By Linda Brennan, Zuleyka Zevallos, and Wayne Binney

First published in 2011 by the Australasian Marketing Journal.

Abstract

There has been an increase in consumers’ reliance on credit and rising consumer debt. The increase is especially problematic for those least able to afford debt of any kind – welfare recipients. This qualitative study reports on 120 Australian welfare recipients’ attitudes towards debt, their understanding about what constitutes acceptable debt and the debt-management strategies they adopt. The results of this research show that welfare recipients see debt as a way of life and as a means of survival in a society where a core value appears (to them) to be the acquisition of material wealth. Their status as income earners and therefore their capacity to service debt is less than others. Consequently, we could expect that their debt levels would be proportionally less; however, many participants in this research did not appear to understand the long term consequences of their level of debt. The paper concludes with a discussion as to how social marketing can be applied to potentially assist this vulnerable consumer group and the wider community.

Keywords: Vulnerable consumers; Consumer credit; Debt management; Social marketing

See an excerpt below

Introduction

The combination of powerful market forces that help to normalise the use of credit and the widespread lack of financial knowledge among consumers makes debt a major issue of socio-political concern. Household debt in many developed countries including Australia has steadily increased to alarming rates and exposed nations to crises such as the Global Financial Crisis (GFC) and sovereign debt crisis in European countries (Stutchbury, 2010). The Governor of the Reserve Bank of Australia has warned that personal rather than government debt is potentially serious for the Australian economy (Battellino, 2010). In the current economic climate there are many groups who are less vulnerable than others because they have the capacity to service and repay debt. However should circumstances change, as has recently occurred in the United Kingdom and United States of America, there is a significant proportion of Australians who would become vulnerable consumers with serious indebtedness as household debt is at a relatively high level (Australian Bureau of Statistics, 2010a).

A group within the Australian population who are recognised as being vulnerable are those who are recipients of government income support payments (Australian Bureau of Statistics, 2010b). The increase in debt among income support recipients is inevitably connected to the relationships between financial institutions and the consumer marketplace. Financial institutions increasingly provide easier and more convenient methods of gaining forms of credit, and the increasing ease of access may explain the growing acceptability of debt. This connection provides an economic context for research into the subjective understandings of debt among vulnerable consumers. Debt not only relates to economics but also concerns consumer psychology and socio-demographic variables (Mewse et al., 2010). In the context of this study, welfare recipients’ understanding of debt is critical given their financial disadvantage, their reliance on government support and, as will be later demonstrated, their precarious dependency on credit institutions.

This study explores the attitudes towards debt among a group of potentially vulnerable consumers in Australian society, welfare recipients. In Australia, income support recipients are mostly comprised of aged pensioners, carers, students, the disabled, the unemployed and single parents. One main government agency is responsible for delivering social security services to these groups in Australia. However, they deliver services on behalf of multiple government agencies that are responsible for differing types of welfare payment(s). For simplicity, we have named the delivery agency ‘‘OzWelfare’’. The Australian government has also recognised that this group of people may need protection from the marketing activities of financial services organisations (Commonwealth of Australia, 2005).

This study examines how 120 participants define debt, how they classify their debts according to acceptability, and why the participants fail to see some liable consumer practices such as credit and mortgages as debt. Firstly, the paper reviews the literature on consumerism, debt and vulnerable consumers. Secondly, it describes the research methodology. Thirdly, it describes the participants’ attitudes towards debt and how these attitudes may coincide with generational shifts and trends in consumerism in recent decades. Fourthly, it describes the participants’ debt management experiences, their knowledge of finance management options, and the connection between attitudes towards debt and repayment behaviour. Finally the paper concludes with a discussion of the findings and a discussion as to how social marketing can be applied to potentially assist this vulnerable consumer group.

Highlights

• Australian welfare recipients’ ideas about debt, acceptable debt and debt management.
• Welfare recipients see debt as a way of life and as a means of survival.
• A core value appears (to them) to be the acquisition of material goods.
• Little understanding of long term consequences of debt and many were deeply in debt.
• Social marketing could assist this vulnerable consumer group and the wider community.

Citation

L. Brennan, Z. Zevallos, and W. Binney (2011) ‘Vulnerable Consumers and Debt: Can Social Marketing Assist?’Australasian Marketing Journal 19(3): 203-211.