M&S’s interest-free installments – a game changer in targeting younger online shoppers?

Marks and Spencer is launching a “buy now, pay later” service online that allows customers to spread the cost of purchases across up to six weeks. It enables shoppers to pay for home and clothing purchases between £30 and £800 in interest-free installments.

Fully available to customers from mid-November onwards, the service “is the latest step in the M&S’ far reaching transformation, becoming more relevant to customers with widespread change across the business”, according to a company press release.

Delayed payment methods are increasingly popular with online shoppers, especially millennials. Currently clothing retailers Asos, JD Sports and H&M offer the service in the UK.

In 2017 M&S found that 54% of its customers were over 50. As a result, the retailer’s strategy is dedicated to attracting the younger generations M&S had historically failed to attract, partly due to a subpar digital presence. Problems such as speed, ease-of-use and design of the website have been worked on since.

In the same year, M&S separated its Food and Clothing divisions into two independently managed businesses and committed to converting occasional into regular shoppers. While the two areas are different in terms of challenges and opportunities, many consumers still view them as connected. Looking into grocery in particular, we ran a single answer demographic to establish frequency of M&S shopping by age:

Overall, the younger the consumers, the less likely they are to shop at M&S. However, the ‘once every 3 to 12 months’ response is common for ages between 25 and 44 – around 30% of these consumers occasionally buy groceries at M&S. With the right strategy they could be converted into regular customers.

Grocery aside, Clothing and Home could prove to be key areas for attracting younger shoppers, especially if the online offering is of good standard. According to M&S’s 2019 Strategic Report, online currently represents 22% of sales compared with 19% last year. The retailer attributes the increase to “improvements in site speed, a redesigned homepage, enhanced product imagery, a simpler check-out and an improved delivery proposition”.

Within the plans for improving customer experience on is the new delayed payment service. Using a single answer steer targeting the younger part of our panel, we aimed to establish to what extent would a delayed payment service boost sales:

Over a third of consumers, aged 18-44, will keep buying clothes from M&S but won’t take advantage of the service. A smaller but still substantial 22% are current shoppers who will increase the amount they spend when delayed payment is available. Potentially the service could help convert them from occasional to more regular shoppers. 

Nearly 14% of consumers who aren’t currently M&S customers could become such thanks to the service, with this ratio getting higher in the 18-24 age group (21.5%). The delayed payment service could help win over new customers from the youngest segment.

In the short term, M&S is hoping to attract younger customers and boost trade going into the key Christmas period with delayed payment, however, mid-November might prove to be too late to have an effect on Christmas sales. To check, we ran a multi-answer steer to consumers aged 18-44, asking which payment methods they would use for their online non-grocery shopping at M&S in the period before Christmas:

Given that slightly less than 27% of our panel selected ‘None of the above’, presumably stating that they didn’t plan to spend on the M&S website before Christmas, we assume that the remaining 73% of younger consumers intend to do so. This is positive result that justifies M&S’s digital strategy, showing that both the age segment and the retail format are extremely important, especially in the pre-Christmas period.

‘Delayed payment’ attracted 6.3% of votes – a ratio consistent among all ages between 18 and 44. This is a low result, showing that the service might have been introduced late in view of Christmas. It is likely to take longer for consumers to realize that this service is available, although appropriate digital marketing could help speed up the process.

Vypr can help brands and retailers forecast the effect their strategy would have on future performance. Rather than surveying opinions or satisfaction, we ask consumers about their actual shopping habits and intentions.

Nationwide mortgages – evaluating customers’ sentiment

The Financial Conduct Authority reported earlier this year that the UK mortgage market features a wide range of products on offer, competition on headline rates, and high levels of consumer engagement. Considering this high level of competition, it is important to evaluate customer satisfaction with the core aspects of mortgage products.

A market that is working well should provide products and services that meet consumers’ needs and offer value for money. In its 2019 analysis of best mortgage lenders, Which? Has measured customer satisfaction using five distinct aspects of a mortgage product – customer service, value for money, flexible payments, clarity of statements, and online access. Here is a short explanation of what each of them incorporates:

Around 36% of Vypr’s panel participants currently have a mortgage, with a quarter of those being customers of Nationwide Building Society. We ran a series of Vykert steers aiming to evaluate Nationwide customers’ satisfaction, based on the selection of factors above.  The Vykert steer features a scale, ranging from -7, through 0, to +7.

Value-for-money is likely the most important factor for customers and a major motivation to opt for a certain mortgage product. The graph below presents our steer result for customer ratings regarding the value of Nationwide’s mortgages:

Out of 361 Nationwide mortgage customers, 256 responded that the value of their mortgages was great, 99 – neither great nor terrible, and only six – terrible. The median response has a value of +4, meaning that half of the responses were higher and half lower than this value.

We assume that ‘flexible payment’ is perceived as the availability of facilities such as overpayments, payment holidays and underpayments for a reasonable charge or free of charge. Here is how Nationwide customers evaluated it on a scale ‘not flexible – very flexible’:

Despite being a positive number, the median value +3 shows somewhat lower satisfaction when compared to the ‘value-for-money’ median of +4.

Our next steer evaluated ‘clarity of statements’, which simply means the readability of information regarding transactions and charges:

This criterion received the highest median value of +5. The remaining two steers aimed to evaluate Nationwide’s ‘online platform’ and ‘customer service’, both of which scored a median value of +4:

The median results from the five steers are presented in the graph below:

Based on median values, the overall customer feedback is positive, with Nationwide mortgage holders happiest with the clarity of statements and least satisfied with payments flexibility. However, looking into the weight of each third of each scale revealed additional information about consumer satisfaction and attitude:

Consumers who have given a markedly negative score to an aspect are likely to have experienced problems with it or have had an opportunity to compare it with another provider’s product to reach to a negative opinion. Inversely, the voters from the neutral third of the scale might have never had interaction with a service or lack a strong impression from a product’s aspect.

Although Nationwide’s customer service received a median score of +4, very few customers were unhappy with it – below 1%, or in this case three voters. The neutral third of the scale comprises 27%, however, some of the neutral voters might have never contacted customer service, therefore the response could be more positive than it might seem.

In regard to payment flexibility, which is our lowest scorer, the negative third was 6%, which is highest among all negative scores. This could be treated by the mortgage provider as a signal that consumers expect more flexibility in regard to payments and providing such would help retain existing customers. Additionally, the neutral third of the scale is also the largest, with 42%, which means that many consumers see Nationwide’s offer as comparable to those of other mortgage providers. Offering more flexibility could help the building society stand out from the competition, which is crucial for attracting new customers, currently scouring the market for the best available mortgages.

Unlike binary “yes or no” questions, the Vykert scale provides deeper insight into what consumers think and how they feel. Vykert is best used to measure and evaluate customer sentiment on a specific product or service, with the value for each evaluated item offering insights on the reasons for the sentiment revealed in the survey.