Marketing of Financial Services

Ans wer: 1
Introduction:
Marketing Mix: A Marketing mix can be determined as a collection of tools that can be
used in achieving marketing objectives. It uses 4Ps as its implementation and helps to
decide the marketing strategy. A marketing strategy connects with the formulation and
execution of the marketing mix i.e., Product, Price, Place, and Promotion. Although, the
services marketing mix has additional 4Ps such as Physical evidence, Process, Productivity
and People.

There are 8Ps in Se rvice Marketing Mix, they are as follows:

A. Product
B. Price
C. Place
D. Promotion
E. People
F. Process
G. Productivity
H. Physical Evidence
Explanation of 8Ps in detail:
A. Product: It is concerned with the product or the actual solution of the service. It is
basically a product which the manufacturer sells and the customers buy. It is one of the
tangible segments in the market for marketing.
B. Price: The pricing of the service should be decided after a complete study of the market
because it is the place from where the organization generates revenue. It helps to
understand the market to target the type of customers.
C. Place: Place refers to the accurate the distribution channels to reach the customers. In
other words, place refers to the distribution channels from where the final products are
reached from the manufacturers to the end users.
D. Promotion: Promotion means how we communicate the product to the customer.
Promotion is used to describe the goods and services which the organization is
providing to the customers.
E. People: People refers to the people who are involved in creating and consuming a
product and also utilize their services for a price. The right people need to provide a
particular service. The right skill and the right attitude are necessary for components of
marketing to achieve a competitive advantage.
F. Process: It is a system that helps an organization to deliver its services to the customers.
Before we come to any conclusion we need to first understand the concept, uses,
advantages and disadvantages of the products as per our need and requirement.
G. Productivity: Productivity is to evaluate the production rate to know its output units per
input. It depends on the business module, availability of resources and usage of policies.

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H. Physical evidence: All the tangibles being involved in the process of service delivery to
the end users. Physical evidence plays a major role in the success rate of service
delivery.

Service Marketing Mix of HDFC Life Insurance:

HDFC Life insurance is one of the leading private life insurance firms in India. HDFC Life
(HDFC Standard Life Insurance Company) is a long-term life insurance provider with its
headquarters in Mumbai, offering individual and group insurance. It is a joint venture
between Housing Development Finance Corporation Ltd. (HDFC) and Standard Life Plus
Aberdeen PLC, It was founded in the year 2000. In order to meet the diverse needs of the
customer, the company provides a series of individual and group insurance solutions.

Utilization of 8Ps of Service Marketing Mix in HDFC Life Insurance:

Product: This provides value to the customer though it is not a tangible product. Every
good is related to a service component as in every service for a physical good. Although,
the degree of association may differ. HDFC life offers various products as per the needs
and requirement of the consumers.
HDFC life offers its customers various insurance products such as the following:
 Protection plans
 Children’s plans
 Women’s plans
 Health plans
 Retirement plans
 Rural and social plans
 Savings and Investment plans

Price: In service marketing, prices are fixed for services provided by the organization and
it depends on the service provider and service delivery. In this competitive market, Pricing
should be competitive and must earn a profit. Price is literally the valuation that is provided
for the product by the company. HDFC Life Insurance has set an idea in the insurance
industry by offering value for money. The company has set in providing the best and high-
value products to its customers at minimum prices. It has kept premium prices for
insurance policies at minimum levels so that maximum people can get the benefits from its
insurance plans. In order to create a loyal consumer base of its own, it has adopted a decent
pricing policy and kept policy rate controlled and affordable for the customers.

Place: This refers to the customers when and where they buy the product or service. It is a
place where the customer will be purchasing the product and the mode in which the
product reaches the customer's place. HDFC life which is a Life Insurance service industry,
the distribution of its products and services are conducted through direct and indirect
channels. There are many ways to reach to the prospective customers. The basic channels
through which their main businesses are done are by the “Insurance agent”. Apart from
this, many customers buy policies online as well which is time-saving and convenient.

