The financial services cultural orientation matrix

Australasian Marketing Journal 21 (2013) 1–9

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The financial services cultural orientation matrix Deborah Stephenson a, Steve Worthington b,1, Rebekah Russell-Bennett a,⇑ a b

School of Advertising Marketing and Public Relations, QUT Business School, Queensland University of Technology, Brisbane, Queensland, Australia Department of Marketing, Monash University, Melbourne, Australia

a r t i c l e

i n f o

Article history: Received 24 October 2011 Revised 1 June 2012 Accepted 3 July 2012 Available online 10 October 2012 Keywords: Financial services Culture Marketing strategies Market entry

a b s t r a c t With saturation within domestic marketplaces and increased growth opportunities overseas, many financial service providers are investing in foreign markets. However, cultural attitudes towards money can present market entry challenges to financial service providers. The industry would therefore benefit from a strategic model that helps to align financial marketing mixes with the cultural dimensions of a foreign market. The Financial Services Cultural Orientation (FSCO) Matrix has therefore been designed, with three cultural dimensions identified which influence preference for financial products; preference for cash, aversion to debt and savings orientation. Based on a combination of these dimensions and their relative strength within a culture, eight different consumer segments for financial products are identified, and marketing strategies for each consumer segment are then proposed. Three cultural clusters from the GLOBE Project House et al. (2002) are used to highlight possible geographic markets for each of these consumer segments. In particular, this paper focuses on GLOBE’s Confucian Asia, Southern Asia and Anglo cultural clusters, as these clusters represent the most well established financial markets in the world and the fastest growing financial markets for the future. The FSCO Matrix provides the financial services industry with an innovative and practical tool for addressing cross-cultural challenges and developing successful marketing strategies for entry into foreign markets. Ó 2012 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved.

1. Introduction Corporations are facing an increasingly global business world (Javidan and House, 2002) and Saturation in the domestic market and increased growth opportunities overseas are encouraging many financial service providers to invest in foreign markets. As an example following China’s entry into the World Trade Organization in 2001, major United States (US) and European banks made inroads into the Chinese credit card market as part of their efforts to strengthen their retail banking business (Mollet, 2004). With domestic growth stagnating in the early 2000s, Japan Credit Bureau (JCB), the largest credit card brand in Japan, has expanded into China by forming an alliance with the Bank of China (Mollet, 2004). More recently, India has also started to open up its financial sector to foreign investment. Credit Suisse recently received in-principle approval for a banking license in India, with other global players now lined up for entry, including Goldman Sachs, Morgan Stanley, ICBC and National Australia Bank (Leahy, 2010; The Financial Express, 2010). ⇑ Corresponding author. Tel.: +61 7 3138 2894; fax: +61 7 3138 1811. E-mail addresses: [email protected] (D. Stephenson), steve.worthington@ buseco.monash.edu.au (S. Worthington), [email protected] (R. Russell-Bennett). 1 Tel.: + 61 3 9903 2754; fax: + 61 3 9903 2900.

However, entry into a new financial market is challenging, as consumer culture influences the success or failure of specific products (Solomon et al., 2007). Culture is the accumulation of shared meanings, rituals, norms and traditions among the members of a society and ‘‘consumption choices simply cannot be understood without considering the cultural context in which they are made: culture is the ‘lens’ through which people view products’’ (Solomon et al., 2007, p. 468). However the whole area of consumer culture theory (CCT) is not, ‘a unified, grand theory, nor does it aspire to such nomothetic claims’ (Arnould and Thompson, 2005). Nonetheless these authors claim that CCT researchers share a common theoretical orientation towards the study of cultural complexity, that links their research efforts. Furthermore CCT theorists study consumption in its contexts, in order to generate new constructs and theoretical insights. These research aspirations have highlighted that the ‘real world’ for any given consumer, is neither unified, monolithic nor transparently rational. This research ‘lens’ then leads to the proposition that cultural attitudes toward money, present challenges in marketing financial products, within foreign markets. In China, for example, negative perceptions of borrowing through formal channels have created a resistance to bank loans (Worthington, 2010). Instead, Chinese consumers prefer to borrow through family and friends and tend to pay cash, even for ‘big ticket’ items, such as cars and houses (Worthington, 2010). More

1441-3582/$ - see front matter Ó 2012 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.ausmj.2012.07.001

