What Bank Marketers Should Know About The Fed’s Survey of Consumer Finances

According to a recent Federal Reserve Bulletin:

“The Federal Reserve Board’s triennial Survey of Consumer Finances (SCF) collects information about family incomes, net worth, balance sheet components, credit use, and other financial outcomes. The 2013 SCF reveals substantial disparities in the evolution of income and net worth since the previous time the survey was conducted, in 2010.”

In addition to providing information that will be conveniently overlooked by Democrats in the next presidential election, there is data that should be of interest to bank marketers, regardless of their political affiliation.

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One of the more interesting shifts (from a marketer’s perspective, that is) is the change in sources of information used by consumers to make decisions about borrowing and investing:

BORROWING                          2007   2010   2013
Friends, relatives, associates      46%    44%    46%
Advertisements and media            43%    34%    29%
Bankers, brokers, other sellers     39%    40%    42%
Internet                            38%    42%    47%
Calling around                      33%    27%    25%
Lawyers, accountants, advisors      20%    22%    22%
INVESTING                          2007   2010   2013
Friends, relatives, associates      42%    41%    41%
Bankers, brokers, other sellers     38%    39%    38%
Advertisements and media            30%    26%    21%
Lawyers, accountants, advisors      29%    31%    32%
Internet                            28%    33%    35%
Calling around                      18%    16%    13%
Source: Federal Reserve Survey of Consumer Finances, 2014
 
For borrowing decisions, fewer consumers “called around” in 2013 than in 2007. Doesn’t really surprise me, considering Gen Yers likely became the dominant group of borrowers over that six-year period, and I’m pretty sure no one in that generation knows how to use a phone for voice-based conversations.
 
The drop in use of advertisements and media as a source of information is significant, and has not gone unnoticed as banks and credit unions have shifted marketing dollars–and continue to shift them–away from traditional media sources.
 
On the investing side, the direction of the trends are consistent with borrowing, although the starting and ending percentages differ.
 
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The implication for marketing isn’t so clear cut, though.
 
Advertisements and media may be cited as a source of information by far fewer consumer today than in the past, but that doesn’t mean that advertisements and media aren’t an effective method for generating awareness or positive affinity.
 
What’s not clear from the Fed Reserve Bulletin is exactly what the SCF asked participants (the questions may be available somewhere online, will have to go look for them). What’s implied in is that the survey asked what sources of information were used for “information about borrowing (or lending).” That could mean a lot of things.
 
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The other thing that strikes me as important here are the percentages of people who cited “friends, relatives, or associates” as sources of information. The percentages are, by no means, surprising, nor is the fact that the percentages remained relatively consistent over the time periods.
 
What’s surprising–alarming may be a better word–is how few financial institutions do anything about word-of-mouth referrals. I don’t have data on this, but very few of the FIs that I talk to track referrals (net promoter stuff does not count as tracking referrals).
 
The SCF data isn’t just about positive referrals–it captures negative ones, as well. If so many people rely on word-of-mouth for information about borrowing and investing, shouldn’t marketers have better insights into what’s being said?
 
You know how beer brands give bars coasters with the brand’s logo on it? Maybe FIs should give out coasters with “talking points” or “conversation starters” for customers to use at their cocktail parties or cookouts.
 
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Another interesting data point in the SCF captured what the Fed calls “intensity of shopping,” which asked respondents to indicate whether they shopped “a great deal,” “a moderate amount,” or “almost none” when making borrowing and investing decisions.
 
Again, without access to the survey question itself, it’s tough to interpret  the findings, which showed that, in both product categories, the percentage of respondents who said they shopped a “great deal” inched up from 2007 and 2010, and again from 2010 to 2013.
 
“Intensity” of shopping is an interesting concept, but the SCF data needs more granularity or more transparency (or both) to be more useful to marketers.

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