Retirement planning, investing, likely to become higher profile issues for both young and old

Observation:  There was an interesting contrast in coverage on the topic of money management and planning for the future in this morning’s newspaper.  First, USA Today explained how Gen Y, generally speaking, is lagging a bit when it comes to financial literacy and personal money management.  Click here to see that story.

A few moments later, I came across a story from the Wall Street Journal that “does the math” and considers the implications of Social Security and Medicare funding that could run dry as soon as 2016, or 2033, depending on the benefits on is entitled to.  Click here to see that story.  

Implications:   The politics of this issue are sure to be given a higher profile in the coming months and years, but that’s not why I bring this issue up.  Consider the implications of an aging Boomer population that will soon be (if not already) drawing on Social Security and Medicare benefits… and a younger Millennial and Gen X population that is asked to pay more to fund these benefit programs at a time when they’re focusing on simply getting their own financial act together.  (In the end, I’m guessing that both an increase in funding and a reduction in benefits is in the cards, if and when Washington seriously addresses this issue.)

Ultimately, retirement planning is likely to be embraced as something each individual must worry about for him or herself, unable to anticipate that a government plan or program will be sufficient either for sustenance or healthcare needs.

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Targeting the mass affluent

Observation:   A story from yesterday’s New York Times explains how some financial institutions have turned their attention to consumers who seem to be doing well, but may not fit the description of super-rich.  Click here to see the story.

Implications:   In our on-location “Consumer DNA” workshops, we often use qualitative research to demonstrate that there are far more “emerging investors” available to most business communities than there are “blue chip investors.”  The latter group is composed of people with at least a six figure income who pay for the counsel of a financial planner, accountant or stock broker; the former group—the emerging set—is composed of people with an above-average income but who are NOT receiving the guidance of a paid professional.

Everyone wants to sell stuff to rich people.  But opportunities exist when you reach for the folks who are not quite rich, but might be on their way.

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Generational Economics: New Age Seniors

Marketing Observation:  Once upon a time, you might have referred to people age 60-69  as “upper demos.”  But that is an outdated notion, one that has not kept up with the changing face of demography, at least in the industrialized parts of the world. Here’s why I say that:

Fifty or sixty years ago, life expectancies were different than they are now.  People often retired from their careers at 62 to 65 years old… and then enjoyed life for a few years before their health began to deteriorate (or they just plain tipped over).  Now, life expectancies are much, much longer—approaching eighty years old—and of course many people are living into and through their 90s and beyond.  These longer lifespans are having a dramatic effect on how we’re living life, especially after age sixty.

Retirement savings have to last a lot longer.  So we’re finding that “retirement” rarely means, “the end of employment.”  For folks in their 60s, it often means quitting the job they’ve always had to have—for economic reasons—so they can take the job they’ve always wanted to have.  Someone who has worked in a confined space for a lot of years might decide to find a job where they can get out and meet people.  Others take a position that lets them fulfill a passionate interest or hobby.  In fact, the concept of “retirement” is making way for the idea of “re-hirement.”  And to the New Age Senior, that return to the workforce serves two purposes.  First, it can be an important supplement to a retirement savings plan that simply has to last longer than it might have, say, fifty or sixty years ago (retirement will last longer than it did back in the fifties for most people). 

But also, the right job can be a source of stimulation and self-actualization for the New Age Senior.  Just realize that their motives for wanting to work might be different now than they were during an earlier career.  Changing jobs can actually be seen as a way of, “giving back.”

Marketing Implications:  Whether you want to sell financial products and services to people who are re-thinking what retirement means, or goods to help people get established in “Career 2.0,” there is a tremendous amount of opportunity in targeting consumers in their 60s.  They still want to travel, spoil grandkids, and play golf.  But they’re looking for ways of fitting all those activities (and more) into a lifestyle that is busier than generations before them at this age.  They’re very health-conscious, eager to stay active, and more technologically savvy, too.

Is this a group of consumers you’d be smart to reconsider, or consider in new ways?

Mike Anderson, for The Marketing Mind consumer trends blog, service of The Center for Sales Strategy.  

Upstarts give traditional banks a run for their money with digital

A story from Marketing Daily looks at a recent report about the progress of banks in the digital space... and finds that innovation in online services is coming from some non-traditional financial services companies.  Click here to see the story.

Implications:  This article/research suggests that having “a blank slate” to work with is a luxury unique to start-ups.

Do you agree with that assertion?  Is your experience in you category of business an asset, or a liability?  Does your legacy in an industry prevent you from creating a start-up approach to a new business initiative?  It’s a worthwhile conversation to have with the leadership and ownership of your organization.

