How consumer attitudes are affecting benefits strategies

US discount retailer Target uses its customer data to determine which of its shoppers are pregnant, based on a belief that new parents become obsessive shoppers.

But Target’s sophisticated marketing approach, which is based on a pregnancy predictor score that identifies expectant mothers’ product purchasing behaviour, backfired last year when the father of a teenage girl complained she was being targeted with discount coupons for baby clothes, only for him to discover later that his daughter was, in fact, pregnant, and that the retailer had suspected it before he did.

Of course, this is an extreme example of the potential dangers of using consumer marketing techniques to drive business, but it offers a valuable lesson for employers keen to apply marketers’ consumer nous to their own organisation.

So, what is consumer marketing and why is it of increasing interest to employers in the context of their workforce?

Marketing strategies

Consumer marketing involves organisations tracking and analysing consumer behaviour, attitudes and preferences, and using this data to shape their marketing strategies and advertising campaigns to attract and retain shoppers, to help sell more stock and, therefore, boost profitability.

For example, a supermarket that identifies shoppers with a love of a particular brand of biscuit can send them discount vouchers for these biscuits, encouraging them to return to their store to buy the biscuits rather than going to a competitor.

HR and reward professionals can apply the same marketing principles to their workforce to help shape their reward and benefits packages in order to attract and retain talent, to engage and motivate their existing workforce and, in some circumstances, to cross-sell their organisation’s own products and services to staff.

Basic approaches to consumer marketing may involve organisations sending information about childcare vouchers to expectant mothers, or guidance about wealth management to staff that may be considering retiring.

Tailored benefits packages

But a number of employers are exploring how to develop their marketing techniques further to help them create tailored benefits packages that offer a far wider range of benefits than just the basics, as organisations wise up to the purchasing power of a consumer group right under their nose, as well as the fact that engaged employees are typically more loyal.

A white paper, Talking about my generation: exploring the benefits engagement challenge, based on a survey of more than 2,500 employees and focus groups with a number of employers, conducted by YouGov for Barclays, found that 12% of Generation Y employees are so dissatisfied with their current benefits that they have considered moving to a new employer. This shows the importance of getting benefits strategies right.

Nigel McNeil, senior communication and change consultant at Towers Watson, is working with a number of employers to develop consumer marketing-led employee campaigns, but there are stark differences between their approach and that typically taken across the retail sector, he says.

“The key difference is that in retail, the [marketing] move is going more towards individual communications and micro segmentation [of consumer data] and that is not an approach that is feasible for these employers to take,” he says. “Their intention is not to go down to the individual, specific communication-based approach to marketing, but more to pull employees together into family groups of behaviour and start to target those.”

Targeted, data-driven marketing campaigns can help employers save money by enabling them to identify and offer perks that really appeal to employees and, therefore, they are more likely to take up.

Fred Whittlesey, principal consultant at pay adviser Compensation Venture Group, says: “Data-driven approaches help confirm where compensation and benefits expenditures are producing a positive return. HR can finally make decisions like the rest of the organisation does and assess the extent to which it is helping [the employer] achieve its business goals.”

Identify employee needs

A greater understanding of their workforce can also help employers identify issues that may harm employees’ productivity, such as money worries or childcare issues. In response, they can offer benefits that address these concerns, such as access to financial advice through, for example, an independent financial planner, and emergency childcare services.

Employers already have much of the data they need to create consumer marketing-type campaigns. Data on everything from employees’ marital status and family situation to their pay grade and benefits preferences are typically stored on payroll, HR and benefits platforms.

Social media platforms, such as Yammer and Twitter, can help employers to increase their understanding of their employees’ lifestyle needs and preferences, but they first need to learn how to sort and translate this information into a usable resource.

This may prove a challenge for some organisations, particularly smaller employers with limited staffing and budget.

Charles Cotton, performance and reward adviser at the Chartered Institute of Personnel and Development, says: “Employers are using data in a different way, in a more insightful way, rather than leaving it in a filing cabinet or on the computer hard drive. I imagine lots of the heavy loading will be at the front end of the process, working out different ways of analysing employees and their user preferences.”

HR and benefits professionals that are not adept at using data-driven strategies are likely to struggle, however.

