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Marketing of Financial
Services
S. No Reference No Particulars Slide
From-To
1 Chapter 1 Role and Contribution of Financial 5-18

Services
2 Chapter 2 Financial Services Marketplace 19-33
3 Chapter 3 34-58
Marketing of Financial Services
4 Chapter 4 Building Strategies and Market 59-92
Plans
5 Chapter 5 93-116
Financial Planning
6 Chapter 6 117-130
Analysing Financial Service
Market Environment
7 Chapter 7 131-148
Consumers of Financial Services
8 Chapter 8 149-166
Segmenting, Targeting and
Positioning
From-To
9 Chapter 9 167-180
Marketing Financial Services in
the International market
181-198
10 Chapter 10
Pricing
11 199-215
Chapter 11 Product Management and
Distribution
12 216-239
Chapter 12
Promotion
13 240-259
Chapter 13 Consumer Relationship in
Financial Services
Course Introduction
• The development of marketing in the financial services sector has been sluggish,
and for a long time the industry was perceived as product oriented.
• Marketing of financial services provides thorough details of the marketing

concepts and activities related to the marketing of financial services.
• Marketing of financial services identifies that the main function of the financial
services marketer is to make an investment decision. The course focuses on the
major types of decisions and problems that are facing the financial services
market.
• The course offers clear explanations of topics such as marketing research,

marketing information systems, situation analyses, segmenting markets,
evaluating the return on investment, complying with laws and regulations,
financial planning, etc.
Chapter 1: Role and
Contribution of
Financial Services
Chapter Index

From-To
1 Learning Objectives 7
2 Topic 1 Meaning of Financial Services 8
3 Topic 2 Different Roles Played by 9-11

Financial Services
4 Topic 3 Regulation of Financial 12-15

Services
5 Let’s Sum Up 16
• Explain the meaning and concept of financial services
• Discuss the different roles played by financial services
• Understand the development of the economy
• Describe lifetime income smoothing and government welfare
• Explain regulation of financial services

Meaning of Financial Services
• Financial services refer to the services catering to the financial needs of people,
organisations, and government of a country, also plays an important role in the
growth of an economy.
• Financial services industry maintains the flow of money in the market by

promoting loans, credits, savings and investment.
• There were several factors which limited the growth of the financial services
industry in India:
– Non-availability of financial instruments and debt instruments
– Deficiency of developed Government securities market, self-determining

credit rating and credit research agencies
– Lack of information about international developments in the financial sector

1. Different Roles Played by Financial Services
• The institutions that handle financial transactions, such as investment, loans,

credits, deposits and funds are known as financial institutions.
• An organisation that aims at setting up and providing a smooth, well-organised

and cost effective association between depositors and investors is known as
financial system.
• A financial system comprises all types of investing institutions including financial

services, financial markets, financial institutions and financial instruments.
• Financial markets assist buying and selling of financial services claims, assets
and securities.
Development of the Economy

There are several institutions which are associated with the development of economy:
Commercial banks
Investment banks
Insurance companies
Brokerages
Mutual funds
Private equity
Venture capital
Non-banking financial companies

Government Welfare
• Government polices work as a regulator to the services offered in the financial
market.
• Government imposes its policies to cater to the needs of financial market and
improve the economic condition of a country through the financial market.
• Financial services are offered keeping in mind the norms and policies of the
Government and its current policies.
• Financial services play a crucial role in the welfare of the Government.
• Reserve Bank of India is the apex body which controls and regulates all the
banks and banking system, and helps the Government in monitoring and
accelerating the growth of the economy.
1. Regulation of Financial Services
• With the widespread scope of the financial services, it becomes obligatory to

regulate the financial services and financial industry in the interest of people and
country.
• The main aim of financial regulators is as follows:
– Sustaining assurance in the financial system
– Contributing to the safety and improvement of steadiness of the financial

system
– Protecting the suitable degree of security for consumers
– Dropping the degree to which it is possible for a regulated business to be

used for a reason connected with economic crime
– Ensuring fair practices of the financial transactions in the market.

Following are the major regulatory authority and governing bodies in India that
regulate the functioning of financial system and market:
• Securities and Exchange Board of India (SEBI)
• Reserve Bank of India
• Ministry of Finance
• Insurance Regulatory Authority of India (IRDA)
• FMC (Forward Markets Commission)

• The Security and Exchange Board of India (SEBI): It plays an important role in
regulation of the securities market in India. It was formed in the year 1988
aiming at safeguarding the interest of the investors in the securities market.
• The Reserve Bank of India (RBI): It was established in the year 1935 aiming at
regulating the issue of Bank Notes and monitoring the currency, financial, and
credit system of the country. It plays a significant role in the economy and
economic growth by introducing the changes into its policies from time to time.
• Ministry of Finance: It is a part of the Government of India which takes care of

the financial stability and system in the country. It is accountable for the fiscal
policies and controlling all the financial system to accelerate the finance growth.
• Insurance Regulatory Authority of India (IRDA): It is a regulatory authority

which looks after and regulates the insurance practices and policies in in India.
The objectives of IRDA are to safeguard the interest of the policyholders, to
regulate, promote, and ensure orderly growth of the insurance industry.
• FMC (Forward Markets Commission): It is a regulatory authority, headquartered

in Mumbai, controlled by Ministry of Finance, Government of India. It is a
regulator of commodity future markets in India. Its functions are:
– Keeping forward markets under observation
– Publishing information related to the trading conditions of commodities
– Undertaking the inspection of the accounts and other documents
– Improving the organisation and working of forward markets

Let’s Sum Up
• Financial services refer to the services catering to the financial needs of people,
organisations, and government of a country, also plays an important role in the
growth of an economy.
• The institutions that handle financial transactions, such as investment, loans,
credits, deposits, and funds are known as financial institutions.
• The most universal kind of investment firm is the management investment firm,
which strongly administers a scheme of bonds to get its investment goal.
• The Security and Exchange Board of India (SEBI) plays an important role in
regulation of the securities market in India.
• The Reserve Bank of India (RBI) was established in the year 1935 aiming at
regulating the issue of Bank Notes and monitoring the currency, financial, and
credit system of the country.
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Chapter 2:
Financial Services
Marketplace
Chapter Index

From-To
2 Topic 1 Evolution of the Financial 23

Service Market
3 Topic 2 Outlining the Product Variants 24

in the Financial Service Market
4 Topic 3 Saving and Investing 25
5 Topic 4 Lending and Credit 26

Chapter Index

From-To
6 Topic 5 Banking and Money 27

Transmission
7 Topic 6 Life Insurance Products 28
8 Topic 7 General Insurance 29-30
9 Let’s Sum Up 31
• Discuss the evolution of the financial service market
• Outline the product variation in the financial service market
• Describe various aspects of saving and investing
• Explain lending and credit
• Discuss banking and money transmission
• Describe life insurance and general insurance products

Evolution of the Financial Service Market
• The first phase commenced in 1985 when the economic reforms were started.
This phase saw the focus on new technological innovations, targets on increased
productivity and the efficient use of the human resources.
• The next phase of the financial sector reforms came to the fore in 1990-92
wherein the economic reforms were the major areas of focus. The government
started the technique of reducing the fiscal deficit by bringing the improvisations
in the banking sector and also the advancement of the technology and its
induction.
• All these practices were done so as to bring in the transparency, organisation and
other pivotal aspects so as to implant the confidence in the investor that their
investments are safe and sound.
Outlining the Product Variants in the Financial Service
Market
• Some of the important products in the financial service market are:

Financial Leasing
Equipment Leasing
Hire Purchase
Credit Card Service
Merchant Banking Service
Securities and Foreign Exchange Broking
Asset Management
Fund Management
Pension Fund Management
Advisory Services
Portfolio Research and Advice
Corporate Restructuring Strategy
Saving and Investing
• Saving: In simple terms savings is the method of setting aside some of the money
usually in parts so as to attain the desired targets. The purpose of saving is to
have some goal like saving for purchasing a car or a house or it may be saving for
the purpose of dealing with emergency situations.
• Investing: In lay man’s language the investment is a process of putting a surplus

amount of money over a product which will generate some more amount of money
during a course of fixed time period. Example of investing is the investment in
real estate. Investors invest in the real estate market to ensure that the value of
the property would appreciate.
• There is a basic differentiation between savings and investment. Where the risk
of losing money is much less in saving which is more in any type of
unconventional investment.
Lending and Credit
• Lending: Lending is a process where the creditor is providing the debtor with the
money required by the individual. That individual can be a person or a company.
The repayment of the money can be done under some agreement which the two
parties have come upon which can be done with a process of embarking interest
over the debtor or can be some other process of agreement.
• Credit: The credit can be of many types from a bank credit to investment and
public credit, etc. It should be noted that the amount of money available to be
borrowed by an individual or a company is referred as credit because it needs to
be paid back to the lender at some point at the future. Credit Increases the
account payable (liability) of a company.
Banking and Money Transmission
• Banking refers to the business activity involving accepting and safeguarding

money owned by other individuals and entities and lending out the money to earn
profit.
• Banks play the important role of financial intermediation by pooling savings and
channelising them into investments through maturity and risk transformation,
thereby keeping the engine of the economy running.
• During any action in the course of financial market there is always a very
important role of a bank and its transaction mechanism.
• Therefore, when there is a huge amount of money involved during any process of
a financial market a bank is always working as a financial institute working as a
mediator between these transactions which are going to be done through these
banks.
Life Insurance Products
• Term Insurance: This is a type of life insurance in which no cash is accumulated for the
policy holder. The insurance cover is provided only for a limited time. Some of the
important factors needs to be considered in a term insurance plan are:
– The insured amount (Sum Insured): The amount, which a beneficiary gets in
case of death.
– Premium Amount: The amount paid by the policy holder while purchasing
the insurance.
– Term of the Insurance: The time period for which the insurance amount is
being purchased.
• Endowment Plans: It is a combination of insurance and investment. In contrast to term
plan, which is a pure insurance, there is a maturity benefit in Endowment Plans.
• Unit Linked Insurance Plans (ULIPs): A ULIP is a plan where, investments are
subject to risks associated with the capital markets.
1. General Insurance
• General insurance is defined as the type of insurance that is not determined to be

life insurance.
• General insurance is also known as non-life insurance policy.
• Main types of general insurance are:
Fire Insurance
Health Insurance
Marine Insurance
Motor Vehicle Insurance

2. General Insurance
• Fire Insurance: Fire insurance is a form of insurance that protects properties of

people from the costs incurred by damage due to fire.
• Health Insurance: Health insurance, like other forms of insurance, is a form of

personal or group insurance by means of which people collectively pool their risk.
• Marine: Marine insurance covers the loss or damage to ships, cargo, and
terminals. It also covers the damage to any transport by which property is
transferred, acquired, or held between the points of origin to the point of final
destination.
• Motor Vehicle Insurance: Motor insurance is also known as vehicle insurance.