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

UPDATE: Drop in oil prices doesn't last

A special release from USA Today a few moments ago suggests that the drop in oil prices was not long-lived.  Prices are moving higher today.

If you sell vehicles, destination travel or product that is shipped, this is just one of those stories that we have to watch, even if it seems to change daily or even hourly.

Mike

A temporary reprieve from inflation?

A huge drop in commodity prices—including silver and oil—received wide coverage in at the market close last night.   Here’s one story from USA Today (click to link), and here’s more coverage from this morning’s New York Times (click to link).

Implications:   Here’s the good news.  Speculators are now suggesting that the price of gas could drop over the next week to ten days (just in time for Memorial Weekend travel). 

Here’s the catch: While many analysts are looking at the run-up on silver as another “bubble,” the fundamentals that were driving price increases for other commodities are still in play.  Those items are greater demand from growing economies in China, India and elsewhere… and an improving economy in the U.S.  (Two reasons for yesterday’s drop in commodity prices was the jump in new unemployment benefit claims and the slowing growth of the economy.)

Yesterday’s drop in oil and other commodity prices is a welcome thing at the consumer level.  But stand by…

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Could recent gains lead to greater (investor) confidence?

There is a lot of positive economic news lately, but I was particularly pleased to see this story from today’s USA Today. Stronger returns on mutual funds and other investments could bolster the confidence of everyday consumers. Click here to see the full story.

Implications: Few consumers were able wrap their head around the financial meltdown of 2007-2009. Many long-held assumptions about saving for retirement were shattered. Any indication that the financial markets have found their footing is a very good thing.

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Is "not losing" the new "gaining?"

A story in the New York Times last week inspired the question in the above headline; interest rates on most savings accounts and investment instruments are very low. Click here to read the full story.

Implications: I’m certainly not the only person whose IRA took a beating throughout the recession. But now, I’m wondering whether that pounding has created a different paradigm in folks like me: Do we feel really good… just because we’re not getting punched?

That seems to be plausible, given the fact that folks are prepared to tolerate such low rates on their savings instruments these days. But even if I don’t make a dime this year on my savings accounts…

It will be more profit than I’ve made in the past three years.

Can completely different options—different from stocks, bonds, CDs and other investment options—be terribly far away? (Will individuals be tempted to invest in small enterprises, rather than public companies? Will we see more peer-to-peer lending? What other options could pose a threat to conventional banking, savings and lending relationships?)

Mike Anderson

Banks regaining *some* customer approval

Few industries took a bigger reputational hit than banks during the great recession. From liberal lending by mortgage banks, to the bundled securities (many involving sub-prime debt and illiquid assets) offered by some investment banks, to the T.A.R.P. “bailout” money offered to many commercial banks… there was plenty of negative press to go around.

Some of the bad feelings toward select banks were well deserved, but other hostility may have misdirected toward all forms of banks, including some who were impacted by, but not necessarily responsible for, the financial meltdown of 2007-2009.

It seems as if some of those negative emotions could be starting to wane, according to this story from Media Post Marketing Daily. Click here to see it.

Implications: I think that as more time passes, consumers will realize the complexity of the financial crisis that was the great recession. It was not an industry that brought all this hardship on, but certain players within that industry.

Surviving banks—even those who brought no harm to their customers or the economy—must nonetheless realize the importance of explaining their role in the community they serve… or risk being unfairly cast with an industry that some consumers are still slow to forgive.

Few consumers realize that some banks were “encouraged” to take T.A.R.P. money, even thought they did not want it. Fewer still realize that it wasn’t a “bailout,” but a loan, to be paid back with interest. Fewer still realize the many ways their local bank, thrift or credit union serves as a vital cog to business, employment opportunities and prosperity in the community.
If you work in financial services, it might be prudent to educate your customers thus, rather than waiting (or hoping) for your customers to figure it out.

Mike Anderson

A generation of emerging investors... overlooked?

In a story from Marketing Daily this week, an interesting pair of questions is asked: Has the investment industry overlooked an entire generation of new prospects? And are they doing enough to court Millennials? Click here to see the complete story.

Implications: This year, I’ve facilitated dozens of workshops we refer to as “Audience DNA” and “Consumer DNA” programs. In the DNA workshops, we mine through volumes of qualitative research to understand the demographics, lifestyle (nature) and affinities of various population segments and industry categories.

One category that is particularly interesting is banking and investments. We typically explore whether a financial institution is wiser to court “blue chip investors” (which I define as having at least a six-figure household income, and who pays for the counsel of a financial planner, accountant or full-service stock broker), or whether it might be wiser to consider reaching “emerging investors” (which I define as having an above-average income, but someone who does NOT yet have a financial planner, accountant, or full-service stock broker).

