MFS Topic 2 The Role of Marketing in Financial Services PDF

School of Economics, Finance and Banking Universiti Utara Malaysia Marketing Financial Services Topic 2 The Role of Marketing in Financial Services A241 BWB...

School of Economics, Finance and Banking Universiti Utara Malaysia Marketing Financial Services Topic 2 The Role of Marketing in Financial Services A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 1 THE GOAL OF FINANCIAL SERVICE ORGANIZATIONS To do this , it must generate The main goal for any products , services or ideas financial service that offer superior value for organization - sustainable its customers that is not competitive advantage easily imitated / copied by competitors A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 2 WHY MARKETING? Liberalization on banking industry Bank merger IT changes Banks have to think seriously about how they can compete EFFICIENTLY AND EFFECTIVELY This have led them to pay increasing attention to marketing TECHNIQUES & STRATEGIES A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 3 WHAT IS MARKETING? According to American Marketing Association –”marketing is the process of planning the conception , pricing , promotion and distribution of goods and services to create exchanges that satisfy individual and organizational objectives Bank Marketing has been defined as “a part of management activity which seems to direct the flow of banking services profitably to selected customers” A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 4  TERMS IN THE DEFINITION ON MARKETING 1. “Marketing is a process” ◦ It is a combination of several activities performed in a systematic way and not just a single transaction A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 5 A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 6 HOW THE “PROCESS” INVOLVE? 1. To identify its target market Example - Before a residential home 2. Structure the home loan scheme that meets the needs of the target market loan scheme is sold, the bank has (through a series of steps must help them understand its benefits) 3. After the customer purchases the scheme, the bank must be in constant touch with the customers and service them All this process of marketing could involve many procedures & people A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 7 TERMS IN THE DEFINITION ON MARKETING These activities are often called the 4Ps – Marketing Mix: 4Ps represent the “marketers” view of the marketing tools available for influencing buyers A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 8 PEOPLE It requires training or re- In the marketing of In view of the heavy training and, in many financial services, it competition, banks In fact, bankers are more cases, a profound is imperative/crucial that expect their staff to take salespersons these days cultural change in the the staff takes a pro-active selling or than two decades ago bank, as people adjust to the centre stage to customer service role new selling roles / style achieve success A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 9 PRODUCTS / SERVICES Products could include ◦ Savings Accounts, Current Account ◦ Credit card ◦ Fixed deposit ◦ Hire purchase ◦ Housing loan ◦ Share financing A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 10 PRICE Price takes many forms such as ◦ Interest rates ◦ Commission ◦ Fees ◦ Other charge A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 11 PROMOTION Personal selling Sales promotion Advertising Publicity A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 12 ACTIVITY 1 List down any promotions that the bank offered A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 13 PLACE Where the products or services are being made available to the customer, or how the customer can obtain these products / services A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 14 TERMS IN THE DEFINITION ON MARKETING 3. “Marketing is directed at satisfying individual and organization objectives”. To satisfy customer needs and wants. For example ◦ Financially insecure individual may wish to invest in time deposit ◦ But if he/she a risk lover individual may invest in speculative stocks It’s marketing’s responsibility to identify consumer needs & wants & develop products that satisfy them Individual objectives refer to the satisfaction of customer needs and wants A need is a state of felt deprivation Wants are how these needs manifest themselves & shaped by culture and personality ◦ The same basic needs could lead to different wants among individuals This should be done however in such a way as to accomplish organizational: OBJECTIVES such as REVENUE, MARKET SHARE AND PRODUCT TARGETS” A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 15 TERMS IN THE DEFINITION ON MARKETING 4. “Marketing operates through mutually beneficial exchanges between buyers and sellers”. Effective marketers Marketing involves the emphasize mutually There are many ways of offering of money, “goods beneficial exchanged in acquiring a product, Eg: or services” in return for which both buyers & begging, stealing & self acquiring the product sellers are better off as a production result of the exchange A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 16 WHAT IS MARKETING STRATEGY? Marketing management refers to the management of marketing activities to attain specific organizational objectives, such as market share, revenues or profits Marketing management strategy includes the follows a) Segmentation of markets b) Identification of target markets c) Develop positioning & differentiation strategies d) Develop & implement a marketing mix for each target market A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 17 WHAT IS MARKETING STRATEGY? A market consists of all the A target market is a collection of Organization should first divide For example potential customers current & potential customers these markets into homogeneous that the firm chooses to serve subsets of customers A market consists of all the potential Banks divide their markets into customers sharing a particular need or commercial & household/retail customers want who might be willing & able to engage in exchange to satisfy that “need or want” Most markets today are heterogeneous One strategy will not be effective for all customers in the market A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 18 STEPS IN MARKETING MANAGEMENT STRATEGY 2) Targeting – 4) Decide on 1) Market 3) Product – Select the the Optimal Segmentation Positioning Target Market Marketing Mix A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 19 SEGMENTATION AND TARGET MARKET SELECTION