The main use of this insurance is providing protection against losses incurred as
a result of road traffic accidents and against liability that could be incurred to the
owner of the vehicle in an accident.
Let’s Sum Up
• Financial marketplace is a place where individuals participate in the trade of

assets such as equities, bonds, currencies and derivatives..
• Savings is the method of setting aside some of the money usually in parts so as to
attain the desired targets.
• Banking refers to the business activity involving accepting and safeguarding
money owned by other individuals and entities and lending out the money to
earn profit.
• Life insurance refers to a contract between an insured and an insurer in which
the insurer promises to pay the insured a sum of money in exchange of
premiums.
• General insurance is also known as non-life insurance policy. Typically, general
insurance is defined as the type of insurance that is not determined to be life
insurance.
Post Your Query
Chapter 3: Marketing of
Financial Services
Chapter Index

From-To
2 Topic 1 Marketing of Goods and 38-39

Services
3 Topic 2 Distinct Characteristics of 40-41

Financial Services
4 Topic 3 Formulating Marketing Mix of 42-46

Financial Services
5 Topic 4 B2B Marketing 47-48
6 Topic 5 Online Marketing 49-51

Chapter Index

From-To
7 Topic 6 Negotiation Skills 52-53
8 Topic 7 Challenges in Marketing 54-55

Financial Services
9 Let’s Sum Up 56
• Discuss the methods of marketing of goods and services
• Explain the distinct characteristics of financial services
• Formulate marketing mix for financial services
• Explain different aspects of B2B marketing
• Describe the importance of negotiations skills
• Explore the challenges in marketing financial services

1. Marketing of Goods and Services
• A product is an offering by an organisation to satisfy the needs and wants of

customers. Product may include goods, services, information, and ideas.
• Products can be classified on the basis of durability and reliability.
• While planning for any market offering, a marketer considers the five levels of
the product that are: the core benefit, the basic product, the expected product, the
augmented product, and the potential product.
• Services are intangible products, such as accounting, banking, insurance,

consultancy, education, medical treatment, and transportation.
• Services are sold without transfer of possession or ownership from manufacturer

to the customers.
2. Marketing of Goods and Services
• Service marketing is not only relevant to the service industry but also for the
organisations that offer products to their customers.
• In the beginning years of India’s independence, India grew on the export of labour
intensive products.
• After the 1970s, India realised the growing importance of services and moved
towards optimising the potential opportunities in the field of services.
• There were economists who have raised doubts about the improvement in service
sector activities.
• They observed that this sector has relatively little scope to improve for
productivity.
1. Distinct Characteristics of Financial Services
The main characteristics of financial services are:
• Complex: Financial services are more complex as compared to normal products

and services.
• Intangible: Financial services are intangible.
• Inseparable: Financial services are produced and consumed simultaneously.
• Perishable: Financial services cannot be stored for future use.
• Variable: Each service unit is a separate and unique event. Therefore; every event
is experienced exclusively by each customer.
2. Distinct Characteristics of Financial Services
The distinct characteristics of financial services are:
• Financial services are planned to transform the savings into investments.
• The savings in the financial services are channelised into investments.
• Financial services comprise of a wide range of activities and are thus subdivided
into traditional and modern activities.
• Both capital and money market activities are imparted by the financial services
• The operations in the financial services are executed under the regulatory bodies
like SEBI and other government agencies or bodies.
• Financial services provide project based advisory services for the new as well as
the ongoing projects. Not only this, it also assists in the collaboration and
acquisition activities.
1. Formulating Marketing Mix of Financial Services
• A marketing mix can be defined as a collection of tools that relate to the

formulation and implementation of marketing mix that is product, price, place,
and promotion.
• 8Ps of the service marketing mix are:
Physical Product
evidence Price
Service
Productivity Marketing Place
Mix
Process Promotion
People
• Product: Includes the goods, services, events, persons, places, ideas, and
information offered to the customers by producers. In simple words, product
implies what a seller sells and what a buyer buys. It is the most visible element of
marketing. Product involves decisions about the factors, such as product design,
features, sizes, quality, and packaging.
• Price: Is an important aspect in marketing mix that generates revenue. It is an

important element as it determines the value of sales or what customer
recognises the value of the good on sale. Price implies the monetary value given
by a buyer to a seller to get a product.
• Place: Is where one can hope to catch the target customers and where selling can
actually be done. Place refers to looking for precise distribution channels to reach
the customers. In other words, place refers to the distribution channels through
which the final products of manufacturers reach the end users.
• Promotion: It is a combination of all the promotional tools that are used by an

organisation to provide information on goods and services to the customers. These
promotional tools include advertising, direct marketing, personal selling, public
relations,
• People: It refers to employees and customers involved in the creation and

consumption of services. People are the essential ingredients for any service
delivery. The employees of a service organisation require to have good
interpersonal skills, attitude and service knowledge in order to deliver quality
services to the customers.
• Process: It is a system that assists an organisation in delivering services. For

example, customers walk into an insurance agency and gets plans according to
his/her need and requirements. This prompt service delivery involves a process
where the person is attended by some staff to understand his/her insurance
needs, suggest a plan accordingly and assist in purchasing the plan.
• Productivity: It is a measure of the rate at which output is produced per unit of

input. It depends on a number of factors, such as availability of resources, change
in business cycles, and government policies. Different industries measure
productivity differently.
• Physical evidence: It encompasses all the tangibles involved in the process of

service delivery. Physical evidence is basically associated with the location where
service is delivered to the customers and helps customers judge the organisation.
1. B2B Marketing
• With the advancement of Internet, the marketing of the goods and services has
come together as a whole new concept.
• In the case of marketing of financial services, the B2B marketing is a very

important tool.
• Key features or B2B marketing of financial services:
– Setting up of the goals and objectives: This is the crucial aspect of the B2B
marketing as without any clear objective no venture can become a success.
The target should be crystal clear and should constitute aspects like the
wants of the customers as well as the marketers.
– Developing strategy to meet the objectives: After setting the goal, it is

important to plan the strategies required in achieving that goal.
2. B2B Marketing
• Setting the content which is authentic and is able to engage the customer: This is
another important fact that needs to be taken care of as any content which is not
genuine or which that is suspicious will cause the failure of the product in the
market. Also, the content or the product should be engaging that is it should be
able to lure the customer and built his interest in it.
• Measuring the response of the customers: The B2B marketing is the commercial
dealings between a producer and a merchant or between the trader and a vendor.
This marketing approach should be able to measure the response of the
customers about their products. To acquire customer reviews is very significant.
1. Online Marketing
• Online marketing is the set of powerful tools and techniques used for promoting
products and services through internet.
• It is a dynamic marketing technique that increases the number of potential
customers by giving them various benefits, such as fast service and links to visit
related websites.
• The essential features of a website are:
– Navigation: Facilitates visitors to easily access useful information available
on any part of the website.
– About Us Section: Describes the core business, products, services, and history
of the organisation.
– Fun, Games and Prizes: Attract or distract visitors. Therefore, games and
prizes should match with the nature of the product.
2. Online Marketing
Some of the Web tools that play an important role in Web-based marketing are:
• Website: Refers to a set of interconnected Web pages. If the website of an
organisation has features like easy navigation and comprehensive information
then it can attract a huge number of customers.
• Online Directory: Refers to a tool that functions as interactive yellow pages. An
online directory helps customers who need specific products.
• E-mail Advertising Campaigns: Refer to compiling e-mail addresses of potential
customers and delivering information about upcoming sales discount, location,
offers, and events of the organisation.
• Affiliate Program: Allows organisations to advertise their products and services
on various marketing websites and charge a certain fee for every click by visitors
on the advertisement.
3. Online Marketing
• With online marketing, the customers have complete control of the website. This
is a pivotal feature that needs to be taken care of.
• The content should be striking and must be able to flaunt the latest changes new
products quickly. A slight delay on this part will have severe outcomes.
• The cost of obtaining the customers has gone down drastically that means fall of
new techniques, strategies etc. it must be developed and installed so as to recover
the customers the competitors financial products will acquire the customer which
would be a loss.
• The technology advancement also plays a pivotal role in the online marketing.
The adaption of new technological devices by the marketer is very important.
• The customers’ fidelity is necessary to be maintained at any cost that implies that
the commitments should be strictly adhered to.
1. Negotiation Skills
• Negotiation skills are very important due to the fact that when it comes to
marketing of services, the person handling the marketing is required to have
remarkable negotiation skills.
• In the absence of this important skill the company will suffer by losing the
client and thus will have severe outcomes.
• This expertise assumes all the more importance because of the fact that
severe online marketing as it creates hyper competition.
• Negotiation is a very important tool for selling financial services because

investors evaluate a number of things before putting their hard-earned into
financial services.
2. Negotiation Skills
The important aspects of negotiation in case of financial services:
• The negotiator should be able to convince the customer that a particular service
fulfils the needs of the customer.
• The negotiator should listen to the concerns of the customer and he/she should be
able to address the concerns.
• The negotiator should offer the services to the customer according to the
requirements of the customers.
1. Challenges in Marketing Financial Services
The challenges which are faced by the marketers are:
• Dealing with the customers’ requirements: This is the biggest trial that the
marketers have to face on account of the fact that the customer himself does not
know what he is looking at i.e. what are his targets and objectives. This makes
the marketing a very challenging task.
• Availability of information: The information concerning the customers is available

to all the competitors. This makes it all the more testing as every competitor
wants to utilise this information and lead from the front.
2. Challenges in Marketing Financial Services
• Usage of analytics and measurements: This is another trial which the marketer
has to bear with the data through the usage of data analytics and pattern
generation.
• Meeting with the requirement of the regulations: This is another problem that
the marketers are required to meet. As the competition rises, the regulations
become more rigorous and all of these are necessary to be compiled with.
• Understanding the social media and marketing in the social media so as to meet
the requirement of different cultures and the society: This is the challenge which
the marketers are required to meet due to the breaking down of the geographical
hurdles and the boundaries.
Let’s Sum Up
• A product is an offering by an organisation to satisfy the needs and wants of

customers.
• Services are intangible products, such as accounting, banking, insurance,

consultancy, education, medical treatment, and transportation.
• The main characteristics of financial services are complex, intangible,

inseparable, perishable, and variable.
• A marketing mix can be defined as a collection of tools that can be used in

achieving marketing objectives. It uses four Ps as its tools to decide the
marketing strategy.
• With the advancement of internet, the marketing of the goods and services has
come together as a whole new concept.
Post Your Query
Chapter 4: Building
Strategies and
Market Plans
Chapter Index

From-To
2 Topic 1 Strategic Marketing 62-74
3 Topic 2 Developing Strategic 75-81

Marketing Plan
4 Topic 3 Tools of Strategy Development 82-89
5 Let’s Sum Up 90
• Explain the concept of strategic marketing
• Discuss the development of the strategic marketing plan
• Explore the tools for strategy development

