Definition of Marketing

Marketing is the process of exposing target customers to a product through appropriate tactics and
channels, gauging their reaction and feedback, and ultimately facilitating their path to purchase.

There are a lot of marketing definitions available but the right ones are focused upon the key to
marketing success i.e. customers. Following are some of the marketing definitions available.

The Chartered Institute of Marketing (CIM) says:

“Marketing is the management process responsible for identifying , anticipating and
satisfying customer requirements profitability.”

Philip Kotler defines marketing as:

“Marketing is the social process by which individuals and groups obtain what they need and
want through creating and exchanging products and value with others.”

Palmer’s marketing definition is as:

“Marketing is essentially about marshalling the resources of an organization so that they
meet the changing needs of the customer on whom the organization depends.”

Lastly, we can say that Marketing is the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for customers, clients,
partners, and society at large.

Explain the different steps in advertising for bank or financial services institutions

Several steps are essential for successful execution of advertising campaigns in financial services.
These steps are-

Determining the Objectives of Advertising:

The first step is to determine the objectives of the advertising campaign, reflecting the overall
marketing strategy of the company.
For example, the objective of an advertising campaign might be to generate new policies for an
insurance product or to increase the level of consumer awareness of the brand or the company.
Recognizing and identifying the exact objective of an ad campaign is critical to accurate assessment
of its merits and potential. Examples of popular advertising objectives in financial services are
target levels for customer inquiries, new policies signed, and advertising recall.
(2) Determining the available Budget
The next step in the advertising process is to determine the budget required to carry out the ad
campaign. Often, the required budget is significantly different from what is available, and may be
dictated by organizational budgetary constraints. For example, the budget available for advertising
a particular financial service might be determined based on a percentage of the total premium
revenues generated in the prior year. Clearly, an increase in the intensity of an advertising
campaign would require higher budget allocations and may call for the abandoning of traditional
budget-setting approaches for advertising. The total budget that is required to execute an
advertising campaign is a function of the reach and frequency (and hence the gross rating points)
necessary to create consumer response and the cost of media used to secure this level of exposure.
The associated dollar figure, therefore, needs to have been estimated prior to negotiations with
higher levels of management, in order to ensure the availability of sufficient funds for executing an
effective advertising campaign.

(3) Estimating the Return on Investment (ROI):

The next step in the advertising process is to determine the return on investments associated with
the advertising campaign. Four items of information are needed in order to conduct this estimation,
one of which is an estimate of the lifetime value of an acquired customer. The lifetime value of the
customer is the total profit that an acquired customer represents to the company. It is quantified as
the sum of the profits associated with the stream of transactions that the customer will undertake
with the company over the years. In addition, an estimate of the total number of consumers who
will be exposed to the advertising campaign is required. An estimate of the percentage of reached
consumers who will eventually purchase the advertised financial product or service is also
required. Clearly, negative return on investment estimates would make the advertising campaign
and unlikely prospect for further action.

(4) Developing the Contents of the Ad:

Once the return on investment computation has shown favorable results, the next step in the
advertising process is to develop the contents of the ad, as reflected in its execution style and
informational content. In this step, the services of advertising agencies that specialize in producing
financial services ads are required. These specialized agencies often also engage the support of
legal experts who can determine the compliance of advertising content with existing regulations.
Often, testing of ad content using small-scale samples, focus groups, or test markets may be
needed.

(5) Media Selection:

The next step in the advertising process is to determine the media that will be used. In general,
financial services that are more complex and require the communication of detailed information
tend to rely on print forms of advertising.
Television advertising, which capitalizes on multiple sensory inputs, tends to be the most effective
although often the most expensive. Once the media to be used for an ad campaign has been
determined by the ad agency, a media schedule needs to be developed in order to achieve the
original objectives of the ad campaign which had been identified. There are specific media
scheduling and campaign execution strategies that are most effective in certain forms of financial
services. For example, an effective ad-scheduling tactic is to advertise in pulses with heavy
advertising in one month, reduced advertising the following month, and a return to high advertising
levels in the third month.

