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MFS

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Marketing of Financial Services

MFS

MFS

MFS

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Marketing of Financial Services

Difference between tangible and financial services marketing, Characteristics of services, Why is planning essential for banks? Benefits of planning, Strategic and marketing plans, Factors affecting banks’ strategy, Changes in banks’ strategy in the 1980s, New approach to banks’ marketing style, Elements of a marketing plan, Marketing mix in financial services, Planning corporate account strategy, Pricing decisions and strategy, and The future of marketing for banks.

or (d) purchased in bulk like tangible products. is that services cannot be experienced in a tangible manner. (b) tasted. (c) handled. Services cannot be: (a) touched.Marketing of Financial Services One of the major problems facing the promoters of financial services as opposed to tangible products. .

the standard of service is not uniform from branch to branch. Service marketing relies heavily on the individual selling the service. Hence.Marketing of Financial Services The Acronym (HIPI) will help you remember the characteristics of services. . It is this individual who is judged as the “bank” rather than the underlying service being sold. selling skills and interpersonal skill of the seller. Heterogeneity Although all bank branches sell the same services. sales training. marketing manager must pay great attention to: product knowledge.

While a service may have some tangible representations like: cheque book covers.Marketing of Financial Services Intangibility Marketing of financial services must necessarily stress the Benefits because services cannot be touched. e. plastic cards.g current account may be considered low risk mortgage account may be considered high risk. bank statements. Different services also present a different level of risk to the customer. these represent only a small part of the intangible service. . tasted or in Any way experienced by the senses. Purchase of financial services often involves a highly emotive decision.

time when sales persons are not serving customers cannot be utilized to expand service at peak periods.) Demand for services fluctuates from day to day. .g. especially for branches in tourist areas. week to week.Marketing of Financial Services Perishability Services are highly perishable since they cannot be stored (e. month to month.

which must be produced before they can be sold to customers.Marketing of Financial Services Inseparability Most of the time services cannot be separated from the sales consultants (e. Services are frequently created at the time they are used.g. unlike the tangible products. investment advisor. If a customers need investment advice. they must go to an investment advisor duly authorized by the bank to provide an advisory service. . corporate manager).

thus leaving itself vulnerable to competitor activity aimed at gaining a dominant place in the market.Marketing of Financial Services A bank without a formal planning process is like a ship without a destination. which fails to plan its future will quickly become out of touch with its environment. Any commercial organization. Quotation: “A bank that fails to plan – is planning to fail”. .

This is principally due that the bank should be in constant touch with a fast changing environment. .Marketing of Financial Services The value of planning lies in the bank or financial institution. which will provide continuity of thought and action from one year to the next. being in a position to control its own future. A systematic appraisal is developed and incorporated in a written plan.

and allocates these resources in the most efficient way. SWOT Analysis).Marketing of Financial Services (a)Executives are forced to set corporate objectives thus providing guidance for the bank’s operations (b) Planning identifies the resource needs of each activity. and Threats (e. . balances these needs against available resources. Opportunities.g. Weaknesses. (c) A good planning process should make all staff more aware of their own roles and responsibilities (d) A formal plan forces banks or other organizations to considers its own Strengths.

thus enabling the bank to build strategies for any profitable segment identified. (f) The bottom line of any planning process is to monitor new development in the business environment.Marketing of Financial Services (e) A good plan will enable a bank or financial services provider to identify the customers’ needs and wants. and try to be in control. .

Marketing Plan Financial Plan Human Resources Plan Risk Management Plan .

some traditional banks went out of Business earlier than expected. some traditional banks remained with the “old banking business concept” instead of employing modern management business skills within the banking business.Marketing of Financial Services With the growing level of competition. and the rapid pace of change. Unfortunately. Marketing plan emerged as an essential tool in the overall strategic plan. banks started to focus their attention on strategic planning. . In spite of this new development.

Mission Statement It states the overall purpose of bank or any organization. Competitive Strength Evaluation An evaluation exercise of the strengths & weaknesses based on factors such as: ( relative costs. service quality. Market Assumptions These contain explicit statements about future trends in strategic market segments. . 4. Key Objectives Objectives are cited for variables such as: (a) financial return expected. (b) degree of efficiency required. 2.Marketing of Financial Services 1. and market share). which may affect the bank’s freedom to act. and (d) service quality 3. © size of loans or credit on offer.

