They are the “affluent" or “mass affluent" and every retail bank in the country would rank them as a top priority.
"No one bank in Australia leads the way in a segment that represents about 20 per cent of the customer base but accounts for more than 60 per cent of personal banking profits."
Maxim SharshunSenior Associate at Strategy&
Banks have spent millions of dollars developing premium products and services, yet no one bank in Australia is leading the way in a segment that represents about 20 per cent of the customer base but accounts for more than 60 per cent of personal banking profits.
The affluent segment has effectively slipped through the cracks between commoditised mass market offerings and the highly personalised private banking-like model that serves the High Net Worth (HNW) segment.
This is particularly perplexing as the attraction of the “mass affluent" sector – and it has gone under several names – has been identified as a key segment for well over a decade and Australian banks have tried multiple strategies to win these prime customers. With limited success so far.
Part of the problem is the segment's diversity. From young professionals to “trust fund kids" to successful small business owners, this segment has many faces. However, despite their differences they share some important common traits: they tend to be well educated, technologically savvy and time-poor, focussed more on value than price, driven by lifestyle and conscious of status.
To be relevant to this segment, the banks need a value proposition that caters to these common traits. An 'affluent eco-system' – a sustainable and mutually rewarding tie-in between the bank and its customers, comprised of products, channels, experiences and relationships – might be the mechanism that can both facilitate customer acquisition and support retention in this segment.
At Strategy& we have identified three reinforcing sources of value to which an affluent eco-system should be aligned:
- Banking on my terms – focuses on getting the basics right but in a way that overtly demonstrates the bank's core services recognise the value of an affluent customer's time.
- Exclusivity and recognition – creates market pull by making the customer feel special with access to products and services not everyone can get.
- Community and lifestyle – building premium sustainable tie-ins which take the value proposition beyond the traditional stable of banking products.