This challenge raises the perfect conundrum: The blue chip investor has more money, but is already a customer in the category. (To win their business, they’d first have to fire whomever they are using now.) The emerging investor has less money, but has nothing to unlearn, no habits that need breaking, and might therefore represent “a path of less resistance.”

Are your best prospects for the future the same as the best customers from your past?

Mike Anderson

So are you happy with your bank, or just not currently angry?

An interesting bit of research about bank customers was published in Marketing Daily this week. (Click here to read the story.) According to the Market Force Information survey, up to 40% of bank customers say they’d consider switching; that includes 9.4% of customers who claim to be satisfied or very satisfied with their current bank.

Implications: It seems you have to ask whether those satisfied customers are indeed really “happy” with their current bank, or simply were not currently angry at the moment the survey was taken.

How about your customers? Are they “happy” with you? And if so, are you happy with that? Or should the questions you ask your customers include…

• If current levels of service, quality and pricing continue, do you see yourself being our customer five years from now?
  
• Would you recommend us to your friends, if the opportunity arose?
  
• Among the services we offer, where do you see the greatest room for improvement?
  
• What’s the single most important thing we do (or don’t do) that keeps you coming back to us?

What other questions should you be asking, to make sure your customers are delighted, and not just tolerant?

Mike Anderson

Young adults are thinking about the future

Research from IPSOS indicates that young adults are thinking about their retirement, and how it will be funded. Click here to see the press release.

Implications: Gen Y and Gen X consumers have heard many of their boomer friends and family members talking about what the Great Recession and its impact on their retirement. All of this trauma surrounding nest eggs has folks of all ages hedging their retirement bets. But I wonder if retirement is the only topic that will receive more forward thinking…

Are your customers thinking more long-term than they used to?

Mike Anderson

Improvement for Home Improvement

Yesterday, Lowe’s reported impressive results for their latest quarter (see this story from Marketwatch). About an hour ago, The Home Deport reported impressive results for their latest quarter (see that story from Marketwatch).

Implications: I have long submitted that home improvement would be a leading indicator that the recovery was gaining strength. (See “Changing purchase Priorities,” October 2009.) Many homeowners now find themselves unable to “upgrade” by moving into their new dream home. So, the next best thing is doing what you must to make your current residence the home of your dreams.

Evidence suggests that the home improvement category agrees.

Mike Anderson

Bank on shifting financial priorities

To say that purchasing priorities and consumer behavior have changed over the past few years would be a gross understatement. That’s why it is more important than ever to “stay tuned” to the customer… constantly evaluating who your best target customers really are, and the deeper benefits those consumers hope to satisfy through the purchase of a product or service. At CSS, we recognize those two issues (Targeting and Benefits Sought) as prerequisite to a sound marketing strategy.

That’s what led us into a wonderful dialogue with C. Britt Beemer, the chairman of America’s Research Group. (Many of you will recognize Mr. Beemer as the co-author of best-selling books like Predatory Marketing, It Takes a Prophet to Make a Profit, and most recently, The Customer Rules.) Every other month, America’s Research Group (ARG) surveys one thousand people (age 20 to 59) to gain insights about the shopping behaviors and purchasing intentions of consumers. Those findings are subsequently published in Consumer Mind Reader™ studies for the clients of ARG.

Recently, Mr. Beemer invited us to contribute a number of questions to the Mind Reader survey that might inform and enhance our Elm Street Economics advertiser workshop. We were happy to oblige.

We decided that one area of focus should be on banking. From the collapse of Lehman Brothers early in the recession to the Toxic Asset Relief Program (TARP) intended to help bail-out the banking industry, plenty of coverage has been given to financial institutions of all sizes during the recent recession. We wondered what affect all that news might have on everyday consumers (the folks who live down on Elm Street).

We started by asking, “Have you made any changes in the past year, with regard to where you bank or where you place your financial investments?” Almost 24% of respondents said they had made such a change.

Next, we asked, “Where would you be more likely to move your checking account?” While 34% of respondents said, “A National Bank,” an amazing 30% answered, “Credit Union.” Another 32% indicated they would move to either a “local (22%)” or “regional (10%)” bank.

When we asked, “Do you feel most banks are pretty secure, and therefore, a safe place for your money?”... 72.3% of respondents said, “Yes.” That might sound like a significant majority—and it is—but according to Mr. Beemer, historic numbers would be closer to 85%.

Given the dramatic headlines of the past several months, we asked, “Do you expect to see some bank failures in the area where you live?” 69% of consumers said, “No.” But nearly 16% said, “Yes,” and another 15% answered, “I don’t know.”