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recent research (Worthington et al., 2011) into credit cards in a Chinese cultural context has focused on the attitudes of the young, affluent Chinese, to the adoption and subsequent use of credit cards. This study highlighted the notion of guilt felt in China when using credit cards instead of cash. The research also introduced the term ’future money’ to describe the pay later facility that a credit card offers. Another aspect favoring the continued use of cash in this culture is that it is a means of signaling wealth, which is an important status aspect in China and this was thought to influence the relatively low level of credit card use in China. The research also revealed a generational issue that was believed to impede credit card adoption. Thus whilst most of the respondents in the qualitative phase of the research, felt that they belonged to a new generation, one that is different to that of their parents and grandparents, nevertheless, the young affluent Chinese, still felt guilty using ‘future money’ and spending rather than saving. Indeed earlier research by Smith and Hill (2009), found that whilst there had been recent rapid socio-economic change within China, there was evidence to suggest strong value system continuity, hence the young, affluent Chinese tend to gravitate towards the familiar, whilst generally resisting that which is unfamiliar. As a basic marketing rule, financial service providers must understand the attitudes of their customers to better tailor their marketing and communication programs (Kanyak and Harcar, 2001). Different cultural attitudes toward financial products may therefore require changes to the marketing mix, such as new branding and positioning strategies, new product developments or new incentive schemes. Previous academic literature has explored the different cultural perceptions of money around the world (Al-Moharby and Khatib, 2007; Bonsu, 2008; Chui and Kwok, 2008; Falicov, 2001; Kwok and Tadesse, 2006). However, few studies have addressed how the current state of financial services within a market has been influenced by the cultural attitudes towards money. A theoretical framework has also yet to be developed that explains what impact different cultural perceptions of money have on the consumption of financial products. This information would be useful for financial service providers looking to expand into new foreign markets. Financial institutions need a strategic model that helps align their product offerings with the cultural dimensions of a foreign market. Cultural dimensions are a useful way of classifying behavior and identifying market segments. Three cultural dimensions have been identified in this paper as relevant to the consumption of financial products. Using these dimensions, this paper will present a conceptual strategy matrix for financial institutions, profiling eight consumer segments for financial products. The Financial Services Cultural Orientation (FSCO) Matrix will outline the financial

preferences for each of the consumer segments and propose effective marketing strategies for reaching them.

2. Literature Review The purpose of the literature review is to present a conceptual background to the FSCO Matrix that will be presented. The FSCO Matrix has been designed using three major cultural dimensions identified in the literature as having an effect on the consumption of financial products in foreign markets. These three cultural dimensions will help financial service providers to understand how cross-cultural influences can impact on their marketing strategies (Assael et al., 2007). Cultural clusters identified in the GLOBE Project (House et al., 2002) are used to highlight possible geographic markets where each consumer segment of the FSCO Matrix may be found. The financial services industry is one that has evolved over centuries, from the clay tokens of Ancient Mesopotamia 5000 years ago, to the hedge funds of today (Ferguson, 2008). This long history makes the financial services industry a mature market that needs to continuously expand in order to grow. Historically, western financial institutions have undertaken this expansion, often through entry into eastern markets. The western financial model was first spread in the guise of imperialism and then through globalization (Ferguson, 2008). However, ‘‘the globalization of finance has now. . .blurred the old distinction between developed and emerging markets, turning China into America’s banker- the Communist creditor to the capitalist debtor’’ (Ferguson, 2008, p. 4). The economic development of eastern countries has seen many eastern financial institutions now entering western markets. In 2009, China Construction Bank opened its first branch in the US, joining four other Chinese banks already present within this market (The Information Company, 2009). The China Construction Bank’s entry into a western market demonstrates that the tradition of western financial institutions entering eastern markets is fast becoming obsolete and that, whilst cultural factors may influence consumer demand, foreign market entry is no longer bound by tradition. The GLOBE Project (House et al., 2002) has been selected as a relevant theoretical framework to guide research into the cultural perceptions of money within two targeted cultural clusters. The GLOBE Project, the most recent global attempt to classify cultural differences, studied sixty-one nations and grouped them into ten cultural clusters based on their similarities along nine dimensions. GLOBE is considered by many academics to offer superior benefits

Table 1 Nine cultural dimensions of GLOBE Project. 1. Uncertainty Avoidance 2. Power Distance 3. Collectivism I

4. 5. 6. 7.

Collectivism II Gender Egalitarianism Assertiveness Future Orientation

8. Performance Orientation 9. Humane Orientation

The extent to which members of an organization or society strive to avoid uncertainty by reliance on social norms, rituals, and bureaucratic practices to alleviate the unpredictability of future events The degree to which members of an organization or society expect and agree that power should be unequally shared. Societal Collectivism reflects the degree to which organizational and societal institutional practices encourage and reward collective distribution of resources and collective action. Low scores reflect individualistic emphasis and high scores reflect collectivistic emphasis by means of laws, social programs or institutional practices. In-Group Collectivism reflects the degree to which individuals express pride, loyalty and cohesiveness in their organizations or families. The extent to which an organization or a society minimizes gender role differences and gender discrimination. The degree to which individuals in organizations or societies are assertive, confrontational, and aggressive in social relationships* The degree to which individuals in organizations or societies engage in future-oriented behaviors such as planning, investing in the future, and delaying gratification. The extent to which an organization or society encourages and rewards group members for performance improvement and excellence. (This dimension includes the future oriented component of the dimension called Confucian Dynamism by Hofstede and Bond, 1988). The degree to which individuals in organizations or societies encourage and reward individuals for being fair, altruistic, friendly, generous, caring, and kind to others. (This dimension is similar to the dimension labeled Kind Heartedness by Hofstede and Bond, 1988).

(House et al., 2002, p. 6). The first six culture dimensions had their origins in the dimensions of culture identified by Hofstede (1980). The first three scales are intended to reflect the same constructs as Hofstede’s dimensions labeled Uncertainty Avoidance, Power Distance, and Individualism.

*

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D. Stephenson et al. / Australasian Marketing Journal 21 (2013) 1–9 Table 2 GLOBE Project’s cultural clusters. Cultural cluster

Countries

Southern Asia Confucian Asia Anglo

India, Indonesia, Philippines, Malaysia, Thailand, Iran Taiwan, Singapore, Hong Kong, South Korea, China, Japan England, Australia, Canada, New Zealand, Ireland, USA.