1. Strategic Marketing
• Strategic marketing can be defined as identifying one or more sustainable

competitive advantages an organisation has in the market.
• It is a way that is used by an organisation to differentiate itself from the

competitors by capitalising its strengths.
• This aim at providing better opportunity to customers.
• Its purpose is to develop plans and actionable items is to ensure that the
competitor’s motives and actions are blocked and secure enviable position in the
market.
• With Strategic marketing it is possible to overcome obstacles that come to your

company's success.
• The main task of the strategic marketing is to remove all the hurdles that come
in their way to achieve established goals and targets.
• A strategic marketing idea guides the planning team in choosing the right course
of action to improve company’s performance and help the organisation in
achieving its long-term objectives.
• Strategic Marketing decides where to compete, how to compete and when to

compete.
• Thus, in order to attain the position of competitiveness, this requires careful

analysis of several factors which have a position to impact the survival of the
business.
• Some of the factors which are responsible for achieving the competitive
advantage are as follows:
Careful and detailed understanding of the market dynamics
Emergence of new entrants in the market
The fragmentation of the consumer base
The challenges of meeting the requirements of the regulatory

bodies and the government policies
• Careful and detailed understanding of the market dynamics. This may include
technological advancements and its injection into the business processes.
• Emergence of new entrants in the market. This is again another important factor
which ensures that the company or an organisation may face competition from
multiple dimensions and each of these competitors has tremendous potential to
annihilate the survival of the business.
• The fragmentation of the consumer base. This is another important factor which
needs to take into account while developing the strategy for countering the
opponent's plans.
• The challenges of meeting the requirements of the regulatory bodies and the
government policies.
• The financial service being greatly impacted by the perception of the individuals
they are required to take into account the various perceptions of the quality so as
to develop plans and strategies to counter the impact of the competitors'
strategies.
• Thus, by keeping in mind the above parameters and factors in mind the
organisation is required to market the financial products and services
accordingly.
The marketing strategy helps in achieving following goals:
• Increase sales
• Widen your customer base
• Keep current customers engaged
• Launch new product or service
• Increase market share
• Establish your brand
• Improve customer loyalty

• Launch an advertising campaign
• Launch a PR campaign
• Encourage word of mouth
• Increase market share
• Retain existing profitable customers
• Make customers feel more valued
• Offer existing customers exclusive offers
• Ensure business stays fresh and new

• Strategic marketing requires efficient allocation of an organisation’s valuable and

scarce resources.
• In addition, it manages the external forces that influence the organisational

environment.
• Examples of external forces are technological changes, increasing competition,

and the advent of liberalisation, privatisation, and globalisation.
An organisation practicing strategic marketing achieves the following benefits:
• Successful marketing mix combination
• Facilitates the breakthrough thinking about future goals of the organisation
• Creates a vision and mission of the organisation
• Develops guiding principles and strategic goals of the organisation
• Converts inputs of the organisation into outputs
• Optimises the organisational performance and process to deliver quality products

and services
• Organisations aim at achieving maximised returns on invested funds and gain

financial success through effective strategic marketing.
• A strategic financial thinker makes plans and policies to manage the funds of the
organisation.
• Plans and policies are related to the decisions regarding financial investment and
borrowings, reserves, and surplus.
The financial strategies focus on:
• Determining the least cost combinations of resources
• Taking investment decisions that maximise the net present value and
shareholder’s wealth
• Identifying scarce financial resources and balancing them effectively
• Raising funds for the organisation through issue of shares
• Performing cash, credit, and risk management

1. Developing Strategic Marketing Plan
• Strategic marketing is a plan that explains how goals will be achieved within a
stipulated timeframe.
• It also determines the preference of market segment, positioning of brand,

marketing mix, and resources allocation.
• Strategic marketing plan combines product, price, place, promotion, and other
elements to achieve the marketing goals of the organisation within a timeframe.
• It gives a defined route to any business to achieve the set objectives.

• The process of developing the strategic marketing plan in case of financial

services is not a simple task.
• It requires the understanding and analysis of the financial market and the
customers as well as it requires a detailed step by step approach to develop the
same.
• A proper analysed and designed strategic plan has the power to take your
business to the top.
The necessary steps which must be taken into account while developing the plan:
Determining the objective of the plan
Define the scope of the plan
Determine the process and the measures for measuring the

performance of the processes
Develop the plan for corrective and preventive actions based on the
feedback received from the execution of the plan
• Determining the objective of the plan: It is one of the most important steps that
need to be addressed in the beginning.
• Unless the objective of the plan is considered, the whole purpose of developing the
strategic marketing plan remains passive or fruitless.
• Once the objective is set, the direction for developing the plan is already laid out.
It makes it easier to process the development of the plan further in an easy and
smooth way.
• This step involves determining marketing goals to answer basic questions, such
as what financial product/ service to launch, when to launch, and how to launch.
These financial marketing objectives should be set after considering
organisational goals.
• Define the scope of the plan: This is another vital step which needs to be taken
into consideration.
• The scope basically sets limits for developing the individual components of the
plan. For instance, the insurance plan to be developed should state the
components such a time period, premium, maturity amount etc.
• Determine the process and the measures for measuring the performance of the
processes: The step ensures that the various processes which have been identified
need to be measured to manage the plan which has been developed.
• For instance, premium calculator should be checked on websites so that the

consumers can check premium to be paid for insurance plans they are planning to
buy.
• Develop the plan for corrective and preventive actions based on the feedback
received from the execution of the plan: This vital step ensures continuous
progress and thus also provides a competitive edge over the competitors.
• By following the above steps, the organisation may be able to develop a sound
strategic marketing plan.
1. Tools for Strategy Development
In order to develop the strategy the following tools are required:
Promotional tools
Positioning tools
Pricing tools
The branding tool

• Promotional tools: Promotional tools are required for developing the strategy for
the promotion of the product.
• While developing the strategy the use of the promotional tools is focused on the
usage of the medium to be deployed for the promotional campaign.
• Financial institutions use advertising, direct marketing, personal selling, public

relations, and sales promotion techniques to make the customers aware of their
financial products and services.
• Positioning tools: This is the tool which is required for developing the strategy for
the financial services with respect to the positioning of the product.
• In general this tool takes into account the factors such as what is the correct time
for the product or the service to be launched in the market, i.e. during the festival
times; during the happening of an event.
• According to Kotler, “Positioning is the act of designing the company’s offering

and image to occupy a distinctive place in the minds of the target market.”
• It locates the brand in a customer’s mind, to maximise the latent benefits to the
organisation.
• Brand positioning gives target customers a reason to buy a certain brand in

preference to others.
• It confirms that all brand actions have a shared aim, which is guided, directed
and delivered by the reason to buy a certain brand. It is emphasised at all points
of customer contact.
• Pricing tools: This is another factor which needs to be taken into consideration as
regards to the development of strategy.
• This is focused on the aspect such as the price of the product or the service that is
to be launched.
• A high price of the product or the service will deter the customers especially if the
price of other products is relatively small while the low price of the product will
reduce the profit margin as well as will induce a low confidence to the customers.
• The branding tool: This is another important aspect which needs to be taken into
consideration while developing the strategy.
• Branding refers to bestowing the brand supremacy to any product or service.
• It is nothing but creating a difference between the offerings.

• Branding is when a marketer tries to make customers aware of ‘whom’ their

product producer is.
• They do it by giving it a name, and also by highlighting other elements that

differentiate it from other products offered by the competitors.
• Branding helps in preparing a mental structure according to which consumers

organise their information about the offering in a way that makes them to take a
purchase decision.
• Branding provides value to the organisation.
• In general this aspect focuses on the aspects such as how to build the brand; how
to ensure that the customers are somehow or the other gets linked to the product
and the like.
• This question of branding the product is of great importance in the marketing of

products and services of the financial entities.
Let’s Sum Up
• Strategic marketing can be defined as identifying one or more sustainable

competitive advantages an organisation has in the market.
• The financial service being greatly impacted by the perception of the individuals
they are required to take into account the various perceptions of the quality so as
to develop plans and strategies to counter the impact of the competitors'
strategies
• Strategic marketing requires efficient allocation of an organisation’s valuable and
scarce resources.
• Strategic marketing is a plan that explains how goals will be achieved within a
stipulated timeframe.
• Promotional tools are required for developing the strategy for the promotion of
the product.
Post Your Query
Chapter 5: Financial
Planning
Chapter Index

From-To
2 Topic 1 Concept of Financial Planning 96-102
3 Topic 2 Importance of Asset Allocation 103-104
4 Topic 3 Aligning Investments to Goals 105-106
5 Topic 4 Retirement Planning 107-109
6 Topic 5 Risk Management Strategies 110-113
7 Let’s Sum Up 114

• Explain the concept of financial planning
• Discuss the importance of asset allocation
• Describe the need to align investments to goals
• Explain the need and importance retirement planning
• Describe the risk management strategies

1. Concept of Financial Planning
• Financial planning refers to the process of planning of finances by an individual

to identify the financial needs and objectives and invest according to the
requirements.
• It can also be defined as a process of meeting financial goals through the proper
management of the finances.
• An individual may have various financial goals, such as buying a house, saving
for child's higher education or planning for retirement.
• According to the Financial Planning Standards Board (FPSB), “Personal financial

planning” or “financial planning” denotes the process of determining whether and
how an individual can meet life goals through the proper management of
financial resources.
• As a process, financial planning helps an individual to identify his/her current

situation by following few steps that consist of:
– Gathering relevant financial information
– Setting life goals
– Examining current financial status
– Coming up with a strategy or plan to meet life goals

• Financial planning integrates the financial planning process with the financial
planning subject areas.
• In determining whether the certificant (planner) is providing financial planning

or material elements of financial planning, factors that may considered include,
but are not limited to the:
– Client’s understanding and intent in engaging with the certificant.
– Degree to which multiple financial planning subject areas are involved.
– Comprehensiveness of data gathering.
– Breadth and depth of the recommendations.