8. events and timing. which result in the changes specified in action plan objectives. which bank units participate and the objectives to be attained for each.Marketing of Financial Services 5. Market Portfolio Strategy The plan must identify the desired investment strategies for each of the markets in. 7. Assessment of Opportunities The plan should assess the threats and opportunities for each market segment. Strategic Changes Objectives & goals for action plans stating changes in capabilities or resources under the control of unit management and selected as most likely for achieving the desired market results. . Action Plans for Implementation Specific programs including measurable goals. This is important in order to achieve the mission & objectives 6.

with a every project concept. .Marketing of Financial Services 9. Project Review or Evaluation Realistically. 10. profits and return on assets for the units. Expected Financial Results These include the anticipated financial outcome in terms of revenue. there should be a review or evaluation with the intention to assess its result.

Marketing of Financial Services Mission Statement Key Objectives Environment & Market Assumptions Competitive Strengths Evaluation Market Portfolio Strategy Strategic Changes Action Plans For Implementation Evaluation Process Action Plans For Implementation Assessment of Opportunities .

Marketing of Financial Services he banking industry around the world has been hanging very rapidly since the early 1970s. he industry has experienced a substantial change competitive conditions as a result of a number factors: the industry tended to go international. new competitors entering the financial services market new approaches to servicing corporate clien new capital markets emerged – as a result transformed traditional funding of banks & MNCs a wide range of sophisticated products were introduced under “packaged sales” . led by the leading US commercial banks.

American Express. while margins on lending were eroded through competition. fee-based services were increasing. Large stor and Supermarkets) .g. banks’ operations had become more complex with the range of services on offer. (e. Shell Co. banks reacted and bega to build up their own multi-national presence through their own brand name. by the end of 1970s. General Motors. banks began to channel their marketing resources towards diversification.Marketing of Financial Services n response to competition. more competition. non-bank financial institutions were also providing financial services – hence.

) impacted on the operations of the banks and became one of the key drivers.g.T. (e. . and professionals like accountants. financial brokers. back office became automated).Marketing of Financial Services new information technology (I. savings and loans associations initiated interestbearing transaction accounts and brought direct competition to commercial banks. asset managers also offer financial services. lawyers. real estate agents.

High-Net-Worth customers) → Stratified Accounts (e. personal loans. credit finance. rich individuals. and (b) wholesale market.g. → Increased competition for loans and deposits .Marketing of Financial Services In the 1980s the banking industry experienced an acceleration in the pace of change in both: (a) retail. insurance products. Retail Banking → Increased Segmentation of Consumer Groups and provided Specialist Private Banking Services (e. 1st & 2nd line mortgages.g. deposits FD & S/Term) → Replacement of Paper-Based Accounting Systems.

and other major credit finance companies) . →Japanese banks took the first 5 top positions in the international banking league. →Increase competition from non-bank institutions (General Motors.T change the banks’ approach to the consumer.Marketing of Financial Services Wholesale Banking →Competition Intensified. →New development in I. wholesale and corporate markets. Merrill Lynch. General Electric. American Express. →MNCs became stronger in their demands by negotiating their own interest rates and cost of services from banks.banks continued to strive for competitive advantage and in doing so cancel out one another’s efforts.

Banks portray themselves as a “One Stop Financial Services Centre”. The competition is so fierce that they can offer any type of service provided their customers are satisfied with the speed efficiency & costs involved. Banks in certain industrial countries are now mobile in such a manner. that they will visit you at your doorsteps. Technology is one considered as one of the key drivers that enables banks to cope with the intensity of competition. . They are now more aggressive in providing a full menu of services that will cater for its customers’ needs. Banks no longer remain in their traditional service market.