Source: House et al. (2002).

to Hofstede’s (1980) cultural factors (Javidan et al., 2006; Smith, 2006). GLOBE’s cultural clusters can provide useful information to financial service providers, who may find it less risky and more profitable to expand into similar cultures to their own, rather than those that are drastically different (Javidan and House, 2002). The definitions of the nine dimensions are shown in Table 1. This paper will focus on the expansion of financial institutions in Anglo countries into foreign markets belonging to GLOBE’s Southern Asia and Confucian Asia cultural clusters (see Table 2). These two clusters offer some of the greatest future growth opportunities in the world for both eastern and western financial service providers. The Indian credit card market, for example, is growing at an annual rate of 35% (Euromonitor International, 2010b). Many financial institutions from GLOBE’s Anglo cluster are therefore increasing their presence within this market. Recently the, Australian and New Zealand (ANZ) bank received approval for a banking licence in India, with other global names also lined up for entry, including Goldman Sachs, Morgan Stanley and National Australia Bank (Leahy, 2010; The Financial Express, 2010). The growing importance of these two cultural clusters to the financial services industry makes it essential to understand their cultural orientation in order to succeed within them (Gupta et al., 2002a). Henry (2010), makes the point in his review of consumer rights and responsibilities in the credit card setting, that this requires constant trade-offs that mirror the struggle between liberal and libertarian political positions, that dominate the GLOBE ‘s Anglo cluster. In the Southern Asian and Confucian Asian clusters, there may well be other political positions that need to be understood and dealt with, if market entry is to be successfully achieved. 3. Cultural dimensions that influence the consumption of financial products From the literature and industry evidence, three important cultural dimensions have emerged as having a significant influence on the consumption of financial products (refer to Fig. 1). These dimensions are preference for cash (Worthington, 2005; Euromonitor International, 2010b), aversion to debt (Shintani, 2000; Euromonitor International, 2010b) and the overall importance placed upon saving (savings orientation) (Terpstra and Sarathy, 2000; Beck & Webb, 2003). These three dimensions are relevant to the consumption of financial products across all cultures and are not limited to the specific cultural explorations of this paper. Thus cultures that possess high and low levels of each dimension are shown in Table 3. The literature and industry evidence for cultural perceptions of money and the impact on financial service offerings are shown in Table 3. An analysis of this research revealed three dominant ultural dimensions relevant to financial services; preference for cash, aversion to debt and savings orientation. Culture can be used to explain the cross-country variation of life insurance consumption. Kwok and Tadesse (2006) find that individualism has a positive effect on the consumption of market-based life insurance, whilst collectivist cultures are more likely to rely on the support of their social networks. The low uptake of life insurance in the Philippines, classified within GLOBE’s Southern Asia cluster, which scored high on group collectivism, further supports these findings

Preference for cash

Aversion to debt

Savings orientation

Consumption of financial products

Fig. 1. Cultural impacts on the adoption of financial products in foreign markets.

(Valerio, 2010; Gupta et al., 2002a). The strong collectivist culture of China has meant that many consumers often seek financial support through informal channels, such as family and friends, resulting in a very underdeveloped tradition of credit, with banks seen mainly as a place for saving (Worthington, 2005). Other literature discusses the role of cash within cultures and the over-riding preference for this payment method over others. Worthington (1998) compares the financial payment preferences of Japan and the UK, finding that whilst the UK has become one of the most card-centric countries in the world, cash still remains the predominate mode for transactions in Japan. Strong preferences for cash are also still prevalent within China, where consumers will always carry enough cash with them to avoid losing face if their credit card or debit card is rejected (Worthington, 2005). The cultural perception of money in China has led to an aversion to debt and borrowing, with a strong emphasis placed on saving and living within ones means (Worthington, 2005; Thompson and Worthington, 2010). Negative perceptions of debt have presented similar obstacles in Japan to the widespread use of credit cards (Shintani, 2000). Other examples of how the perception of money impacts on financial product offerings is presented in Table 3. 3.1. Dimension 1: Preference for cash One of the predominant cultural influences affecting the consumption of financial products is the preference for cash (payment through the physical forms of money, such as notes or coins) within a culture. In some cultures there is still an over-riding preference for cash over other forms of payment, which has negatively influenced the uptake and use of more advanced financial products such as credit cards (Worthington, 2005; Worthington, 1998; Shapiro, 1993). Preference for cash appears to be driven by a trust in this commodity, or perhaps a lack of trust in the alternatives or institutions (Euromonitor International, 2010c; Thompson and Worthington, 2010; Worthington, 2005). Cultures that demonstrate a high preference for cash also appear to have high uncertainty avoidance (Worthington, 2005). A preference for cash may manifest a reliance on social norms, rituals, and bureaucratic practices to alleviate the unpredictability of future events (House et al., 2002). Trust in cash, and its historical presence within a culture, means that its relevance may remain strong. Many older Iranians, for example, are still attached to cash and seeing the physical transaction of money (Euromonitor International, 2010c). Furthermore, many Chinese consumers will always carry enough cash with them to avoid losing face if their credit card or debit card is rejected (Worthington, 2005). Financial service providers need to be aware of an underlying cultural preference for cash, as this may dictate what financial products will be accepted in the market. 3.2. Dimension 2: Aversion to debt An aversion to debt is a significant cultural factor that can affect the consumption of financial products. Negative perceptions of