• Financial planning gives more clarity to the goals of life.
• It creates a kind of road map in terms of what has to be done to achieve those
goals.
• The main objective of financial planning is to meet the financial goals of the
investor by the right combination of savings and investment.
• Many factors are to be taken into consideration for financial planning, e.g.
economy, government, consumer, education, geographic factors, career, age, etc.
Importance of Financial Planning

• Helps in taking the right investment decisions: Financial planning provides a
direction to individuals with regards to their financial decisions. It helps them in
making the right investment decisions and ensures that funds are available at
the time when individuals need it the most.
• Helps in understanding an individual’s risk appetite: A financial plan helps
individuals in assessing their risk appetites and taking calculative steps while
investing. The risk profiles are based on various factors including family
conditions, commitments, age and available liquidity.
• Helps in accumulating wealth as per individual goals: Financial planning limits
random investing and helps individuals to systematically accumulate wealth for
fulfilling short and long-term goals.
Role of Financial Planner

A financial planner is a qualified investment professional who guides individuals to
meet their long-term financial goals and develop strategies to achieve these goals.
He/she helps the individuals in the following:
• Identifying the investment needs
• Translating the needs into measurable financial goals
• Planning investments to achieve those goals
• Providing financial security and thus ensures that all financial goals are met.
• Giving direction and meaning in one’s financial decisions

A financial planner suggests individuals regarding their lifetime financial decisions,

which include the following:
Risk Management and Insurance Planning
Investment and Planning Issues
Retirement Planning
Tax Planning
Estate Planning
Cash Flow and Liability Management

1. Importance of Asset Allocation
• How an individual’s portfolio is invested across different investment avenues is

one of the most important decisions in financial planning.
• This is because markets are cyclical, what offers higher returns today may
become a risky choice to opt for later.
• By spreading the investments across different asset classes and markets, an

individual can take advantage of the opportunities in the market.
2. Importance of Asset Allocation
An asset allocation strategy is based on the following factors :
Time Horizon
Risk Tolerance
Financial Situation
1. Aligning Investments to Goals
• Investment strategies should be aligned with each client’s personal goals. Goals-
based investing recognises that investors have conflicting goals.
• Whether a client intends to accumulate assets for retirement, save for a luxury
vacation, donate to trusts, or achieve any other goal, the investment strategy
should be aligned to each goal.
• Therefore, instead of pooling all client assets into a single portfolio, a separate
portfolio for achieving each goal is preferred. The portfolio performance is
measured in terms of the client’s progress toward achieving each stated goal.
2. Aligning Investments to Goals
An example of how aligning investments to goals help individuals:

1. Retirement Planning
The guidelines for retirement planning are:
Time Horizon
Spending Requirements
After Tax Rate of Return
Portfolio Allocation
Estate Planning
• Time Horizon: The present age and expected retirement age are the basis of the
initial groundwork for retirement planning. The longer the time horizon between
present day and retirement, the higher would be the level of risk that an
individual’s portfolio could withstand. In addition, the risks of return volatility
are mitigated with a longer time horizon.
• Spending Requirements: Precise assessment of retirement spending goals would

help an individual to plan the retirement accurately as higher spending needs in
the future requires additional savings today.
• After Tax Rate of Return: The after-tax rate of return must be calculated to
assess the feasibility of the portfolio producing the needed income. The
retirement income should be estimated by keeping in view the tax deductions
applicable.
• Portfolio Allocation: The most important step in retirement planning is to arrive

at a proper portfolio allocation that balances the risks and returns and still meets
the post retirement income expectations.
• Estate Planning: Proper estate planning and life insurance coverage ensure that
an individual’s assets are distributed in a way that his/her family members do
not experience financial hardship following the individual’s death.
1. Risk Management Strategies
Risk management provides financial security through the use of financial strategies,
tools and services. It mitigates the risk of potential financial losses if and when they
occur. A comprehensive risk management strategy is based on minimising the
personal, property and liability risks.
• Personal risks: These include risks associated with the potential loss of income
due to injury, poor health and unemployment.
• Property risks: These include risks associated with the potential loss of value of
assets due to fire, hurricanes, negligence and other uncontrollable events.
• Liability risks: These include risks associated with circumstances such as

lawsuits and damage to other’s property or person due to negligence.
There are three main strategies for risk management:
Risk Transfer Risk Avoidance Risk Reduction
• Insurable risk is • Eliminating the • Optimisation of

shifted to hazards and risks by reducing
another party (insu exposures that the severity of the
rer). place an loss.
individual's assets
at risk.
• Risk Transfer: One of the most common ways to mitigate and manage financial risk
is through the purchase insurance instruments. Insurance refers to the equitable
transfer of financial risks from one entity to another in exchange for payment.
Insurance is risk management strategy used for hedging against contingent risk and
uncertain losses. Insurance offers protection to policy holders against large and
unexpected financial losses, by way of compensation as per their contractual
obligations. This form of risk management is often referred to risk transfer.
• Risk Avoidance: The other common way to mitigate financial risks is through
avoidance of risk. Individual’s assets are exposed to various potential hazards and
exposures. For example, not buying a house at a place prone to earthquakes is risk
avoidance. Individuals can choose to avoid certain risks by making different choices
in life.
• Risk Reduction: The other risk management strategy used by individuals is

through reduction of risks. This involves reducing the severity of loss or the
likelihood of occurrence of loss. For example, fire extinguishers are used to reduce the
risk of loss by fire.
Let’s Sum Up
• Financial planning refers to the process of planning of finances by an individual

to identify the financial needs and objectives and invest according to the
requirements.
• Asset allocation is an investment strategy that aims to balance risk and reward
by apportioning a portfolio's assets according to an individual's goals, risk
tolerance and investment horizon.
• Investment strategies should be aligned with each client’s personal goals. Goals-
based investing recognises that investors have conflicting goals.
• Risk management helps in mitigating the potential financial risks to minimise

the affect they could have on an individual’s finances.
• There are three main strategies for risk management; risk transfer, risk
avoidance, and risk reduction.
Post Your Query
Chapter 6: Analysing
Financial Service Market
Environment
Chapter Index

From-To
2 Topic 1 Marketing Environment 120-122
3 Topic 2 Micro Environment 123-124
4 Topic 3 Macro Environment 125
5 Topic 4 Analysing the Developments 126-127

in the Marketing Environment

• Explain the concept and types of marketing environment
• Discuss the concept of micro environment
• Explain the concept of macro environment
• Elaborate on the developments in the marketing environment

1. Marketing Environment
• Marketing environment refers to all internal and external factors, which directly
or indirectly influence the organisation’s decisions related to marketing activities
of financial services.
• A marketing environment of financial services is characterised by numerous

features, which are:
Specific and general forces
Difficulty
Vibrancy
Uncertainty
Relativity
The study of marketing environment for financial services is essential for the success
of a financial organisation:
• Identification of opportunities: It helps an organisation in exploiting the chances

or prospects for its own benefit.
• Identification of threats: It helps organisations in identifying threats and takes

required steps before it is too late.
• Managing changes: It helps in coping with the dynamic marketing environment.

If an organisation wishes to survive in the long run, it has to adapt itself to the
changes occurring in the marketing environment.
• An organisation needs to keep itself updated to modify its marketing activities as

per the requirement of the marketing environment.
• Any change in marketing environment brings both threats and opportunities for
the organisation.
• An analysis of these changes is essential for the survival of the organisation in

the long run. A marketing environment mostly comprises of the two types of
environment:
Micro Environment
Macro Environment
1. Micro Environment
• Micro environment refers to the environment, which is closely linked to the

organisation, and affects organisational activities directly.
• The forces affecting the micro environment:
Marketing Intermediaries
Customers
Competitors
2. Micro Environment
The components of micro environment:
Organisational
Resources
Micro
Environment
Organisational Organisational
Capabilities Competencies
Macro Environment
• Macro environment involves a set of environmental factors that is beyond the

control of an organisation.
• These factors influence the organisational activities to a significant extent. Macro

environment is subject to constant change.
Political, Regulatory and Legal Environment
Economic Environment
Social Environment
Technological Environment
1. Analysing the Developments in the Marketing
Environment
• To identifying the internal strength, weaknesses, opportunities and threats an

organisation conducts situation analysis that aims to analyse the means to leverage
the macro environment opportunities and managing the weaknesses and external
threats.
• Therefore, situation analysis is an important pre-requisite in analysing the

developments in the marketing environment.
• The most widely used technique of situation analysis is SWOT analysis.
• The technique was developed at Stanford Research institute during the 1960s.
• SWOT is the acronym of Strength, Weakness, Opportunity and Threat.

2. Analysing the Developments in the Marketing
Environment
An overview of SWOT analysis for assessing the developments in the marketing

environment of financial services:
Let’s Sum Up
• Marketing environment refers to all internal and external factors, which directly
or indirectly influence the organisation’s decisions related to marketing activities
of financial services.
• Micro environment refers to the environment, which is closely linked to the

organisation, and affects organisational activities directly.
• Macro environment involves a set of environmental factors that is beyond the

control of an organisation.
• Situation analysis is an important pre-requisite in analysing the developments in

the marketing environment.
• SWOT analysis intends to match the strengths and weaknesses in an

organisation with the opportunities and threats faced by the organisation.
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Chapter 7: Consumers of
Financial Services
Chapter Index
From-To
2 Topic 1 Consumer Choices in Financial 134-136

Services
3 Topic 2 Purchasing Behaviour of 137-140

Consumer in Financial Services
4 Topic 3 Characteristics of Financial 141-142

Services Customers
5 Topic 4 Behavioural Finance 143-145

• Explain consumer choices in financial services
• Discuss buying behaviour of consumer in financial services
• Learn characteristics of financial services customers
• Explain the concept of behavioural finance

1. Consumer Choices in Financial Services
• A consumer choice can be defined as preferences present with the consumer for
the products/services.
• In case of financial services, consumers face a lot of options to choose from. They
require stable, secure and fair financial services.
• Various factors determine the choice of financial services by a consumer:
Internal Factors
External Factors
Internal factors are controllable factors, also called as personal factors. These are
related to consumer’s internal environment. Personal factors are as follows:
Consumer’s income
Retained earnings
Consumer’s expectations and confidence
Rate of return
• External factors are uncontrollable factors.
• These are related to consumer’s external environment. External factors are as

follows:
Financial market environment
Political and Legal Factors
Consistency and Uniformity in returns