Few financial institutions have the resources to serve every “market segment” Selection is made on the basis of an evaluation process which includes factors such as ◦ size & growth of the segment ◦ the level of competition in the segment ◦ the organization’s capabilities to serve the customers in that segment & ◦ the firm’s objectives For each target market, the organization needs to have a “positioning & differentiation strategy” A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 20  Strategy of identifying the preferences of the target market customers & developing an offering as close to the customer’s preferences as possible POSITIONING & To persuade its customers that its offering is DIFFERENTIATION superior to its competitors’ offering For each target market, the company has to develop a “MARKETING MIX” A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 21 POSITIONING & DIFFERENTIATION For each target market, the organization needs to have a “positioning & differentiation strategy” Example The positioning or differentiating strategy leads to the next step in marketing strategy “marketing mix” - which consists of the 4Ps A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 22 ROBERTS LAUTERBORNS Consumer wants and needs - corresponding to Product in the Marketing Mix: ‘Consumer wants and needs’ moves the focus from ‘product’ and being product-led, with companies making things customers didn’t want Cost to satisfy - corresponding to Price: The second ‘C’ is ‘Cost to satisfy’, designed to replace ‘price’, as Lauterborn stated this was irrelevant as so many other factors were involved ◦ The challenge with this is the perception of the terms ‘cost to satisfy’ with a company like Apple A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 23  ROBERTS LAUTERBORNS Convenience to buy - corresponding to Place: The third ‘C’ is ‘Convenience to buy’ and admittedly, the ‘P’ for ‘Place’ always felt tenuous as it’s really about access to the product and the letter ‘P’ worked in the alliterative set! ◦ The concept of shopping from 9am to 5pm, has gone Communication - equivalent to Promotion: The final ‘C’ in Lauterborn’s 4Cs collection is communication Marketers View Customers View 4Ps Product 4Cs Customer's needs & wants Price Cost to the customer Place Convenience Promotion Communication A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 24 THE FOUR PILLARS OF THE MARKETING CONCEPT 1) CUSTOMER 2) PROFIT 3) TOTAL 4) SOCIAL ORIENTATION COMPANY EFFORT RESPONSIBILITY A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 25 CUSTOMER SATISFACTION Highly satisfied customers tend to be repeat purchasers, The marketing concept Less likely to stray to & it is much more expensive recognizes that customer competitors, & less price to generate a new customer satisfactions is the business sensitive than customers who than to provide additional that all businesses are in are not highly satisfied service to an existing one A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 26 CUSTOMER SATISFACTION The marketing concept does not imply that customer satisfaction is the only objectives of an organization The market concept believes that profit objectives can best be met by providing customer satisfaction A bank's operations are financed mainly by deposits from the public and only a small portion from shareholders The highly successful marketing organization finds ways to use its resources in the most efficient way possible consistent with customers’ needs & wants Greater customer satisfaction should improve earnings by increasing fee income & deposit balances A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 27 PROFIT The highly successful marketing organization finds ways to use its resources in the most efficient way possible consistent with customers’ needs & wants. Greater customer satisfaction should improve earnings by increasing fee income & deposit balances. A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 28 TOTAL COMPANY EFFORT The commitment to customer satisfaction must be made & supported by top management & implemented in the form of a corporate culture that places the customer at the center of all the bank’s activities Each department must cooperate and work together to meet organization goals The marketing concept must become the philosophy of the entire organization, not just the marketing department A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 29 CORPORATE SOCIAL RESPONSIBILITY Banks like other firms are expected to play an active roles in the community Social responsibility is an important part of the mktg concept, especially for banks A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 30 ACTIVITY 2 Share with us what CSR that banks has carried out? A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 31  Marketing Management Philosophies 1. Production concept The assumption is that if an organization makes the product available & affordable to the consumers, they will buy it. 2. Product concept The emphasis in this philosophy is on developing innovative & technically sophisticated product. (emphasis on R &D) A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 32 MARKETING MANAGEMENT PHILOSOPHIES 3.Selling concept - Companies are guided by the assumption that products need to be aggressively pushed & promoted 4. Marketing Concept - The role of marketing is to identify customer needs & wants, help in developing products that satisfy those needs. 5.Societal Marketing Concept - To generate superior value to their customers by improving the consumer’s & society’s well being ◦ BSN contribution to the community through the opening of the branches in rural areas to bring bank services to the outlying areas, building bus shelters, donations & extending scholarships to assist in the education needs of the community A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 33 MARKETING MANAGEMENT PHILOSOPHIES Marketing concept vs Societal Marketing concept ◦ Marketing concept focuses on customer satisfaction & company profitability ◦ Societal Marketing concept concerns about the long-run well- being of the environment & society A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 34 THE ELEMENTS OF MARKETING The marketing approach: ▪Research to determine customers’ financial requirement ▪Design new services or innovate old ones according to the findings ▪Market services to the customer for whom they were researched and designed at a profit ▪Satisfy the customers’ financial needs A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 35  THE BANK MARKETING FUNCTION Focuses its attention on the following activities: ▪Customers’ behaviour, attitudes and segmentation ▪Branch management, locations and distribution of banking services ▪Advertising, communication, promotions and publicity ▪Product / service development ▪Pricing of bank’s services ▪Defining marketing strategies, administration & controlling the marketing program ▪Marketing research that attempts to collect, investigate, analyze and interpret market developments The objective of the marketing process is profitable sales of services that satisfy customer’s financial requirements and needs A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 36 THE MARKETING APPROACH TO BANKING SERVICE 1) Identify the customers’ financial needs and wants 2) Develop appropriate banking products and services to meet customers’ needs 3) Pricing: determine the prices for products / services development 4) Advertise and promote the products to existent and potential customers of financial services 5) Distribute: set up suitable distribution channels and bank branches 6) Forecasting and research future financial needs A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 37 THE MARKETING APPROACH TO BANKING SERVICE Stages 2 through 5, this Stage 1- it starts and process is marketing concludes with identifying These decisions act on mix and has a special each other, while they are and satisfying customers’ importance in any needs being “mixed” together marketing program Banks must manage a A marketing mix is a term These decisions must be collection of marketing used to describe a evaluated continually, if mix because they sell a blending of decisions the total collection of customer – about product services , marketing programme is to satisfying services to place, promotion and price succeed diverse target markets A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 38 THE MARKETING APPROACH TO BANKING SERVICE Create marketing programs designed to attract funds Convert these funds into other customer-satisfying services from uses of credit and buying power Create marketing programs to attract customers for this funds A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 39  BANK Marketing Marketing mixes mixes to to attract users of funds and services attract funds TARGET CUSTOMERS “Marketing Tasks of Banks” A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 40 Three Types of Marketing in Service Firms COMPANY INTERNAL MARKETING EXTERNAL Marketing EMPLOYEE CUSTOMER INTERACTIVE Marketing A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 41 THREE TYPES OF MARKETING IN SERVICE FIRMS The service marketing triangle underlines the relationships between the various providers of services, and the customers who consume these services Relationships are most important in the services sector Employee – Company – Customer Internal marketing: Employee and Company relationship External marketing: Company and Customer relationship Interactive marketing: Employee and Customer relationship A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 42 COMPANY TO CUSTOMERS: EXTERNAL MARKETING External marketing is the Banks develop new services action or business of to meet consumer needs, promoting and selling services price them, promote them & or products, including market make them available through research and advertising to convenient locations clients and potential clients A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 43  COMPANY TO CUSTOMERS: EXTERNAL MARKETING Communication of the service strategy to customers is important to build the trust of customers and hence to convert the customers to be loyal to the company ◦ Target group is customers ◦ Communication between firm and customers ◦ Promotional features include word-of-mouth, advertising, newsletters ◦ Increase customer satisfaction/experience ◦ Incentives are by way of quality service ◦ Public relations is needed ◦ Retention of customers is vital ◦ Requires control and feedback A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 44 COMPANY TO EMPLOYEES: INTERNAL MARKETING Internal marketing is an ongoing process that occurs rigorously within a firm whereby the functional process is to motivate, empower and align employees at all management levels to consistently deliver a satisfying customer experience Hence, training employees, building value and trust, and empowering employees are some of the ways that the company can make their employees a positive influencing force for the customers Target group is employees Most banks perform internal banking Communication between firm and employees through properly recruiting, training, Promotional features include salary increase, transfers, staff benefits, recognition motivating & reward program Increase job satisfaction A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 45 COMPANY TO EMPLOYEES: INTERNAL MARKETING Employees are also provided with reference guidebooks for Example: Bank conducts basic commonly encountered The perceived quality of the banking courses for new staff service depends upon the to familiarize them in respect problems @ frequently asked interactions between employees questions to assist them in to the bank’s operation their communication with & customers customers To ensure that these interactions are satisfactory, The employee to customer interaction is also known as the That’s the difference your banks monitor them & coach employees can create when “moment of truth” or “critical their employees to handle the they interact with customers situations effectively incidents” A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 46  COMPANY TO EMPLOYEES: INTERNAL MARKETING Once your employees starts treating the customer as if they are really king, the whole service triangle gets completed, and you will get the best results from all processes employed ◦ Example: Hong Kong Bank staffs are trained in sales techniques & negotiation skills ◦ Account relation management programmes are conducted for account managers in priority banking department so that they can manage their accounts more affectively A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 47 SUMMARY Marketing is “a process”-It is a combination of several activities performed in a systematic way! Marketing mix include product, price, place & promotion Marketing is undertaken to satisfy customer needs and wants and to fulfill organizational objectives Marketing operates through mutually beneficial exchanges Marketing is equally relevant for goods , services or ideas Marketing plays an indirect as well as direct role in creating superior value for its customer A241 BWBBK3053 MARKETING FINANCIAL SERVICES (2024 VERSION) 48