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Table 3 Cultural perceptions of money and impact on financial service offerings. Cultural Dimension

Financial product

Country

Financial consumption impact

Reference

Aversion to debt

Credit cards

China

Aversion to debt

Credit cards

Japan

Worthington, 2005; Gong, 2003 Shintani, 2000; Worthington, 1998

Aversion to debt

Other loans

China

Aversion to debt

Life insurance

Various

Aversion to debt

Mortgages

UK (Islamic sub-culture)

Aversion to debt

Other loans

Preference for cash

Credit cards

UK(Islamic sub-culture) China

Preference for cash Preference for cash

Credit cards Cash

UK Japan

Preference for cash

Cash

China

Preference for cash

Cash

China

Savings culture

Life insurance

Japan

Savings culture

Savings accounts

China

Savings culture

Life insurance

UK

Savings culture

Life insurance

Philippines

Savings orientation

Savings accounts

UK (Islamic sub-culture)

Borrowing money is perceived as a sign of being incapable to provide, a sign of living beyond one’s means- avoidance of formal loan options Credit cards seen as debt and thus used for larger, less frequent purchases. Consumers more likely to pay off credit card in full, rather than use revolving credit. Credit cards used to withdraw cash Borrowing money perceived as a sign of being incapable to provide, a sign of living beyond one’s means. More likely to borrow through informal channels such as relatives Countries high on individualism purchase more market-based life insurance, rather than relying on fellow kinsmen to provide financial support Accumulation of interest forbidden under Islamic law. Development of new interest-free mortgages, where rent, as opposed to interest, is paid back to the lender, in addition to monthly mortgage repayments. Development of new product offerings compliant with Islamic law that avoid accumulation of interest (e.g. car insurance) Consumers prefer to borrow through ‘informal’ channels either at low or no interest rate, borrowing relies on pre-established and trustworthy relationships (Guanxi) One of the world’s largest card-centric countries, increasing cashless society Cash still the predominate mode of payment. High amount of ATMs and high withdrawal limits reinforces consumer preference for cash Consumers always carry enough cash with them to avoid losing face if their credit card or debit card is rejected Most common method of payment for online purchases is cash upon deliveryimpacts online business transactions favorable:favourable attitude towards saving and providing for the future. One of the largest insurance markets in the world, 90% of households have life insurance coverage. Policies protecting against cancer growing in popularity High personal savings due to uncertainty about long-term welfare. Financial products encouraging saving are popular (e.g. savings accounts, debit cards) High uncertainty avoidance means increased planning for the future. British citizens invested more than 40% in life insurance from 1986–1990 Low uncertainty avoidance has resulted in a low uptake of life insurance as ‘‘fate will provide’’ Development of new product offerings compliant with Islamic law. Savings account with no overdraft or credit card facility, no interest generated

debt can hinder the acceptance of products that are designed to accumulate debt, such as loans and credit cards (Gong, 2003; Thompson and Worthington, 2010; Shintani, 2000; Worthington, 2005). Cultures that demonstrate high aversion to debt may also a strong humane orientation (House et al., 2002). Cultures that have a strong humane orientation encourage and reward individuals for being generous, caring and kind to others (House et al., 2002). This humane orientation may therefore lead to consumers lending and borrowing from one another, rather than through formal channels. In India, for example, a high humane orientation, together with an overall negative perception of debt, has impacted on the financial services sector. Debt has traditionally been associated with poverty and poor money management. Many Indians have therefore preferred to borrow through informal channels, such as family and friends, rather than financial institutions (Euromonitor International, 2010b). An aversion to debt can also affect the traditional use of financial products (Cards International, 2007; Shintani, 2000; Worthington, 1998). For instance, the way in which credit cards are used in Japan is substantially different to how they are used in western countries. Japanese consumers tend to use their credit cards for larger, less frequent purchases and are more likely to pay off their credit card in full (Shintani, 2000; Worthington, 1998). Australians, however, are more likely to use their credit cards in place of cash, with 70% of cardholders regularly using revolving credit (Cards International, 2007; Euromonitor International, 2010a). An aversion to debt can influence both the adoption of financial products as well as the way in which financial products are used. Financial service providers may therefore need to adapt their

Worthington, 2005; Gong, 2003 Chui and Kwok, 2008 Casciani, 2002; BBC Online, 2003 Pigott, 2009; Brignall, 2008 Worthington, 2010

Worthington, 1998 Worthington, 1998; Shapiro, 1993 Worthington, 2005 Bin, Chen & Sun, 2003 Terpstra and Sarathy, 2000; Beck & Webb, 2003 Worthington, 2005 Beck & Webb, 2003 Valerio, 2010 BBC Online, 2003

marketing strategies. For example, Japan’s low use of revolving credit may alter the way in which revenue is generated within this market (Shintani, 2000; Worthington, 1998). 3.3. Dimension 3: Savings orientation The importance of saving within a culture impacts on the consumption of financial products. An individual who has a strong preference for saving may also have a strong future orientation (House et al., 2002). Individuals in countries such as Japan and China engage in future-oriented behaviors, such as planning, investing in the future, and delaying gratification (Terpstra and Sarathy, 2000; Beck & Webb, 2003). A high savings orientation is anticipated to be related to a preference for products that encourage saving or the spending of one’s own money (Clemes et al., 2010; Worthington, 2010). External motivations, such as cultural traditions and future uncertainties appear to influence an individual’s preference for saving (Worthington, 2010). This is most evident in China, where the cultural pressure to climb the ‘three mountains’- education, accommodation and healthcare- has led to a personal savings rate of around 25% (Euromonitor International, 2010e; Worthington, 2005). A strong savings orientation has led to the acceptance of debit cards and in China and in 2010, there were 2.1 billion debit cards (also known as bankcards) in circulation, many of them based on a savings account held by a Chinese individual,in a Chinese bank.(Worthington et al., 2011). A low emphasis on saving within a culture can also impact on the adoption (or non-adoption) of financial products. In the Philippines, only 1 in 10 people regularly save a sufficient amount of