(6) Scheduling and Campaign Execution:

There are specific media scheduling and campaign execution strategies that are most effective in
certain forms of financial services. For example, an effective ad-scheduling tactic is to advertise in
pulses with heavy advertising in one month, reduced advertising the following month, and a return
to high advertising levels in the third month.
This tactic tends to result in more sales and higher levels of consumer response than a constant and
steady level of ad spending.

(7) Measurement:
The final step in the advertising process is to assess the impact of the ad campaign through formal
market research or examination of company records. It is critical to measure and record sales levels
and other advertising responses following an ad campaign in order to determine the financial
effects of the invested advertising dollars.

Such measures may help fine-tune the advertising strategy of the company and provide estimates
for optimizing future advertising campaigns. For direct advertising campaigns, such measures are
obtained through the tracking of consumer inquiries following the ad campaign and the use of
tracking numbers, which can pinpoint the exact promotional material to which the consumers are
reacting. For ads delivered through mass media such as television, radio, and newspapers, the
tracking of consumer responses may be considerably more difficult and might require examining
aggregate changes in sales for the months following the ad campaign, or the purchase of market
research data from specialized research firms.

Discuss the regulations that directly influenced on advertising specific financial services

Some of the regulations that have a direct influence on advertising specific financial services are
discussed below-.

Advertising Commercial Banking Services:

Advertising of commercial banking services is monitored through the various regulations enforced
by the Federal Reserve as well as the Office of the Comptroller of the Currency. For example,
the Truth in Savings Act specifies items of information that depository institutions should disclose
about deposit accounts featured in their advertisements. Terms such as the rate of interest,
applicable fees, and terms of the deposit such as the minimum length of time that is required prior
to withdrawal of the funds need to be clearly communicated to consumers. For credit products,
theTruth in Lending Act (regulation Z of the Federal Reserve) dictates that the true cost of credit
must be communicated in written form to consumers. Regulation Z also establishes the method to
be used to determine the cost of credit and requires that lenders communicate this information in
the form of the annual percentage rate (APR).
Regulators may also monitor advertisements to ensure that banks do not exaggerate the extent to
which they claim to make credit available to customers as a means for generating leads. In addition,
commercial banks, which are ensured by the Federal Deposit Insurance Corporation (FDIC), need to
mention their coverage status with the FDIC in their ads and other consumer communications.

Advertising of Insurance Company:

Each state’s department of insurance regulates insurance advertising. The objectives of insurance
advertising regulations are twofold. The first objective is to prevent the creation of biases in
consumer assessment of the probability of catastrophic events. This objective relates to the
established fact that consumers typically are unaware of the risks and probabilities for events for
which they purchase insurance products, as discussed in Chapter 2. For example, insurance
advertising that bolsters the fear of catastrophic events through dramatic imagery is not allowed.
Negative outcomes of disasters should also not be overstated in insurance advertisements. The
second objective of insurance advertising regulations is to prevent the creation of inferences that
suggest that an insurance company is unusually generous in its payout behavior. As a result,
insurance advertisers have to take great care not to exaggerate either the severity of harmful
events or their own willingness to payout customer claims. In addition, images of currency and
checks should not be included in advertisements for insurance products as they may make
consumers infer unconsciously that the insurance company has a high propensity to payout claims
and is usually generous.

An additional objective in insurance advertising is to prevent misleading information from being

communicated to consumers. Formally, an ad can be considered misleading when it causes
individuals with average levels of intelligence to arrive at inferences that conflict with reality. In
order to establish if such inferences are a result of the advertisement, formal market research
utilizing third-party companies and random samples of consumers would be used. Insurance
advertising is further restricted by the terminology that may be used. Terms such as “liberal” and
“generous,” for example, cannot be used as they boost impressions of the payout behavior of the
insurance company. Similarly, references to words such as “financial disaster” and “catastrophic”
are not allowed because they may exaggerate the extent of the harm consumers might face if they
do not have insurance coverage. The fact that insurance prices vary from one consumer to the next
due to varying risk levels also limits the pricing terminology that can be used in insurance
advertising.
Therefore, terms such as “low,” “budget,” and “low-cost” cannot be used.

