Topic 1 - Needs, Wants + Aspirations Flashcards
What are needs?
- ‘must have’ items in order to survive
- e.g. water, food + shelter
What are wants?
- optional ‘nice to have’ items
- desirable not essential
- e.g. jewellery, going cinema
What are aspirations?
- hopes for future
- items/experiences ppl wish to have in medium/long term future
- e.g. exotic holiday, sharing a flat w friends
What causes needs + wants to change when growing older?
- their lifestyle
- the prevailing culture of society they live in
- family size
- ability to afford products
What is the life cycle stage of a 0-2yr old?
Birth + infanthood
What is the life cycle stage of a 2-5 yr old?
Childhood - preschool
What is the life cycle stage of a 5-12 yr old?
Childhood - school
What is the life cycle stage of a 13-19 yr old?
Teenager
What is the life cycle stage of a 18-25 yr old?
Young adult
What is the life cycle stage of a 26-40yr old?
Mature adult
What is the life cycle stage of a 41-60 yrs old/55-65 yrs old?
Middle age to late middle age
What is the life cycle stage of a 66+ yr old?
Old age/retirement
What are the main types of financial product to satisfy medium + longer term needs, wants + aspirations?
- MT + LT savings
- investments
- pensions
- LT borrowing
- insurance
What are medium + longer-term savings for?
- to save over a longer period (> 3 yrs)
- to cover future needs, wants + aspirations
What are investments for?
- saving for a longer-term want/aspiration
- more risky than LT savings product but may bring a higher return
What are pensions for?
- save money in pension scheme for retirement
What are longer-term borrowing products for?
- to finance a large purchase + pay back over a long period
- e.g. a mortgage or a hire purchase
What is insurance for?
- covering LT risks
Why do ppl buy financial products?
- enables ppl to satisfy their needs, wants + aspirations
What is the key internal factor that affects someone’s choices?
- own personal set of values, beliefs + attitude
What are values?
- general feelings or beliefs about desirable behaviour + goals
What 2 sig. functions do values fulfil in regard to buying financial products?
- help ppl distinguish between what they consider as needs + wants, + to form aspirations
- help ppl plan finances + decide between diff. alternatives
What are beliefs?
- the way ppl think things are
- more specific + detailed than values
- can be religious but also inc.: free speech, fairness
What can beliefs influence?
- the way ppl see financial services + the firms providing them
What are attitudes?
- how, at a given time + place, ppl think + feel about another person, event or issue
What can attitudes be changed by?
- circumstances
- events
- experience
- advice
What do ppl’s perceptions represent?
- their understanding of the wrld around them (physical surroundings + social envi.)
Where do ppl get their perceptions from?
- sensory inputs (sight, sound, smell, tough + taste)
- non-sensory inputs
What do perceptions affect?
- feelings ab. products
- financial products that could help buy these products
- banks + other financial institutions providing financial services
What do preferences for particular products depend on?
- personal values, beliefs + attitudes
What is 1 way customers can express a preference about financial products?
- by the distribution channel they choose to use (branch, by phone or online)
What are major external factors influencing needs, wants + aspirations?
- marketing + advertising
- peer pressure
- trends, fashion + role models
What is marketing?
- activities companies do to promote buying + selling of a product/service
- inc. advertising, selling + delivering products to customers/businesses
What can marketing be subdivided into?
- promotion
- public relations (PR)
What is promotion?
- paid for marketing activities, inc. advertising
What are the aims of the activities included in promotion?
- communicate w ppl
- inform them of goods + services
- persuade them to buy
What is advertising?
- used to inform customers about available products + persuade them to buy product
- can carry explicit + implicit messages
What types of media carry advertisements?
- TV + radio (broadcast media)
- newspapers + magazines (print media)
- online (electronic + social media)
- cinema
- hoardings
- posters + billboards
What types of promotion may businesses use?
- carrying out product trials
- offering ‘money off’ coupons or ‘buy 1, get 1 free’ offers
- running customer competitions
- sponsoring teams/events + offering special credit terms
- bank may offer cash back to customers choosing its credit card
Why should ppl be careful when choosing a financial product?
- always lots of ‘small print’: terms + conditions
- sometimes bonus/discount only available in certain circumstances (may be misleading)
What is public relations known as?
- ‘below the line’ expenditure
What is public relations (PR)?
- advertising not paid for directly but keeps a business’s product in the public eye
What are e.g. of PR?
- businesses having an agreement w a celeb. to use their products/marketing merchandise at public events
- feature a celeb. in its magazine/website
What are the 2 other aspects of PR?
- public placement
- sponsorship
What is public placement?
- product appearing on a TV show/film
What is a sponsorship?
- business paying for a sporting/entertainment event/venture
What do peers determine?
- the acceptable behaviour within our particular group
What do trends affect?
- way ppl pay for goods + services (e.g. cards or cash)
- ppl’s attitudes to saving
- how ppl view using credit
What is a major influence on attitude?
- social networking sites (e.g. Facebook + twitter)
What is culture about?
- norms: behaviour + attitudes across social groups
What does culture indicate?
- what society considers to be acceptable + unacceptable
What culture is strong in the UK?
- home ownership
Why is culture important?
- influences what ppl consume + what financial services products ppl buy
What is the feedback effect?
- link between thoughts, feelings + behaviour, can be traced back to attitudes + so out personal values
What is the feedback effect linked to?
- expectations
What does the feedback effect refer to?
- ppl’s own attitudes mean they affect the outcomes of events
What are financial examples of the feedback effect called?
- expectations-led’ events
What is a financial examples of the feedback effect?
- if ppl expect a share price to fall, they’ll start to sell the shares: if enough ppl sell them, price falls
What are some examples of how values can affect an individual’s thoughts, feeling, behaviour + decision-making?
- ethical investing
- managing finance
- religious beliefs
What is ethical investing?
- someone choosing to save money to use on what that individual considers to be good purposes
What are ethics?
- set of ideas ab. what ppl think is right
How can ppl manage their finance?
- forward planning + budgeting
What are financial choices affected by?
- how well they feel they can manage the costs + consequences
- a person’s attitude to risk + reward
What is an example where religious beliefs affect financial decisions?
- Islamic law prohibits payment of interest on debt: Muslims not allowed to borrow money via a western-type mortgage/loan
- all major banks provide compliant financial products
What are implications when someone purchases a financial services product?
- responsibilities the customer must afford to meet their obligations
- for a specified time period
In the case of a medium/long-term loan why can a person not by certain they can afford to pay the money back?
- their circumstances may change (lose job/become ill + unable to work)
What are examples of when affordability needs to be considered?
- buying insurance policies
- in relation to saving
- borrowing money
What are most ppl’s attitude to risk?
- some degree of risk tolerance, but also limit risk they’re exposed to
What are the 2 extremes of attitudes to risk?
- risk tolerant
- risk adverse
How do ppl who are risk tolerant act?
- find it exciting to take risks
- engage in hazardous activities + don’t insure anything
How do ppl who are risk adverse act?
- cautious, avoid risky situations + take precautions in situations they can’t avoid