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D. Stephenson et al. / Australasian Marketing Journal 21 (2013) 1–9 Table 4 Financial Services Cultural Orientation Matrix. Low preference for cash

Low savings orientation High savings orientation

High preference for cash

Low aversion to debt

High aversion to debt

Low aversion to debt

High aversion to debt

Free-spirited spenders Plastic fantastics

Cautious optimists Sensible savers

Optimistic laggards Cashed-up sensible spenders

Back to basics Cashed-up sceptics

their income (Euromonitor International, 2010d). As a result, the insurance market has struggled to take off, with a 2008 Citibank survey revealing that 32% of respondents had no insurance policy whatsoever (Euromonitor International, 2010d; Valerio, 2010). The low level of acceptance of insurance products in the Philippines has impacted on the product offerings of financial institutions, such as ANZ, which has cut insurance from their portfolio in this region (ANZ, 2010). These three dominant cultural dimensions therefore provide a framework to the development of the FSCO Matrix. A combination of these dimensions and their relative strength within a culture lead to a predisposition for certain financial products. By understanding these cultural preferences, financial service providers will be able to introduce more relevant products to the marketplace. 4. Proposed FSCO Matrix The three cultural dimensions previously identified can be used to develop marketing strategies for entering foreign financial markets. The FSCO Matrix (see Table 4) can used by any financial service provider seeking to enter a foreign market that is culturally different from their own. The FSCO Matrix is therefore applicable to both eastern and western financial institutions. Different combinations of the three cultural dimensions are used to develop eight consumer segments for financial products. The application of this matrix involves two steps; step one, diagnose current attitudes and step two, select consumer segments. 5. Step 1: Diagnose current attitudes towards money and profile foreign market In order to develop effective marketing strategies for a foreign market, first, the cultural disposition of this market must be measured. To do this, a sample of consumers in the target country should be assessed for their preference to cash, aversion to debt and savings orientation. Based on their responses, individuals should be classified into one of the eight consumer segments in the FSCO matrix. Once all respondents have been assigned to a consumer segment, the organization can then identify the most attractive target markets within the foreign market and conduct a survey of these potential customers. Based on their scores for the three dimensions, all respondents would be assigned to a consumer segment and the proportion of consumers in each segment calculated. The most attractive segments of the Chinese market would then emerge. For example, if 35% of respondents were classified as free-spirited spenders this may represent the largest segment of the Chinese market. This segment may be an attractive market if the organization has products that appeal to this market which offer competitive advantage. Financial institutions seeking to enter the Chinese market would therefore focus their marketing efforts on this segment. 6. Step 2: Select consumer segment and develop targeted marketing strategy This paper proposes that each combination of cultural dimensions requires a different marketing strategy for financial products.

For each of the eight consumer segments, we define the characteristics based on prior research and suggest financial services marketing strategies that may appeal. We then conclude the section with a summary of suggested marketing strategies for each consumer segment. A summary of the suggested marketing strategies for each consumer segment of the FSCO Matrix is shown in Table 5. We also suggest in which of the GLOBE’s cultural cluster the majority of each consumer segment might be found. 6.1. Free-spirited spenders Free-spirited spenders have a low preference for cash, a low aversion to debt and a low savings orientation, thus they like credit, are comfortable with debt and prefer to spend rather than save. They are therefore open to sophisticated financial products that may lead them into debt, such as credit cards and personal loans. Free-spirited spenders may generally belong to GLOBE’s Anglo cultural cluster (refer to Table 1). The GLOBE Project found this cluster to score high on power distance, meaning that a high emphasis of consumption is placed on status and authority (House et al., 2002). A free-spirited attitude towards spending and accumulating debt may be a symptom of the need to demonstrate status or an inabiliyy to control spending. Financial products that appeal to this category include those that allow consumers to borrow money at a low interest rate, as low savings may inhibit the ability to pay back debt quickly (Euromonitor International, 2010a). Such products include debit cards with overdraft facilities and credit cards with revolving credit. However, as a result of the economic downturn, free-spirited spenders are increasingly curbing their spending and attempting to pay off their debt. Many financial service providers have therefore introduced credit cards with balance transfers that allow consumers to consolidate their debt onto one card. HSBC, Citibank and ANZ are just some of the banks that have introduced these cards, competing on low interest rates or longer interest free repayment periods (Credit Card Offers, 2010). Free-spirited spenders are also increasingly using debit cards in place of credit cards. This has led to the introduction of debit cards with e-commerce capabilities that consumers can use in place of credit cards for online purchases. The success of the Visa debit card highlights the popularity of this new technology, with more than 741 million cards in worldwide circulation (Visa, 2010). Financial products that will succeed amongst free-spirited spenders include those that offer the ability to consolidate debt or pay off debt quicker. Price will become an increasingly important factor to this segment, with financial institutions competing on interest rates or longer repayment periods. Free-spirited spenders may also respond to reward schemes, such as bonus shopping points and gift vouchers, in return for using their debit cards. 6.2. Plastic fantastics Plastic fantastics have a low preference for cash, low aversion to debt and a high savings orientation. They are considered to be ‘fantastic’ by financial service providers because they are open to modern financial products that may generate debt (e.g. credit cards), but have the financial capabilities to repay what they owe, as they have being culturally conditioned to save. Plastic fantastics are