• Overdraft. • Variable Term Loan. • Acceptance Finance. • Hire Purchase. • Parallel Loans. • Tax Leasing. • Merger & Acquisition Finance. • Merchandise Loan. • Property Construction Loan. • Commodity & Stock Loan. • Secured Equipment Loan. . • Leverage Leasing. • Fixed Rate Short Term Loan. • Mortgage Finance Loan. • Multi-currency Lending. • Syndicated Loan.

. Documentary credits. International cheques. • Bank-to-bank transfers. • Direct debits. International Transfers EFT transfers. • Credit transfers. Commercial Credits Clean credits. Import & Export credits. • Banker payments.Domestic Transfers • Cheques. Bank drafts. • Standing orders instruction.

Pension Fund advice. and Dividend payments. Insurance Man advice. Tax planning. Pension fund management. Corporate trustee services. Estate planning. and Financial plan & money management service.Trust Services Executorships. Shares & Bonds purchases. Safe deposit services. Share registrars. Investment advice. . Training in finance. Treasury management. Life insurance. Consultancy Services Invoicing centres. Trusteeships. Forex forecasting.

 Data processing services.  Correspondent banking services. and  Consumer banking services .  Non-life insurance planning.  Factoring of commercial invoices.  Economic & strategic studies.  Life Insurance planning. Payroll management & accounting.  Travel arrangements.

Marketing of Financial Services Relative Market Share High STAR H i g h Strategy→ “Build” Low PROBLEM CHILD Strategy→ “Build” or “Harvest” or “Divest” CASH COW L o w Strategy→ “Hold” DOG Strategy→ “Harvest” or “Divest” Source: Boston Consulting Group Matrix .

• Cash Cow Where the bank would invest just enough money to hold the BU share at the current level.Marketing of Financial Services • Star Where the bank would make investments in order to build up or expand its Business Units (BU). . regardless of the long-term effect. • Problem Child Where the bank allows market share to decline in order to maximize short-term profitability & cash flow. * Dog Where the bank sells or phases out the BU & reinvest resources.

(2) Product Development. (3) Market Development.Marketing of Financial Services Ansoff identified 4 strategies following the BCG Matrix: (1) Market Penetration. . and (4) Diversification.

Marketing of Financial Services MARKET CURRENT MARKET C U R R E N T N E W NEW MARKET P R O D U C T Market Penetration Market Development Product Development Source: Ansoff Matrix Diversification .

the bank is moving into new market with new products. (3) Market Development The bank is already known for its current products. but the strategy is to take these products into a new market. (2) Product Development The bank is already well known in its current market place but there is an identified need for new products to meet the changing needs of this market. .Marketing of Financial Services (1) Market Penetration This strategy is the least risky of the 4 strategies because it involves increasing market share in existing markets. (4) Diversification With this strategy.

The McKinsey model argues that businesses should develop their growth strategies based on: • Operational skills. • Privileged assets. • Growth skills. The McKinsey Model resembles the Ansoff Model. . Growth can be achieved by looking at business opportunities along several dimensions. summarized in the diagram. and • Special relationships.

New Competitive Arenas New Industry Structure New Geographic Areas New Delivery Systems New Products & Services Existing Products to new customers Existing Products to existing customers Acquisitions McKinsey Growth Pyramid Joint Ventures How? Minority Stakes Alliances Marketing Partnership Organic Invt Generic Options & Investment Structures for a Growth Strategy Increasing Level of Risk .

Operational Skills
They are the “core competences” that a business has which can provide the foundation for a growth strategy. (e.g. the
business may have strong competencies in customer service; distribution, technology).

Privileged Assets
Those assets are held by the business that are hard to replicate by competitors. (e.g. in a direct marketing-based business these assets might
include a particularly large customer database, or a wellestablished brand).

Growth Skills
These are the skills that businesses need if they are to successfully “manage” a growth strategy. These include the skills of new product development, or negotiating and integrating acquisitions.

Special Relationships
Such relationships are those that can open up new options. (e.g. the business may have specially string relationships with trade
bodies in the industry that can make the process of growing in export markets easier than for the competition) .

