The way consumers buy things is changing for ever and, like other distribution outlets, if we choose to ignore the realities of consumer trends and buying habits, then we do so at our peril.
Every day, more and more people are buying, or at least committing to buy, things online but for businesses, simply having a presence online in itself is not an answer. Online propositions have to be, and are expected to be, different from those in the high street.
To encourage customers to buy online, many businesses have aggressively marketed “special” or “discounted” terms, to the extent that now everyone expects buying online to be cheaper than buying offline. However, more and more customers have started to, what I call “Google” a lot of things they buy online.
By Googling, I mean that before they buy they go to all the usual sales outlets for the things they want, they get all the usual sale banter but they also get the facts they need to help them refine their requirements and adjust their purchasing decisions. Then they connect to the web and key the details of the thing they are about to buy into Google to see what other retailers/distributors are prepared to sell that thing for.
The people I have spoken to who buy like this say they always get the thing they want at a better price. They also tell me that they never go back to the original retailer that wanted to charge them more because “they've had their chance”.
As a group, they also say that they tend not to trust the people that market themselves as prepared to beat any better price you find. They say it smacks of: “Well, if I'd known you were a smart customer I would never have tried to charge you so much.”
Of course, it isn't possible to Google every purchase. Some items are too low in cost to bother with and other purchases are convenience “here and now” buys or are emotionally driven but it is a fact that a good number of financial services products are a good fit for Googling. Regulation and/or the regimentation required by comparison and quotation engines has resulted in the majority of FS products being very well defined and this is particularly so for protection products.
There will always be those that say these products are too complicated for customers to buy and that somehow customers are misbuying. However, most customers can just as easily key male, 06/11/1964, non-smoker, £150,000, level term, no waiver and 25 years into a website (having been advised this is what they should have) as easily as they can VW Golf, 1.6, GTI, leather interior, alloy wheels with air con and blue. Thereafter, it all comes down to price, where the lowest bid secures the customer.
The web has opened up the world to make our commercial activities far more comparable with others, with many businesses now simply positioning themselves as transactional vehicles for knowledgeable customers. Of course, the doomsday scenario is that this change in consumer behaviour will demolish traditional advice-based businesses and eventually this will lead to less knowledgeable customers – then where will they go to for advice before buying?
Big companies argue that brand can play an imp-ortant role and I believe that it can but as I look around me, I do not see an IFA intermediary brand that consumers across the UK recognise and trust (and I do mean brand, not simply a familiar name or logo). In fact, I see companies such as Tesco applying their brand values to our markets and proving to be very successful.
Personally, I am not so sure that there is very much that local advisers can really do about the habits of customers although I am confident that there remain one or two product areas where customers cannot easily distinguish between the terms that are offered, the main one being mortgages.
With the vast majority of protection products being sold as part of a house buying or refinancing package, there remains a degree of hope for some advisers – as for the specialist protection writers – you will just have to build a UK-wide brand with understandable consumer values or accept that you will always have to be the cheapest if you really want to survive the bubble.
Richard Verdin is sales and marketing director of Direct Life & Pensions