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New Product Penetration

Despite the fact that Basic Advice is a low-cost, easily accessed product, in the two years since it was introduced the take up appears to have been very low. Why?

Almost one in 10 adults in Britain do not use mainstream financial services, and most of these are not in paid employment. However, most people without paid work do have bank accounts. Two hypotheses have been put forward to account for this minority without accounts: (i) reluctance by financial institutions to serve low-income customers; or (ii) information failure on the part of non-consumers.

Volterra’s modelling has shown that non-consumers of financial services are distinguishable from consumers only by belonging to social networks where financial services usage is relatively low. This supports the information failure hypothesis, in that decision makers often pay attention to each other when choosing between alternative courses of action.  This is especially so when there is limited information about the problem and/or limited ability to process even the information that is available – which describes well the decision to use financial services for the first time.

Using survey data from the ONS, our modelling has also shown that a small world network best describes the way in which information and influence affect people’s decisions in this market. Since it is difficult for changes in behavioural rules to percolate across small world networks, information failure is likely to persist and people who have not taken up the Basic Advice product are unlikely to switch.

These results imply that take-up will remain low, and that conventional marketing techniques are unlikely to change this outcome. Marketing strategies that recognise the specific features of the small world network may, however, be able to trigger a cascade of behavioural change and improved uptake of the product.