LOGO

Introduction to financial
services marketing
 References

1. Christine Ennew, Nigel Waite, Marketing

Financial Services, Butter-Heinemann
2. TS. Hoàng Thị Thanh Hằng, Ths. Ngô Thị
Xuân Bình, Ths. Trần Thị Ngọc Quỳnh,
Marketing Dịch vụ Tài chính, NXB Kinh tế,
2015
 Learning objectives

By the end of this chapter you will be able to:

● Identify how and why services in general and
financial services in particular are different from
goods
● Understand the implications of these differences
for marketing practice
● Understand the way in which services can be
classified and the position of different types of
financial services within this classification.
 1.1 Introduction

 Marketing is an approach to business which

focuses on improving business performance
by satisfying customer needs.
 Such as environmental analysis, strategy and
planning, advertising, branding, product
development, channel management, etc.)
 1.2 Defining financial services

 Financial services are concerned with

individuals, organizations and their finances –
that is to say, they are services which are
directed specifically at people’s intangible
assets (i.e. their money/wealth).
 The term is often used broadly to cover a
whole range of banking services, insurance,
stock trading, asset management, credit cards,
foreign exchange, trade finance, venture capital
and so on.
 1.2 Defining financial services

The marketing issues that arise with such a variety

of products are considerable:
● Some financial services may be very short term,
while others are very long term
● Products vary in terms of complexity
● Customers will vary in terms of both their needs
and their levels of understanding
 1.3 The differences between goods and services

We should recognize that ‘a good’ is a noun

while ‘service’ is a verb – goods are things
while services are acts. Rathmell (1966)

Services are something that can be bought

and sold but which you cannot drop on
your foot. Gummesson (1987)
 1.3 The differences between goods and services

Services are processes or experiences

Characteristics of services:
 Intangible
 Inseparability
 Perishable
 Heterogeneity
 1.3 The differences between goods and services

Characteristics of services:
 Intangible
 Inseparability: the service does not exist
until a customer wishes to consume a
service experience; Services are produced
and consumed simultaneously
 Perishable: they cannot be inventoried
 Heterogeneity: variability in quality
 Arguments

- Lovelock and Gummesson suggest that the IHIP

simply does not adequately distinguish between
goods and services. They argue instead for a focus
on ownership (or lack of it) and the idea that
services involve different forms of rental (rental of
physical goods, of place and space, of expertise,
of facilities or of networks).
- Vargo and Lusch (2004)
1. Intangible
 Providing physical evidence or some physical
representation of the product.
 Placing particular emphasis on the benefits of the
service
 Reducing perceived risk and making consumers feel
less uncertain about the outcome of their purchase
 Building trust and confidence to reassure consumers
that what they receive will be of the appropriate
quality
2. Inseparability
 Ensuring that the processes of service delivery are
clearly specified and customer orientated
 Ensuring that all staff involved in service provision
appreciate the importance of a customer-orientated
approach and are empowered to be responsive and
flexible in customer interactions.
 Identifying methods of facilitating customer
involvement in a way which will enhance the quality
of the service provided.
Perishability
 Assessing whether there are identifiable peaks
and troughs in consumer demand for a particular
financial service.
 Offering mechanisms for reducing demand at
peak times and increasing it at off peak times.
 Assessing whether there is the opportunity to
adjust capacity such that variability in demand
can be accommodated.
Heterogeneity
 Service processes need to be flexible enough to
adapt to different needs, and the more varied
are customer needs and the higher customer
expectations, the greater the need for
flexibility.
 It is becoming increasingly important that staff
are empowered to respond to different needs
and situations, so that processes can be adapted
as and when necessary.
 Review questions
1. Choose a financial services provider and look at examples of
how it markets its services. How does this provider seek to
address the issues of intangibility, inseparability, perishability
and heterogeneity?
2. What are the differences between external marketing, internal
marketing and interactive marketing?
3. Look at the way in which three insurance companies market
life insurance products. How effective are these insurers in
conveying the benefits of risk reduction and peace of mind?
4. Look at the way in which three pension providers market
personal pensions. How effectively do these marketing
campaigns deal with the fact that pensions are long-term
products characterized by considerable potential uncertainty?
 Strategic marketing plan