1. Purchasing Behaviour of Consumers in Financial
Services
• Purchasing decision process of a consumer involves the action that a consumer

undertakes before, during, and after the purchase of any product.
• A person needs to go through several processes for selecting the desired product
out of multiple alternatives.
• Consumer has to identify his/her decision behind the visible act of purchase.
Services
The purchasing decision process followed by consumers in case of financial services :
5. Post-
purchase
4. Purchase behaviour
decision
3. Evaluation
of
2. Information alternatives
search
1. Problem
recognition
Services
• Problem Recognition: Recognising the problem is the first stage of the buying
decision by a consumer. This stage takes place when the problem or need of a
particular product is identified through the internal and external stimuli of a
person. The internal stimuli may drive a person to meet his/her basic needs such
as need for future savings.
• Information Search: Information search represents the second stage of the buying
decision process. Once the problem or need of a person is recognised, he/she goes
for searching the information related to his/her requirements. A financial advisor
has to present all possible information related to financial instruments such as
interest rate, locking period, profits expected etc.
Services
• Evaluation of Alternatives: After gaining the required information, a person can

make the final decision. Evaluation of alternatives indicates various attributes
that enable a person to judge or assess the financial product/service.
• Purchase Decision: In case of financial services, the purchase decision by a

consumer is influenced by several factors such as brand name, attractive
features, previous experience with the product, terms and conditions, availability
of the substitute, and the payment method.
• Post Purchase Behaviour: A post purchase behaviour occurs when a consumer,

after purchasing a product, compares it with his/her expectations and feels
satisfied or dissatisfied. Any consumer satisfied with the post purchase activities,
possesses repeat purchase behaviour.
1. Characteristics of Financial Services Customers
• Customers’ needs, expectations and responses to marketing activities form an

important part of the consumer research.
• In case of financial services, it is quite difficult for a consumer to evaluate the

purchases in advance as returns are uncertain.
• Personal consumers generally regard the financial products and services as

distress purchases they have to make as they don’t want to purchase it.
• Consumers are generally uninterested and passive buyers. This is not true for
business customers as financial products and services help them to grow their
business.
• They have specialised financial teams with detailed knowledge of financial

markets.
2. Characteristics of Financial Services Customers
The main characteristics of financial services customers are:
• Take great risks
• Assess all the alternatives available to get the maximum return
• Depend on brand loyalty
• Depend on financial planners for financial decisions
• Desire to know the long term benefits and risks of the investments
• Tend to take financial decisions based on perceptive factors such as trust,

instinct, brand or suggestion.
• Concentrate on facts and figures, so that they can easily compare different offers.
1. Behavioural Finance
• Behavioural finance implies the influence of psychology on the behaviour of

financial practitioners and its effect on the markets. It explains how and why
markets behave improperly.
• Behavioural finance is a generally new field that tries to join behavioural and
cognitive mental hypothesis with routine matters of trade and profit and fund to
give clarifications to why individuals settle on unreasonable monetary choices.
• One of the most elementary assumption which conventional economics and

finance makes is that individuals are rational "wealth maximisers".
• According to conventional economics, emotions and other irrelevant factors do not

influence people when it comes to choose the economic factors.
Behavioural finance change the way the individuals perceive risks. They manage
risks in these four ways:
1. Avoidance: Risk can be avoided possibly by eliminating the task that comprises of
risk factor. It is the easiest method to get rid of the risk. Nonetheless, eliminating
the task will also eliminate the chances of accomplishing the attainable goals. In
certain cases it is possible as well as worth eliminating the task which involves
significant risk.
2. Reduction: The second possible method to handle the risk is to reduce it. There
are two ways to reduce the risk that is, by limiting the activity to be performed or
by increasing the precautionary measures.
3. Transfer or sharing: Transferring risk is the method of passing on the risk or

sharing it with other entity. However, transferring or sharing is possible if the other
entity is willing to accept it and is able to deal with it.
4. Acceptance or retention: Deciding to face the risk and deal with it is called
acceptance. Not transferring or sharing the risk is called retention of risk. This
approach is acceptable when the loss sustained is minimal and does not have any
hazardous effects. This method is adopted when the cost of transferring or reducing
the risk is excessive and goes beyond the returns expected.
Let’s Sum Up
• Organisations should know customers buying behaviour and their decision

making behaviour. It is also important for the organisation to remain loyal to the
customers.
• Understanding consumer buying behaviour is the main component of research in

marketing.
• A consumer goes through several buying decision processes such as need

recognition, information search, alternatives, purchase decisions, evaluation of
and post-purchase decisions.
• Behavioural finance is a generally new field that tries to join behavioural and
cognitive mental hypothesis with routine matters of trade and profit and fund to
give clarifications to why individuals settle on unreasonable monetary choices.
Post Your Query
Chapter 8: Segmenting,
Targeting and
Positioning
Chapter Index
From-To
2 Topic 1 Needs of Segmentation and 152-154

Targeting
3 Topic 2 Approaches of Segmentation 155-156
4 Topic 3 Segmentation of Business-to- 157-158

Business Markets
5 Topic 4 Strategies of Targeting 159-160
6 Topic 5 Positioning of Financial Services 161-163

• Identify the needs of segmentation and targeting
• Explain the approaches of segmentation
• Discuss the segmentation of business-to-business markets
• Explain the strategies of targeting
• Discuss the positioning of financial services

1. Needs of Segmentation and Targeting
• Segmentation refers to the selection of a specific group of customers having

similar needs and preferences in a market.
• It enables an organisation to identify and understand the needs of different

customers with respect to their buying behaviour more deeply and clearly.
• This is possible by directing all the organisational resources to understand the

needs of customers lying in a particular segment and develop the product
accordingly.
• A segmentation approach allows the strategic marketing planner to take a closer

view of a smaller segment and thus, it helps the planner to be in a better position
to spot opportunities.
• After segmenting the market, an organisation focuses on or targets the most

profitable segment to gain profit.
• Target Markets refers to that part of the market, which an organisation aims for
selling its products or services.
• Target market selection process involves the evaluation of the attractiveness of

every market and selection of one or more profitable markets.
• An organisation considers various factors, such as size and growth of a particular

segment. It tries to understand the customers and the competitive environment.
For selecting a target market, an organisation needs to evaluate the potential

segments of market on the following criteria:
• Whether organisation has the required resources to cater to the needs of that
segment and the overall organisational objectives are achieved while serving the
segment.
• The estimation of sales volume to of the segment to determine the revenue the
organisation will earn by targeting that market.
• It is important for an organisation to assess competitors in the targeted segment.
• The cost estimates also act as an important evaluation criterion for evaluating
the market segment. Every segment involves different marketing mix as per the
varying needs of customers.
1. Approaches of Segmentation
• Organisations need to use the segmentation strategy for catering the needs of the
customers and earning profits.
• For segmenting the market, different organisations use different approaches and
bases, which are discussed as follows:
– Geographic Segmentation: In geographic segmentation, a market is divided

into different geographical areas on the basis of cities, states, and countries..
– Demographic Segmentation: It involves the classification of market into

segments based upon the demographic attributes, such as age, gender,
income, occupation, religion, race, and social class.
– Psychographic Segmentation: It involves segmentation on the basis of

lifestyle, values, and beliefs of an individual.
2. Approaches of Segmentation
• Behavioural Segmentation: It is the segmentation on the basis of behaviour of

customers towards a product. This helps the marketers to know the past
purchases of a customer. The variables that help in segmenting the market
according to the behaviour are discussed as follows:
Benefits
Occasions
Usage Rates
Loyalty Status
1. Segmentation of Business-to-Business Markets
Business-to-Business (B2B) markets are the one wherein the trading of goods and
services takes place between the organisations. The segmentation is done mostly on
the following basis:
• Demographic variables: It includes determining the industry in which the

organisation is going to serve, what size of organisation is to be targeted, and
which geographical area is to be served.
• Operating variables: It includes determining technology upon which the

organisation is focusing; it also emphasises upon deciding which kind of users are
to be targeted such as heavy users, low users or medium users. Apart from this, it
also decides the customer’s capabilities; in other words it decides whether the
organisation should serve customers that have few needs, or those who have
many needs.
2. Segmentation of Business-to-Business Markets
• Purchasing approaches: It includes decisions such as whether the organisation is

adopting highly centralised or decentralised purchase approach; whether it is
concentrating upon engineering oriented or finance oriented or some other
dominance based organisation; whether it is going to deal with existing partners
or with new ones; what is going to be its general purchase policy; and so on.
• Situational factors: They determine the urgency of delivery of goods or services by

the organisation, size of the order, and the application upon which the
organisation is focusing for its products.
• Personal characteristics: It includes the similarity between the buyer and the
seller, organisation’s attitude towards bearing risks and loyalty of the customers
to the organisation.
1. Strategies of Targeting
• Single Segment Concentration: It involves the selection of the most attractive

segment by an organisation. It is mostly termed as concentrated segmentation.
The small-scale organisations having limited resources mostly target a single
segment.
• Selective Specialisation: This strategy focuses on selecting multiple market

segments. In selective specialisation, the organisation uses expertise for meeting
the needs of the selected segments.
• Product Specialisation: It focuses on providing different products for different

types of segments. The focus of an organisation is more on products rather than
the segments. An organisation using such a strategy earns a substantial
reputation in producing those specific products.
2. Strategies of Targeting
• Market Specialisation: It involves concentrating on the needs and wants of

customers belonging to a specific market. It also involves some risks as the
organisation caters to only a specific market.
• Full Market Coverage: It emphasises the importance of supplying products for all
the segments of the market. Full market coverage helps an organisation to
expand its market and earn more revenue.
1. Positioning of Financial Services
• Positioning refers to a process of creating an image or identity for an

organisation’s products in the minds of its target customers.
• A product is positioned with the help of a punch line that carries the unique
selling proposition of a product.
• The positioning strategy should create the first impression in the mind of
customers. The aspects that the positioning strategy should satisfy are as follows:
– Carrying a value benefit for ample number of customers.
– Making the product of an organisation different from its competitors.
– Denying the possibility of imitation of product by other organisations.
– Generating profit for the organisation.

• A successful product positioning can be done by differentiating the products of an

organisation from its competitors.
• An organisation should create differentiation that involves the following criteria,

which are:
– Significance: A product should give benefit to its target customers.
– Uniqueness: A product should consist of distinctive features. Product

uniqueness can be a new or add-on benefit in the existing product of an
organisation.
– Reasonable: It checks the buying ability and budget of customers.
– Profitability: It helps an organisation to continue its operations for a longer

period and differentiate with change in time.
Following are the various errors made by the organisations while positioning a
product:
• Targeting a limited part of the market due to the limited available information.
• Targeting a very narrow group of customers who are not even profitable for the
organisation.
• Misinforming the customers about the features, prices and benefits of products
that in turn dissatisfy them and create a negative image of the organisation.
Let’s Sum Up
• Segmentation refers to the selection of a specific group of customers having

similar needs and preferences in a market.
• For segmenting the market, different organisations use different approaches and
bases, which are geographic, demographic, psychographic, and behavioural
segmentation.
• B2B markets are segmented based on geography, benefits, and usage rate in the
same way as they are used in segmenting consumer markets.
• Various strategies have been developed by organisations over a period of time to
select the target market single segment concentration, selective specialisation,
product specialisation, market specialisation, and full market coverage.
• Positioning refers to a process of creating an image or identity for an
organisation’s products in the minds of its target customers.
Post Your Query
Chapter 9: Marketing
Financial Services in the
International Market
Chapter Index

From-To
2 Topic 1 Internationalisation of 170-171

Financial Services
3 Topic 2 Drivers of Internationalisation 172-173
4 Topic 3 Globalisation Strategies 174-175
5 Topic 4 Selection and Implementation 176-177

of Strategies

• Explain internationalisation of financial services
• Discuss drivers of internationalisation
• Describe globalisation strategies
• Explain selection and implementation of strategies

