All I want for Christmas is a direct customer
Our industry has a long track record of building products for unadvised customers – ‘direct to consumer’ propositions. We are inundated with claims of the rising power of consumers, inciting a fear that we are on the cusp of losing our customers to those cheeky disruptors with cool websites and slick videos.
Reasonable concerns couched hysterically, and we aren’t saying it’s entirely wrong (it’s Christmas after all; Scrooge we are not). But who are all these direct customers?
Will the real direct consumer please stand up?
So what is a direct consumer anyway? For today’s purposes we’ll define it as a person who has not taken regulated financial advice (that doesn’t mean they haven’t been on the receiving end of some friendly pointers, or some unregulated ‘help’ / general advice), and that person must also have made an active purchase decision (and not just been signed up by their employer).
Online brokers are awash with such customers. Estimates of customers with active broking accounts range well north of 500,000, and the majority of those people don’t pay for advice from a broker or adviser.
But what about in wealth? After hundreds of millions of dollars of capital expenditure over the years…who are these direct consumers apparently waiting agog for us to put a new superannuation or investment proposition under their noses?
As today’s chart shows that – outside of SMSFs – there just isn’t much professionally managed ‘direct’ money around.
This is in stark contrast to the experience in many offshore markets where the equivalent to Australia’s superannuation system is not nearly as mature (which means it’s up to individuals to independently save and invest). And it raises an important point: if you’re building a direct proposition that isn’t for SMSFs it’s critical to understand exactly who your target customers are.
Fishing in a shallow pool
A good case study showing just how difficult it is to attract direct clients is Kinetic Super.
Following steady decline in its member base, you may remember Kinetic launching an expansive (and no doubt expensive) campaign including rebranding, TV commercials and a slick new website. Recently published numbers reveal that despite this gargantuan effort Kinetic’s member numbers are down from ‘more than 300,000’ to ‘more than 250,000’ since the campaign started (and finished).
The lesson here is: direct customer acquisition is expensive – in terms of dollars as well as reputation. It takes years to get the process humming.
If you are going to target direct, have a clear strategy, a viable proposition and be realistic about acquisition costs.
So the point here is not actually to be the Grinch who stole your direct strategy, but rather to caution when writing ‘direct customer’ down on your Christmas wish list – tread carefully. If you are building a new direct proposition, identify your customer segments before you build and focus on maximising the effectiveness of your customer acquisition spend. The alternative approach – build it and they will come – has been well tested and may end up relying heavily on an overweight man in a red suit climbing down your chimney to grant your wish.