How bad is the economy and what does that mean for consumer-facing financial firms looking for growth? On the surface, the news isn’t good. 46% of consumers say that their financial situation has deteriorated in the past 12 months. While we would expect wealthier consumers to be faring better than others, the data suggest the relationship is not linear. Consumers with under $25K in total investable assets (“Mass Market”) are indeed the most likely to say their financial condition has worsened. However, the core group of mass affluent consumers – those with $100K-$499K in investable assets – are the least likely to report an improvement in their financial condition.

Who are the mass affluent and what does this finding mean? The anxiety of the mass affluent is driven by their life stage and lifestyle:

• 62% of the mass affluent are between 45 and 65 years old. 23% of them say they are retired.
• The mass affluent are savers and investors. 38% of them save $500 or more each month, 56% of them have a brokerage account, and 79% have an IRA or other retirement account.
• The mass affluent are getting hit harder by declining home values. 36% of them report that the value of their home has declined sharply compared to only 23% among all consumers.
• The mass affluent are retiring regardless of economic conditions. While 12% of the younger pre-affluent group (with between $25K-$99K in investable assets) say they are delaying retirement because of their financial situation, only 2% of the mass affluent plan to delay retirement.
• The mass affluent aren’t cutting back their spending. Only 20% of the mass affluent say their spending has decreased in the past 12 months, compared to 28% of all consumers.

Are these factors important for driving uptake on financial products? Absolutely! The Mass Affluent remain the most likely to be in market for a variety of products. 54% of them have shopped for a financial product in the past 12 months. 31% shopped for a credit card in the past 12 months v. 19% for all consumers.

Moreover, the needs of the mass affluent are becoming more urgent for a few financial products. They are equally or more likely to open several types of accounts than they were 12 months ago, particularly home equity and brokerage/investment accounts.

What this means for financial firms is that despite consumers’ negative feelings about their financial condition, many consumers are still planning for the future, managing their debt and spending and continuing to save and invest.

Recently, Compete posted a blog interview with Jon Swallen, SVP of Research for TNS Media Intelligence. In the blog, Jon details the state of the auto insurance market, which included his view on growth opportunities within car & other vehicle insurance. Jon specifically addressed the growing importance of specialty lines, such as motorcycle, boat, and small commercial auto as private passenger auto business growth slows. We took a look at the online market for these three lines of specialty insurance.

Above is the online share of prospects (consumers that shopped online) for each specialty line between February ’08 and April ’08. While boat insurance holds the largest share at 57% among these specialty lines, motorcycle insurance is experiencing the highest growth. Motorcycle insurance today has only half the share of boat insurance, but online prospects grew by 138% between February and April 2008 v. 35% growth for boat insurance. Over the same period, the online prospect market for small commercial auto insurance declined a modest 8%.

Major insurers are putting a stronger emphasis on motorcycle insurance on their websites and in advertising. GEICO’s homepage (above) prominently displays motorcycle insurance. Allstate has also recently launched its motorcycle-specific, interactive Allstate Garage (below).

The table below shows top destinations from searches for the term “motorcycle insurance.” In line with their prominent placement in search results, GEICO and Progressive dominate search referrals with more than double Allstate’s third place showing.

Motorcycle insurance still represents a small piece of the online insurance market. Compared to prospects for auto insurance between February and April 2008, motorcycle insurance represented less than 2% of total prospects combined. Even so, with gas prices up, more consumers are looking at motorcycles and scooters as a low-cost commuter option. Perhaps this is the reason that there is such a focus on motorcycle insurance these days. It should be interesting to see if it sustains recent growth.

It’s no secret that the economy is currently in a state of flux. Rising oil and gas prices have a way of financially affecting almost every aspect of our lives. The word “recession” has been floating around for the better part of a year now and worried consumers are trying to keep tabs on the financial markets more than ever.

This consumer anxiety becomes apparent when looking into the traffic of the financial sections of popular domains such as yahoo.com, msn.com, and google.com. These sites have seen a great deal of growth over the past year. MSN Money and Yahoo! Finance have had year over year growth of 27% and 77%, respectively. Google Finance has experienced a whopping increase of over 20,000%. Granted this area of Google’s domain was still in its infancy last year, the increase in traffic has been quite steady compounded by a 1,334% jump from May to June of this year. The increase in traffic to these sites is even more fascinating when considering that the largest domain level growth was google.com at 13%. Yahoo.com and msn.com experienced more modest yearly progress with 5% and 3% improvements.

Determining the root cause of the increase in visitors is an inexact science since there is a wide variety of information available when visiting these financial hubs. One trend for Yahoo! Finance is the increase in visitors checking specific stock quotes and tracking custom portfolios. Year-over-year growth in these particular activities has been close to 28% each.