1. Internationalisation of Financial Services
• Opportunism and replication of the businesses and strategies have been

identified as the key drivers of cross-border expansions, suggesting that
internationalisation strategies need to be focused on a more rigorous analysis of
the resources of a foreign country’s value creation.
• Therefore, to sustain and ensure the growth in the international market

strategies need to be uniquely formed for the competitive advantages of
individual financial services organisations.
• There are fears raised by the presence of internationalisation namely the threat
to a domestic financial firm and financial systems, a loss of monetary autonomy,
underestimating the prudential controls with the increase of volatility of capital
flows.
2. Internationalisation of Financial Services
• Deregulation in the domestic financial market lets the market forces to eliminate
the controls over deposit rates and credit allocation, and generally the reduction
of role of the state in the domestic financial system.
• Capital liberalisation account gets rid of the restrictions of the currency

convertibility.
• Internationalisation of the financial services removes discrimination in treatment

of foreign and domestic financial service providers, creating a congenial ground
for the financial services. The internationalisation of financial services is a major
challenge for strengthening broadening financial system in developing countries.
1. Drivers of Internationalisation
• There have been a lot of stages of development through which the

internationalisation of higher education has moved in the past few decades.
• Then fifteen years back, it was competition that raised cooperation involving the
active recruitment of international students as a bigger issue of
internationalisation.
• The focus of internationalisation has shifted back in the past few years with an
increase in the demands for global knowledge of economy, culture, and
technology.
• In addition, there has been an increase in mass recruitment with a hugely

selective based approach by absorbing the highly skilled and talented brains.
2. Drivers of Internationalisation
• There are two types of drivers that can be studied to have a deep understanding
about the factors that affect internationalisation.:
Internal Drivers
• Internal drivers are those drivers which internally affect

the business of an organisation while expanding in global
market.
External Drivers
• External drivers refer to the factors which are

uncontrollable and completely dependable on the external
environment.
1. Globalisation Strategies
• Organisations need to focus on developing globalisation strategies that focus on

achieving growth across borders.
• To enter into new markets in different countries, organisations can adopt

following strategies:
– Mergers and Acquisitions: These have become popular strategies in the last
two decades to expand the scope of business for an organisation. A merger
can be defined as the combination of two or more organisations, in which
both the organisations are dissolved and their assets and liabilities are
combined to form a new business entity. An acquisition, on the other hand, is
the process of gaining partial or full control of one organisation by another.
2. Globalisation Strategies
– Joint Ventures: A joint venture can be defined as a creation of an entity by

combining two or more organisations that want to attain similar objectives
for a specific time period. In other words, it is a cooperative business
agreement between two organisations to fulfil their mutual needs.
– Strategic Alliances: A strategic alliance is a mutual agreement between two

or more organisations. According to Yoshino and Rangan, “A strategic alliance
is a partnership between two or more organisations that unite to pursue a set
of agreed upon goals but remain independent subsequent to the formation of
the alliance to contribute and to share benefits on a continuing basis in one
or more key strategic areas.”
1. Selection and Implementation of Strategies
• The process of strategy implementation is as follows:
Activating Managing Achieving

Strategies Change Effectiveness
• Activating Strategies: After selecting a strategy, its activation is done by dividing

the strategies into plans, programs, projects, policies, procedures, and rules and
regulations.
2. Selection and Implementation of Strategies
• Managing Change: Change is an essential element as every organisation has to

deal with the dynamic forces present inside and outside the organisation. An
organisation operates in two types of environment namely internal and external
and follows various techniques to scan the changes in the environment.
• Achieving Effectiveness: It refers to achieving the organisational effectiveness

that implies a degree to which organisation is able to fulfil its objectives. It is a
result of the implementation process.
Let’s Sum Up
• The internationalisation of financial services is a major challenge for

strengthening broadening financial system in developing countries.
• There are majorly two types of drivers of internationalisation, such as internal

drivers, and external drivers.
• In the present era, globalisation has forced financial institutions to cultivate

strategic partnerships to gain a competitive edge over others in the market.
• It is important for a financial organisation to select a strategy as per the products

and services produced by it. After selecting the appropriate strategy, it is
essential to implement it effectively so as to get the desired results.
• The process of strategy implementation includes activating strategies, managing

change, and achieving effectiveness.
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Chapter 10:
Pricing
Chapter Index
From-To
2 Topic 1 Roles and Objectives of Pricing 184
3 Topic 2 Challenges of Pricing in 185-186

Financial Services
4 Topic 3 Determination of Pricing 187-189
5 Topic 4 Price Differentiation 190-191
6 Topic 5 Pricing Strategies 192-193
7 Topic 6 Promotional Pricing 194-195

 Explain roles and characteristics of pricing
 Understand challenges of pricing in financial services
 Discuss the process of determining pricing
 Define price differentiation
 Explain pricing strategies
 Describe promotional pricing

Role and Objectives of Pricing
• The pricing of financial services acts as the basis for the positioning of the
services in the market.
• It allows organisations to respond to the competitors in market by increasing or

decreasing prices.
• Prices have a long term impact on the financial positions of organisations, as both
profits and losses are dependent on the pricing options adopted.
• Sometimes, prices also act as substitute for advertising and sales promotion, For
example, pricing strategy can be utilised as an incentive to channel members
when the focus is on making the price as a signal of value.
1. Challenges of Pricing in Financial Services
• Pricing is a complex process in case of financial services as it is difficult to

determine the overall costs which is arrived through different express charges
and other factors.
• It is represented by the various charges that are deducted by the product

provider.
• However, in case of general insurance, premiums may not be strictly considered

as the price to the customer.
• The difficulty in determining price is compounded by the complexity and

accumulation of charges.
2. Challenges of Pricing in Financial Services
• Some challenges which are faced by organisations while deciding prices for
financial services:
New Entrants in the Marketplace
Gaining Consumer Trust
Changes in Regulations in Market

1. Determination of Pricing
The marketers follow various steps to set prices:
Set Price objectives
Estimate the Demand For the

Product/Service
Analyse the Competition
Select the Pricing Method
Select the Pricing Policy

• Set Price Objectives: This is the first step in determining the price of financial
services. It refers to setting the goals of the pricing policy. An organisation can
have multiple pricing objectives. Some of the pricing objectives are discussed as
follows:
• Estimate the Demand for the Product/Service: In this step, an organisation needs
to estimate the demand for the product/services in the market. It helps the
organisation in understanding the factors affecting the demand of a product.
• Analyse the Competition: In this step, an organisation must analyse the pricing
of competitors. The pricing strategies of competitors affect the demand of the
product and lead to a loss of a market share.
• Select the Pricing method: This step involves the selection of a technique for
setting the price. There are various types of pricing methods used by
organisations.
• Select the Pricing Policy: This is the last step in determining the pricing for the
financial product/services. It involves the selection of a strategy or practice used
by an organisation to achieve its pricing objectives.
1. Price Differentiation
• Price differentiation is charging different prices from various customers for the
same products.
• Organisations adopt the strategy of differential pricing when multiple customer

segments exist in a market, to avoid confusion regarding the different prices of
products.
• In such markets, customers are not allowed to resell the products at higher rates
in another market.
2. Price Differentiation
Various types of price differentiation:
Differential
Pricing
Secondary
Negotiated Periodic Random
Market
Pricing Discounting Discounting
Pricing
1. Pricing Strategies
• Organisations offering financial services intend to achieve its leadership positions

through its pricing strategy.
• It can be seen when central bank announces the monetary policy that is based on
market’s views and the base rates decided by various banks.
• This base rate essentially helps the banks to determine their loan rates.
• There are some pricing actions by various banks which are viewed very closely by
various market participants including competitors.
2. Pricing Strategies
Some of the important pricing strategies are:
Penetration or Low Pricing
Price Bundling
Relationship Pricing
Risk Pricing
Pricing by Channel
Fixed Pricing
1. Promotional Pricing
• Promotional pricing is pricing strategy that is used by financial institutions to

promote the product/service.
• The different types of promotional pricing are:
Price Leaders
Promotional
Pricing
Special Event Comparison
Pricing Discounting
2. Promotional Pricing
• Price Leaders: This type of promotional policy involves setting the prices of a
product less than or equal to its actual cost. The marketers believe that this
strategy helps in increasing sales.
• Special Event Pricing: This involves reduction in the prices of a product according
to special events, such as festivals or seasons. Organisations follow this strategy
to gain revenue. The sales gap in organisations is filled by this type of pricing.
• Comparison Discounting: This involves setting the price of a product/service at a

specific level and simultaneously comparing it with the higher price. The higher
price can be the product’s last price, price of competitor’s brand, or price of the
same brand at the other retail outlet.
Let’s Sum Up
 Pricing plays an important role in the marketing mix by defining the pricing
strategy to attract the maximum customers within business’ target market.
 Some important objectives of pricing maximising profits, achieving a target
return, increasing or maintaining market share, and prevent price wars.
 Price differentiation is charging different prices from various customers for the
same products.
 Some of the important pricing strategies adopted by financial institutions are
penetration or low pricing, price bundling, relationship pricing, risk pricing,
pricing by channel, and fixed pricing.
 Promotional pricing is pricing strategy that is used by financial institutions to
promote the product/service.
Post Your Query
Chapter 11:
Product Management
and Distribution
Chapter Index
From-To
2 Topic 1 Meaning of Service Product 203
3 Topic 2 Corporate Banking and 204-205

Financial Products
4 Topic 3 Retail Banking and Retail 206

Financial Products (Housing,
Auto Loan and Consumer
Durable Financing)
5 Topic 4 Influences on Product 207

Management
Chapter Index

From-To
6 Topic 5 Developing New Products 208-209
7 Topic 6 Managing Existing Products 210
8 Topic 7 Distribution Channels 211-212

 Discuss the meaning of service product
 Explain the concept of corporate banking and financing products
 Describe the concept of retail banking and retail financing products
 Explain the various influences on product management
 Explain the process of developing new products
 Discuss how to manage existing products
 Discuss the importance of distribution channels

Meaning of Service Product
• According to Philip Kotler, “A service is any act or performance that one party can
offer to another that is essentially intangible and does not result in ownership of
anything. Its production may or may not be linked to a physical product.”
• Services are activities or products that cannot be touched, but can only be felt.
• Services are heterogeneous because you cannot receive the exact same service
again in the same bank or in other bank.
• The innovations in the financial market lead to new concepts, products, and
services in the financial market.
• At the same time, the structural change in international capital market introduce
not only new products and services but also and innovative techniques of
operation.
1. Corporate Banking and Financial Products
• Corporate banking typically refers to financial services offered to large or

wholesale clients.
• Corporate banking is a profitable division for banks, more profitable than retail
banking, aimed towards households and small and medium enterprises (SMEs).
• Corporate Banking represents the wide range of banking and financial services.
• These banks provides accessibility to commercial banking products, such as

domestic and international trade operations and funding, channel financing, and
overdrafts, domestic and international payments, INR term loans (including
external commercial borrowings in foreign currency), letters of guarantee etc.
2. Corporate Banking and Financial Products
• General commercial banking services:

