The lead taken by Internet players offering financial services will be challenged this year as traditional financial institutions leverage offline relationships to build their online appeal and tap into life-stage marketing to improve targeting, according to a new study from Internet research firm CyberDialogue, New York, and consultant Booz, Allen & Hamilton, McLean, VA.
CyberDialogue, which measures Web usage in a variety of industry categories, has found that two of five adults online — or 27 million cybercitizens — use the Web to obtain information and services for investing, banking and insurance. Of this group, almost one-third turn to personalized investment management services from online brands like AOL Personal Finance, Quicken.com and Yahoo Finance.
“In general, financial services are behind a lot of the other brands in terms of harnessing the Internet,” said Mike Weiksner, CyberDialogue financial strategies analyst. “They thought maybe [online investing] is a fad that will go away, but the Internet will end up showing how consumer-centric and valuable customer relationships are.”
Traditional providers enjoy the advantage of large customer bases but must learn how to integrate the Internet into their offerings. According to the recently completed Cybercitizen Finance Survey, only 13 percent with existing offline relationships would switch to an online provider while 52 percent would use the same provider online as offline.
From extensive interviews with 1,000 Internet users and 500 non-users, the survey has identified behavior patterns and preferences for the online research and purchase of banking, insurance, credit card, loan and investment products. Cybercitizens, the survey found, are financially more active than adults in general in online banking (12 percent use it vs. 4 percent of all adults), credit card usage and spending (81 percent vs. 65 percent with monthly charges of $756 vs. $560), investing (75 percent vs. 62 percent), and the purchase of life insurance (73 percent vs. 69 percent).
The most effective way to reach prospects online is to position offers at sites and through channels that relate to life-stage purchases such as buying a home or car, changing jobs or putting a child through college, according to the survey. This is best accomplished through partnerships with real estate agent or auto dealer/auto search sites rather than advertising.
“We're extremely bearish on advertising,” Weiksner said. “There is much more value in partnership arrangements. These need to be integrated into the Web site where they allow people to go back and forth between a loan provider and car dealer.”
Partnerships can be bundled in a way that creates value for an affinity group, such as car buyers, while avoiding pricing pressure. Weiksner said insurance providers on an auto site don't have to offer the lowest rates because they are offering the best service by making the purchase convenient to the customer. By creating this supplier chain of sites, financial services companies present their message to groups in a buying mode.
Financial services companies need to convince life-stage Web sites that they will be value added partners, Weiksner said. An auto dealership may not be able to afford to keep a qualified loan/insurance expert on site, but it can provide that expertise to buyers by enlisting Web partners that specialize in those areas.
A brief culled from survey results outlines specific strategies to reach consumers based on their life stage:
* New parents spend less time online than the average Cybercitizen and use most of their time (64 percent) seeking product information. They also have a higher propensity than offline consumers (41 vs. 25 percent) to purchase a PC. Financial services clients can capture the attention of this group by partnering with sites related to babies, computers, travel, software, books and music.
* Parents putting a child through college are the most financially active of all Cybercitizens and have the highest net income and net worth yet spend less time online than the average adult and tend to get their financial information by offline means. They can be targeted through sites that link to offline programming like MSN for CNBC and CNNfn. They can also be reached through offers to their children, who spend more time on game sites and in chat rooms than the average Cybercitizen.
“Offer kids going into college special banking products,” Weiksner said, “Having the buzz around them, parents would see the neat things children were doing with their accounts. It's the word of mouth effect where the kids are the referral and the parents would be the profitable relationship.”