866-997-4948(US-Canada Toll Free)

Loyalty in Financial Services - UK - April 2014

Published By :

Mintel

Published Date : Apr 2014

Category :

Banking

No. of Pages : 170 Pages

Financial services firms cannot expect their clients to exhibit loyalty when they feel that new customers are the ones getting the best deals. Indeed, most of the “loyalty” in the financial services market is due to customer inertia. Going forward, firms need to look at how they can reward long-standing customer relationships in order not to alienate the core of their customer base. Competing for new customers should not be a race to the bottom, especially as those who are more attracted to better rates or discounts will happily move again in the future anyway.
Table of Content

Introduction

Abbreviations

Executive Summary

Financial services in context
Financial services among the worst rated when it comes to rewarding loyalty
Figure 1: Consumer perceptions of how well different firms reward loyalty, January 2014
Efforts to reward loyalty have yet to change consumer perceptions
Figure 2: Consumer perceptions of how well finance firms reward their loyal customers, May 2012 and January 2014
Supermarkets lead the way when it comes to loyalty scheme membership
Figure 3: Loyalty scheme membership, January 2014
Financial account switching
Car and home insurance are the two most widely switched products…
Figure 4: Switching of financial services products, January 2014
and they are also the most frequently switched as well
Figure 5: Financial account switching, January 2014
Inertia in the current account market means that switching is relatively low
Reasons for switching accounts
Cost and pricing drives switching behaviour, except in the current account market
Figure 6: Reasons for moving financial services products, January 2014
Attitudes towards loyalty in financial services
Damning verdict on financial services firms
Figure 7: Attitudes towards the approach of financial services firms to loyalty, January 2014
Loyalty is seen as secondary to higher rates and better deals
Figure 8: Attitudes towards the importance of loyalty to customers, January 2014
Consumers feel that loyalty should be rewarded
Figure 9: Attitudes towards consumer willingness to look for better deals, January 2014
What we think

Issues and Insights

Insurers have the most scope for improvement
The facts
The implications
Loyalty is a two-way street
The facts
The implications
Most people want tangible benefits for being loyal
The facts
The implications

Trend Application

Pick ‘n’ mix rewards
Show me the loyalty
Mintel futures: Generation Next

Loyalty Across Different Industries

Key points
Supermarkets come out on top
Figure 10: Consumer perceptions of how well different firms reward loyalty, January 2014
“Visual” and tailored discounts lead to positive perceptions
Banks come out on top for financial services firms, but that does not mean much
Utilities firms perform the worst, closely followed by insurers
Younger clients much more likely to rate banks favourably
Older clients have a higher appreciation of locality
Almost two years on and not much has changed in terms of customer perceptions
Figure 11: Consumer perceptions of how well finance firms reward their loyal customers, May 2012 and January 2014

Loyalty Scheme Membership

Key points
Clubcard and Nectar card schemes have helped to push supermarkets into an unassailable lead
Figure 12: Loyalty scheme membership, January 2014
Entry of Tesco Bank into the current account market has potential to disrupt
Credit cards offer scope for improvement
Insurers struggling to promote loyalty
Reward scheme participants have much more positive opinions about firms
Figure 13: Consumer perceptions of how well different firms reward loyalty, by credit card and bank loyalty scheme membership, January 2014

Switching of Financial Products

Key points
Car and home insurance are the most widely switched products
Figure 14: Switching of financial services products, January 2014
Older and affluent consumers more likely to have switched providers
Figure 15: Number of financial services products switched, by age and gross annual household income, January 2014
Credit card loyalty scheme members much more likely to have switched providers
Figure 16: Switching of credit card providers, by credit card loyalty/reward scheme membership, January 2014

Length of Time since Last Provider Switch – By Financial Product

Key points
Insurance products again top the list
Figure 17: Financial account switching, January 2014
Cash ISA and saving account switching is also relatively frequent
Current accounts are extremely ‘sticky’
Figure 18: Switching of current accounts, January 2014
Mortgage provider switching is relatively infrequent

Reasons for Switching Financial Products

Key points
Current accounts
Customer service slightly more likely to drive switching behaviour
Figure 19: Reasons for moving current account providers, January 2014
Current account switching service and new entrants to the market
Branch closures are not a big driver for switching activity
Savings account/cash ISA
Introductory and bonus rates are helping to drive switching
Figure 20: Reasons for moving savings account/cash ISA providers, January 2014
Older and more affluent customers keeping an eye on rates
Car and home insurance
Price, price and price
Figure 21: Reasons for moving car or home insurance providers, January 2014
Customer service and the quality of product
Mortgages
A better deal can lead to long-term savings in the mortgage market
Figure 22: Reasons for moving mortgage providers, January 2014
Credit cards
Switching is heavily driven by new and better deals
Figure 23: Reasons for moving credit card providers, January 2014

Attitudes Towards Loyalty in Financial Services

Key points
A damning verdict on financial services firms
Figure 24: Attitudes towards the approach of financial services firms to loyalty, January 2014
Find the right balance between rewarding loyalty and attracting new custom
Figure 25: Switching of financial services products, by agreement with the statements ‘Financial services firms tend to offer better deals to their new customers’ and ‘Financial services firms take their customers for granted’, January 2014
Building societies continue to stand out from banks

Importance of Loyalty to Consumers

Key points
More people want better rates than loyalty schemes
Figure 26: Attitudes towards the importance of loyalty to customers, January 2014
Very few see the point in showing loyalty to financial services firms

Consumer Willingness to Look for Better Deals

Key points
Clients believe that firms can put more effort into rewarding loyal customers…
Figure 27: Attitudes towards consumer willingness to look for better deals, January 2014
…but many also believe that it is important to do your own research
Perceived hassle of research and switching leads to customer inertia