A good marketing strategy will:

● Identify specific objectives that the organization wishes

to achieve
● Commit resources (money, time, people) to help
achieve these objectives
● Involve a thorough evaluation of the marketing
environment
● Aim to match environmental opportunities and
organizational capabilities
● Focus on the delivery of superior value.
 Strategic marketing plan

● Have a logical structure

● Contain explicit marketing objectives which link to corporate
objectives
● Analyze the environment (both internal and external) and
the current position of the organization
● Based on this analysis, identify which combinations of
products and markets the organization will serve and how it
will compete (segmentation, targeting and positioning)
● Contain specific decisions relating to key marketing
variables such as product, price, promotion and place (the
marketing mix)
● Conclude with an outline of the appropriate methods for
implementing the identified strategy, including issues relating
to budget, accountability and evaluation.
 Marketing objectives

They are intermediate outcomes which will lead to the

organization achieving its corporate objectives.

Marketing objectives should be clear, measurable,

realistic and time-limited.
 Marketing objectives
Some examples of marketing objectives

Example 1: To achieve a 12.5 per cent increase in

volume sales of new personal pensions during the
budget year.
Example 2: To increase pension sales by year end.

Example 3: To promote personal pensions

through the branch network.

Example 4: To re-price the personal pension product

to improve competitive rating.
 Marketing objectives

To qualify as a valid marketing objective, the following minimum

conditions must be satisfied:
1. The desired outcome must be specified – for example, growth in
sales, growth in market share, level of consumer awareness, level
of customer satisfaction
2. The outcome must be sufficiently well-qualified to eliminate
ambiguity and facilitate precise measurement – for example,
growth in number of policies sold to new customers, growth in
market share by new business premiums
3. A specific quantum of outcome must be proposed – for example,
a 7.5 per cent growth in new business sales volumes
4. The timescale for achievement of outcome must be specified –
for example, by the end of the second quarter.
 Marketing strategy
The marketing strategy focuses specifically on the choice of
markets and how the organization plans to compete and create
value in those markets.
The main component of a marketing strategy is often described as
the STP (Segmentation, Targeting and Positioning) process:
1. Segmentation involves identifying the different groups (segments)
of consumers that exist in the market, and understanding their
wants and needs
2. Targeting involves evaluating the attractiveness of different
segments, choosing which ones to target with the organization’s
products and services
3. Positioning involves identifying the organization’s competitive
advantage, the way in which it can create value for customers, and
how this offer should be presented to customers.
 Segmentation targeting and positioning

Successful segmentation

Measurability: the preferences, size and purchasing

power of different segments

Profitability. This is the degree to which segments

are large and/or profitable enough.
Accessibility. This refers to the degree to which the
segments can be effectively reached and served.

Relevance. This is the degree to which the common

characteristics used to group customers are relevant
to customer decisions.
 Approaches to segmenting consumer
markets

Segmentation was described as grouping

consumers around a common characteristic that
is of relevance to marketing.

Customer- orientated segmentation and

product-based segmentation.
 Approaches to segmenting consumer
markets

Customer characteristics:
customer-orientated segmentation

 Define who the customers are, where

they live, the kind of people they are,
the kind of lifestyle they lead and the
views they hold.
 Customer-orientated segmentation

1. Demographic: 3. Geographic:
● age ● country of domicile
● gender ● region or locality
● family relationships ● metropolitan
● ethnic group ● urban v. rural
● religious affiliations 4. Psychographic:
● life stage ● attitudes
● educational attainment ● lifestyle choices
2. Socio-economic: ● beliefs
● income ● motives
● financial assets ● personality type.
● social class
● occupational status
 Approaches to segmenting consumer
markets