The model outlines seven ways of achieving growth, which are summarized as follows:  Existing products to existing customers  Existing products to new customers  New products and services  New delivery systems,  New geographic areas,  New industry structure, and  New competitive arenas

 Existing products to existing customers The lowest-risk option; try to increase sales to the existing customer base; this is about increasing the frequency of purchase and maintaining customer loyalty.  Existing products to new customers Taking the existing customer base, the objective is to find entirely new products that these customers might buy, or start to provide products that existing customers currently buy from competitors

Some of these can be sold to existing customers – who may trust the business (and its brands) to deliver. entirely new customers may need more persuasion  New delivery systems This option focuses on the use of distribution channels as a possible source of growth. New products and services A combination of Ansoff’s market development & diversification strategy – taking a risk by developing and marketing new products. Are there ways in which existing products and services can be sold via new or emerging channels which might boost sales? .

 New competitive arenas This option requires a business to think about opportunities to integrate vertically or consider whether the skills of the business could be used in other industries. New geographic areas With this method. businesses are encouraged to consider new geographic areas into which to sell their products. Geographical expansion is one of the most powerful options for growth – but also one of the most difficult.  New industry structure This option considers the possibility of acquiring troubled competitors or consolidating the industry through a general acquisition programme. .

Marketing of Financial Services Gap Analysis of Revenue 80 70 60 Desired Revenue Revenue 50 40 30 20 10 0 Tim e Strategic Planning Gap Projected Revenue .

product & market. operational. and (b) redefine the objective so that they produce the same result as the current projected trends.Marketing of Financial Services GAP analysis can be used at a number of levels of Planning – strategic. . The resultant gap analysis will enable the bank to choose between one or two courses of action: (a) plan strategies to close the gap.

The changes follow the acronym (LePESTCo): External Factors (1) Le → Legal (2) P → Political (3) E → Economic (4) S → Social (5) T → Technological (6) Co → Competition .Marketing of Financial Services Changes in the external environment can affect the desirability of the potential strategies of a bank due to changes in its relative position in the market.

• Taxation Laws. • National Rate of Inflation & Money Supply. • Gross Domestic Product (GDP). • Foreign Exchange Controls. • Attitude of the Government towards foreign banks & non-bank financial institutions. and • Unemployment Levels. ECONOMIC CONDITIONS • Industry Structure. • Interest Rates. .Marketing of Financial Services LEGAL * Banking Regulations & Laws. •POLITICAL • Attitude of the Government towards the local banks. • Foreign Exchange Rates.

TECHNOLOGY • Development in Integrated Technology. • Socio-economic Distribution. • Geographic Population Distribution. • Population Size. • Age Distribution. • Levels of Investment Required.Marketing of Financial Services SOCIAL & DEMOGRAPHICS • National Birth Rate. • Changes in Technological Industry. • Trend in Lifestyle. • Public Opinion & Attitudes towards financial services providers. . • Education/Skill Distribution. and •Trend in Banking Usage. and • Customers’ attitudes towards new technology.

• New Entrants penetrating the Market.Marketing of Financial Services COMPETITION • Existing players in the Market. • Marketing Style. • Pricing of Financial Services/Products. and • Consolidation within the Banks. .

• Planning. • Menu of product/service range. • Ability to attract qualified personnel. • Commitment to research & development. and/or. • Strategies for segmentation. timing & reach). • Composition of the clientele. • Pricing. • Technology used for service delivery. spending. morale.g. • Image & service quality standards & performance. • Efficiency of service delivery. and • Plan to diversify within. • Promotion aspects (e. • Reputation among suppliers and creditors. information & control systems. • Training. key accounts. outside the industry.Marketing of Financial Services COMPETITOR ANALYSIS • Market share. • Financial position. union relations. .

(c) Systems. and (d) Financial resources needed to back the plan. .Marketing of Financial Services A sound marketing plan should also considers the impact of internal factors such as: (a) Employees. (b) Premises.

Marketing of Financial Services Employees Does the bank have adequate qualified employees to handle the marketing campaign? Are the employees fully aware of the marketing plan and their respective responsibilities? In the event of a shortage of employees – will they be recruited from the bank’s competitors or given internal training? Will the employees be given a marketing target to achieve within a specific period of time? Who will be responsible for the overall co-ordination? Will they be remunerated based on performance? .

