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Digital brands – PayTM, Mobikwik, PayU, Oxigen – are radically disrupting financial services. While traditional banks are investing heavily in developing and promoting their own digital services, there is a need to recognize the differences in how consumers choose to use digital channels.
Investment in digital is essential; not only to drive efficiency and cut costs, but also to reach new customers as increased competition and technology change the nature of the sector.
Alternative choices for managing money mean that retaining and rewarding customers in a way that reflects their personal preferences and motivations is more important than ever to ensure brand loyalty. To help understand these differences, we recently surveyed 4,400 affluent middle class consumers (within the top 10-15 percent income bracket) in Brazil, China, India, Italy, Singapore, the UAE, UK and US.
This group is increasingly valuable to brands as they have been shown to have the power to influence other consumers. The research identifies four global “tribes”, or groups of people, who share common traits which cut across age, gender and international boundaries:
1. Prudent Planners: They are motivated primarily by family and altruistic goals. Three quarters of this tribe cite spending time with family as their top indulgence. As the largest proportion within the affluent middle class, this group will represent around two billion consumers by 2030.
2. Stylish Spenders: They are a small but influential tribe representing 8 percent of the affluent middle class globally. Over half are under 35 years of age with 32 percent earning over $190,000 a year. Despite their spending power, this group is the most loyal to brands they trust, participating in an average of five loyalty programs and feeling loyal to up to eight companies.
3. Mid-Life Modernists: They stand out for their enthusiastic use of technology, with 90 percent spending more than five hours a week using their smartphone and 45 percent spending over 20 hours a week of their leisure time online via a computer. As a result, digital experience has a significant influence on this group and businesses which invest in this area can create powerful advocates among this tribe. This tribe is most prevalent in India and Singapore.
4. Experientialists: They want unique, money can’t buy experiences and exclusivity rather than standard products and services. This group is most likely to enjoy experiencing different cultures and use travel as a way of keeping in touch with friends and family. Experiences such as spending on holidays, dining out and luxury foods are also a priority.
What does this mean for financial services brands?
Delivering a great digital experience is essential in order to remain competitive in the financial services market, attracting and retaining new customers. Using big data to better understand behavior provides the opportunity to deliver timely and contextually relevant marketing, and to connect with customers’ emotions.
In India the opening up of digital services, such as the Internet banking and mobile payments, and wider reforms to reduce the unbanked population are welcome. Each of the tribes show distinct preferences in how it uses technology and what it expects from their digital interactions. It is more important than ever to address how these consumers wish to engage with their banks.
Prudent Planners continue to value face-to-face interactions as well as digital services, so retaining this as an option is the key for this sizeable segment. This is particularly important in areas like banking, where branches are closing and there is a shift towards online and mobile services.
Metro Bank in the UK caters for this group, emphasizing its branch experience while still offering online banking and apps, which suit other tribes. Banks should also think about the best way to reward these consumers, as they are more interested in experiences rather than pure monetary rewards.
Stylish Spenders expect companies to know who they are and offer highly tailored offers and content. As a result, they can be powerful advocates for brands which develop relevant and engaging digital experiences. Banks should look to build services with responsive platforms, as well as applications that provide access to account details and financial planning services.
Financial brands need to think carefully about how they deliver digital experiences. Programs like Barclays video banking for its premier customers are appealing to the stylish spender, where they are able to have a face-to-face conversation with an adviser via their smartphone or tablet wherever they are in the world.
A seamless experience across digital channels is important for Mid-Life Modernists, the most active users of smartphones, tablets, smart TVs and apps. In India, 49 percent of consumers use their mobile phone for 10 hours or more per week; and our research indicates a growing trend among consumers who use mobile applications for banking services. Indeed India ranks as the highest country for mobile banking adoption at 59 percent.This tribe is interested in modern, sophisticated digital design and a seamless handover as they move between these different channels.
In the US, American Express has recently enabled customers to use its reward points to pay for Uber, illustrating a smooth transition between brands and an incredibly convenient experience for users. Banks are currently missing an opportunity to reduce the cost of their loyalty programs by managing their own reward and redemption programs.
These programs offer banks an opportunity to increase their revenue streams, allowing them to raise their card fees. Customer benefits like lounge access, card assistance and insurance solutions need to be offered on mobile applications and sites to ensure a truly omni-channel experience. Research by Cognizant has shown that more than 40 percent of banking happens through a mobile application, and that the quality of this experience is the reason why a third of consumers will stay with their bank.
Experientialists ‘live for the moment’ and expect fresh content, regular updates and unique experiences from their financial service providers. Marketing has traditionally focused on geographical or demographic segmentation but digital is making it easier to segment activity based on customer behavior and common attitudes.
It also makes it easier to focus on the customers who will have the biggest impact on the business and for many financial services, travel and luxury brands, this is the affluent middle class consumer.