Customer needs and behaviors: product-

orientated segmentation

 Define the nature of the utility that consumers

seek to gain from the consumption of a
product or service.
Product-orientated segmentation
 Product-orientated segmentation

Women in the age group 35 to 60 who

want to invest for retirement and favour
an ethical approach to investment.
 Targeting strategies

The basic array of targeting strategies is as follows:

● Undifferentiated – serves an entire marketplace with a single
marketing mix which does not distinguish between sub-segments
of the market
● Differentiated – an aggregate marketplace, such as banking, is
organized into a number of segments, each of which is targeted
with a tailored marketing mix
● Focused – a choice is made to target a small subset of the
segments of a multisegment marketplace with a single marketing
mix that best suits the needs of that segment
● Customized – each individual that comprises the target market
is the subject of a marketing mix that is tailored in some way to
the individual’s specific needs.
Differentiated Strategy
 Positioning products and organizations

At the core of positioning lies a brand’s or

company’s competitive advantage in terms of
how it differentiates itself from the competition
and how it delivers value to its customers.

Positioning is about how a company or brand

wants itself to be perceived in the minds of
the individuals who comprise its target
segments.
 Positioning products and organizations

To be commercially advantageous,
positioning should be based upon product
and service characteristics that:
● are relevant to the target segment
● achieve differentiation from the
competition
● can be communicated clearly to the
market
● can be sustained.
 Examples

Morgan Stanley’s position is based on

product/service attributes and emphasizes
‘excellence in financial advice and market
execution’.

The Standard Bank of South Africa aims to be

‘Simpler. Faster. Better’.

HSBC, which positions itself as ‘the world’s

local bank’ to create the image of a bank that
delivers value on the basis of both local
knowledge and global strength.
Perceptual mapping
 Positioning products and organizations

Whatever position is decided upon, it must satisfy some

basic tests of its likely effectiveness. Jobber (2004)
identifies a set of four such tests, namely:
1. Clarity – is the basis of the position clear and
straightforward to grasp?
2. Credibility – can the position be justified and
validated by the evidence available?
3. Consistency – is the essence of the position
communicated consistent over time in all elements of
the marketing mix?
4. Competitiveness – does the position result in benefits
to the customer that are demonstrably superior to those
provided by its competitors?
 Market-specific strategy

A market-specific strategy outlines specific decisions

about how to market particular products and services to
particular groups of consumers. This stage will include
an indication of the necessary level of marketing
expenditure, as well as details on the product itself and
how it will be promoted, priced and distributed (the
marketing mix).
 Implementation

Implementation is concerned with how the

marketing plan is put into practice.

It must consider budgets, accountability

and evaluation.
Service Product
 PRICING
Price is important for the following reasons:

1. It is a crucial determinant of margin and profit

2. It influences the level of demand for its products and services
3. It plays a key role in affecting relative competitive position
4. It can be adjusted quickly, under certain conditions, to enable
the provider to achieve short-term volume or margin priorities
5. It can be varied at different stages in the product lifecycle in
conjunction with other elements of the marketing mix.
 Explicit or overt pricing

This approach makes the price paid for the service

very clear. Consumers are presented with clear and
precise figures about what they will pay for this
service.

For example: a bank charges for an ATM

withdrawal or a credit card company charges an
annual fee.

Advantage:
Clear to both consumer and supplier
A way of influencing consumer behaviour
Implicit or covert pricing
This is a system of pricing in which the actual
price to the consumer is unclear and appears not
to be paid by consumers.
Determination of price

1. Cost-based

2. Competitive

3. Market-orientated
 The cost-based approach

The cost-based approach to pricing operates by

identifying the costs associated with a given product
and then adding on a profit margin to arrive at a
price.

