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Affinity Marketing - UKProduct Type: Market Research ReportPublished by: Mintel International Group Ltd. Published: November 2004 Product Code: R560-1402 Description Over the past couple of decades, the marketing of financial services products in the UK has evolved considerably. A key aspect of this change has been the shift away from the use of mass marketing techniques in favour of a more tailored approach, with organisations attempting to deliver a more personalised marketing message to distinct groups of consumers.
One of the most effective ways in which financial services providers have been able to target smaller sections of the consumer base is by establishing relationships with a number of different charities, clubs, associations and other groups. They have then been able to deploy a range of marketing techniques in order to target a particular group of individuals who are bound by some common purpose or interest. In essence, affinity marketing therefore allows an organisation to leverage some of the equity that they have built up within their brand by selling their supporters a variety of products which they do not currently provide. As such, it is basically concerned with nurturing the healthy relationship that exists between an affinity group and its supporters in order to encourage the development of more enduring customer relationships. The establishment of affinity relationships within the financial services industry has been most prevalent in the credit card market, although they have also become popular in the deposit savings, personal loan and general insurance sectors. While the success of affinity schemes has been more patchy in other product areas, these techniques have also been deployed in other sectors of the market such as mortgages, life, pensions and investments. With the financial services market becoming increasingly mature, this trend away from mass marketing can only be expected to continue. Affinity marketing is therefore likely to gain in prominence as a means of giving financial services providers a competitive advantage and allowing them to differentiate their product offering from those of their competitors. This report aims to provide an analysis and assessment of some of the main themes that are currently affecting the affinity market highlighting the key issues involved in developing successful, mutually beneficial relationships. In addition it also uses research commissioned specifically for use in this report in order to gain a greater appreciation of consumer attitudes towards affinity marketing. Table of Contents Introduction and Abbreviations Aims of the report Abbreviations Executive Summary Affinity marketing aims to build mutually beneficial relationships Credit cards provide the main focal point for affinity schemes The number of affinity cards in issue has been in decline Charitable groups are major players in the affinity market Almost three quarters of adults belong to an affinity group Around one in ten consumers own an affinity product There is strong support for the concept of affinity marketing Supporting a good cause is the most common purchase prompt... ...but price is also a key factor in the purchase decision Multiple credit card holders tend to use the one with the lowest rate The 25-34s and C1s represent the key affinity target audience Background Affinity marketing aims to build mutually beneficial relationships It allows organisations to leverage equity from their brand Charitable groups have become major players in the affinity market... ...but other types of organisation are also heavily involved Effective affinity marketing schemes benefit all three stakeholders Figure 1: Affinity marketing relationships Affinity schemes offer financial providers a range of benefits Partner organisations also stand to gain from affinity relationships... ...while affinity group supporters enjoy a variety of benefits as well Market Factors Affinity marketing is most common for low-value commodity products Fierce competition is likely to limit growth in the affinity card market Changes in marketing techniques have created opportunities Distribution trends have provided a boost to affinity schemes Further growth in Internet sales could create a significant boost The quest to increase cross-sales will help affinity schemes The need to build trust could provide a boost to affinity schemes A rise in social responsibility could also boost the affinity market The number of charities has risen during the last few years Figure 2: Registered charities in England and Wales, number and income, 1998-2004 The income generated by charities has also grown strongly... ...but there is a limit to the number of suitable affinity partners Affinity credit card sales have been hit by cashback schemes Bad publicity could hit demand for affinity credit cards Market Issues and Strategy The choice of affinity partner is clearly a crucial decision A range of criteria should be used to select an appropriate partner The relationship needs to represent mutual enhancement A strong commitment from both parties is particularly crucial Joint team working is also an essential requirement Ownership of the customer can be a cause for concern Organisations need to be careful not to damage their own brand Retail Banking and Affinity Marketing Credit cards provide the main focal point for affinity schemes Figure 3: Affinity product penetration levels, retail banking products, September 2004 35-44-year-olds and ABs are more likely to own an affinity card Figure 4: Credit card penetration, by gender, age and socio-economic group, September 2004 The number of affinity cards in issue has fallen in the last six years Figure 5: Number of credit cards in issue in the UK, 1995-2003 Affinity card transaction levels have also been in decline Figure 6: Volume and value of affinity card transactions, 1995-2003 Affinity cards do still represent an important niche market