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most likely to belong to the growing middle class of GLOBE’s Confucian Asia cluster (e.g. China, Hong Kong or Japan). In China alone, the middle class market represents around 17 million households and is expected to grow to 55 million by 2013 (Worthington, 2010). Plastic fantastics have a strong savings orientation that stems from their cultural heritage, but have also been exposed to western influences and are therefore open to plastic replacements to cash that may lead them into debt. They essentially have all of the spending habits of a western consumer, without the same default habits (Muhlbacher et al., 2006). The emergence of plastic fantastics is likely to have been influenced by overseas travel into western markets. An exposure to western financial influences has, in particular, impacted on the demand for plastic payment cards amongst this segment (Euromonitor International, 2010c,f; Thompson and Worthington, 2010). For plastic fantastics, ‘‘there is a status and prestige in holding plastic. Plastic is a payment instrument, but it is also a lifestyle product’’ (Muhlbacher et al., 2006, p. 465). Further, for this consumer segment, obtaining a branded card is like gaining admission into a club (Muhlbacher et al., 2006). As the middle class of Confucian Asia continues to grow, the financial services sector is likely to see an increase in the adoption of plastic payment cards. Promotional efforts that focus on creating demand for branded payment cards would be a successful marketing strategy in the future. New pricing strategies that can address current consumer dissatisfaction with fees will also be effective (Euromonitor International, 2010f). Many banks have begun to address this by offering debit cards with no ATM withdrawal fees and credit cards with no annual fees (Euromonitor International, 2010f,k).

still very cautious about accumulating debt, instead preferring to spend what is they already have and save for the future wherever possible. Sensible savers may generally belong to GLOBE’s Confucian Asia cluster, which scores high on group collectivism (Li et al., 2010; House et al., 2002). This collectivist worldview plays a significant role in the high aversion to debt and high savings orientation of this segment. Sensible savers are more likely to avoid borrowing money through formal channels, and will instead turn to informal channels, such as family and friends, for financial support (Gong, 2003). Their collectivist orientation also places a cultural expectation on them to save in order to be able to provide for their families in the future (Worthington, 2010). Sensible savers are focused on saving for a purpose, whether it is for their children’s education, their parent’s healthcare or for their own retirement (Worthington, 2010). Financial products that encourage long-term saving are therefore widely accepted amongst this segment. Around 90% of Japanese households have life insurance, with a relative contract value much higher than the US, making it one of the largest insurance markets in the world (Terpstra and Sarathy, 2000). In China, a general decline in birth rates, together with Chinese government’s one-child policy, has resulted in an inverted triangle, whereby two married adults now need to care for four parents and possibly eight grandparents, without being able to share this financial burden with other siblings (Euromonitor International, 2010e). There will therefore be an increased need in the future for financial products that offer consumers a greater opportunity to save (e.g. insurance products, term deposits, trust funds). Financial institutions will also need to develop attractive incentives for customers in exchange for their long-term investments.

6.3. Cautious optimists

6.5. Optimistic laggards

Cautious optimists have a low preference for cash, high aversion to debt and low savings orientation. They are open to modern financial products, however, are highly cautious of accumulating more debt than they already have. Cautious optimists may generally belong to GLOBE’s Anglo cluster (e.g. England, Canada or Australia), which places a greater importance on individual accomplishment, rather than group collectivism (Assael et al., 2007; House et al., 2002;). In striving to achieve this individual accomplishment, many cautious optimists have found themselves in debt and are highly vigilant to not accumulate any more. Cautious optimists are focused on paying off their credit cards and reducing their housing repayments. Financially concerned Canadian consumers are making a concerted effort to manage their debt, with two thirds of credit card holders paying off their credit cards all or most of the time (Euromonitor International, 2010g). Australian consumers are also retrenching, with stalling property prices encouraging many consumers to either pay down their debt or boost their precautionary savings (Euromonitor International, 2010a). Cautious optimists display many of the same qualities as freespirited spenders, who will gradually move into this category themselves. Financial products that allow consumers to consolidate their debt, such as credit cards with balance transfers, may therefore also succeed amongst this market. Incentives that encourage the voluntary repayment of debt, such as reduced bills, may also be effective. Insurance products that would help avoid debt in the future may also appeal to cautious optimists.

