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Understanding Consumer Behaviour On Financial Resources In The New Normal

Financial institutions have been looking into new data sources, but the COVID-19 crisis has accelerated this need

Photo by Ales Nesetril on Unsplash

By Carolyn Corda

Financial institutions have used data to fuel marketing efforts for many years. Banks, for example, have leveraged transaction data to identify customers most likely to be interested in loans and mortgages. However, as customers have come to expect increasingly sophisticated personalisation in their interactions with financial service providers, it’s crucial to have a deeper understanding of consumer behaviour, circumstances and interests if a business is to develop lasting and profitable customer relationships. 

According to a report by SmarterHQ, 72% of customers – ranging from Gen Z and Millennials to Gen X and Baby Boomers – will only engage with marketing messages that are personalised and tailored to their interests. In addition, according to a report by Backbase and IDC, 63% of banking customers in Asia Pacific are willing to switch to neo banks or other digital challengers as their digital capabilities – such as high personalisation and innovative best practices – supersede those of traditional banks.

Many organisations track consumer sentiment by survey or by keeping an eye on consumer spend indices published by the government. However, this overlooks a particularly important aspect of these challenging times: besides accounting for the financial resources that individuals have at their disposal, it’s also vital to understand consumers’ willingness to participate in group social activities. With varied social distancing measures in place – as well as different levels of risk threshold – how willing are consumers to be physically close to others, whether at restaurants, shops or on a plane? 

Aggregate data that pulls together spend in entertainment, travel, and dining can help unlock the most rewarding audience segments for financial institutions to target, with relevant, tailored marketing. It’s crucial to start quantifying how comfortable consumer groups are to both spending extra cash and to being out and about. 

Playing catch-up

Financial institutions have been looking into new data sources, but the COVID-19 crisis has accelerated this need. Customer behaviour is fast-changing and dependent on their well-being and confidence. Leveraging internal data helps to identify those customers more likely to be interested in a credit card, but it won’t provide context on their confidence in spending, shopping and dining out. 

Looking at what we call ‘consumer vitality’ – a measure that combines confidence with financial capability – we start to get a sense of the reaction to the coronavirus and its ongoing impact on spend. 

Data has shown that travel, tourism and social gatherings in APAC all suffered a huge drop in March – during the height of the pandemic – and that dining is now beginning to recover. In Singapore, strict measurements were put in place leading up to the circuit breaker in April, and this affected many restaurants. However, we began to see an uptick in June, most likely attributed to Singapore entering Phase 2 of the circuit breaker and ‘revenge dining’ kicking in; this led to F&B spend increasing by 19.9%, as compared to the previous month. This trend continued in July, going up by 29.2%, taking only a slight dip of 3.4% in August. With Singapore now entering Phase 3 end-December and increasing the social gathering limit to eight, restaurants and other dining businesses remain steadfast in recovery.

Understanding that some customers feel safer in restaurants now and are keen to spend helps financial institutions ascertain the most suitable reward packages for a given individual.

Leveraging consumer vitality data allows brands to understand the differences between a customer’s aspirations and their actual purchases. For example, a person may browse luxury clothes online or expensive meals at a Michelin-star restaurant, but in reality, they may purchase products and services that are more in line with their perception of their current spending power. 

Consumer vitality also helps marketers determine whenever a person is interested in offers such as VIP pre-sale access tickets or whether they might be too nervous to attend a public gathering at present. The data gives crucial customer insights that paint a better picture of an individual and can be used to serve existing customers and – crucially – attract new ones with compelling offers. 

Understanding consumer vitality

Financial institutions need to work collaboratively with other organisations to obtain new data. For example, joining a data consortium – like ADARA – can allow access to actionable customer insights that rely on identity-driven data. 

Data consortiums leverage verified customer identities, built from ethically sourced data points across a spectrum of discretionary spend, to allow financial institutions to gain information on how customers interact with other brands and services. This information helps a financial service provider better understand their own relationship dynamics with their customers. 

To differentiate themselves in what is sometimes a low-interest category, financial institutions must develop more customer-centric and personalised marketing strategies. By understanding what COVID-19 has meant to consumers and how it impacts their spend, financial marketers can develop more rewarding relationships and effective communication with their customers. 

Carolyn Corda is the Chief Marketing Officer at ADARA

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