Target Groups – Consumer Attitudes Towards Loyalty

Key points
Apathetic consumers present the biggest target group
Figure 28: Target groups, January 2014
Apathetic – 33%of the sample
Forgiving – 20% of the sample
Fed-up – 22% of the sample
Engaged – 25% of the sample
Switching behaviour is higher among fed-up and engaged consumers
Figure 29: Switching of financial services products, by target groups, January 2014
Forgiving customers more likely to move because of service
“Buying” loyalty
Figure 30: Reasons for moving savings accounts and/or cash ISAs, by target groups, January 2014

Appendix – Loyalty Across Different Industries

Figure 31: Consumer perceptions of how well supermarkets reward their customers, by demographics, January 2014
Figure 32: Consumer perceptions of how well local shops reward their customers, by demographics, January 2014
Figure 33: Consumer perceptions of how well coffee shops/restaurants reward their customers, by demographics, January 2014
Figure 34: Consumer perceptions of how well pubs reward their customers, by demographics, January 2014
Figure 35: Consumer perceptions of how well airlines reward their customers, by demographics, January 2014
Figure 36: Consumer perceptions of how well mobile phone companies reward their customers, by demographics, January 2014
Figure 37: Consumer perceptions of how well banks reward their customers, by demographics, January 2014
Figure 38: Consumer perceptions of how well credit card companies reward their customers, by demographics, January 2014
Figure 39: Consumer perceptions of how well insurers reward their customers, by demographics, January 2014
Figure 40: Consumer perceptions of how well travel firms reward their customers, by demographics, January 2014
Figure 41: Consumer perceptions of how well utilities firms reward their customers, by demographics, January 2014

Appendix – Loyalty Scheme Membership

Figure 42: Most popular loyalty scheme membership, by demographics, January 2014
Figure 43: Next most popular loyalty scheme membership, by demographics, January 2014
Figure 44: Other loyalty scheme membership, by demographics, January 2014

Appendix – Switching of Financial Products

Figure 45: Most switched financial services products, by demographics, January 2014
Figure 46: Less switched financial services products, by demographics, January 2014
Figure 47: Number of financial services products switched, by demographics, January 2014

Appendix – Length of Time since Last Provider Switch – By Financial Product

Figure 48: Financial account switching – Current account, January 2014
Figure 49: Financial account switching – Savings account, January 2014
Figure 50: Financial account switching – Cash ISA, January 2014
Figure 51: Financial account switching – Car insurance, January 2014
Figure 52: Financial account switching – Home insurance, January 2014
Figure 53: Financial account switching – Credit card, January 2014
Figure 54: Financial account switching – Mortgage, January 2014

Appendix – Reasons for Switching Financial Products

Figure 55: Reasons for switching current accounts, January 2014
Figure 56: Reasons for switching current accounts, January 2014 (continued)
Figure 57: Reasons for switching savings account/cash ISA, January 2014
Figure 58: Reasons for switching savings accounts/cash ISA, January 2014 (continued)
Figure 59: Reasons for switching car or home insurance, January 2014
Figure 60: Reasons for switching car or home insurance, January 2014 (continued)
Figure 61: Reasons for switching credit cards, January 2014
Figure 62: Reasons for switching credit cards, January 2014 (continued)

Appendix – Attitudes Towards Loyalty in Financial Services

Figure 63: Agreement with the statement ‘Financial services firms take their customers for granted’, by demographics, January 2014
Figure 64: Agreement with the statement ‘Financial services firms tend to offer better deals to their new customers’, by demographics, January 2014
Figure 65: Agreement with the statement ‘Financial services firms are more interested in rewarding loyalty from wealthier customers’, by demographics, January 2014
Figure 66: Agreement with the statement ‘Financial services firms are all the same when it comes to rewarding customer loyalty’, by demographics, January 2014
Figure 67: Agreement with the statement ‘Building societies are better at rewarding loyalty than banks’, by demographics, January 2014

Appendix – Importance of Loyalty to Consumers

Figure 68: Agreement with the statement ‘Better rates or cheaper products are more important to me than a loyalty scheme’, by demographics, January 2014
Figure 69: Agreement with the statement ‘A loyalty scheme wouldn’t stop me from looking around for a better deal/product’, by demographics, January 2014
Figure 70: Agreement with the statement ‘It’s worthwhile to stay loyal to a financial services firm’, by demographics, January 2014
Figure 71: Agreement with the statement ‘It is difficult for financial services firms to reward loyal customers’, by demographics, January 2014

Appendix – Consumer Willingness to Look for Better Deals

Figure 72: Agreement with the statement ‘It is important to personally research for the best deals, rather than to rely on firms to offer you the best products/rates’, by demographics, January 2014
Figure 73: Agreement with the statement ‘Financial services firms should make more effort to reward long-standing customers’, by demographics, January 2014
Figure 74: Agreement with the statement ‘It is too much hassle to constantly look for better deals and change providers’, by demographics, January 2014

Appendix – Target Groups

Figure 75: Target groups, by demographics, January 2014
Figure 76: Attitudes towards loyalty in financial services, by target groups, January 2014

Make an enquiry before buying this Report

Please fill the enquiry form below.

  • Full Name *
  • Your Email *
  • Job Title
  • Company *
  • Phone No. * (Pls. Affix Country Code)
  • Message
  • Security Code *

Upcoming Reports

  • Sugar and Gum Confectionery - UK - January 2015

    Rising dental health concerns can create an opportunity for chewing gum brands. Currently much of the marketing for sugar-free gums centres around fresh breath, however, the dental health benefits, particularly for children, could warrant more focus. Though explored internationally, tooth-friendly gums tailored for children remain rare in the UK market....