The Financial Services

Consumer
Introduction

Understanding consumers and consumer needs and -

.requirements is the guiding philosophy of marketing
This demands an insight into the wider aspects of -
consumer psychology and behavior, including what
motives consumers, what their attitudes and perceptions
of the company and its product are, as well as an
.understanding of their decision processes
Understanding the financial consumer is no longer just -
a marketing requirement, it has become a legal
.requirement
 Evaluating Alternatives – Service Attributes
• Search attributes help customers evaluate a product before purchase:
• Attributes consist of:
-Features: what the product is consists of
-Functions what the product does and how it works and
-Benefits: how the product provides satisfaction to the users
– E.g., type of food, location, type of restaurant and price
• Experience attributes cannot be evaluated before purchase
– The consumer will not know how much s/he will enjoy the
food, the service, and the atmosphere until the actual
experience
• Credence attributes are those that customers find impossible to
evaluate confidently even after purchase and consumption
– E.g., hygiene conditions of the kitchen and the
healthiness of the cooking ingredients
 Perceived Risks of Purchasing
and Using Services
Functional – unsatisfactory performance outcomes

Financial – monetary loss, unexpected extra costs

Temporal – wasted time, delays leading to problems

Physical – personal injury, damage to possessions

Psychological – fears and negative emotions

Social – how others may think and react

Sensory – unwanted impact on any of five senses

 How Might Consumers Handle
?Perceived Risk

• Seek information from respected personal sources

• Compare service offerings and search for independent

reviews and ratings via the Internet
• Relying on a firm with good reputation

• Looking for guarantees and warranties

• Visiting service facilities or going for trials before purchase and

examining tangible cues or other physical evidence
• Asking knowledgeable employees about competing services
 Factors Influencing Customer Expectations of
Service

Source: Adapted from Valarie A. Zeithaml, Leonard A. Berry, and A. Parasuraman, “The Nature and Determinants of Customer
Expectations of Service,” Journal of the Academy of Marketing Science 21, no. 1 (1993): 1-12
Components of Customer
Expectations
 Social and economic factors affecting
the demand for financial services
.A more mature customer

.Increased Importance of female customers

.Alternative Sources of income

.A more mobile customer

.A more socially conscious customer

 Financial Services characteristics and
their implications for buyer behavior
Services are different from goods, and that affect
and change consumer’s behavior towards
services and bring about differences in
.evaluation and decision making processes
In financial Services, it’s possible to find a great
wide variety in the level of complexity of the
products, varying levels of consumer
participation, varying degrees of product
uniformity from highly standards to completely
customized, as well as high and low levels of
.involvement
 Financial Services Characteristics
Intangibility -1
.Good: is an object, a device, a thing
.Service: is a deed, performance, an effort
Intangibility as a characteristic creates two
major problems for financial service
:provider
.Making the product difficult to grasp mentally -1
Service cannot be displayed or physically -2
demonstrated to customer, posting problems in
.the advertising and trial of products
 Financial Services Characteristics
Inseparability -2
Results from services being processes or
experiences, where consumers become
co-operators with the provider.
Inseparability leads services being more
.prone to variation in quality
.)Customers act as a partial employees(
Inseparability may only apply to a few
.financial products
 Financial Services Characteristics
Heterogeneity: being different of offering -3
services
:Two consequences arises
How the provider will deal with non--
.standardization
It increases the uncertainty of the purchase-
.decision
 Financial Services Characteristics
Perishability -4
Results because of simultaneous production
and consumption, and leads to a problem
.of an inability to build and maintain stocks
Since there will be no inventory available for
back-up, when demand exceeds capacity
customers are likely to be sent away
.disappointed
 Financial Services Characteristics
Fiduciary responsibility -5
The implicit responsibility of financial service organizations
for the management of their customer’s funds and the
.nature of financial advice supplied to their customer’s

Financial services consumers are essentially buying

.promises

In addition to confidence and trust, consumers rely on their

cues ( Such as the size of the financial institution, its
image and the longevity of business to provide an
indication prior to purchase of the extent to which
.promises are likely to be honored
 Financial Services Characteristics
Two-way information flows -6
Financial services are not simply concerned
with one-off purchases but involve a series
of regular two-way transactions over an
.extended time period
Like: issuing statements, account handling,
branch visits, use of ATM. This provides
the potential for a wealth of information to
.be gathered on consumers
 Implications for consumer
evaluation processes
As a result of financial services characteristics,
three distinct qualities have been appeared and
impacted consumer evaluation processes in the
selection and purchase of services and its
.providers
Search qualities: describe the attributes of a )1
service which can be determined prior to
purchase of the product. For financial services,
such qualities relate to the tangibles that
customer can draw information from, such as
.branch network, or technology
 Implications for consumer
evaluation processes
Experience qualities: relate to the -2
attributes which are only discernible either
during consumption or after purchase,
.thus not prior to the purchase
Credence qualities: are characteristics -3
which the consumer may find impossible
to evaluate even after purchase and
consumption. Ex. pensions and
.investment
 Financial needs and motives for
buyer behavior
Motivation: forces which initiate and drive behavior
.towards attainment of specific goals or objectives
Goal: result of needs which cause a state of tension in an
.individuals
Goal object: techniques or devices used to achieve or
.attain goals
Need: a discrepancy between an actual and a desired
.state
:Two conditions must present in motivation situation
there must be a goal or an objective that acts as an -1
.incentive
there must be a state or condition within the person that -2
stimulates action
 Financial needs and motives for
buyer behavior
Many products are but a means to an end,
whereas financial services largely provide
.a means to means to an end
Needs derive motives in a specific
direction, individuals are generally
motivated to experience pleasure and
avoid pain: Approach objects_ positives
.goals provide attainment of pleasure
Avoidance objects_ negative goals provide
.the avoidance of pain
Basic financial needs that financial
consumers have
.Cash accessibility: frequent access -1
Asset security: protect against theft and -2
.depreciation
.Money transfer: move money around -3
Deferred payment: agrees in making future -4
payments
Financial advice: work as instrument to find a -5
.solution
Figure 2-4 Hierarchy of financial needs
 Financial services decision making
:Decision Making process
Problem recognition -1
information search -2
evaluation of alternatives -3
purchase decision -4
post-purchase evaluation -5

This model is built around the information processing model or the

AIDA (Awareness, Interest, Desire and Action) which assumes
buyers pass through a cognitive, affective, and behavioral stages
.when a product has a high degree of involvement

For simplicity, in financial services another model is used which breaks

the process down into three stages: 1- pre-purchase information
search, 2- evaluation of alternatives, 3- post-purchase evaluation