Finally, we asked participants, “How long do you expect the fallout from the mortgage crisis to affect banks?” Just over 24% said “Six months to a year.” 31% said “two years.” Another 30% said “Three to four years.” And more than 13% said “Five years or longer.”

Implications: Every business (and every industry) suffers from customer churn… but 24% turnover sounds very high to me in a category like financial services. I spoke with a banker I know this afternoon, and he agreed, saying that anything approaching 10% would sound very scary.

Speaking of churn, it would seem that bigger is not necessarily better in today’s financial environment. While 34% of respondents indicated they would move their checking account (a primary financial instrument) to a national bank, more than 60% favored a smaller institution (credit union, local, or regional bank). Is that because the customer is perceived to have a voice in the operation? Could it be the customer wants more one-on-one contact (and fewer automated or “telephone tree interactions”) with their financial institution?

Consumers have seen plenty of news coverage about the woes facing the banking and financial services sector. And it would appear that coverage is having an impact on consumer opinion. But those are just my thoughts about what the research suggests. Did other implications occur to you?

Mike Anderson

Déjà vu, circa 1970s: Women in the workforce

When times were great, many career women could afford to leave the workforce… opting to head home and raise a family. Now, with spouses who have either been laid off, or fear being laid off, or investment portfolios that took a beating the past few years, many of those women are headed back into the workforce… according to this story in the New York Times last weekend.

Implications: Women first hit the workforce en masse back in the 1970s (that’s not counting their jump into action during WWII, serving a critical role in the factories that supplied allied troops). And the more gender-balanced workplace gave way to accelerated growth for convenience appliances, prepared foods, and other items to help make their double-duty more manageable.

I’m wondering whether a resurgence in convenience items might soon follow (whether devices or packaged goods, such as heat-to-complete or grab-and-go foods). After all, we’re hearing a lot, lately, about more time in the kitchen, less dining out-of-home, etc. Is that reduced consumption of convenience or restaurant fare sustainable, if she’s pulling double-duty again?

Mike Anderson

Retirement, re-defined

At the time, most of us were focused on our immediate losses. But now, a long-term by-product of the stock market decline of late 2008 is getting more of our attention: A lot of soon-to-be-retirees had their nest-egg in that basket. And those boomers are reconsidering when and how to retire, now that some of those nest-eggs have cracked.

Two recent stories support that assertion. First, Marketing Daily published a story last week which included some highlights from a survey by TD Ameritrade. One of the conclusions in the study: Women have begun to re-set their retirement expectations, and have accepted the idea that they might have to live on less money than they had previously anticipated once they retire.

Second, a story in the New York Times explained that many boomers are deferring their retirement plans… which could impact the younger, emerging workforce, as fewer departing workers translates into fewer openings just as these young adults are entering the job market.

Implications: Many boomers have long suspected that Social Security would not outlast their retirement, so they created their own retirement plans, through IRAs, 401(k)s, or other investment instruments. And with a few exceptions (the dot-com bubble, the Enron age), those investments were performing as expected (or better), at least until the commencement of The Great Recession.

During those go-go years, many people envisioned a retirement location and lifestyle that may have looked more like a resort than a residence. Now, just like so many other expectations, many would-be retirees are re-setting their goals, and aligning their expectations with what they perceive to be the new financial reality.

Even as the stock market demonstrates signs of recovery and greater resilience, people now realize just how far and how fast the system can be upset. In response, one might expect all kinds of questions with regard to these and other late-stage decisions:

• “Where, how and when should I retire?”
  
• “If I’m going to continue working longer, can I at least retire from the job I’ve always had to have (for economic reasons), and take this opportunity to get the kind of job I’ve always wanted to have (for reasons of self-satisfaction and actualization)?”
  
• “During this age of “re-hirement,” might the size of my paycheck take a back-seat to benefits—most notably health care—when it comes to deciding whether a compensation package is fair?”
  
• “What does my dream job look like as I enter semi-retirement?” (For example, how many hours per week am I willing to work? Do I expect this job to provide sustaining income, or just supplemental income? And what physical limitations might I think about that weren’t a concern to me twenty or thirty years ago? How can I find a job that’s not really “work” to me… but more like getting paid for something that is more like a hobby or special interest to me?)
  

I’m certainly not the first to suggest that boomers have re-defined every life stage they have experienced, just like a proverbial pig moving through a demographic python. Don’t expect them to retire from that function, just because they’re approaching retirement.

Mike Anderson

Absent communication, there is confusion

I read a good story from Marketing Daily recently, which discussed the about-face of financial institutions recently, with regard to their correspondence with consumers. The article cited direct mail activity as tracked by Mintel, which noted that credit card and mortgage and loan offers accounted for 86% of all direct mail offers. No wonder the activity was down 26%.