– Loans and other credit products
– Treasury and cash management services
– Equipment lending
– Commercial real estate
– Trade finance
– Employer services
• Services particularly tailored to large clients such as multinational companies:
– International banking services:
– Investment banking
– Project finance
– Advisory services
Retail Banking and Retail Financial Products (Housing,
Auto Loan and Consumer Durable Financing)
• Retail banking is the division of a bank dealing with retail customers, directly. It
is also referred to as consumer banking or personal banking.
• The most common financial products offered by retail banks are:
– Housing Loans: These are loan acquired from retail banks for purchasing a
home. Home loans involve either an adjustable or fixed rate of interest and
payment terms. Home loans may also be referred to as mortgage loans.
– Auto Loans: These are loans taken from a retail bank to finance the purchase
of an automobile. The vehicle is kept as collateral in incidences of non-
payment.
– Consumer Durable Financing: Consumer Durable loan is a finance option for

purchase of household items like Washing Machines, Refrigerators, AC,
Colour TV, LCD, Microwaves etc.
Influences on Product Management
• Access to financial services can be defined as the ability of households and firms
to use financial services when opted.
• The major factors that affect the management of financial services are:
Socio-Economic Factors
Macroeconomic Constraints
Financial Sector Inefficiencies and Inadequacies
Institutional Deficiencies
Regulatory Obstacles
1. Developing New Products
• Innovation in new products can be achieved by finding innovative ways of

delivery.
• New products can be broadly classified into following categories:
Major Innovations
New Service Lines
Generation of new product ideas
Concept generation
Setting economic standards
Product testing
Commercialisation
2. Developing New Products
• The new product development process include various stages:
Generation of New Product Ideas
Concept Generation
Setting Economic Standards
Product Testing
Commercialisation
Managing Existing Products
• Product management was developed in the early 1930s for the purpose of
focusing single mindedly on a long line of products.
• A marketer can identify the weak and the negative aspects of the product by
evaluating the arrangement of current product mix.
• Product mix is a set of similar or non-similar products produced by an

organisation.
• A product mix can be improved through line extension and product modification:
Line Extensions
Improve Product Mix Quality Modification
Product Modification
Functional
Modification
1. Distribution Channels
The Distribution Channels perform following roles for financial services:
• Provision of appropriate advice and guidance regarding the suitability of financial

products.
• Offering a range of product solution for varying customer needs.
• Developing means of establishing client relationships.
• Performing product sales functions.
• Providing relevant information such as product features, general information,

customer education and compliance information.
• Means of cross-selling additional products to existing customers.

2. Distribution Channels
The interaction between the financial service and the distribution channel:
Let’s Sum Up
 The innovations in the financial market lead to new concepts, products, and
services in the financial market.
 Corporate banking typically refers to financial services offered to large or
wholesale clients.
 Retail banking is the division of a bank dealing with retail customers, directly. It
is also referred to as consumer banking or personal banking.
 Factors influencing product management are socio-economic factors,
macroeconomic constraints, financial sector inefficiencies and inadequacies,
institutional deficiencies, and regulatory obstacles.
 New products can be broadly classified into following categories:
– Major Innovations
– New Service Lines
Post Your Query
Chapter 12:
Promotion
Chapter Index

From-To
2 Topic 1 Principles of Promotion 219-224
3 Topic 2 Planning a Promotional 225-229

Campaign
4 Topic 3 Promotional Tools 230-236

• Explain the principles of promotion
• Describe the planning of a promotion campaign
• Explain the various promotional tools

1. Principles of Promotion
• Marketing communication is a vital part of marketing and is usually referred as

‘promotion’ as it is the most noticeable P in the ‘4 Ps’ of the marketing mix.
• Quite often, people get confused between marketing and promotion, as for them,
marketing is promotion.
• ‘Promotion’ refers to a part of the total exertion of any organisation that it applies
to communicate with consumers about its offerings.
• Both organisations and consumers have needs which have to be fulfilled. The
organisation wants to improve or maintain its profits, market share, and brand
equity.
• On the other hand, the consumer desires to reach his or her personal goals.
For an effective business communication, it should have seven essential qualities,

called 7Cs or seven principles of effective business communication.
Clarity
Courtesy Completeness
7C's
Concreteness Conciseness
Correctness Consideration
1. Clarity: Communication during any promotional activity should be done in simple

and clear language so that the receiver easily understands the message of the
sender.
– One should keep in mind the following points to convey a clear message:
– Objective of the message to be conveyed
– Length, simplicity, and relevance of sentences
– Suitable medium to convey the message
– The targeted receiver (top, medium or lower level of the organisational

hierarchy)
– Use of examples, illustrations, and visual aids

2. Completeness: It means that communication should contain all the necessary

information to get the desirable response from the sender. On the other hand, the
sender should answer all the questions asked by the receiver and pay attention to all
minute details. This leads to effective communication, which results in the
accomplishment of predefined goals. If the communication is not complete, it can
result in misinterpretation of information by the sender or receiver. While checking
for completeness of communication, the following points need to be considered:
– Answering all asked questions
– Conveying extra details when desirable; however, the details should be

relevant
– Checking for five W’s, that are what, when, where, why, who
3. Conciseness: Effective promotion is only possible if the message communicated is

concise, i.e. there is no additional or redundant details. Further, there should not be
any wordy expressions and repetitions. However, the completeness of the message
should be in place while making the message concise.
4. Consideration: The preparation of messages to be communicated must take into

consideration the views, thoughts, background, mindset, and education level of the
receiver and vice versa. A considerate message should have the following features:
– Lay emphasis on ‘you’ approach, i.e. keeping the receiver on sender’s place.
– Show interest in the sender while sending the message to him/her. This helps
in receiving a positive response from the sender.
5. Correctness: Communicating the right message during any promotional activity is

important. The message should contain accurate facts and figures along with using
the right level of language. In addition, the message should not have any grammar,
spelling, and punctuation mistakes.
6. Concreteness: A promotional activity can only be successful if the communicated

message is specific and to the point. The details provided in the message should be
definite and vivid. There should not be any vague and obscure statements in the
message.
7. Courtesy: While promoting financial services, marketers should use polite words in
their message to consumers and should be appreciative, thoughtful, and tactful,
while receiving or sending a message.
1. Planning a Promotional Campaign
• Marketers need to have an effective plan to successfully promote their financial

services.
• The promotional campaign has to be planned in such a way that the goals of
promoting the financial service is achieved in time.
• In addition, the target audience, cost of the promotional campaign and ultimately,
the overall outcome needs to be considered.
In order to carry out an effective promotional campaign, a proper plan needs to be in

place and involves the following steps:
Defining a specific objective
Creating a workable distribution plan
Creating a central theme
Developing a message to support the theme
Considering vital factors
Having a knowledgeable marketer

1. Defining a specific objective: There should be clarification regarding the purpose

of the promotional campaign. This means that the objective can be to either boost
the sales with various current clients, increasing the value of a particular
financial service, etc.
2. Creating a workable distribution plan: Marketers must have a workable

distribution plan in place for promoting a particular financial service. It has been
observed that the increase of effectiveness of promotional campaigns is achieved
significantly when the distribution is planned and devised carefully.
3. Creating a central theme: Marketers need to focus on creating an interrelated

recognisable logo and colour for all aspects of the campaign.
4. Developing a message to support the theme: The promotional campaign can be

further supported through the development and addition of a catchy message aimed
at the target audience who can easily remember it. It also helps the target audience
to remember the organisation’s name and the financial service being promoted.
5. Considering vital factors: While planning the promotional campaign, marketers

should remember that consumers not only choose a financial service based solely on
price, uniqueness or perceived value but also check for the latest trends and features
involved with the service.
6. Having a knowledgeable marketer: The knowledge, qualification, behaviour,

attitude and other characteristics of the marketer is also important for a successful
promotional campaign. The presence of a good marketer is essential as he/she will be
able to answer all possible questions related to promotion of the financial services.
He/she will also be able to provide quality information of a variety of value added
services such as service ideas, creative distributive solutions, etc.
1. Promotional Tools
• Marketing communication is a mix of various promotional tools.
• Each promotional tool of the communication mix has different characteristics.
• These tools include:
Advertising
Sales Promotion
Public Relation
Events and Experiences
Direct Marketing
Word-of-Mouth Marketing
Personal Selling
• Advertising: According to Philip Kotler, “Advertising is any paid form of non-

personal presentation and promotion of ideas, goods, or services by an identified
sponsor.”
• Some of the major benefits of advertising are as follows:
– Extensiveness: Through repeated use of the message regarding financial

services, a wide target audience can be covered.
– Enlarged articulateness: It refers to the opportunity that a marketer gets

through advertising to sensationalise the organisation and its services,
through crafty use of technology.
– Impersonality: Advertising does not necessarily mean that the target

audience will respond instantly and positively to any financial service being
offered by an organisation.
• Sales promotion: According to Philip Kotler, “Sales promotion refers to a variety

of short-term incentives to encourage trial or purchase of a product or service.”
Some of the major benefits of sales promotion are as follows:
– Communicative: It refers to gaining attention of the customers and leading

them to acquire the financial service through various short term
encouragements.
– Incentives: It refers to incorporating some value-added services to the original

offer so as to convince them to acquire the service.
– Invitation: It refers to providing invitation to the customers to making them

indulge in the service acquisition process.
• Public relation: According to Philip Kotler, “Public relation refers to a variety of

programs designed to promote or protect an organisation’s image or its individual
products.”
• Some of the major benefits of sales promotion are as follows:
– Credibility: It refers to the more authentic and credible way of promotion

through news, stories, events, etc.
– Ability to reach out to the target audience: It helps in reaching out to the
customers that usually do not prefer to go with ads or salespeople.
– Dramatisation: It refers to the ability to present the financial service or the

entire organisation highly.
• Events and experiences: According to Philip Kotler, “Events and experiences refer
to organisation sponsored activities and programs designed to create daily or
special brand-related interactions.” It reaches out to the customers, helps in
building brand strongly to promote the service.
• Some of the benefits of events and experiences are as follows:
– Relevancy: It involves the consumer personally that makes it very relevant

and effective.
– Involving: It provides real time experience and engages the customers more
actively.
– Implicit: It promotes a financial service and helps in increasing sales

indirectly.
• Direct marketing: According to Philip Kotler, “Direct marketing refers to use of

mail, telephone, fax, e-mail, or internet to communicate directly with or solicit
response or dialogue from specific customers and prospects.”
• Some of the benefits of direct marketing are as follows:
– Personalised: It refers to reaching out to people individually, as the message

can be prepared in a customised manner.
– Timely: At the time of promotion, the message can be prepared there and
then itself, i.e. it can be modified according to the demands.
– Interactive: It involves customers also in the communication. Thus, the

interactive mode of communication helps the sales person to understand the
customer’s problems and needs in much better way.
• Word-of-mouth marketing: According to Philip Kotler, “Word-of-mouth marketing

refers to people-to-people oral, written, or electronic communications that relate
to the merits or experiences of purchasing or using products or services.”
• Personal selling: According to Philip Kotler, “Personal selling refers to face-to-face

interaction with one or more prospective purchasers for the purpose of making
presentations, answering questions, and procuring orders.”
Let’s Sum Up
 Promotion’ refers to a part of the total exertion of any organisation that it applies
to communicate with consumers about its offerings.
 For an effective business communication, it should have seven essential qualities,
called 7Cs or seven principles of effective business communication.
 The promotional campaign has to be planned in such a way that the goals of
promoting the financial service is achieved in time.
 Marketing communication is a mix of various promotional tools. These tools are
blended in different quantities in a campaign.
 Each promotional tool of the communication mix has different characteristics.
Post Your Query
Chapter 13:
Consumer Relationship in
Financial Services
Chapter Index

