Vulnerable consumers and hardship programs
Retailers across a variety of sectors offer hardship programs to assist consumers who are experiencing vulnerability, from flexible payment options to financial counselling. This practice has seen increased adoption in Australia as a reaction to the pressures placed on consumers by inflation and their use of credit cards and after-pay services.
With the disturbing trend of consumers deliberately under-consuming essentials to reduce costs (the ‘heat-or-eat’ dilemma) both supporting consumers who are in hardship as well as preventing financial vulnerability in the first place have become important considerations for retailers and regulators.
Hardship programs typically try to achieve this by acting not just as a debt collection strategy but as a way for retailers to demonstrate care for their customers. Indeed, the outcomes of hardship programs may even be more impactful than loyalty programs in determining long-term relationships between retail and customers, as our natural aversion to loss causes interest and fines to be remembered more than rewards such as discounts and free products.
As well-meaning as some of these programs may be however, they are often designed in a ‘one-size-fits-all’ approach, such as the price and bill payment strategies common to the energy sector. This approach treats consumers as one homogenous group and overlooks alternative strategies that could assist consumers in avoiding debt in the first place.
This research seeks to better understand the specific attributes associated with consumer vulnerability and propose strategies for hardship programs specifically targeting consumers drawing upon each bundle.
Method and sample
This research uses data from the commonwealth funded Low-Income Energy Efficiency Program (LIEEP), which from 2013 to 2016 trialled and evaluated energy and debt reduction programs across 32,498 households and almost 60,000 individuals. Thematic analyses were conducted on the qualitative responses from participants and researchers in the LIEEP to systematically code data on the basis of the resource-based view (RBV) and the motivation– opportunity–ability (MOA) frameworks to identify and bundle the key resources associated with financial vulnerability.
Key findings
Three key themes emerged from the analysis, linking groups of attributes with consumer vulnerability. These were: connections-attributes; convenience-attributes and security-attributes. Theoretical frameworks were then applied to distil overarching strategies for designing retail services for consumers utilising each collection of attributes.
Connections-attributes:
These attributes related to connection and engagement with others, particularly within an in-group culture such as those in culturally and linguistically diverse peoples, as well as Indigenous peoples. While some of these attributes were associated with greater ability to cope with vulnerability, such as community connectivity, some attributes such as low trust for out-group cultures and low familiarity with specific retail systems (in this instance, understanding what behaviours result in higher energy bills) intensified vulnerability. Particularly when the individual had previously been exposed to discrimination from service providers, attributes associated with vulnerability such as low institutional trust were more likely to emerge.
The theoretical framework suggests that addressing vulnerability for individuals with these attributes should focus on the role of community ‘connectors’ such as trusted organisations or opinion-leaders, which provide a social license to retailers that otherwise struggle to overcome perceptions of marginalization and distrust.
Convenience-attributes:
These attributes relate to the need for convenience arising from inflexible constraints, such as being time poor due to work life balance, the demands of young families, and fixed costs such as renting that restrict the ability to make structural changes in lifestyle or expenses.
Some aspects of these attributes resulted in strengths, such as increased digital savviness to maximise social experience despite these constraints. However, many increased susceptibilities to financial vulnerability due to both inflexible finances and the limits on time to conduct adequate information searches to make an informed financial decision.
This research suggests that retailers support consumers with these attributes by communicating effectively and efficiently in their language, typically in a digital language. Proactive technology-based hardship programs provide the immediacy and responsiveness that is necessary to reach these time poor consumers.
Security-attributes:
These attributes represent individuals, such as pensioners, driven to seek security, typically due to some insecurity factor such as advanced age. These consumers had some factors such as valuable assets (often owning their own, older, home) and higher levels of institutional trust that helped to reduce their financial vulnerability. However, as many were retired with low cash flow, and had limited access to information regarding financial services and retail systems, they still found themselves struggling to meet their financial obligations to retailers.
This combination of attributes often leads to individuals to adopt a ‘thrift’ mindset, going without essentials to feel secure in paying bills and protecting their assets. Despite often feeling stressed and confused by financial vulnerability, they are also unlikely to complain or seek out solutions to their vulnerability.
In reaching these consumers, this research suggests that a ‘high-touch’ communication approach; proactive, personalised and face to face, is necessary to build feelings of security and overcome high levels of anxiety around decision making. This can be facilitated through intermediary support services, such as home and community care networks, building on these consumers’ existing trust in community.
Recommendations
Overall, the findings suggest different drivers of independence behaviour for YAWDs with high and low social support. These findings have several managerial implications to help increase the independence and thus well-being of vulnerable consumers.
For vulnerable consumers with high social support, marketers should develop approaches to increase their control over a given situation. These approaches could be showing successful journeys; focusing on ways to solve problems arising along the journey, such as by including links to real time traffic information or encouraging engagement with other travellers; showing services in action to demonstrate how the service could be used; highlighting the functionality incorporated into public transport designs to show how they could benefit from the services offered. When integrated with a social media campaign, the campaign should provide links to different tools available to help vulnerable consumers with journey planning and problem solving. It could also incorporate a live chat functionality with service providers or consumers with lived experiences. The anticipated positive emotions, such as satisfaction and gratification, resulting from travelling independently should also be highlighted, as these can also drive positive attitudes to independent behaviour.
For vulnerable consumers with low social support, marketers should mitigate their risk aversion, as this impacts their negative emotions, attitude, and behaviour. Since addressing all elements in this pathway is too much for one marketing campaign, it is recommended to focus on individual elements in the pathway to continually strengthen it. For example, campaigns could show mobility in action with methods for problem solving to reduce perceived risk or show successful journeys to elicit a sense of satisfaction and minimise negative emotions.
For both groups with high and low social support, information about how to access transport and the types of options available could be provided, in the form of active training and mentoring or scenario style experiences using virtual reality or 3D designs. Moreover, internal marketing campaigns within organisations, such as government, transport and disability support providers are important to help employees understand the lived experiences of those with disabilities.
Conclusions
In identifying attributes associated with financial vulnerability, this research highlights the importance of tailoring hardship strategies to specific target audiences. By moving beyond the idea of consumer vulnerability being a single phenomenon, but rather an outcome experienced differently by consumer groups, retailers can better support and build relationships with customers. As different audiences have different attributes, identifying which areas of deficiency exist in any given target audience can inform the strategies most appropriate to both support customers through hardship, but also to minimise or eliminate triggering vulnerability in the first place.
Researcher
More information
The research article is also available on eprints.