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Promotion: Promotion adopts different ways to communicate with the customer regarding
the products offered by the company. This also includes communicating about the
advantages of a product or service than conveying about its features. HDFC Life Insurance
has the importance as most trusted brands in India. It has put its responsibility towards
CSR activities for improving conditions of society. It has also received several awards for
different plans. Its most popular tagline is Sar Utha Ke Jiyo and it has created a huge
fame among consumers. HDFC Life has adopted several promotional activities to create
effective brand recognition. Advertising campaigns have been launched through media in
radio, newspaper, magazines and television channels. It has an official website that gives
detailed information about all the insurance policies.

People: People involve such as customers, employees and management. A necessary

component for any service delivery is by the use of suitable staff and people. In service
marketing, customers also have an active role in service delivery. A good service provider
should ensure that the service and its experience satisfy the customers. People are the
foundation of any service industry so satisfactory product and service should be provided
to them and HDFC life is doing the same to people for years now.

Process: Process refers to the systems which used to assist the company in delivering the
product and service. HDFC life always follows customers in a friendly process and
customers feel satisfied to transact with them is because their process is transparent.

Productivity: We all are aware that HDFC life is a star performer in the insurance sector
from last many years. There are other players too who have entered into the market and
providing good deals, but still, people trust the HDFC life as it is an old company in the
market.

Physical evidence: Physical evidence serves as a proof of service experienced in the

service marketing. Services are primarily intangible; certain things can add to the
experience of product and service, for example, complimentary items offered during
service, handouts and brochures that create product awareness among customers. HDFC
life is also present online, offline, and through advertisements etc. so it has a notable
physical evidence among the consumers.

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Ans wer: 2
Introduction:
Mutual Funds: Mutual funds are a collection of stocks and bonds. It can be defined as the
money that is collaborated by a large number of investors who give their money to a fund
manager to invest in a large portfolio of stocks or bonds for a small fee. Mutual funds have
advantages because of its cost-efficiency, risk-varied and professional management nature.
Mutual funds involve investment in different assets, and a loss experienced in one asset
investment can be recovered from the gains obtained from the other asset investment.
Investments made by mutual funds are made in equities, bonds, and debentures. They are
set up with a specific plan in mind and the focus will be on bonds from companies, bonds
from the government, large stocks, and small stocks etc.

Factors that are considered while buying mutual funds:

 Expenses: We should not buy mutual funds by force of anybody, check for a low fee
mutual fund. Any money we pay in fees will reduce the returns from the fund.
 Asset allocation: If we want to explore the international stocks, we can invest 25% of
our money in international mutual funds. It is good to expand our risk among a variety
of stocks, but we need to keep in mind that any mutual fund will give us varied into the
asset based on the investment.
 Fund size: Smaller funds are normally better. A larger fund has more difficulty to take
a large position in a small stock.
 Last fe w years return: As a customer, we expect good returns, so we should check the
past data of the fund regarding the return which is given by the investors.

In the objective schemes of mutual funds, portfolio gets time to time rebalanced between
equity and debt. This scheme provides appreciation and income. The company periodically
gives out a part of the capital gains earned. This scheme invests in shares and fixed income
securities. The proportion specified in the offer documents is usually in the ratio 50:50.
Balanced schemes aim to give both growth and income by occasionally distributing a part
of the income and capital gains they earn.

A balanced fund is also known as "middle-of-the-road fund” because it processes

everyday income and gives average capital growth. The funds are invested in common
stocks, bonds and debentures and its preferred stocks seek high income and seek low risk
of investment. These funds are sometimes termed as asset allocation funds bec ause it gives
the choice to increasing our investment in various asset types of single investment. These
funds are selected by investors who prefer to invest in safe and income making securities.
The performance of balanced mutual funds is unusual. These funds underperform when the
stock market is performing well, i.e., when the share prices go high. However, they
perform fairly well when stocks are not doing well. Investors keep an update on their
investment and try to add more of bonds to the portfolio.