From-To
2 Topic 1 Acquiring the Right Customer 243-244
3 Topic 2 Retaining Customers 245-246
4 Topic 3 Customer Retention Strategies 247-250
5 Topic 4 Lifetime Customer Value 251-252
6 Topic 5 Customer Relationship in Digital 253-254

Marketing
7 Topic 6 Consumer Protection Act (COPRA) 255-256

• Learn how to acquire the right customer
• Explain how to retain customers
• Understand customer retention strategies
• Explain the lifetime customer value
• Discuss the customer relationship in digital marketing
• Define Consumer Protection Act (COPRA)

1. Acquiring the Right Customer
• An individual who purchases an organisation’s products or services is called a

customer.
• When the new customer frequently purchases the organisation’s product, he/she
becomes the existing customer.
• A customer can be new in two ways, which are explained as follows:
– New to the product category: Includes those customers who have identified a
new need or a new solution for their existing need.
– New to the organisation: Includes those customers who are new to the
organisation and are won from competitors. This type of customers switch to
other brands depending on extra benefits they get from other brands.
2. Acquiring the Right Customer
• An organisation uses a number of methods for acquiring new customers.
Advertising
Sales Promotion
Public Relation
Events and Experiences
Direct Marketing
Word-of-Mouth
Personal Selling
1. Retaining Customers
• Customer retention is all about maintaining long-term business relationships of

an organisation with its customers.
• In other words, customer retention is an activity that is undertaken by an

organisation to reduce customer defections.
• This can be possible if an organisation focuses on fulfilling the requirements of

customers and exceeding their expectations.
• The customer retention activity of an organisation begins by establishing a

rapport with customers and continues throughout the lifetime of a relationship.
• An ability of an organisation to retain its customers is not only related to the

quality of its products, but also related to the service extended by the
organisation towards their existing customers and the reputation that the
product builds in the market.
2. Retaining Customers
A customer switches from one brand to the other due to the following reasons:
• Higher and unfair price charged by the current brand
• Inconvenient service
• Ethical issues, such as fraud and pilferage
• Better offer from the alternate brand
• Individual perceptions
• Motivating factors, such as brand name
• Group and family influence
• Economic and living status of customers
• Impact of promotional activities

1. Customer Retention Strategies
Different organisations use different strategies for retaining their customers:
• Higher and unfair price charged by the current brand
• Inconvenient service
• Ethical issues, such as fraud and pilferage
• Better offer from the alternate brand
• Individual perceptions
• Motivating factors, such as brand name
• Group and family influence
• Economic and living status of customers
• Impact of promotional activities

• Customer Delight: It is a strategy wherein an organisation exceeds customer

expectations.
• It helps an organisation to recognise the actual expectations of customers from a

product.
• Delightful customers tend to stay with a brand for a longer period.
• Organisations must have a deep customer insight to delight them consistently.
• Customer delight can be expressed as follows:
CD= P>E
Where, CD= Customer Delight, P = Perception, E= Expectation

• Perceived Value of Customers: It is a strategy in which an organissation creates

additional value for its customers.
• Such type of strategy is successful when an organisation creates additional value

for its customers without incurring additional costs.
• Organisations use three modes for creating additional value for its customers,
which are:
– Loyal System: It is a mode that is designed to reward customers for their

support.
– Customer Club: It involves creating additional value for customers.
– Sales Encouragement: It includes offers, such as free vouchers, rebate or cash

back, and self-liquidating premium.
• Customer Engagement: In this strategy, an organisation tries to attach customers

emotionally to its brand in a manner so that they become highly resistant to
competitive influence.
1. Lifetime Customer Value
• Customer Lifetime Value (CLV) is the understanding of the customer from the
organisation’s point of view.
• The four stages of the process to calculate CLV are as follows:
1. Forecasting the existing customer lifetime in countable terms such as in years.
2. Forecasting how much revenue the organisation could generate on yearly

basis. The estimation could be made on the basis of products that might be
purchased in future, and the price paid.
3. Estimating the cost that may be developed while delivering those products.
4. Calculating the net present value (NPV) of these future amounts.

2. Lifetime Customer Value
• There are some simple formulas for calculating CLV, which are as follows:
– CLV = Total Revenue – (Fixed Cost + Variable Cost)
– Average Customer Lifetime (years) = 1/1-Retention rate
– CLV (using referrals) = D [(Rt - Ct)+Rf (Ac-Acr)]/(1+r)-Ac
Where, t = year, Rf = No. of referrals generated by customers in a year, n =

Duration of customer relationship
Ac = Full acquisition cost for new customers, D = Customer retention rate
Acr = Reduced acquisition cost for the existing customers, Rt = Revenue earned
from a customer in year t, r = Discount rate, Ct = Cost involved in servicing a
customer in year t
1. Customer Relationship in Digital Marketing
• Customer Relationship Management (CRM) is a process of making and

maintaining relationships with customers and gaining maximum customer
loyalty.
• It is a new trend followed in marketing practices by managing the detailed

information about customers and customer touch points.
• Customer touch point refers to a point of contact between the customers and
products and services.
• CRM is a strategy for managing the organisation’s encounter with customers.
• CRM helps the organisation to gain a competitive edge in the market and retain
customers.
• CRM helps organiaation in getting a clear picture of each customer's habits and
preferences.
2. Customer Relationship in Digital Marketing
The importance of CRM in digitalisation of financial services like banks are as

follows:
Helping in customer selection and retention
Providing better customer services
Assisting Sales Force Automation (SFA)
Keeping a track on activities
Managing reporting and forecasting
Enhancing the Customer Satisfaction

1. Consumer Protection Act (COPRA)
• Consumer Protection Act, 1986 is designed to protect interests of consumers in

India. As per this act the consumer councils and other authorities for the
settlement of consumer disputes are established.
• Central Consumer Protection Council: The council is founded by Central

Government which consists of the following members:
– The Minister of Consumer Affairs, – Chairman, and
– Such number of other official or non-official members.

2. Consumer Protection Act (COPRA)
State Consumer Protection Council: It is designed and established by the State

Government , the council has following members:
– The Minister in charge of consumer affairs in the State Government –

Chairman.
– Such number of other official or non-official members representing such

interests as may be prescribed by the State Government.
– Such number of other official or non-official members, (not more than 10),
they can be nominated by the Central Government.
Let’s Sum Up
 Customer acquisition is a process of obtaining new customers or converting

prospects into customers.
 Customer retention is all about maintaining long-term business relationships of
an organisation with its customers.
 Customer Lifetime Value (CLV) is the understanding of the customer from the
organisation’s point of view.
 Digital customer relationship management use digital mode including Internet
communications channels and technologies to expand and improve customer
relationship management (CRM) and customer experience management (CEM )
initiatives.
 Consumer Protection Act, 1986 is designed to protect interests of consumers in
India.
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Marketing of Financial

1 Chapter 1 Role and Contribution of Financial 5-18

• Marketing of financial services provides thorough details of the marketing

• The course offers clear explanations of topics such as marketing research,

S. No Reference No Particulars Slide

2 Topic 1 Meaning of Financial Services 8

3 Topic 2 Different Roles Played by 9-11

4 Topic 3 Regulation of Financial 12-15

• Discuss the different roles played by financial services

• Understand the development of the economy

• Describe lifetime income smoothing and government welfare

• Explain regulation of financial services

• Financial services industry maintains the flow of money in the market by

– Non-availability of financial instruments and debt instruments

– Deficiency of developed Government securities market, self-determining

– Lack of information about international developments in the financial sector

• The institutions that handle financial transactions, such as investment, loans,

• An organisation that aims at setting up and providing a smooth, well-organised

• A financial system comprises all types of investing institutions including financial

Development of the Economy

Non-banking financial companies

• Financial services play a crucial role in the welfare of the Government.

• With the widespread scope of the financial services, it becomes obligatory to

• The main aim of financial regulators is as follows:

– Sustaining assurance in the financial system

– Contributing to the safety and improvement of steadiness of the financial

– Protecting the suitable degree of security for consumers

– Dropping the degree to which it is possible for a regulated business to be

– Ensuring fair practices of the financial transactions in the market.

• Securities and Exchange Board of India (SEBI)

• Reserve Bank of India

• Insurance Regulatory Authority of India (IRDA)

• FMC (Forward Markets Commission)

• Ministry of Finance: It is a part of the Government of India which takes care of

• Insurance Regulatory Authority of India (IRDA): It is a regulatory authority

• FMC (Forward Markets Commission): It is a regulatory authority, headquartered

– Keeping forward markets under observation

– Publishing information related to the trading conditions of commodities

– Undertaking the inspection of the accounts and other documents

– Improving the organisation and working of forward markets

S. No Reference No Particulars Slide

2 Topic 1 Evolution of the Financial 23

3 Topic 2 Outlining the Product Variants 24

4 Topic 3 Saving and Investing 25

5 Topic 4 Lending and Credit 26

S. No Reference No Particulars Slide

6 Topic 5 Banking and Money 27

7 Topic 6 Life Insurance Products 28

8 Topic 7 General Insurance 29-30

• Outline the product variation in the financial service market

• Describe various aspects of saving and investing

• Explain lending and credit

• Discuss banking and money transmission

• Describe life insurance and general insurance products

• Some of the important products in the financial service market are:

• Investing: In lay man’s language the investment is a process of putting a surplus

• Banking refers to the business activity involving accepting and safeguarding

• General insurance is defined as the type of insurance that is not determined to be

• General insurance is also known as non-life insurance policy.

• Main types of general insurance are:

Motor Vehicle Insurance

• Fire Insurance: Fire insurance is a form of insurance that protects properties of

• Health Insurance: Health insurance, like other forms of insurance, is a form of