Head Office.Marketing of Financial Services Premises Where will the marketing campaign be executed . or Branch Level? Are the current premise visible or adequate to promote the marketing campaign? Will there be any additional cost to be incurred to make the premises more user friendly and appealing? How are the premises styled – open plan or closed counters? Are the premises comparable with the bank’s competitors? .

Marketing of Financial Services Systems Are the present systems adequate or robust enough to handle the marketing campaign? Are the systems user friendly? Are the employees fully trained to manage the systems in place? Can the systems be replicated by the bank’s competitors? Who will be responsible to manage the systems? Can the systems be tempered with? Is there a contingency plan in place in the event of a system break down? .

Marketing of Financial Services Financial Resources Is there a specific budget allocation for the marketing campaign? Who will be responsible to manage the budget? Has adequate provisions made to include cost overrun of the campaign? Does the budget time frame match the marketing campaign period? Is the marketing campaign costs built into the service costs? .

 Consider the buying decision process.  Count the number of accounts in total.  Evaluate the trend in market concentration. .Market Characteristics  Assess the market size.  Test for historic growth rate. and  Assess the characteristics of customers.  Evaluate the service delivery process.  Make a projection of the growth rate.

 Work out the degree of service differentiation.  What is the “Value Added”?  Consider the level and type of risk faced by the bank. and  Attitude of customers to new services/products.  The impact of shared-cost structures.  Test the relative profitability of the service. .Service Characteristics  Relative capital intensity.  What are the potential for cross-selling opportunities?.  Rate of service change and innovation.  Service integration with other bank services.

 Impact of new technology and trends.  Impact of social attitudes.Environmental Characteristics  Political stance and their impact on the industry. and  Economic dynamics and its impact on the industry. .

 Evaluate the degree of competitor concentration in the market. and marketing effort.  Work out the relative employee skills required.  What is the position regarding entry or exit barriers?.  Consider the impact of changes of competitors. .  What is the major trend in the market share?.  Assess the relative capital intensity. cost. and  Evaluate the services life cycle of the industry. and  Assess the systems capability.  Test for relative service price.  Evaluate the bank’s market share towards its competitors.  Consider the relative resource availability to the bank. Identify the existing competitors and their market share (to include non-bank financial institutions).

Life Cycle Position STAGES IN THE BANK’S SERVICES LIFE CYCLE Demand Your Bank’s Position Embryonic Growth Shakeout Maturity Decline Time .

Competitive Strategy (1980) .Porter’s Five-Forces Model Threats of New Entrants Bargaining Power of Lenders Competitive Rivalry Bargaining Power of Customers Threats of Substitute Services Source: Adapted from M E Porter.

COST LEADERSHIP Broad Target 3 (a) COST FOCUS Narrow Target 3 (b) DIFFERENTIATION FOCUS .Porter’s Generic Strategy Model COMPETITIVE ADVANTAGE Lower Cost Differentiation C O M P E T I T I V E S C O P E 2. DIFFERENTIATION 1.

because many services are broadly similar. The bank can try to achieve lower costs by means of encouraging customers to use products in a way that is cheaper for the bank (e. The bank will also have to promote the benefits such as convenience to the customers.g. diversification for cost leadership strategy may not be feasible.Cost Leadership This can be achieved through market leadership. with high sales and aggressive costs control). . SWITCH. For a small market. DELTA cards). cost leadership may be difficult to maintain in banking. or from economies of scale (e. Depending on the type of market.g. ATMs.

. delivery system or image that is distinctive from its competitors.Differentiation This is where a bank seeks to be unique in the financial services sector by producing a product/service. Differentiation is only successful if the customers perceive the difference.  The bank that says Yes  The listening bank  Your partner in development  Your solutions bank The major problem with differentiation as a strategy is that financial services can be easily copied and adapted by other competitors using slight different wordings. Banks would tend to use marketing slogan such as:  You’re better of talking to Barclays.

select a quoted MNCs as its target market. Differentiation Focus This approach can be described as “finding a niche in the market place and developing services that matches the niche market”. the focus strategies aim at a narrow target. . If the target market is too small. The bank would normally select a target market (s) & tailors its strategy to the specific need of the target market (s). (e.g.Cost Focus While the cost leadership and differentiation strategies aim at a broad target. and aim to serve them to the virtual exclusion of other target markets). The bank can either aim at cost focus or differentiation focus. the bank may be left with a service menu that is not profitable.

