Q&A with Derek Cushman
US Financial Wellness Solutions Leader
How should we use cluster analysis to offer more targeted financial wellness programs?
Cluster analysis is a statistical method of grouping people based on shared similarities: gender, ethnicity, age, where they live, and so on. Although there will always be exceptions, this “profiling” generally provides a relatively accurate picture of the needs of different employee groups because it’s based on actual data. As you start to understand statistically significant segments of your population, you can then think of targeted strategies that speak to each group, rather than speaking to your employees as a homogenous whole. Then you get more engagement and utilization of benefits, and you can make a real change in your employees’ financial wellness.
We did a cluster analysis project with a large multinational retailer, in which we performed statistical modeling to identify which factors influence financial wellness behaviors. We looked at the employee population in terms of ZIP code, ethnicity, and gender. We look at ZIP codes because people tend to flock toward other people like them. The value of the homes in the area, as well as whether it’s urban, rural, or suburban, are all factors — people who live in the same area tend to have similar financial behaviors. The same goes for ethnicity. Group behavior rubs off on other people and values are passed down through generations. Although it would be wrong to draw any sweeping generalizations, this kind of analysis is helpful, as it gives you a baseline for understanding where your workforce is financially and what it needs, as well as how to best communicate to different groups.
Interestingly, after accounting for these factors as well as actual earnings, tenure with the employer, and what part of the company employees worked in, we found that the strongest indicator of an employee’s 401(k) contribution rate was his or her supervisor’s contribution rate. The second strongest was his or her peers’ contribution rate.
So behavior is very much influenced by those around you, particularly those who manage you.
Read the rest of this series:
- A targeted approach to workforce financial wellness part 1
- A targeted approach to workforce financial wellness Part 3
Learn more about financial wellness. Read our Q&A series with Betsy Dill, US Financial Wellness Advisory Leader:
- Re-examining financial literacy Part 1: From education to action
- Re-examining financial literacy Part 2: From education to action
- Re-examining financial literacy Part 3: From education to action