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Making Sense of the Ever-Changing Affinity Market

  

The following is an executive summary of PIMA's 60+ page member research report: Affinity 2030: Sizing the Affinity Market (member login required), published in Fall 2023.  

For decades, the affinity market has operated as one would expect: Two parties establish an affiliation, where one party provides a product or service to the other in exchange for access to a new customer group. In the insurance and financial services industries, the second party would be a group consisting of individuals with similar interests, needs, identities, risks, or other characteristics. 

That much hasn’t changed. Market dynamics have, however, bringing into question the overall makeup of affinity groups and leading many to wonder... 

What Is an Affinity Group? 

Based on the distribution model for many professionals, an affinity group is still a group comprised of individuals with commonalities and can often fall into one of three categories: membership-based, customer-based, and “other” new types of affiliations.

Membership-based is just as it sounds. Individuals are members of an organization and may include: 

  • Environmental groups
  • Advocacy groups
  • Civic and social organizations
  • Labor unions
  • Business associations
  • Professional organizations
  • Sports teams and clubs
  • Warehouse clubs and supercenters 

Customer-based would be any group composed of customers from a given business and may include:  

  • Auto dealers
  • Auto and personal finance
  • Commercial banking
  • Credit unions
  • Airlines
  • Cruise lines
  • Hotels

Other includes emerging affinity groups such as : 

  • Auto manufacturing
  • Colleges, universities, and professional schools
  • Military personnel and veterans
  • Hobbies and social interests 
  • Gig economy 

For some of these segments, the numbers have been in decline. While many still hold strong, it’s important to recognize the shifts happening, as buying and belonging is changing. 

Aren’t We Missing Something?

If you’re familiar with the affinity market, you may have noticed absences in PIMA’s market segmentation. For some segments, there is already great work being done by other organizations. For others, there was not enough quantitative data available for this inaugural research. For that reason, you won’t find the following in the research report: 

  • Employers
  • Government employers
  • Junior colleges
  • Technical/Trade schools
  • Membership clubs
  • Loyalty programs

While these are affinity groups — they were simply not included in our most recent research.
 

Factors Affecting the Numbers

Market trends being what they are, those working in affinity distribution will be facing behavior shifts over the next few years. But challenges, as they say, present opportunity, which will quickly become evident as you dive deeper into what’s been impacting the affinity segments and their numbers. Here’s what they’re dealing with:

  1. Changing employment dynamics. 
    You need only look at industry employment trends for an idea of what many other organizations have been trying to solve. Younger workers are not affiliating with social organizations, traditional associations, or labor unions at the same level as previous generations. 
  2. Increased technology adoption. 
    Technology is changing the way people interact with the world. Remote and hybrid work arrangements are here to stay — as is social media. What’s more, an increasing number of consumers have grown more comfortable with the idea of using apps and websites to transact with everything from banks to charitable organizations. 
  3. Building a customer base. 
    Technology has also put into question how to build trust and long-term relationships with customers, members, and businesses themselves. This is especially true with younger generations, as many are digital natives and used to spending their time online. 
  4. New business models. 
    For one, the gig economy is changing the market for almost all industries. No matter the service, you can probably find a freelancer to fill your needs. Then, there’s been changes to the purchasing models, which is upending the way many businesses target consumers, market their wares, and drive sales. 
  5. Evolving consumer interests. 
    While consumers have always been fickle, both businesses and organizations are having a difficult time threading not just one needle but many — and at the same time. They may find themselves in a position where their value proposition no longer resonates, their products are experiencing a decline in interest, or memberships just don’t seem appealing to target audiences.  

Each of these factors should be considered while exploring the potential within any segment of the affinity market. Are new products in order? What about new marketing methods? Should you be looking at diversification of products, markets, or somewhere in between?

 

By the Numbers: The Membership-Based Affinity Market

Membership-based groups appear to be some of the hardest hit, and the reason behind the declining numbers depends on the affinity segment you’re looking at. Each segment faces its own unique challenges due to changing market dynamics. 

Causes and Advocacy 

Though the numbers sit at around 13M in the top five environmental groups and nearly 93M in the top five social causes, donor participation is down — as is volunteerism. Complicating matters further is the mode of giving. It’s moving online and happening through digital channels (i.e., websites, mobile apps). The move, however, does present an opportunity when it comes to the technology that organizations use or plan to implement in the future. What is the best means for tapping into this emerging market? 

Civic and Social 

Civic and social organizations have been experiencing similar issues with volunteerism. It dropped 7% in 2021 alone. While membership is around 10.8M across 11 organizations, they still struggle to maintain a volunteer base. And much like causes and advocacy, they’ve also been leveraging technology — more so for communication purposes, cost savings, and operational efficiencies, but this, too, could present an opportunity. 

