Segmenting the workforce for benefits provision

Breaking a workforce down into specific segments may help employers get the best from their benefits package, as targeting marketing at these groups could significantly boost buy-in, says Vicki Taylor

Case study: Friends Provident

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Historically, employee benefits have been provided as a one-size-fits-all solution. Now there is an increasing awareness that, not only is it prudent to select a range of benefits to appeal to diverse tastes, but that segmenting the workforce into distinct groups and changing the way benefits are promoted to them can help to boost take up. If you are in any doubt as to whether segmentation really works, you only need to look at the way it is used by the advertising industry to market products and services to different parts of society. McDonald’s, for example, saw its quarterly profits rise by 57% after the World Cup, due, at least in part, to the way in which it targeted fans both watching the tournament and attending.

Gareth Jones, senior flex consultant at Aon Consulting, explains: “Segmentation has got a huge role to play in boosting employee engagement. Firms are now beginning to realise the importance of segmenting their employee database [and] saying ‘lets customise something for that particular group of people’.” There are various ways of segmenting a workforce, including by employees’ age, length of service, job role and salary bracket. There are also additional factors, such as employees’ financial astuteness, which organisations might also want to take into consideration. For the majority of employers currently venturing into the fray, segmentation is still a very crude science, but the process is likely to become more advanced over time.

Nicola Cull, a senior consultant at Watson Wyatt, explains that employers typically focus on factors such as age and sex, perhaps assuming, for example, that graduates or men are less likely to want targeted information about benefits such as childcare vouchers and onsite cr¯ches. “What we are starting now to take more notice of is personal situations. [Is an employee] a single person, a [former] student with debts, are they mid-career, married with no children or are they a two-person income family?” she says. Even very basic segmentation, such as targeting information on retail vouchers differently to younger employees or staff with families, can help to boost take-up rates. “People may think, ‘ok, if I have got a family I am going to spend a fortune in supermarkets’, but they don’t think about the other ways retail vouchers can be used [in chains] like Arcadia or Gap or even [on] petrol. “It is just [a case of] trying to bring out what might appeal to different segments [by] presenting [benefits in] a slightly different way,” says Jones. Employers interested in segmenting their workforce have the option of giving it an initial go themselves or enlisting the help of a consultant.

But it is unlikely a company’s first stab at segmentation will be perfect. Alex Tullett, head of benefit communications at Jardine Lloyd Thompson, says: “Initial segmentation tends to be a little bit finger in the air the first time you do it. You have to learn from what worked and what didn’t.” Typically, employers will find that if they pull together all of the information they hold on employees, they will come up with a pretty good profile of who each person is and what benefits might be relevant to them.

Kevin Chapman, head of communication at Hewitt Associates, says: “There is some stuff you know about people. You will know their age, the types of jobs they do and how long they have been with the organisation. “You probably know their marital status, how many children they have and you probably know a bit about their history, such as whether they are in the pension scheme or not and whether they make contributions. Then you get a bit of data [if they have been] in flex, because you know what type of choices they have made.” Once staff have been segmented into groups, there are then various ways in which the information can be used. Employers could, for example, only highlight information about particular benefits to a certain segment of the workforce, but they should be extremely careful if doing so. “You [could] end up potentially falling foul of discrimination laws, if, for example, you only promote flexible working to parents. Those who are non-parents could end up having a whinge about it,” warns Tullett. Another danger is that employers could also miss out on an opportunity to raise the engagement levels of all employees.

Nick Howard, principal in the communication consulting arm of Mercer Human Resource Consulting, says: “Research has shown that even if someone doesn’t have kids and isn’t interested in flexi-time they feel more positive about the organisation they are working for if they know that those benefits are being offered to the relevant people. It helps them to feel [they are] working for a good employer.” There is also the potential that employers may miss out some staff who are not interested in a particular benefit now, but might be one day, at which point they will be unaware that it exists. A better way of making sure everyone gets the information they need is to issue core information about the benefits package supplemented with additional information directed at each segment. Jones says the best targeted communications project he has been involved with was a booklet containing all of the technical information about a flexible benefits scheme, with a wraparound magazine containing different information depending on which segment an employee fitted into. “If you picked up the version meant for managers it had a little story about the business sense behind flex, [and] it had an interview with a managerial person as to what benefits they took, as opposed to the youth angle which had interviews with younger people. The whole thing was [aimed at] getting people to actually read it,” he explains.

