Retirement: feast or famine? Factors associated with retirement planning

With the percentage of people over 65 expected to double between 2001 and 2051, and with less than half of all households currently saving, understanding the triggers that cause an individual to adjust current spending or saving patterns and re-direct money towards saving for a post-working life is vital. Similarly determining if gender differences exist in pre-purchase decision-making for saving for retirement is invaluable for the development of marketing and communication campaigns to encourage consumers to save for retirement. Focus group research revealed that there are factors that do have a greater impact on consumer’s savings behaviour for retirement, whilst other factors are of less significance; significant gender differences were not found. Contributions of the research and recommendations for future research are discussed. Introduction It is predicted that between 2001 and 2051 the percentage of people over 65 will have doubled from 12.4% of the population to 24.2% (ABS Catalogue No. 4109.0). This trend of Australia’s ageing population is similar to that of other developed countries and is due to a fall in fertility rates and an increased life expectancy (ABS Catalogue No. 4109.0). As the ageing of Australia’s population and the associated costs of retirement are increasingly important economic issues, gaining greater understanding and insights into consumer behaviour on this topic is crucial. This research explores the problem of pre-purchase decision-making in the context of saving for retirement. The purpose of this study is to explore what factors motivate consumers to save for retirement. Given the importance of this issue the focus of the study was to gain insights into the triggers that cause consumers to save for their retirement. Thus the research problem was identified as, What factors influence consumer decision-making in the financial preparation for retirement and are there gender differences? To answer this question existing consumer behaviour literature was examined, both broadly then more narrowly in the field of services marketing and ultimately financial services marketing. Eight focus groups with a total of 55 participants were held in Sydney. Focus group transcripts were analysed enabling the researchers to develop a proposed model for saving for retirement. Finally, contributions to academic knowledge as well as suggestions for further research were developed. The results of this study are presented in this paper. Existing Literature Early consumer decision-making models tended to be based on the process associated with purchasing goods, so when Fisk (1981) adapted the Engel Kollat and Blackwell (EKB) model of consumer decision-making specifically for the consumption of services he recognised that the process prior to a service encounter is not a linear one, but rather a composite of factors and activities that lead to the decision to purchase a service – an important and critical difference between goods and services pre-purchase decision-making. Understanding this pre-purchase phase, and the consumer thinking processes including motivations and expectations, is vital as it determines whether or not a consumer will progress through the decision-making process to actually buy the service, yet it is a relatively under-researched area (Betts, 1994; Bruner & Pomazal, 1988; Gabbott & Hogg, 1994; McKechnie & Harrison, 1995; Murray, 1991; Punj & Srinivasan, 1992). Studies have found that consumer expertise/knowledge (Byrne, 2005; Howcroft, Hewer & Hamilton, 2003; Perry & Morris, 2005), gender, marital status, age, education (Gough & Sozou, 2005), and perceived risks (Diacon & Ennew, 2001) influence the behaviour of a consumer purchasing financial products or services. Similarly, the importance of personal sources of information in the pre-purchase decision-making process for consumers of services is established (Freiden & Goldsmith, 1989; Friedman & Smith, 1993). However, pre-purchase decisionmaking in services is not only characterized by the greater propensity of consumers to seek personal sources of information and a preference for experience to assist in the decision-making process (Murray, 1991), but also a higher level of risk (Hill & Neeley, 1988). On the subject of risk, there is clear evidence to show that services have a higher degree of perceived risk when compared directly with goods (McColl-Kennedy & Fetter, 1999; Mitchell & Greatorex, 1993; Murray, 1991; Murray & Schlacter, 1990; Turley & LeBlanc, 1993; Zeithaml et al, 1985) which directly and positively correlates to information search and purchasing decision. That is, the greater the perceived risk, the greater the information search (McColl-Kennedy & Fetter, 1999; Turley & LeBlanc, 1993), and the subsequent delay in making a purchasing decision. When applied to a complex financial services environment significant delay in decision-making are likely as perceived risks would be great for products or services associated with saving for retirement. With reference to gender, it has been shown that the way in which males and females process information is different (Meyers-Levey & Maheswaran, 1991; Meyers-Levy & Sternthal, 1991) and further that these differences do have implications in the pre-purchase decision-making process for financial services (Graham et al, 2002; Clark-Murphy & Gerrans, 2002). Moreover, research has shown single women are less prepared financially for their retirement (ANOP Survey, 2004) and are more risk averse (Bajtelsmit, Bernasek & Jianakoplos, 1999; Gerrans & Clark-Murphy, 2004; Jianakoplos & Bernasek, 1998). However, the issue of gender and risk-taking is complex. For example Bajtelsmit and Bernasek (1996) suggest that gender risk differences “have their root in discrimination and/or differences in individual preferences” (p.5), whilst Schubert et al’s (1999) findings strongly suggest that when researching gender and financial risk-taking, context also has an important influence. Similarly, the Gerrans and Clark-Murphy (2004) study found “the gender effect is not uniform and can be demonstrated as depending on marital status, whether the member considered themselves informed and age” (p.27). Research Methodology To examine the three research issues, qualitative research in the form of focus groups was used to explore the topic. This was considered the most appropriate research technique because of the exploratory nature of the study and the rich data that could be obtained from the interactions that occurred in the group discussions. In total, eight focus groups were conducted with a total of 55 participants. The main segmentation variable was gender. Consequently, four male and four female groups were held (M=29=53%) with respondents aged between 25-55 years old. Age and marital status were also used to segment groups in order to increase homogeneity within each group. The data from these discussions was transcribed, analysed, interpreted and grouped into themes broadly matching the internal, external and risk factors associated with pre-purchase decision-making theory in services (Punj & Srinivasan, 1992; Kurtz & Clow, 1998).