Optimistic laggards have a high preference for cash, low aversion to debt and low savings orientation. They are open to the idea of credit but have not yet progressed to this stage and still rely on cash-based transactions. Optimistic laggards generally belong to GLOBE’s Southern Asia cluster (e.g. India, Philippines, or Indonesia). This cluster scores high on power distance, resulting in the unequal distribution of power and a distinct set of socioeconomic classes (Gupta et al., 2002b). Optimistic laggards generally embody the growing middle-class of the Southern Asia cluster, which still operate in a highly cash-centric environment and have only recently begun to adopt plastic payment cards into their way of life (Euromonitor International, 2010b,h,i). Cash still represents 81% of consumer payment transactions in the Philippines. Financial products that assist in the distribution of cash, such as ATM cards and debit cards, have therefore gained popularity. In 2009, there were 42 million ATM cards in circulation in the Philippines (Euromonitor International, 2010i). New multipurpose cards are also starting to make headway in this market. These cards have a debit, pre-paid and ATM function rolled into one (Euromonitor International, 2010i). The Philippines’ Rizal Commercial Banking Corporation (RCBC) pioneered this innovation with the development of the MyWallet card, which allows cardholders to make withdrawals, bill payments, balance enquiries and pay for shopping without the need to maintain a minimum balance (Euromonitor International, 2010i). Large branch or ATM networks that assist in the distribution of cash are also a major source of competitive advantage amongst this segment (Euromonitor International, 2010h). In 2009, Indonesia’s Bank Mandiri introduced the Mandiri Mobile service, a fleet of cars that function as mobile ATMs that allow customers to access cash in locations where conventional ATM’s may not be found (Euromonitor International, 2010h). Financial products that appeal to optimistic laggards include cards that can distribute cash quickly

6.4. Sensible savers Sensible savers have a low preference for cash, a high aversion to debt and a high savings orientation. Whilst they are open to modern financial products (e.g. plastic payment cards), they are

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and be used in a variety of locations. However, in order to ensure their widespread use, financial service providers must also develop strong distribution networks. 6.6. Cashed-up sensible spenders Cashed-up sensible spenders have a high preference for cash, low aversion to debt and high savings orientation, thus, whilst they like cash and saving, they are also comfortable with debt. They represent one of the most attractive market segments for financial institutions as they are open to the accumulation of debt, but have the financial capabilities to repay what they owe. Cashed-up sensible spenders may generally belong to GLOBE’s Confucian Asia cluster (e.g. China, Hong Kong or Japan). The concept of ‘face’ is particularly salient amongst this segment, with proper living, social consciousness and self-control being stressed (Gong, 2003). ‘Face’ is about meeting the expectations of others and maintaining a consistent and respectable image to the outside world (Gilbert and Tsao, 2000; Gong, 2003). Maintaining ‘face’ has had a significant impact on the use of plastic payment cards and the persistence of cash within this segment. Chinese consumers will always carry enough cash with them to avoid losing ‘face’ if their credit card is rejected (Worthington, 2005). Cash is also considered to be the strongest sign of affluence amongst Chinese consumers. This therefore encourages its continued use in place of credit cards (Thompson and Worthington, 2010). The importance of maintaining ‘face’ may also impact on the selection of financial service providers. In particular, China’s economic growth has made consumers more quality and brand conscious, encouraging banks to become more brand-orientated

in order to differentiate their products and services from competitors (Bandy, 2006). Many banks have started to create consumer-oriented slogans, such as CITIC Industrial Bank’s ‘service starts with sincerity’ (Bandy, 2006). The concept of ‘face’ is deeply entrenched within the Confucian Asia culture and unlikely to disappear any time soon (Gong, 2003). Therefore, financial products that are likely to succeed amongst cashed-up sensible spenders include those that can dispense cash quickly. Despite their limited use amongst this segment, there is a growing status and prestige in holding plastic payment cards (Muhlbacher et al., 2006). Financial service providers should therefore also focus on building a strong brand image for their cards in order to drive consumer demand (Clemes et al., 2010). 6.7. Back to basics Back to basics have a high preference for cash, high aversion to debt and low savings orientation. Cash still remains the predominant method of payment, as most consumers do not qualify for more sophisticated financial products. Back to basics may generally be the low-income earners of GLOBE’s Southern Asia cluster (e.g. India, Philippines or Malaysia). This segment makes up the vast majority of the population in this region and has had little exposure to modern financial products (Euromonitor International, 2010c,h). Financial service providers in Southern Asia still mostly exclude many lower income earners from accessing credit due to these customers’ lack of adequate collateral, such as proof of dependable income (Euromonitor International, 2010d; Lafferty Group, 2010). Complex paperwork also appears daunting to customers with limited financial literacy (Lafferty Group, 2010). The challenge for

Table 5 An Overview of the suggested marketing strategies for each segment. FSCO Matrix segment

Free-spirited spenders

Plastic fantastics

Cautious optimists

Sensible savers

Optimistic laggards

Cashed-up sensible spenders Back to basics

Cashed-up sceptics

Marketing mix elements Product

Price

Place

Promotion

Debit cards with overdraft facility Credit cards with revolving creditCredit cards that consolidate debtDebit cards with e-commerce capabilities Credit cardsDebit cardsOther plastic payment cards (e.g. gift cards)

Low interest ratesLonger interest-free repayment periods

Anglo cluster markets (England, Australia, South Africa, Canada, New Zealand, Ireland, USA)

Promotion of interest free periodsReward schemesGifts or incentives for using debit card

Eliminate annual feesReduce or eliminate ATM withdrawal fees

Middle class of Confucian Asia markets (Taiwan, Singapore, Hong Kong, South Korea, China, Japan)

Lower interest ratesLonger interest-free repayment periods

Anglo cluster markets (England, Australia, South Africa, Canada, New Zealand, Ireland, USA)

International travel modes e.g. airlinesBranding campaignsPrice promotionsBonus gifts or rewards Incentives for repaying debt quickerReward schemes with discounts on everyday items (e.g. groceries)