A wide variety of organisations have launched affinity cards Figure 7: Examples of affinity cards, October 2004 MBNA and HBOS are the leading providers of affinity cards... ...but other players are also active in the affinity card market Product features can differ considerably from scheme to scheme Price differentials have narrowed significantly in the last few years Some schemes are trying to engender a greater degree of loyalty Savings accounts are also a common affinity product offering Sporting clubs have been particularly keen to set up savings accounts Rates on affinity savings products vary from account to account Figure 8: Examples of affinity savings accounts, October 2004 Personal loans are another popular affinity product offering A number of financial providers offer loans via affinity schemes Affinity schemes have enjoyed more limited success with mortgages... ...but a number of providers do offer affinity mortgages The Lambeth has had mixed experiences with affinity mortgages General Insurance and Affinity Marketing Affinity marketing has had some success with general insurance Figure 9: Affinity product penetration levels, general insurance, September 2004 Distribution trends have been positive for affinity marketing Further development of the online market offers great potential A wide range of organisations now promote insurance products Motor insurers have long-standing relationships with motoring groups Pet insurers have established strong links with many groups Travel insurance also offers opportunities for affinity schemes Life, Pensions and Investments and Affinity Marketing Affinity schemes have had less success with these products Figure 10: Affinity product penetration levels, life, pensions and investments, September 2004 Product complexity presents a major obstacle in these areas This complexity also encourages purchases based on value grounds The potential for contaminating a brand can also act as a deterrent There are some positive signs for future affinity growth A number of groups have forged affinity partnerships in this area Case Studies The Co-operative Bank The Co-operative Bank is a key player in the affinity card market A range of marketing techniques are utilised to promote their cards The same fixed fee is paid however the business is sourced The Bank is also heavily involved in the affinity loans sector Its ethical stance makes it easier to promote links with charities Working in partnership with the affinity group is critical Endsleigh Endsleigh's strategy has focused on targeting career people Links have been established with professional groups and trade unions Endsleigh is also currently expanding its range of affinity partners Marketing is increasingly Web-based rather than via direct mail Britannia Building Society The Society has a history of working with trade unions It has also developed links with a number of football clubs The Society has recently teamed up with Reader's Digest Britannia feels the right partnerships provide real business benefits Norwich and Peterborough Building Society The Society is committed to supporting its local community It has established relationships with three 'local' football clubs Marketing of these products tends to be at a branch-based level The partnerships help the Society build relationships with customers Importantly, the affinity schemes clearly benefit all three stakeholders The National Trust Relationships have been forged with several commercial partners Norwich Union is the National Trust's insurance partner The charity launched a credit card with HSBC in 1990... ...but the Trust is now in the process of changing its card provider The National Trust feels it has a lot to offer partner organisations The Consumer - Membership and Ownership Almost three quarters of adults feel they belong to an affinity group Figure 11: Affinity group membership, September 2004 Charities typically enjoy strong levels of consumer support Motoring organisations also boast relatively high membership levels Two thirds of AB respondents support at least one charity Figure 12: Affinity group membership, charities, by gender, age and socio-economic group, September 2004 Part-time workers tend to be strong supporters of charity groups Figure 13: Affinity group membership, charities, by lifestage, Mintel's Special Groups and working status, September 2004 Broadsheet readers also have a strong affinity with charities Figure 14: Affinity group membership, charities, by TV region, newspaper readership and commercial TV viewing, September 2004 A fifth of men have a strong allegiance to sporting clubs Figure 15: Affinity group membership, other groups, by gender, age and socio-economic group, September 2004 Nearly half of ABC1 third age adults belong to a motoring group Figure 16: Affinity group membership, other groups, by lifestage, Mintel's Special Groups and working status, September 2004 Broadsheet readers are more likely to be affinity group members Figure 17: Affinity group membership, other groups, by TV region, newspaper readership and commercial TV viewing, September 2004 Around one in ten consumers own an affinity product Figure 18: Affinity product penetration, September 2004 Affinity credit cards boast the highest ownership levels Pet insurers have also developed successful affinity relationships ABs and 35-44-year-olds are more likely to own affinity products Figure 19: Affinity product penetration, by gender, age and socio-economic group, September 2004 ABC1 family and ABC1 third age groups have higher penetration rates Figure 20: Affinity product penetration, by lifestage, Mintel's Special Groups and working status, September 2004 Broadsheet readers are also more likely to hold affinity products Figure 21: Affinity product penetration, by TV region, newspaper readership and commercial TV viewing, September 2004 Over a quarter of environmental charity supporters own affinity products Figure 22: Affinity product penetration, by affinity group