The over-50s represent more than one-third of the United Kingdom's population, and are the most affluent consumer group in terms of both income and wealth. Yet, according to a report from independent market analyst Datamonitor, many financial services providers are still taking this valuable consumer group for granted.
According to Datamonitor, a very small proportion of financial services providers actually tailor their marketing materials and product specifications toward this age group. The most obvious examples where tailoring is done successfully are life and pension providers, given the nature of their products. However, when it comes to mass retail banking products, very few providers bother - potentially missing out on their share of one of the country's most valuable consumer segments.
"Representing nearly 20 million of the total UK population, growing at a sustained pace, and holding a bigger proportion of wealth than their younger counterparts, the over-50s represent a goldmine for financial services providers," said Karina Purang, financial services analyst for Datamonitor, and author of the report.
Datamonitor, however, suggests that not all financial products need to be differentiated and specifically targeted at the over-50s, as senior customers do have a number of financial needs that are common to the rest of the population, regardless of age. But among those financial products that are worth targeting specifically, Datamonitor highlights savings, investments and general insurance products (such as household insurance).
Higher net worth
The UK's wealth is becoming increasingly concentrated among the older age groups, making it an essential target for financial providers. Both the number of high net worth individuals aged 56+ (those with more than 200,000 in liquid assets), and the extent of their fortune, has risen significantly. In 2003 there were over 522,000 high net worth consumers aged 56+, accounting for almost 70% of the UK's high net worth population, and owning 68% of high net worth liquid assets (some 215 billion).
So why is it that, while the over-50s segment is a growing market, financial services providers are doing so little to develop a product offering that is particularly tailored to the needs of the market? Within the various types of financial product, lending products have a lower penetration amongst the over-50s. For example, Mori Financial Services' (MFS) recent data shows that penetration of consumer credit products among the over-50s amounted to 14% in 2003. Conversely, the over-50s are more likely to hold savings and investment products - a trend that can be attributed to the fact that this age group is typically more wealthy than the average population.
Within the various age groups among the over-50s, those aged above 65 greatly value a strong customer relationship with providers. The MFS survey showed that these segments typically choose financial services providers not on the basis of product performance but on the basis of the trust that they have in that provider. On the other hand, those aged between 50 and 64 tend to be more demanding and give more importance to product performance and sophistication when choosing a provider.
"In targeting the over-50s, providers must consider each of their financial products separately and come up with an attractive offer that will suit the needs of each of the sub-groups within this customer segment, as the over-50s are far from being homogeneous," said Purang.
According to the report, savings and investments are where the biggest opportunities lie, because senior customers hold a significant amount of wealth. Product redesign, developing a fuller product mix, offering a first class quality of service, and adopting proactive and tailored marketing are crucial in acquiring and retaining customers in this product sector.
Household insurance was also found to be among the most popular products for the over-50s. The majority of providers targeting the over-50s segment currently differentiate their products based on price. However, Datamonitor believes that targeting the over-50s through various age bands is not necessarily the right answer, and recommends that providers should segment their senior customer base by household income bands instead. This is because affluent customers generally have greater household insurance needs than those in lower income bands, simply because they tend to have more assets.
In addition, many more over-50s own a property abroad than in previous decades; their love of overseas holidays and financial affordability are among the factors that are driving that market.
One of the biggest challenges for marketers is to communicate the right message to the over-50s consumer. This is because the over-50s do not generally feel their actual age, and their needs and attitudes are continually changing.
In the report, 'Marketing Financial Services to the over-50s', Datamonitor advises financial services providers to concentrate their efforts in targeting attitudes rather than age groups. Seniors have gone through a number of life events and life stages before reaching the crucial age of 50. According to Purang, their experiences differ, and so do their needs and behaviours.
Handling the 'old gold'
For the marketer, this means that the over-50s need to be monitored more than ever before. Marketing and communication managers should avoid making assumptions about seniors, and they should check that assumptions on various issues (such as old-age loyalty, technological awareness, and receptiveness to innovation) actually reflect reality.
This might, for example, be achieved through conducting regular focus group sessions that include a sample of older customers who cover the spectrum of attitudes, ages, income bands, and family situations. Such focus groups can also help providers to avoid outdated marketing myths.