Labor Unions

Enrollment in labor unions is on the decline, with the current rate at just 10.1% of the workforce and roughly 16.5M union members. While down, an inflection point has emerged. The Starbucks/Amazon effect has interest in unionizing among younger workers on the rise. However, 27 states have enacted right-to-work laws, making it a challenge. 

Business Associations

The trend of membership decline continues with business associations. Right now, it stands at 3.7M across 12 associations. 

Much of the problem is industry performance. When times are bad, it only stands to reason why members would consider leaving. However, an increase in new members can be found within two demographics: Millennials and Gen Z — though the rise of social media is competing for members.

Professional Organizations

Professional organizations follow the same story as business organizations, seeing individual membership growth in stagnation or decline. Currently, the count is nearly 13M members across the top 12. The challenge that many organizations face is communicating the value proposition of membership. 

One of the more interesting findings within this affinity market segment is the increase across certain organizations. They are bringing in new members, just not at the same rate in years past. Coupled with the fact that other organizations are experiencing increased declines has led to the number of members being low.  

Sports Teams and Clubs

One of the bright spots can be found with sports teams and clubs, and the brightest of bright spots can be traced back to one activity: pickleball. Approximately 36.5M people count themselves as players, and the number keeps growing. As such, professional leagues are now forming around the sport. 

This isn’t to say other sporting activities aren’t contributing to the number of members, as there are currently 6.5M people involved in a sports-related organization or club. But much of the rise can be attributed to pickleball. 

Warehouse Clubs and Supercenters

Another bright spot that’s been experiencing strong retention and phenomenal growth would be that of warehouse clubs and supercenters. Current numbers have reached 124.4M members, and the top three clubs anticipate building a number of new locations in the coming year. That will only add to the membership base.

Additionally, retention numbers are high among all three, and club sales grew anywhere from $45B to $50B in 2022. 

A Quick Membership-Based Breakdown

  • Environmental groups – 13.0M
  • Advocacy groups – 92.8M
  • Civic and social organizations – 10.8M
  • Labor unions – 16.5M
  • Business associations – 3.7M
  • Professional organizations – 12.9M
  • Sports teams and clubs – 6.5M
  • Warehouse clubs and supercenters – 124.4M

By the Numbers: The Customer-Based Affinity Market

The story playing out within customer-based groups is more so about market dominance, with some major players owning anywhere from 60% to 85% of the market share. However, certain affinity market segments have been seeing new entrants coming to the space that may disrupt the current business model. 

Auto Dealers

The best way to look at auto dealers is from two perspectives: new and used, and the reason will become distinctly clear when looking at the numbers. New auto sales range from 14M to 17M units per year, while used car sales came in at 43.1M in 2021. 

Where the market dominance comes in is with the automotive groups currently in the space. A handful of automotive groups sell upwards of 500,000 units each year.

Auto and Personal Finance

At last count, the number of individuals with auto loans was approximately 28.8M, and the dollar amount owed is on the rise. People spend an average of $94 more per month on auto financing.

As with many segments, technology has been disrupting this space — fintech companies in particular. There is an opportunity for financial institutions to lower rates to gain market share, but time will tell if they take advantage of this. 

Commercial Banking

Commercial banking represents the largest customer base within the affinity market, totaling 288M. And though the number of entities operating in the space are many, you’ll find three servicing the majority of customers. 

Much like auto and personal finance, technology is changing the industry. Digital banking is on the rise. An increasing number of customers now prefer to do their banking online. 

Credit Unions

Though consolidations are on the rise, credit unions have been experiencing solid growth over the last few years, with a total of 135M customers to date.

Technology is making waves here, as well — mainly in the form of fintech companies causing some attrition to memberships. However, credit unions have responded by increasing their investment in technology to remain competitive, and the move has paid off. Membership growth is now at 4%. 

Airlines

The airline industry is one in recovery, serving 2.9M customers a day. Many of those customers are using just four airlines. Combined, these companies serve 780M to 900M U.S. passengers annually, which represents 67% of the marketplace. 

Unlike many of the other segments in this category, it isn’t technology disrupting the space. It’s labor shortages. Even the major players are struggling to hire mechanics, flight attendants, and pilots. 

Cruise Lines

Another industry in recovery, cruise lines served just 4.8M passengers in 2021 — down from 29.7M in 2019.

Most of these passengers are on the older side, but the industry has been changing not only its marketing tactics but many of its amenities, services, and experiences to bring in a younger generation of passengers. 

Hotels

Hotels have a number of major players in the space, with eight hotel groups owning a total of 168 brands and roughly 35,000 properties. Reward program memberships are high, estimated at around 235M. 

