2. Customer Segments and Service Delivery Flashcards
What are the possible banking needs of someone who is school age? (1)
Not many as dependent on parents.
Savings accounts funded at birth or with gifts - likely to be attracted by bonuses linked to this or free gifts eg money box
What are the possible banking needs of teenagers and students? (2)
Little surplus income
IF WORKING - current & savings accounts. (specialist products for this age group aim to provide financial education & develop customer loyalty)
BORROWING? - most wont as still dependent, but some borrow for cars, holidays & to supplement student loan. Usually v, specialist schemes.
What are the financial characteristics of someone who is young, free and single?
They gain independence in early 20s
Spending increases, little savings - all or most of income is spent
Establishing a home, usually renting, stretches income
Is someone young free and single likely to prioritise insurance?
No, too expensive and no dependents to protect
What are the different stages of being married and living together (1 & 2)
- Before children
- Extending the family
What are the financial characteristics of someone who is married/living together stage 1? What are their priorities? (3)
No children
Both working
Some savings - usually house deposit
- accumulate savings
- mortgage planning
- insurance - life, critical illness & income protection
What are the financial characteristics of someone who is married/living together stage 2? What are their priorities? (4)
With children
Reduced work to look after kids
Little savings
- Income protection insurance even bigger priority - more dependents
- Life insurance (both earner and non earner e.g to cover childcare costs) - possibly want a large lump sum
- Start to plan long term savings for kids - eg. education
- Start to think about pension, but this is low priority as long way off
What are the financial characteristics of established families? what are their priorities? (3)
Increased income as both parents return to work full time
Highest expenses - upgrade to larger house & school/education fees
Improved credit enables borrowing (for cars, household goods)
- life & income protection
- building up capital
- pension saving
What are the financial characteristics of mature households? What are their priorities? (3)
Highest earning potential and decreased expenses - children have left, mortgages paid or reduced.
More disposable income and most likely age to receive inheritance
- Inheritance tax planning
- Pension provisions become v. important
- Protection becomes less important - life assurance is usually already in place by now
What are the financial characteristics of retired people? What are their priorities? (2)
Income from employment ceases
Need to generate income from capital - prior to this, people tend to want to convert capital into lump sums rather than a regular income
Asset rich and income poor
- Inheritance tax planning
- Health care/long term care costs
What can cause people to differ from the typical life cycle? (5)
- Culture - Country & Customs
- Circumstances - Wealth, Health & Family situations
- Lifestyle choices
- Attitude to risk
- Unforeseen/unexpected events
Why are the life stages important for financial providers?
Allows them to use targeted marketing - customers are offered products according to their profile
What is a customer persona?
A semi-fictional depiction of the type of person that someone could be based on the key characteristics of a target segment.
Depicts the ideal customer based on market research and existing customer data
Why are customer personas used vs life stages?
They more sophisticated than life stages as they give a more detailed analysis.
Life stages = understanding groups of people
Personas = not just understanding groups, but the key characteristics of those within the groups
What are the names of the 3 consumer personas established by Accenture Financial Services (2017)? What did they assess?
- Nomads
- Hunters
- Quality Seekers
Assessed customer attitudes to banks’ competitive pricing & responsiveness of service
Describe the Nomad consumer persona. How do they prefer to experience banking?
Those who value digital innovation & new ways of accessing services
e.g. online, like amazon & google finances
Describe the Hunter consumer persona. How do they prefer to experience banking?
Motivated by the best value for money. Prefer to deal with humans/traditional banks.
Describe the Quality Seeker consumer persona. How do they prefer to experience banking?
Favour high quality/responsive service & safe data protection measures.
Want providers to put their interest first and keep their data secure.
Outstanding customer service is more important than the cost.
What is Segmentation?
Dividing customers into groups to better understand them. Unlike personas, characteristics of individuals are not analysed, so the grouping is much more broad
What types of information is collected to create segmentation? (5)
- Age
- Gender
- Location
- Buying Behaviours
- Brand choices
What types of information is collected to create personas? (6)
- Personal motives
- Frustrations
- Influences
- What someone values when choosing a brand
- How someone communicates
- Preferred delivery channels
What would give a more representative example of the target audience? Segmentation or personas?
Personas - creates a detailed hypothetical customer based on analysis
What do we mean by lifestyle choices? (3)
- Attitude to debt
- Attitude to risk
- Spending patterns
can be both monetary and non-monetary
What is the consume now, buy later lifestyle choice? Is this a good or bad thing?
Things like loans, hire purchases, credit cards
Nothing wrong with affordable credit, e.g. mortgages etc, but you are depending on future income and should constantly review your ability to repay. Need to be aware of what will happen if you don’t meet repayments
When people save now for something bigger later, what do they save for in the (1) short term (2) medium term (3) long term. What sort of people does this lifestyle choice suit? Is it always a good thing?
- consumer expenditure, e.g. holiday
- House deposit
- Retirement
Suits the risk adverse
Not always best to avoid borrowing, eg. mortgage better than paying rent as you get asset at end and benefit from increase in value.
When getting married, what are the financial implications? What choices are to be made?
you depend on each other.
Choices like opening joint account or joint mortgage.
Should discuss ground rules before doing either of these things
What is meant by:
1. Needs
2. Wants
3. Aspirations
- Essentials - food, clothing, shelter
- Non-essentials, satisfies the ego - expensive car/house when cheaper would suffice
- Hope to achieve in future, e.g. a saver might focus on pension needs whereas a spender might aspire to finance consumption
How do financial institutions help people identify their financial goals?
By gaining an understanding of their wants, needs and aspirations.
Do all financial products involve risk?
Yes, even savings accounts are at risk of provider collapsing
What is hedging? Who uses it?
a technique for minimising risk used by professional traders. Covering a risky deal with one less risky or that is likely to have the opposite effect.
Like the stocks version of matched betting
Most people don’t have money to do this
When saving for retirement, what are the merits and risk involved with saving into one large fund as opposed to multiple funds?
Merit - easier, more rewarding
Risk - could lose everything if fund fails
What cultural factors should banks consider when targeting audiences?
- Language - want to discuss accounts in own language (welsh or migrant)
- Migrant workers - may want to send money home overseas
- More multicultural towns/cities - staff should have better understanding of culture/language of custs
What is the prohibition of ‘riba’?
In Islamic law, interest is forbidden as people aren’t allowed to make money from money
Riba = excess. Payment should not be made in excess of the principal amount, both when receiving or giving
What is a Sharia/Islamic Mortgage?
Lender leases the property to the homeowner who pays rent until the ownership is transferred.