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Advantages of Balanced Funds:

Balanced mutual funds have with many advantages of investment. This type of investment
provides most of the requirement of a layperson investor. Following are few of the benefits
of holding funds in a balanced mutual fund.
 Simple and easy to manage: We have the choice of investing in different securities. It
is a portfolio made up of the stock element, bond component and sometimes money
market component. This type of mutual fund is simple and easy to manage.
 Diversification of Investment: As a balanced fund invests in equity and also in debts
so the portfolio will be expanded and reduces risk. It does not urge the investor to hold
funds in a single type of market.
 Low risk: Low risk is one of the main advantages of these funds. As they invest wisely
between equity and debt so, the risk level lowers comparatively. The securities contain
the portfolio in a mix of stocks and bonds which brings down the risk factor attached to
this type of investment. The portfolio is less charged in nature.
 Steady Income: Here we may not get much return as we get in large-cap mutual funds
but still we get a steady income with low risk. These funds are a good choice if the
investment horizon is long-term and it will initiate average income in long-term.
Balanced funds mostly focus on the value and growth factors of the securities instead of
making a huge profit in a short time.
 Minimum Capital Requirement: A balance fund investment provides the investor
with a flexibility of holding funds in the market with minimum and a small investment.
We don't need to invest in a large amount of money to have a balanced fund portfolio.
Conclusion:
Meanwhile, it seems that balanced funds are practically risk- free, it is not an instance.
Balanced funds have their own share of risk. While in case of a direct investment over a
number of stocks and debt instruments, one can transfer the resources among different
funds as diverse for tax planning or wealth creation. However, in balance funds, since the
decision of resource allocation is with the fund manager, customized variation will not be
possible.
All the mutual funds with an equity disclosure of 65% or more on an average are treated as
an equity asset class for taxation basis. So the short-term capital gains means the gains
which are booked with 1 year of the equity-oriented balance are taxed at 15% and if these
funds are held for a period more than 12 months, their long-term capital gains are taxed at
10% and if the gains booked is greater than Rs. 1 lac (as per the latest budget of 2018).
Few Balanced Funds with their returns:
Balanced Fund Name 3 Years 5 Years
ICICI Prudential Balanced Advantage Fund 11.38% 15.57%
Reliance Equity Hybrid Fund 13.76% 18.43%
ICICI Prudential Equity & Debt Fund 11.11% 17.48%
SBI Equity Hybrid Fund 9.77% 16.94%
Aditya Birla SunLife Balanced 95 12.86% 17.52%

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Ans wer: 3
3a) Suggesting Ashish in buying Life Insurance Policy between ULIP and term plan:
Life Insurance: Life Insurance is an agreement providing for payment of a sum of mo ney
to the person being secured. We require life insurance only if someone depends on you for
help and financial support. Our life insurance premium depends on the type of insurance
we take, and for policy to be in effect, we should keep paying the amount for certain term
period.

There are different types of life insurance schemes in India. They are as follows:
 Term Life Insurance: Under a Term life insurance, the insurance company pays a
specific amount to the appointed receiver in case of the death of the insured. These
policies are usually for a time period of 5, 10, 15, 20 or 30 years. Term life insurance is
popular in advanced countries. In India, these policies are becoming popular after the
private insurance company entering this industry. The premium paid on these type of
policies is relatively quite low when compared with other types of life insurance
policies, mostly because of the fact that these policies do not have cash value and it does
not take care of the savings part.
 Unit Linked Ins urance Plan (ULIP): Unit Linked Insurance Plan (ULIP) is a life
insurance solution that provides for the benefits of risk protection and flexibility in
investment. The investment is expressed as units and is constituted by the Net Asset
Value (NAV). The policy value at any time varies according to the value of the
underlying assets at that time. The returns in a ULIP depend upon the performance of
the fund in the capital market. ULIP investors have the choice of investing in different
schemes, i.e., various equity funds, balanced funds, debt funds, and soon.
 Endowme nt Policies: We can pay premiums from time to time for these policies. We
get a lump sum amount either in the event of the death of the insured or on the date of
completion of the policy, whichever is earlier.