Advertising, Investment and Brokerage Services:

The advertising of investment and brokerage services is regulated by the SEC as well as the NASD.
These regulators require that advertisers ensure that consumers understand that past returns of an
investment may or may not be realized in the future. As a result, statements to this effect need to
be mentioned in consumer communications, including advertisements in mass media and direct
mail. Advertisements for mutual funds must also encourage potential investors to seek the detailed
technical information on the fund by requesting the fund’s prospectus. The ads should facilitate
such action by providing consumers the necessary contact information.
Additional Securities and Exchange Commission rules should be consulted for the details of
information that must be included in mutual fund advertisements. Readers are encouraged to
further examine sources specializing in financial services advertising regulations for additional
details.
Briefly discuss the marketing mix in banking sector in Bangladesh

Recently, banks are in a period that they earn money in servicing beyond selling money. The
prestige is get as they offer their services to the masses. Like other services, banking services are
also intangible. Banking services are about the money in different types and attributes like lending,
depositing and transferring procedures. These intangible services are shaped in contracts. The
structure of banking services affects the success of institution in long term. Besides the basic
attributes like speed, security and ease in banking services, the rights like consultancy for services
to be compounded are also preferred.

Price:
The price which is an important component of marketing mix is named differently in the base of
transaction exchange that it takes place. Banks have to estimate the prices of their services offered.
By performing this, they keep their relations with extant customers and take new ones. The prices
in banking have names like interest, commission and expenses. Price is the sole element of
marketing variables that create earnings, while others cause expenditure.
While marketing mix elements other than price affect sales volume, price affect both profit and
sales volume directly.
Banks should be very careful in determining their prices and price policies. Because mistakes in
pricing cause customers’ shift toward the rivals offering likewise services.
Traditionally, banks use three methods called “cost-plus”, “transaction volume base” and
“challenging leader” in pricing of their services.

Distribution:
The complexity of banking services is resulted from different kinds of them. The most important
feature of banking is the persuasion of customers benefiting from services.
Most banks’ services are complex in attribute and when this feature joins the intangibility
characteristics, offerings take also mental intangibility in addition to physical intangibility. On the
other hand, value of service and benefits taken from it mostly depend on knowledge, capability and
participation of customers besides features of offerings. This is resulted from the fact that
production and consumption have non separable characteristics in those services.
Most authors argue that those features of banking services make personal interaction between
customer and bank obligatory and the direct distribution is the sole alternative. Due to this reason,
like preceding applications in recent years, branch offices use traditional method in distribution of
banking services.

Promotion:
One of the most important elements of marketing mix of services is promotion which is consist of
personal selling, advertising, public relations, and selling promotional tools.

Personal Selling:
Due to the characteristics of banking services, personal selling is the way that most banks prefer in
expanding selling and use of them.
Personal selling occurs in two ways. First occurs in a way that customer and banker perform
interaction face to face at branch office. In this case, whole personnel, bank employees, chief and
office manager, takes part in selling. Second occurs in a way that customer representatives go to
customers’ place. Customer representatives are specialist in banks’ services to be offered and they
shape the relationship between bank and customer.

Advertising:
Banks have too many goals which they want to achieve. Those goals are for accomplishing the
objectives as follows in a way that banks develop advertising campaigns and use media.

1. Conceive customers to examine all kinds of services that banks offer

2. Increase use of services
3. Create well fit image about banks and services
4. Change customers’ attitudes
5. Introduce services of banks
6. Support personal selling
7. Emphasize well service

Advertising media and channels that banks prefer are newspaper, magazine, radio, direct posting
and outdoor ads and TV commercials. In the selection of media, target market should be
determined and the media that reach this target easily and cheaply must be preferred.