Product Price People Place Promotion .

Product/Service This concerned with the features of the bank products. tele-marketing.g. internet. Promotion It is concerned with advertising.g. personal visits to the customer. and any option available to the customer. branch network. bank lending would include the term of loans – fixed or variable rate and option to switch from variable to fixed rate or vice versa). or how can the customer obtain the service. commissions for services. Price This refers to the interest rates offered to depositors and borrowers. bank charges. (e. Internet banking). Place Where the product or service is being made available to the customer. direct sales. . ATMs. (e.

as people adjust to new selling roles. In the marketing of financial services. bankers are more sales persons these days than two decade ago. . In fact.People In view of the heavy competition. banks expect their staff to take a pro-active selling or customer service role. it is imperative that the staff (people) takes the centre stage in order to achieve success. It requires training or re-training and in many cases a profound cultural change in the bank as a whole.

* Demand for plant & equipment. a bank would necessarily have to consider the following factors: Financial Data * Sales. * Interest rate charged & paid. * Trends in fixed asset investments. * Debtors ageing trend. and * Major shareholders. * Equity capital injected. * Trend in the margin for the other banks. * Sales percentage by the major line of business.In planning to target the corporate market. * Sales growth rate potential. * Gross margin. * Creditors facilities. . * Stock turnover. * Debt maturity schedule. * Net margin. * Short-term & long-term debts profile. * Trends in working capital for the corporate.

Procedures to Adopt in Targeting Corporate Customers Market Planning General Screening Prospecting Needs Identification Strategy Assessment A/Cs Action Planning Review Relationship Dev .

Competitor Analysis Existing lead bankers. o Consultants .  Main brand names.  Number of employees.  Production/service sites (no & location).  Subsidiaries (domestic & international).  Market position. and  Names & position of board and finance officers.General Business Considerations  Lines of business. o Lawyers. Other bankers. Advisors o Accountants.

Industry economic trends. Capital Intensity. R & D investment. Profitability.Industry Background Information Growth Rate (i. historic & projected).e. Marketing intensity. & Industry competitiveness .

Internal factors • marketing objectives. Pricing decisions must be made. and • organization for pricing. • costs involved. and • LePEST . External factors • nature of the market & demand.Pricing decisions are not only made in relation to new products. • marketing mix strategy. • competition. taking into account the bank’s environment & how the factors constituting the environment can be controlled. but also in relation to the existing products. The factors can be divided into (a) internal & (b) external.

and to test the acceptability by the target market using market research approach. and (3) Perceived Value or Value Pricing.Once a new product/service has been developed. Three of the most important strategies for pricing new Products/services are as follows: (1) Skimming Pricing. . a bank will need to decide upon the price to charge. (2) Penetration Pricing.

(i. (b) a high initial price many help the product gain an image of prestige and quality. (d) there are sufficient buyers to pay the high price. demand is inelastic).e. thus bringing in funds to finance expansion into larger markets. It is especially suitable for new products because: (a) new products are less affected by price until the competition arrives. (c) a high initial price often produces more revenue in the early days.Skimming Pricing This involves setting a high initial price for the product/ service so as to just “skim the cream” of demand for the product/service. . and (e) a skimming price can be means for testing demand.

distribution costs can be achieved with a large sales volume. (3) When the market appears price sensitive. it sets a low price in order to capture a large share of the market quickly. .Penetration Pricing This the opposite of skimming pricing. and (4) Substantial economies in production. This is a valid policy if one of more of the following conditions apply: (1)The intention is to capture a large share in a mass market. and/or. (2) Strong competition will emerge soon after introduction.

