Many financial services firms know how much their customers are socking away into a 401K or what their checking accounts look like on a regular basis. But when it comes to understanding their customers’ day-to-day spending priorities – like where they tend to splurge, and, most importantly, why – many have a ways to go.
With that in mind, there’s a piece of the spending puzzle that, with the right approach, could very well be a boom for the financial services industry. And it barks – er, I mean, marks – a new fiscal frontier. The Great American Pet.
Why? Americans are shelling out a lot of dough on Fido. Because, as Nielsen found, almost all pet owners (95%) consider their pet to be a member of the family. And that love for a pet is having an influence on the family budget.
Big Spending on Little Creatures
According to Nielsen, almost two-thirds of Americans own a pet (dogs lead the pack), and this number grows every year. So does spending. In 2015, Americans crossed the $60 billion mark. And it’s not stopping there – the American Pet Products Association (APPA) set its 2016 projected increase to nearly $63 billion. We’ll have to wait and see what that number really turned out to be, and what the APPA projects for 2017 and beyond.
Food is by far the largest subset of pet-related spending (the APPA says Americans spent $23.05 billion on pet food in 2015). Supplies and toys, veterinary services, and medicine also constitute that multi-billion dollar figure.
Interestingly, pet grooming and boarding is the fastest growing spending subset – and it’s beginning to look a lot like the (human) spa industry. Depending on breed and size, the average dog groom runs pet owners between $30-$90, with fancier salons and premium services like nail cutting and teeth cleaning costing additional sums. This means pet haircuts on average cost more than human haircuts!
Silicon Valley has taken notice, creating pet-friendly spin offs of start-ups you and I now turn to regularly. For example, Rover created an Airbnb program for pets that focuses on pet sitting (and just secured $40 million in Series E funding to expand its services). Just like your Fitbit, Whistle pioneered a GPS-enabled location and activity tracker for pets. Don’t know what to make your dog for dinner? Just Food for Dogs will deliver Blue Apron-esqe meal kits right to your front door.
Splurge-Worthy Family Members
Pets’ influence on spending became very clear when C Space talked to just under 100 consumers across the United States about their general spending habits and financial planning influences. As an unintended result of this research, we found that spending on pets is a very common “splurge” for consumers, no matter their household income level. Consider what Dave, a 27-year-old from Massachusetts, told us:
“Something I’ll spend money on without worrying about it is my cat. I used to get a little upset that she would eat half of her wet food. Then eventually I realized she’s 14 going on 15, and I do well enough that she cannot eat all of her food and it’s not the end of the world. So I will buy her food on Amazon whether she loves it or not and let her waste a little bit of it. I’m ok with it.”
This type of mentality – that our pets are our children – is dictating just how much pet parents are willing to spend, and on what. To reward good behavior, they shell out billions annually on dog and cat treats. Nearly half (45%) organize birthday parties for their furry family members. And almost two-thirds (64%) buy their pets holiday gifts.
How the Financial Services Industry Can Benefit
Though pet spending isn’t the largest piece of the consumer spending pie, it is a trend with strong emotional ties that is income-level agnostic. It’s worth considering the impact on Americans’ wallets, and what that means for spending and saving in the future. For example, could financial services firms develop separate accounts for your pet to help plan and pay for pet-related expenses? Maybe a 529 account for your pet is the next savings account you’ll be contributing to regularly!
Some financial services firms are already making four-legged strides. For example, Citizens Bank has an entire web page dedicated to financial planning for pets. Other organizations have embraced Americans’ pet spending habits by offering credits cards with pet-friendly rewards, such as the Bank of America PetRewards Visa, offered in partnership with Hills Pet Nutrition, and the Comenity Capital Bank WellnessPlus card, offered in partnership with H3 Financial Services.
Then there are the possible insurance implications to consider. Are joint human and pet health insurance programs the way of the future, to help plan for medical expenses for the whole “family”? Citing the physical and mental health benefits having a pet can have for pet owners, insurance companies could very well decide to incentivize this behavior.
So, why does this all matter? Pets are ingrained in our lives. They’re beloved family members and we are emotionally attached to them and their wellbeing. Consequently, consumer pet spending is at an all-time high, and all signs show that it’s going to stay that way. Pet-related start-ups are booming, and the funding is following.
Insight into the emotional drivers and motivations behind people’s spending and saving habits can help financial firms design and deliver better customer experiences. The question is: Will the nation’s biggest financial institutions sit and stay? Or, will they roll over to meet the needs of every member of the American family?