However, 25% of members have forgotten they even signed up for the program, while active usage is around 50% to 55%. The numbers may be somewhat skewed as a result. 

A Quick Customer-Based Breakdown

  • Auto dealers (new) – 13.7M
  • Auto dealers (used) – 36.2M
  • Auto and/or personal finance – 28.8M
  • Commercial banking – 288M
  • Credit unions – 135.3M
  • Airlines – 2.9M daily customers
  • Cruise lines – 4.8M passengers
  • Hotels – 235M reward members

 

By the Numbers: The 'Other' Affinity Markets

Being that “other” includes a broad spectrum of affinity segments, no single story emerged — nor did a single point of measurement. A number of different factors are at play in this space, so expect to see a variety of trends surface over the next few years.

Auto Manufacturing

In 2022, the auto manufacturing sector produced 13.7M new cars. The majority of that number can be traced back to five manufacturers, owning nearly 70% of the market.

Much of the disruption within the industry involves electric vehicles. In 2010, growth was at 0.1%. Today, electric vehicles now account for 5% of auto sales. 

Higher Education

Colleges, universities, and professional schools have been experiencing declining enrollment, and that may likely continue. Today, there are nearly 17M students enrolled in two- and four-year degree programs. The reasons for the decline run the gamut, from tuition increases to alternative career opportunities. 

What’s more, declining birth rates between 2007 and 2009 have raised questions about whether many of these institutions will have enough enrollment to continue programming — even when factoring in the 91 for-profit schools that closed since 2016 due to financial difficulties. 

Military and Veterans

The military segment has a fairly straightforward story, with over 1.3M activity duty members and approximately 16.5M veterans. By 2046, the number will decline to an estimated 12.5M veterans. As far as this segment’s makeup, female members are expected to grow from 11% to 18% during that same time. 

Hobbies and Social Interests

The hobbies and social interests segment is a story of the pandemic. People began spending their time doing a variety of different activities, such as cooking, reading, video gaming, gardening, and taking part in outdoor activities — not to mention adopting a pet. In fact, the pet industry saw a spike in revenue to $136B in 2022. People have also gotten back to traveling, socializing, and more. 

Gig Economy

The gig economy has long been an industry of freelance work, but it has quickly evolved into two facets: asset-based and talent-based. People are either using an owned asset (i.e., car, home, etc.) or themselves to provide a service. And it’s become so expansive and encompasses a wide range of industries, activities, and services that the gig economy has now grown into a $450B industry. 

While workers within this space tend to skew younger, older generations have gotten involved in gig work. As of 2022, 39% of the U.S. workforce did some level of freelance work, largely to supplement their income. Lack of job security, paid vacation, and medical benefits are just a few of the challenges that continue to plague the industry.

A Quick Breakdown of 'Other'

  • Auto manufacturing – 13.7M new cars
  • Colleges, universities, and professional schools – 16.9M students
  • Military personnel – 1.3M 
  • Veterans – 16.5M
  • Hobbies and social interests – 1M 
  • Gig economy (asset) – 9M
  • Gig economy (host) – 4.9M
  • Gig economy (driver) – 5.9M
  • Gig economy (talent) – 15.2M

 

Evaluating Your Market

Much of what’s happening in the affinity market is a story of dominance. You’re often looking at a few major players dominating their respective sectors, so the question becomes more about strategy than anything else. How can you best position the products, services, and relationships in whatever segment you’re targeting? And with digital disrupting many of these sectors, what role will technology play in your strategy? Is your business in a position to support new digital solutions? 

More importantly, have you questioned the long-term viability of the segment your business is currently servicing? Is it in decline? Is it time to explore new markets, realign products, or target new audiences? In fact, 2024 will be the peak year of people turning 65, which means 75% of the workforce will be Millennials and Gen Z around that same time. What has your business done to prepare for that shift? What are you doing with the messaging around affinity group benefits? How will the change impact your affinity group marketing plans? 

Regardless of market trends, the industry has always been about building trust and relationships. That won’t change. What will change is the means of achieving that objective. Technology is now helping businesses in all industries connect with consumers, personalize messaging, and uncover opportunities to drive sales. Are you using technology to its fullest capabilities? Does your business need to invest in additional resources? 

Whether aligning with membership-based, customer-based, or “other” organizations, it’s all about arriving at the right strategy. Have you figured out how to balance opportunity and risk within an emerging market? Are you ready to capitalize on the trends that lie ahead? 

If you’d like to learn more about how to navigate today’s affinity market, join the PIMA Community and get access to affinity-specific research such as PIMA’s recently published report Affinity 2030: Sizing the Affinity Market (member login required) as well as network with the brightest minds in the affinity market.

PIMA® (Professional Insurance Marketing Association®) is a member-driven trade association focused exclusively on the affinity market.


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