If this approach is adopted, however, care should be taken not to offend certain groups of employees. For example, some staff may take offence if they receive a booklet illustrated with pictures of older people, while the person sat next to them has a version illustrated with pictures of youngsters. Of course, the problem with segmentation is that it often depends on making sweeping judgments. If you segment by age, you might assume, for example, that staff who have just left university will have little money to invest in pensions and share schemes. However, these generalisations won’t always apply to everyone, a fact that employers are gradually starting to realise.

Tim Roberts, managing director at Talking People, adds: “To assume, for example, that men aged 58 aren’t having children, or even women aged 50 are not having children, particularly with second marriages, can be fundamentally flawed. The more you make broad assumptions through targeting data, you can get yourself into a lot of trouble.” One solution is to allow employees to self-select the information they are interested in, for example, through a website, and therefore self-segment. Another answer is to divide employees down into groups of one, says Chapman. “I think there is a huge amount to be gained from targeting people as individuals and the ultimate segmentation is that everyone gets something that is totally bespoke. At an individual level, it is where you get the highest impact.” For example, if an employee makes their benefits choices for flex online, a box could pop up if they have taken private medical cover but not dental cover to ensure they are aware that both benefits exist. Segmentation can also allow employers to better target pensions at staff.

Neil O’Reilly, head of communication and education in the defined contribution pension business at Fidelity International, says that age is currently the most common way of segmenting employees when it comes to pensions. “We have worked with clients where we have segmented the membership into three age groups – under 35-year-olds, 35-to-50 year olds and 50-plus groupings. “Clearly, people in the 50-plus group are more interested in their options when it comes to retirement, while in the younger age range it is important to talk about long-term pension options, pension investments and the need for long-term planning.” However, in the future, more organisations may start to use employees’ financial astuteness as a base on which to target the information they provide. “If there are a significant group of people who are of the view that they are too young for pensions we would target information to explain the financial benefits of starting to invest even small amounts of money as early as possible,” he adds.

And where a group of employees believe pensions are too expensive, it could be beneficial to target information about company contributions and relevant tax breaks so they start to realise that it is perhaps more affordable than they may think. It is also useful to bear in mind that different methods of communication are typically better suited to specific groups. “I think you would probably argue that those in the older age bracket would prefer face-to-face communication and those in the younger age bracket are probably more comfortable with seeing communication on an electronic basis. I would caveat [that] by saying that I don’t think it is always true,”

Tullett adds. The thing to remember is that all organisations are different, so identifying which method of segmentation is best for a particular workforce could take time. The key is to seek feedback from employees about what communications work for them and to monitor take-up rates to see what effect targeted information has had.

Case study: Friends Provident

Friends Provident began segmenting its staff last year and a greater awareness of its workforce profile has allowed the company to see how it might shape its benefits package. Mike Hampton, director of business services at the financial services firm, explains: “A graduate coming in fresh out of university maybe with a significant loan outstanding will have different issues and considerations from somebody who is joining mid-career. It is just trying to understand what our workforce population looks like and what it is that is of interest to them.” One area where Friends Provident has identified a need to provide particular benefits is within its graduate scheme. “The way that we structure [the graduate scheme] package is to provide them with a golden hello to enable them to manage their outstanding loan. “That is one area where we have identified a market need. Other areas we are conscious of, and probably need to address as an organisation, are young people and their ability to get on the housing ladder.” He adds that the company historically provided mortgage subsidies and, although this isn’t necessarily the answer this time around, it will be looking at what it can do to assist this employee group. Segmentation: what you need to knowl Employers can segment their workforce in various ways, including by age, length of service, job role and salary bracket.


What you need to know

The financial astuteness of different members of staff is another way to segment, particularly when it comes to financial benefits such as pensions and share schemes. Once segments have been identified, employers can target information about particular benefits to certain groups to help boost take up. Employers could allow employees to self-segment by choosing the information that they want to receive, for example, through a company website or intranet site. The future could involve segmenting employees down into groups of one. The technology currently exists to allow this, but few employers are taking segmentation to this level yet.