Banks should care about following criteria for selection of media.

1. Which media the target market prefer

2. Characteristics of service
3. Content of message
4. Cost
5. Situation of rivals

Ads should be mostly educative, image making and provide the information as follows:

1. Activities of banks, results, programs, new services

2. Situation of market, government decisions, future developments
3. The opportunities offered for industry branches whose development meets national benefits.

Public Relations:
Public relations in banking should provide;

1. Establishing most effective communication system

2. Creating sympathy about relationship between bank and customer
3. Giving broadest information about activities of bank.
It is observed that the banks in Turkey perform their own publications, magazine and sponsoring
activities.

Selling Promotional Tools:

Another element of the promotion mixes of banks is improvement of selling. Mostly used selling
improvement tools are layout at selling point, rewarding personnel, seminaries, special gifts,
premiums, contests.
Explain the New-Product Pricing Strategies

Pricing strategies usually change as the product passes through its life cycle. The introductory stage
is especially challenging. Companies bringing out a new product face the challenge of setting prices
for the first time. They can choose between two broad strategies:
1. Market-skimming pricing and
2. Market-penetration pricing.

Market-Skimming Pricing
Many companies that invent new products set high initial prices to “skim” revenues layer by layer
from the market. Apple frequently uses this strategy, called market-skimmingpricing (or price
skimming).

Example of market-skimming pricing

When Apple first introduced the iPhone, its initial price was as much as $599 per phone. The
phones were purchased only by customers who really wanted the sleek new gadget and could
afford to pay a high price for it. Six months later,
Apple dropped the price to $399 for an 8GB model and $499 for the 16GB model to attract new
buyers. Within a year, it dropped prices again to $199 and $299, respectively, and you can now buy
an 8GB model for $99. In this way, Apple skimmed the maximum amount of revenue from the
various segments of the market.

Conditions for Market skimming Pricing:

Market skimming makes sense only under certain conditions.

First, the product’s quality and image must support its higher price, and enough buyers must want
the product at that price.

Second, the costs of producing a smaller volume cannot be so high that they cancel the advantage
of charging more.

Finally, competitors should not be able to enter the market easily and undercut the high price.

Market-Penetration Pricing
Some companies use market-penetration pricing. Companies set a low initial price to penetrate the
market quickly and deeply—to attract a large number of buyers quickly and win a large market
share. The high sales volume results in falling costs, allowing companies to cut their prices even
further

Example of Market-Penetration Pricing

The giant Swedish retailer IKEA used penetration pricing to boost its success in the Chinese market.
When IKEA first opened stores in China in 2002, people crowded in but not to buy home
furnishings. Instead, they came to take advantage of the freebies— air conditioning, clean toilets,
and even decorating ideas. Chinese consumers are famously frugal.
When it came time to actually buy, they shopped instead at local stores just down the street that
offered knockoffs of IKEA’s designs at a fraction of the price.

So to lure the finicky Chinese customers, IKEA slashed its prices in China to the lowest in the world,
the opposite approach of many Western retailers there. By increasingly stocking its Chinese stores
with China-made products, the retailer pushed prices on some items as low as 70 percent below
prices in IKEA’s outlets outside China. The penetration pricing strategy worked. IKEA now captures a
43 percent market share of China’s fast-growing home wares market alone, and the sales of its
seven mammoth Chinese stores surged 25 percent last year. The cavernous Beijing store draws
nearly six million visitors annually. Weekend crowds are so big that employees need to use
megaphones to keep them in control.

Conditions for Market-Penetration Pricing:

Several conditions must be met for this low-price strategy to work.

First, the market must be highly price sensitive so that a low price produces more market growth.

Second, production and distribution costs must decrease as sales volume increases.

Finally, the low price must help keep out the competition, and the penetration price must maintain
its low price position. Otherwise, the price advantage may be only temporary.