membership, September 2004 Most people feel organisations should be able to promote products Figure 23: Nothing wrong with raising money from financial products, September 2004 16-44-year-olds are more likely to support the idea of affinity marketing Figure 24: Nothing wrong with raising money from financial products, by gender, age and socio-economic group, September 2004 People at the family lifestage are more supportive of affinity marketing Figure 25: Nothing wrong with raising money from financial products, by lifestage, TV region and newspaper readership, September 2004 Group members are more supportive of raising money in this way Figure 26: Nothing wrong with raising money from financial products, by affinity group membership, September 2004 Children's and elderly charity supporters are keen advocates Consumers prefer to buy from companies linked to groups they support Figure 27: More likely to buy a product linked to a cause i care about, September 2004 A significant minority of ABs are not convinced by affinity marketing Figure 28: More likely to buy a product linked to a cause i care about, by gender, age and socio-economic group, September 2004 Pre-/no family consumers are more likely to buy affinity products Figure 29: More likely to buy a product linked to a cause i care about, by lifestage, TV region and newspaper readership, September 2004 Motoring group members seem less convinced by affinity marketing Figure 30: More likely to buy a product linked to a cause i care about, by affinity group membership, September 2004 The Consumer - Purchase Prompts A variety of factors influence the decision to buy affinity products Figure 31: Factors influencing affinity purchase, September 2004 Supporting a good cause is the most common purchase prompt... ...but price is also a key factor in the purchasing decision Better benefits would influence a quarter of potential customers Almost two thirds of affinity card holders are supporting a cause Figure 32: Factors influencing affinity purchase, by product holding, September 2004 Members of environmental charities are particularly committed Figure 33: Factors influencing affinity purchase, by group membership, September 2004 Political party activists are keen to support the cause Figure 34: Factors influencing affinity purchase, by group membership, September 2004 A competitive price is the main influence on 25-34-year-olds Figure 35: Factors influencing affinity purchase, by gender, age and socio-economic group, September 2004 Consumers at the third age lifestage are keen to help a good cause Figure 36: Factors influencing affinity purchase, by lifestage, TV region and working status, September 2004 Around half of all consumers would pay more for affinity products Figure 37: Would pay more for an affinity product, September 2004 16-24-year-olds are more inclined to consider paying more Figure 38: Would pay more for an affinity product, by gender, age and socio-economic group, September 2004 Consumers in the South are also less likely to pay extra Figure 39: Would pay more for an affinity product, by lifestage, TV region and newspaper readership, September 2004 Members of professional bodies are less inclined to pay a premium Figure 40: Would pay more for an affinity product, by affinity group membership, September 2004 A range of factors influence the choice of which card to use Figure 41: Factors influencing choice of credit card, September 2004 Three quarters of affinity card holders also own another credit card Multiple credit card holders tend to use the one with the lowest rate Reward points and cashback are more important than donations Other factors influence a relatively small proportion of consumers Affinity card holders typically reach for their donation cards first Environmental group members often prefer a card which donates Figure 42: Factors influencing choice of credit card, by group membership, September 2004 Members of professional bodies are extremely price-conscious Figure 43: Factors influencing choice of credit card, by group membership, September 2004 Almost one in eight 16-24-year-olds prefer to use cards which donate Figure 44: Factors influencing choice of credit card, by gender, age and socio-economic group, September 2004 Consumers in London and the South are extremely price-conscious Figure 45: Factors influencing choice of credit card, by lifestage, TV region and working status, September 2004 The 25-34s and C1s present a key affinity target market Figure 46: Profile of potential affinity target market, September 2004 Further analysis on factors prompting use of affinity products Figure 47: Proportion of the sample forming each of the four typologies, August 2004 Definitions of typologies Typology 1: Abstainers (63% of respondents) Typology 2: Altruists (15% of respondents) Typology 3: Price Concerned (12% of respondents) Typology 4: Superiority Seekers (10% of respondents) Figure 48: Typology groups relating to affinity prompt factors, by gender, age, socio-economic group and TV region, September 2004 Number of factors nominated by typology Figure 49: Repertoire analysis on prompt factors, by four typology groups, September 2004 The Future A number of factors will create a positive backdrop for affinity schemes Favourable consumer feelings could also boost affinity sales... ...but affinity products will need to be relatively competitive Affinity cards will continue to face tough market conditions... ...but they are likely to remain an important niche market Further development of the Internet could boost affinity sales Expansion into complex product areas still faces potential obstacles Forecast Scenario 1 Figure 50: Forecast of affinity marketing groups, Scenario 1, 2004 and 2009 Scenario 2 Figure 51: Forecast of affinity marketing groups, Scenario 2, 2004 and 2009 Scenario 3 Figure 52: Forecast of affinity marketing groups, Scenario 3, 2004 and 2009 Appendix: Research Methodology |
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