In another Marketing Daily report, Boston Consulting Group research indicated the importance of communicating with customers, especially in the financial sector. When asked if they were satisfied with their financial institutions, 83% of those who had been contacted by their bank recently said, “Yes.” Those who had not been contacted said they were happy only 53% of the time. Similar satisfaction declines were reported by people who had not been contacted by their investment brokers or insurance companies.

Implications: A while back, I wrote about the importance of transparency and clarity, with regard to financial institutions, insurance carriers and investment counselors (Let us be perfectly clear, 1/20/09). In a confused economy, there can be no clarity without communication. Those in the financial services sector who feel they have bigger fires to focus on right now might not realize the blaze of contempt that is at hand.

Are your clients confused by everything that’s going on? Would they appreciate—or do they expect—a phone call, letter or email from you, providing counsel? Reassurance? A simple report?

Often, what consumers fear most is the unknown. Regardless of the business you’re in, what kind of communication could you offer to relieve that stress?

Mike Anderson

Banking on consumer confidence

To say that the banking industry has gone through some trials over the past year would be a gross understatement. But against this backdrop of turmoil, and recognizing that consumer opinions about banks and banking are shifting, a number of financial institutions are offering a message of strength, stability, security, and/or responsibility.

In a Wall Street Journal story last week (Banks Wage Rate War for Deposits, 11/14/08)—and in other trade coverage—we started to see evidence that banks were going after consumers’ savings and other deposits. The move makes a lot of sense, both because consumers’ are increasing resisting the temptation of indulging on purchasing (instead putting a few more dollars away, just in case), and because other sources of funding for financial institutions (such as interbank lending) remain somewhat stalled.

Another trend in the financial sector: Selling consumers on the idea that banking is still a good idea. In one example, Miami-based TotalBank is telling customers they can be confident in their local, community bank (see the Marketing Daily story from Monday 11/17/08).

Implications: Banking is one example of an industry that is deeply affected by the current economic climate, and I would argue that it is a matter of both cause and effect. The sector, in general, is arguably among the causes of the sub-prime and credit crisis… but it is also affected by that crisis. (Granted, there are innocent bystanders/institutions within the sector. But banking, overall, is facing some particularly delicate challenges where consumer opinion is concerned.) Consumers are asking: Is my bank safe? Is my bank trustworthy? Where should I put my money, in a world that has not been kind to my IRA, 401(k), or other investments?

Another shift that’s starting to surface: The tendency for people to exercise caution in spending, live within their means, and think about what they’ll do with the money they’re saving as a result.

Sun Trust started a new campaign, recently, focused on a return to responsibility… for consumers. Recognizing that people would increasingly prefer to be envied for spending wisely—rather than spending freely—the bank encourages people to “bank solid, with a solid bank.” (See details in a Marketing Daily story 11/18/08.)

Even if you’re not in the banking business, it might be smart to get into the business of rebuilding consumer confidence. And not just that people can be confident in your business… but also, helping consumers feel confident in themselves. Can you position your product or service as a more prudent alternative, compared to _________? Does your product or service offer attributes such as reliability, a warranty, or other security measures? Could your company offerings be seen as a long-term investment, as opposed to a short-term fix? These are comforting elements to a consumer who could use the assurance.

Mike Anderson

The retirement surge

A recent briefing from MediaPost and the Center for Media Research reminded us that retirement is “booming.”

17.9% of Americans are retired now, a number that has increased by 6% over the past five years, and which will grow even more dramatically as boomers approach retirement age. But the demographic group known as “retirees” isn’t just growing in size. It is growing in individual economic stature.

Today’s retirees look much different than those of a few years ago… they have remarkable spending power. The briefing cites a Media Audit report which indicates that more than 13% of new cars are purchased by retirees. 83% of retirees own the home they live in. And 30% of retired adults have investments exceeding $100,000 in value, a higher share than ever before.
When you think of people who are “approaching retirement age,” do you picture Sylvester Stalone (born 1946, age 62)? Bette Midler (born 1945, age 63)? Jane Fonda (born 1937, age 71)?

Implications: Boomers are changing the face of retirement… if not the very definition of retirement. Boomers, who “came of age” in the 60’s and 70’s… have been life-long fans of experimentation and experiences. When you company introduces or promotes a product or service, do you consider the early-adopter mentality of today’s boomers and retirees? Do you sell features (product attributes) or benefits (lifestyle experiences)? In 2008, “upper demo” doesn’t mean what it used to.

Mike Anderson