High interest rates on savings accountsLow weekly contributions for insurance policies Low or no ATM withdrawal feesCompetitive annual feesCompetitive ‘top-up’ fees Low or no ATM withdrawal fees

Confucian Asia markets (Taiwan, Singapore, Hong Kong, South Korea, China, Japan)

Incentives that reward patronage (e.g. special discounts and services)

Middle class of Southern Asia markets (India, Indonesia, Philippines, Malaysia, Thailand, Iran) Confucian Asia markets (Taiwan, Singapore, Hong Kong, South Korea, China, Japan) Low income earners of Southern Asia markets (India, Indonesia, Philippines, Malaysia, Thailand, Iran) Confucian Asia marketsespecially China

Large ATM networks to accompany productsMobile ATM’s

Credit cards that consolidate debtDebit cards with e-commerce capabilitiesAccounts with direct debit functionsLife insuranceOther insurance products Savings accountsTrust funds (e.g. education funds, retirement funds)Term depositsLife insuranceOther insurance products ATM cardsDebit cardsMultifunctional cards

Credit cards or debit cards with cash-out capabilitiesBranded plastic payment cards Recharge cards (topped up with income)Mobile phone bankingMPESA equivalent product ATM cardsDebit cardsCredit cardsWidespread ATM network

Implementation must be low cost

Low or no withdrawal feesHigh cash withdrawal limitsLow or no annual fees

Branding campaigns for financial service providers Live demonstrations on how to use recharge cardsWord of mouth campaignsPartnership with mobile phone providers Price promotionsLoyalty programs with credit cardsBonus gifts for using credit card

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financial service providers is to develop products that can meet the needs of low socioeconomic consumers. In 2007, Barclays overcame similar challenges in Kenya by launching the M-PESA program for low-income earners (Lafferty Group, 2010). M-PESA allows customers to transfer and receive money using their mobile phones, without the need for a bank account – an important factor in Kenya where millions of people do not have access to formal banking services (Lafferty Group, 2010). Financial service providers could potentioally launch a similar program in India, where mobile phone ownership is high, even amongst low-income earners. Furthermore, the Indian mobile phone market continues to grow at a rate of six million customers per month (Euromonitor International, 2010j). Mobile phone banking products have the ability to service the back to basics market, which may not have direct access to bank branches or ATMs. Financial products that are likely to succeed include those that can cater to the limited infrastructure and consumer capabilities of this market and which can be implemented at a relatively low-cost (Euromonitor International, 2010j).

may be significant discrepancies between societies that share the same language, religion and ethnic traditions (Li et al., 2010). The success of a financial product in one country may not achieve the same success within another simply because they are grouped within the same cultural cluster. The FSCO Matrix only provides a general guide as to what products may work based upon cultural similarities. Further research should explore whether any other cultural dimensions, other than the three outlined in this paper, may have an effect on the consumption of financial products. If so, the FSCO Matrix may be expanded to include more consumer segments. The FSCO Matrix should also be applied within an industry context to test the effectiveness of its application. Moreover, it would be beneficial to track the success of some of the proposed marketing strategies from this paper over time. A systematic review of the actual strategies currently being undertaken by financial institutions entering foreign markets should also be conducted to help build a strategy resource set for the financial industry. 8. Conclusion

6.8. Cashed-up sceptics Cashed-up sceptics have a high preference for cash, high aversion to debt and high savings orientation. They are somewhat sceptical of western financial products that may generate debt, preferring to uphold their own financial tradition of using cash. Cashed-up sceptics generally belong to GLOBE’s Confucian Asia cluster, in particular, China. There is a culturally perceived necessity within this country to both save and yet simultaneously accumulate products to show wealth to the outside world (Thompson and Worthington, 2010). For many Chinese consumers, cash still remains the strongest signal of wealth. ‘‘A businessman with many cash notes in [his] wallet shows that he is affluent’’ (Thompson and Worthington, 2010 p. 6). Cash also still remains the most trusted method of payment amongst cashed-up sceptics. ‘‘Although the adoption rate of credit cards is steadily rising, cash is still king, suggesting that Chinese consumers perceive themselves to have greater control over their spending when using cash, rather than when using credit cards’’ (Thompson and Worthington, 2010, p. 2). Chinese consumers are still very conventional, preferring to use cash that they know is theirs, rather than ‘future money’ that they have not yet earned (Thompson and Worthington, 2010). Financial products that generally appeal to cashed-up sceptics include those that give consumers quick access to cash, such as debit cards and ATM cards. Credit cards are also likely to continue to grow amongst this market. However, as this segment is highly debt-averse, credit cards that offer no revolving credit line may be the most appealing. Marketing strategies for credit cards should also include a ‘savings’ aspect that appeals to this segment’s high savings orientation (Thompson and Worthington, 2010). Financial products may include loyalty programs, promotional discounts and additional ‘free’ product offerings that encourage consumers to use their credit cards more often (Thompson and Worthington, 2010). 7. Limitations and further research The FSCO Matrix is conceptual; it is a strategic model that helps align financial services marketing mixes with the cultural dimensions of foreign markets. However it lacks evidence. Empirical research is needed to validate which cultural clusters represent each segment and the appropriate marketing mix. The FSCO Matrix also does not consider any cultural differences that may exist between countries grouped within the same cultural cluster. There

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