. The older people are, the more debt they are likely to
have.
The proportion of people between
the ages of 53 and 59 seeking help from the CCCS rose to a peak of
23% in 2006 and although this figure has declined since, the level
of over 50s debt is still worryingly high.
The CCCS 2010 Statistical
Yearbook shows clients approaching the charity are getting
older year-on-year. The average age now stands at 42 and those aged
55 to 59 owe the most at £25,396 ($41,104).
“Clients over 60 owing a similar
amount than those aged 40 – 59 is worrying, as they often do not
have the financial ability to service their unsecured debts,” says
the report.
The over 50s segment is clearly one
with great potential if treated with a sensitive and mature
approach. MasterCard has done well to highlight the huge growth the
segment has and will continue to achieve.
By simply segmenting the over 50s,
however, a bank will be left with a mountain to climb in terms of
trying to cater to so many different people’s needs – people who
are at wildly varying stages of their lives.
The over 50s market needs to be segmented further to achieve
true tailoring of products and to make this challenging task that
little bit easier for banks to digest.