I have mentioned above about life insurance, term insurance and e ndowment plan. Mr
Ashish wants to buy life insurance and my suggestion would be a Term Plan best choice
for him. Term insurance can be an addition for financing and whole life policies in a well
rounded financial plan designed taking into account the capital and income needs of an
individual.

Term insurance has many benefits as compared to othe r insurance options few of
the m are as follows:
 Lowest premium: Term insurance allows a person to get the greatest death advantage
for the lowest premium spent when the policy is first issued.
 Less initial costs: Term plan will cost us very less at the time of buying in a contrast to
pure life insurance or endowment plan.

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 Simple and convenient: Term plans are rather simple to understand and we can buy the
insurance online quickly.
 Flexibility: Picking up a term life policy is much easier than getting out of cash value
policies. In term policies, if we stop paying the premium the risk cover will be
terminated and the policy comes to an end.
 Longer coverage: Term plan will give us the benefit of long-term coverage like many
other policies give coverage till 75 or 80 years of age.

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3b) Suggesting and helping Ashish on unde rstanding how he can grow his
investments and maximize his savings:
Financial Planning: The financial planning procedure helps an investor to solve financial
problems, by providing an idea of various investment options. For instance, an investor
who invests in stocks or mutual funds will be able to save some money to repay the loan in
future or save enough money for his retirement.

Financial planning is done to achieve future financial goals. The circumstances that must
be surveyed by an investor while planning the personal financial goals are as follows:
 The timing of goals: Fixing appropriate time to reach financial goals is very necessary
because it helps to keep a track of current expenses and limits the unnecessary use of
money.
 Goal frequency: Distinguishing the frequency of circumstance of goals is very
important as it helps to plan in advance. This keeps the changes that can improve the
investor’s plan. For example goals like money for gifts, vacations come more often
whereas goals like child’s education, marriage or buying a home come less frequently.
 Goals for different needs: Identifying goals for different financial needs like the
consumable product goals and the durable product goals is necessary. The consumable
product goals occur on a timely base such as food, clothing and leisure.

Ashish wants to maximize his savings and to understand how he can get the maximum
benefit of compounding to grow his investments. As disclosed, Ashish has just started his
career and have a long way to go for his professional life. Undoubtedly, he has a good time
to get the maximum benefits from his investment. In this scenario, Mutual funds SIP way
would be a good choice for him to build a solid entity in the next few years.

Systematic Investment Plan or commonly known as SIP is one of the most secured choice
these days. Generally, people do not have much knowledge of the stock market so they
prefer mutual fund of mode to enter into the stock market. Mutual funds are being
managed by experienced fund managers so we have less risk of default, t hese fund
managers are very much experienced in this field, they have great knowledge of the stock
market, fluctuations, and other events. They accordingly make the investment in shares of
other corporations.

Few benefits of investing in Systematic Investment Plan (SIP) are as follows:

 Flexibility: SIPs are observed to be flexible investment option. Here we can choose the
monthly investment amount, also choose a date on which SIP amount can be deducted
from our bank.
 Compounding benefits: The concept of building wealth is to start investing early and
to keep investing regularly. A small amount of money invested regularly can help us
grow to a large sum of the amount at some point in time.

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 Disciplined Investment: We do not know where to enter the stock market but with SIP
way, fund managers take care of our investments and this is a disciplined investment
option.
 The advantage of Rupee cost averaging: Rupee cost averaging is a successful
investment strategy that removes the need of time in the market. One has to invest a
fixed pre-decided amount of money on a regular basis for a long-term period. Because
the amount invested is constant and one buys more units when the price is low and
fewer units when the price is high which may have a lower average cost.

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