“Employers need financially competent business people in their HR department,” says Compensation Venture Group’s Whittlesey. “People who say things like ‘I’m not a maths person’ need to find other career opportunities. Running a business is a financial and quantitative endeavour. Marketing is all about research and data.”

Employee data risks

Some employers may also find it hard to determine the appropriate level of employee information to collect and use. The above-mentioned Target anecdote involving a pregnant teenager is a case in point of the potential dangers of using personal data for consumer marketing campaigns.

But data mining is, arguably, the only way organisations can ever hope to understand their workforce, because few employees, much like consumers, know exactly what they want, and are prone to frequent changes in their attitudes and spending behaviour. This makes employers’ attempts to track and analyse this behaviour a real challenge.

Whittlesey warns: “Employers are discovering the principles of behavioural economics and learning that employees, like all humans, make decisions on incomplete information, don’t read what is provided to them, are irrational, risk averse, and very short-term in their thinking.

“[Employers] have often relied too heavily on self-reporting through employee opinion surveys, but are now learning that what employees say does not always accurately reflect what they think and do.” 

Mining data on actual employee behaviour provides much better insights, he says. “For example, if you ask employees if they want a certain type of elective benefit, most will say yes, and why not? Why turn something down until you know the details?  But if participation is then low, that is much more important information, assuming the benefit was marketed well.”

But employers also have to consider the fact that, perhaps understandably, some staff will always want to limit the information their employer holds about them to the very minimum, which adds to the challenge.

Consider the motivation

Neil Strong, a strategic consultant at communications consultancy Shilling, says employers should consider their motivation for applying consumer marketing techniques to their own business, and the appropriateness of their timing, before trying to implement such a strategy.

“Employers have to mindful about context,” he says. “If there are some bad changes going on within their business, they don’t want to be sending positive messages out.

“It’s not just about pushing out big impact selling campaigns and a big splash media campaign and saying, ‘this is happening, come and buy it’. [Employers] have got to look at the bigger picture first and look at why they are putting [a strategy] in place, why they are putting it in place now, and asking ‘what happens if we do nothing?’”

Once employers have examined all the strategic aspects, they can look at things tactically and decide how to go about the campaign, says Strong.

But Alex Thurley-Ratcliff, innovation and business development at Shilling, questions the wisdom of employers using consumer marketing technique-based staff campaigns.

“It’s not about looking at employees as consumers, pure and simple,” he says. “They are looking at them as a population or an audience. Consumer marketing techniques work well in all sorts of arenas, but no one size fits the uniqueness of every employee population, so employers have to put a boundary in the business strategy.

“That defines what [an employer is] actually going to do. If its consumer marketing activities don’t fit within its business strategy, or don’t support them in the right way, then I don’t think it should use them.”

Limits of marketing techniques

Employers still convinced that consumer marketing-led campaigns are suitable for their organisation should accept that they may propel their employee benefits strategy only so far, and they should be prepared to abandon such campaigns once they no longer serve a purpose. This is particularly the case for employers which are positioning their organisation as an employee benefits provider, particularly with regard to benefits such as pension schemes.

Thurley-Ratcliff says: “Employers have to be careful that they don’t incentivise staff to take things up that might be beneficial to the [organisation], but might not be thoroughly beneficial to the individuals, because employers are not just trying to shift units or sell a product; they are trying to get employees to engage in an informed, decision-making process, and that is all a bit more complex.”

But whatever employers’ views on consumer marketing techniques, all organisations will soon have to review their methods of communicating with, and engaging, their employees to protect their top talent.

Doctor Paul Redmond, head of careers and employability at Liverpool University and author of the Barclays’ white paper, says: “[Our research] found that the credit crunch has had a real impact on the way people view their relationship with their organisation, and that once the economic conditions start to improve, there is going to be a talent exodus and people are going to be leaving their organisations and looking for different jobs. I don’t think many employers have picked up on that.”

Redmond says staff have been working longer hours and taking on more responsibility in the workplace during the economic downturn, but have not seen any change in the way their employers relate to them to reflect their expanded duties, be it by introducing more supportive employee benefits, or through a more engaging communications campaign.

“Organisations have got to wake up to [this prospective exodus] very quickly and realise that, particularly with the younger generations, they are looking for a different type of relationship [with their employers],” he adds.