There are two main variants of the cost-based

approach to pricing: full-cost pricing and marginal-
cost pricing.
Full – cost pricing
Marginal cost pricing
 The competitive approach

Price can also be based upon competitors’ price levels.

Two variants are commonly encountered: going-rate

pricing and competitive bidding.
 The market-orientated approach
Marketing-orientated pricing sets out to reflect a broad
range of variables in the determination of price.

1. Marketing strategy
2. Price–quality relationships
3. Product line pricing
4. Negotiating margins
5. Political factors
6. Costs
7. Effect on distributors and retailers
8. Competition
9. Explicability
10. Value to customer.
The marketing mix is a term used to describe the marketing tools
that a manager controls.

4-Ps
 Price, Product, Promotion and Place

7-Ps
 …+People, Process and Physical evidence
 PRODUCT

1. The core. The core product represents the basic need that is being
provided
2. The tangible product. The next layer of the product is usually
described as the tangible product, and at this level the organization
will make the product identifiable by adding certain features, facilities,
brand name, etc.
3. The augmented product. The third layer, which is described as the
augmented product, is usually used to refer to those features which
organizations add to make their products distinct from the
competition.
4. The potential product. The final layer of the product is described as
the potential product. This refers to features that are either very new
or not yet available, but which can potentially be added to a product
to make it very distinct.
 Promotion

The term ‘promotion’ refers to the range of methods

used by an organization to communicate with actual
and potential customers (e.g. advertising, publicity/
public relations, personal selling and sales promotion)
in order to evoke an attitudinal position and an
appropriate behavioural response.
Principles of communication
Planning a promotional campaign
 Formulate message
Any message can be divided into two key
components – the message content and the
message form

The message content relates to the basic

ideas and information that the sender wishes to
convey to the receiver.

The message form: combination of verbal, audio

and visual signals
 Forms of promotion

Advertising

Advertising covers television, radio, Internet and

press advertising, along with other approaches such
as direct-mail and direct-response advertising.

Advertising is usually classified as being of two types:

 Above-the-line advertising
 Below-the-line advertising
 Advertising
 Above-the-line advertising
Refers to all forms of advertising where a fee is payable
to an advertising agency, and includes press, TV, radio,
Internet, cinema and poster advertising.

 Below-the-line advertising

Describes forms of advertising for which no

commission fee is payable to an advertising agency,
and includes direct-mail and direct-response
advertising, exhibitions and point-of-sale material.
 Forms of promotion

Personal selling
Personal selling is probably most common in corporate
markets, but is also widely used in personal markets in
relation to some of the more complex financial services.

One of the major benefits of personal selling as a form of

communication is that it allows immediate feedback from
the consumer to the organization (or its representative).

Although personal selling can be a valuable and

effective form of promotion, it is also very expensive.
 Forms of promotion

Publicity/public relations

Publicity is normally defined as being any form of

non-paid, non-personal communication
and, like advertising, it involves dealing with a
mass audience.

Two areas merit particular attention – the

creation of a corporate image, and sponsorship.
Forms of promotion
Sales promotions
Sales promotions in financial services are usually
described as being demand–pull methods of
promotion.

Benefits tied to product use.

Reduced price.

Competitions.

Couponing
 Distribution channels
● Specialist financial services branch outlets, such as
banks, building society branch offices, credit union offices
● Non-financial services retailers, such as supermarkets,
electrical goods, motor dealers, clothes shops, department
stores
● Quasi-financial services outlets, such as post offices, real
estate agents
● Face-to-face sales channels, such as financial advisers,
direct sales-forces, credit brokers, insurance agents
 Distribution channels

● Bancassurance
● Telephone selling via both outbound and inbound call-
centres
● The Internet
● Direct mail
● Direct-response advertising, including newspapers
and magazines, commercial radio and television
● Affinity groups, such as employers, trades unions,
football clubs, universities.
 LOGO

Your company slogan in here

www.themegallery.com