This enables the bank to charge a higher price. the higher the value perceived by the customer. .Perceived Value or Value Pricing Bank marketers should use this strategy to get beyond the stage of “what does it cost us to deliver this service?” to “what is the perceived value (benefit) of this service to the customer?”. The more tangible and intangible features (including say Prestige) that can be added to a service.

(b) Break-Even Pricing. considering the market circumstances. The strategies may be considered along those lines: (a) Cost Plus Pricing. (c) Relationship Pricing.A bank must consider changing the price of the existing products/services in certain circumstances. . (d) Loss-leader Pricing. (f) Pricing for Market Share. The marketing committee or team is usually responsible to feed the strategist or the management team of the best approach. and (g) Differential Pricing. (e) Competitive Pricing.

. For such a strategy to be very productive. No business wants to operate at a loss. The methodology is practically similar to the sales of tangible commodities. it is essential that the true cost is obtained from the outset before the final price is determined. let alone. a bank or financial institution. then adds a worked out margin to ensure that the product/service is sold at a profit.Cost Plus Pricing Methodology This approach identifies the basic cost of the product/service first.

this practice is closely monitored by the marketers and report to the management the bank can loose a lot of money within a short period of time. One would ask. Both the fixed and variable costs are taken into account when such a price is determined by the management. Unless.Break-even Pricing Such a pricing strategy speaks for itself “break-even” where the product/service sold does not realized a profit or loss. this is not in line with sound commercial practice? This strategy can be used by management to adjust the price to fit in with expected demand and customer sensitivity until a price is arrived that fits the target sales and equally produces the desired profit result. .

Otherwise. other prices may be adjusted downwards in order to keep the business.Relationship Pricing This is particularly important when a bank is trying to deal with the corporate clientele and high net worth individuals. while increasing the profits overall from these customers. the bank will be placed at a serious disadvantage which can cost the shareholders very dearly. . It is an important development that the management of a bank must be able to track down the trend in the revenue generation process. In order to cross-sell other services.

it provide the bank with the opportunity to cross-sell other services.Loss-leader Pricing The term “loss-leader” means that you need to sell one particular product at loss. The loss-leader service would be usually a service that is not mutually exclusive (i. but on the other side. standing on its own). which is necessarily linked to other more profitable products/services.e. In the case. a bank would know that it is operating a service at a loss. This is not a bad strategy.get one free” . subject that the marketing team together with the management team are in control of the entire campaign. This strategy resembles “buy one item.

. then the bank may have to price its products/services at the price that the market is expected to bear. The typical psychological behaviour “ I will buy it – if the price is right”. Financial services marketing is not different from the other commodities.Competitive Pricing It is absolutely crucial that when a bank is considering its marketing plan. If the market is fiercely competitive. the various pricing strategies are considered. Customers normally would base their buying decisions after considering all the built-in features including the price. which is embodied in the strategic plan.

the bank’s profits will suffer in the short-term. To apply such a commercial strategy is to engage the bank’s resources into a meaningless plan. but grow in the long-term if the strategy is implemented successfully.Pricing for Market Share Again. which can be very costly. In the case of pricing to gain the market share so as to operate as a cost leader in the market – the marketing team must be able to tune the whole campaign in line with the overall corporate philosophy of the bank. any smart management team has to consider the motive (s) of its pricing policy as a priority rather than simply put a price on a service. . In order to gain the market share.

different from your competitors. different from service-service. It is less expensive for the bank to handle thousands of “salaried payments” electronically. and internally. . certain methods of conducting business transactions are cheaper for the bank & customers.Differential Pricing What does differential means? It means to be different! Different from whom? Externally. than by cheques – due to the time involved. It encourages customers to move away from voluminous payment of say salaries by cheques. Internally. but by means of electronic transfer.

the marketing campaign by banks to retain. Banks’ can only retain customers loyalty through the delivery of service quality combined with risk-based pricing method. let alone.The marketing campaign of banks’ services has always been dynamic since de-regulation of the financial services sector took effect in the 80s. Banks must also pay attention to their customers’ needs. it is expected that as competition intensified from all fronts. The competitive pressure by various players in the financial services sector will not diminished in any form or substance. Instead. increase their market share will equally become more aggressive. .

I wish you all. . good luck in your studies.

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