These trends indicate that the online population is increasingly interested in keeping a pulse on not only the financial markets, but on their personal livelihood as well. It is no secret that in troubling financial times people tend to worry about retirement savings and personal investments even though they are long term in nature. Investors just have to remember our history indicates the further we fall, the greater we bounce back.

*** UPDATE*** Since this blog was first posted we have had a chance to revisit the historical data related to Google Finance. We discovered that the trended data dating back to June of 2007 was undercounted which in turn augmented the growth figures reported for this subdomain. Year over year for Google Finance was actually 169% which still indicates a great deal of momentum for this financial hub. This represents growth that is still significantly greater than that of both Yahoo! Finance and MSN Money but to a lesser degree. Below is a revised graph to show this reported change.

In June 2008 Chase launched an innovative marketing program called Chase Exclusive that provided preferred offers to its existing online checking account customers. The campaign promoted “better rates,” “more rewards,” and “bigger discounts” to this group of consumers. Undoubtedly the aim of this program was to increase customer retention and grow the bank’s overall share of wallet amongst its consumer base across multiple product lines.

Michael Cleary, head of product development and marketing for Chase’s consumer bank stated: “We created Chase Exclusives to deepen our relationship by delivering benefits that are real, quantifiable, and immediate.” (Source: Payment News) Cleary later goes on to say that its checking consumers could save $2,000 or more by choosing Chase, rather than a competing bank, for a financial product such as a mortgage, home equity loan, or a CD. The business case for this campaign is predicated on driving high adoption amongst Chase’s customer base for these preferred offers. The cost of providing preferred terms could in fact be less expensive for Chase than the marketing costs associated with driving new consumers towards the bank’s products.

At this point you are probably wondering: Is the Chase Exclusive campaign working? Compete analyzed this campaign from an online perspective. Despite a direct link from Chase’s home page to a dedicated “Chase Exclusives” page (see above), the bank has not yet driven meaningful online traffic to this page. The number of weekly online visitors to the Chase Exclusive page can be seen below.

The campaign is still in its early stages, so it is very likely that site traffic will increase in the future, however at this point the campaign is not driving significant online traffic. This actually might be by design, as visitors to the Chase Exclusives page cannot directly enter into an online application for these preferred product offerings, but rather get redirected to a branch location tool. It appears that shoppers need to go offline to receive the “Chase Exclusives” offers. It will be interesting to monitor whether traffic to this site grows in the future. One could conclude that some visitors to the Chase Exclusives site likely wanted to purchase a product online as opposed to being driven offline. Is Chase losing application volume by not readily enabling an online enrollment process from the “Chase Exclusives” page? Time will tell.

There has been a lot of attention given lately to the credit card aggregation space. Perhaps it is partially based on the success of CreditCards.com which intended to go public earlier this year but withdrew its filing in March due to market volatility. Credit card aggregators provide information on different credit cards on their sites, and then “transfer” those consumers to the issuers’ sites to apply. In the case of CreditCards.com, consumers can select from more than 150 cards by more than 25 issuers.

Below is a look at all credit card prospects during May and June ‘08. The yellow portion of the graph represents the number of prospects visiting the top credit card aggregation sites during May and June 2008 while the blue portion of the graph represents prospects visiting top card issuer sites. As you can see, the credit card aggregation space still represents a small piece (approximately 9%) of the overall space.

CreditCards.com is the dominant player in the credit card aggregator space. In May, CreditCards.com represented approximately 69% of all credit card aggregator prospects. Some credit to their success may be given to the mere fortune of having such a straightforward name as the term “creditcards.com” is the only branded aggregator term to appear among the top ten search terms for aggregators.

However, another factor contributing to Creditcard.com’s top ranking is a 200% increase in marketing spend between January and April ‘08. While CreditCards.com’s search and display advertising is prevalent online, the company has also been ramping up other media spend. Between January and April ’08, it allotted more than half of total media spend to television (Source: TNS Media).

Overall, the aggregator space continues to be a viable alternative for people finding cards online, and CreditCards.com will continue to excel as it continues to ramp its multi-channel marketing spend.

During May, there were up ticks in shoppers for both deposits and home loans, while demand for credit cards slowly angled downward. May performance shows us how rough a year it has been with almost all segments down in terms of year-over-year volume. Even though deposits and home equity have achieved large gains over the previous month, both segments are far from the momentum of last year.

• The credit card industry again saw slow decline from April with a -1% decline in shoppers and a -7% decline in applicants. Conversion also declined 2% over the previous month as the credit card market seems to angle downward.
• Deposits had big gains across both checking and savings (including high yield savings). Shopper volume increased across the board while both Savings and High Yield Savings saw more than 20% gains in terms of applicants. These gains however still fall short of the deposits market a year ago.
• Home Loans took a large step back during May. After posting small gains in April for applications, all three segments took a hit, the largest being a decrease of -38% in refinance mortgage. Even though home equity, purchase, and refinance increased shopper traffic during May, shoppers were less likely to complete any leads or applications.