Study: Motivations Of The Affluent Differ When Choosing Products

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Top agents make a point of getting to know their clients so they can offer the most appropriate products. Top companies help their agents do this so they can design products that address specific needs, thereby remaining competitive.

Results of a new study of the affluent market can be used as part of the process, says Robert Baranoff, vice president and director of research, LIMRA, Windsor, Conn.

“Were institutionalizing what the best producers have always done,” Baranoff says. “They took the time to know the motivations of their client; this (analysis) broadens that effective tool.”

“Strategies for the Affluent Market,” the study done by LIMRA with McKinsey & Company, a management consulting firm, divides the affluent market into six “aspirational” groups.

LIMRA used a statistical cluster analysis to segment more than 700 wealthy consumers with inquiries on how they want to spend their time, including questions on whether they want a second career or to go back to school, and how they want to use their money, with questions on charitable giving and whether they want to leave money to their children.

The groups represent the basic motivations behind the choices people make when buying financial products, according to LIMRA.

The six segments are:

–Deserving connoisseurs, people who feel they deserve the best of everything;

–Leisure seekers, people who want to do more of what they enjoy;

–Mainstream wealthy, those who maintain a level of fiscal prudence to ensure a financially stable future;

–Family providers, people who want to leave everything to their children;

–Work-engrossed, people who identify with their career and perceive money as security; and

–Explorers, those who feel they can do whatever they choose to do with their life.

“Historically, companies have focused on assets and age, but people who have the same level of assets can have very different feelings of how to use those assets,” Baranoff says. “So the idea is to create a fact-finding tool that gives the agents questions to ask early on that will enable the agent to pinpoint what segment the prospect fits into.”

Among the benefits of using aspirational segmentation is that it allows for a more insightful, and therefore more effective, mode of pricing, the study says. This is because it can be based on price sensitivity, fee structure preference and tiered service requirements, since tailored products require more service at the company level, as opposed to pricing strategies based on traditional segmentation, which is informed solely by an individuals asset level, according to the study.

Because aspirational segmentation gives a company insight into clients behavioral differences, a company using this tool is able to calculate specific profit potential, according to the study. Using traditional segmentation, a company can only calculate potential revenues.

A tailored approach to products and sales, matching individual needs as opposed to a “one-size-fits-all” approach, is the basic premise of aspirational versus traditional segmentation, according to the study.

Understanding behavior can also help an agent decide how to attempt to acquire a new client. The study indicates the percentage of each group according to how the client/agent relationship was established.

The percentage breakdown of those who came to the relationship through a referral was 50% of deserving connoisseurs; 43% of leisure seekers; 42% of mainstream wealthy clients; 42% of family providers; 22% of work-engrossed; 36% of explorers.

Those who came to the relationship through advertising or seminars broke down as follows: deserving connoisseurs, 22%; leisure seekers, 14%; mainstream wealthy clients, 21%; family providers, 7%; work-engrossed, 11%; explorers, 22%.

Those who came to the relationship through family or work contacts broke down as follows: deserving connoisseurs, 30%; leisure seekers, 32%; mainstream wealthy clients, 39%; family providers, 35%; work-engrossed, 59%; explorers, 40%.

The analysis also shows the percentage of each group that stays with an advisor for six years or more: 77% of work-engrossed; 40% of leisure-seekers; 35% of deserving connoisseurs; 33% of mainstream wealthy; 30% of family providers; and 15% of explorers. Some 75% of explorers stay with an advisor from three to five years as do 54% of deserving connoisseurs; 52% of family providers; 40% of leisure seekers; 37% of mainstream wealthy and 18% of work-engrossed.

The study also finds that 71% of family providers invest more of their assets in financial institutions as a result of a financial plan as do 61% of explorers; 54% of leisure seekers; 53% of mainstream wealthy; 43% of deserving connoisseurs; and 24% of work-engrossed.

According to the study, the breakdown of those who own individual life insurance paid for by themselves is as follows: 92% of mainstream wealthy and work-engrossed consumers; 68% of family provider and explorer consumers; 65% of deserving connoisseurs; and 60% of leisure seekers.

Among the other findings of the study are that “an institutionalized referral program would be far more effective and less expensive than traditional mass marketing customer acquisition methods.”

The study also found that “behaviors and attitudes drastically differ among people with similar wealth. Aspirational segmentation leverages segment-specific preferences to tailor sales approaches, products and marketing messages.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, January 28, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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