Challenges In Marketing Financial Services 6z4ht

Challenges in Marketing Financial Services Marketing Financial services

Table of Contents  Introduction  MARKETING CHALLENGES FOR FINANCIAL SERVICES  Ways to Overcome Today's Challenges in the Financial Industry  Conclusion

Introduction The marketing of financial services is a unique and highly specialized branch of marketing. The practice of advertising, promoting, and selling financial products and services is in many ways far more complex than the selling of consumer packaged goods, automobiles, electronics, or other forms of goods or services. The environment in which financial services are marketed is becoming more competitive, making the task of marketing financial services increasingly challenging and specialized. Financial services marketers are challenged every day by the unique characteristics of the products they market.

For

example,

often

financial

services

cannot

be

visually

communicated in ments as easily as consumer goods can. Furthermore, the relatively unexciting nature of financial services makes the task of attracting consumer attention and inspiring consumer desire a difficult one. The study of financial services marketing is in many ways far more fascinating than other areas of marketing. There are many predictable behaviors that consumers often exhibit in their dealings with financial services providers. The predictability of these behaviors and the abundance of data enable financial services organizations to use market segmentation technologies for matching the most relevant products to individual consumers. There is mounting evidence that suggests the environment in which financial services are marketed is becoming more complex and challenging. As part of this study we will be discussing some of the challenges in marketing Financial Services and ways to overcome these challenges.

MARKETING CHALLENGES FOR FINANCIAL SERVICES Financial products and services are a particular type of good that pose special challenges to marketing. These challenges include the following:

 Vague Product/Service Attributes A core challenge is a general lack of consumer awareness of the various dimensions that constitute a financial service. Research has shown that consumers’ education on financial services is generally very poor. Studies also show that consumers can only process about seven pieces of information at any one point in time, so their ability to fully process the information presented to them in financial services advertising is comparatively limited. The difficulty in understanding financial services is further compounded by the fact that financial services are generally uninteresting and unexciting, making the task of appreciating the differences among financial services more challenging for the average person. 

Well conceived and executed advertising is one of the few ways to overcome this challenge because it may facilitate consumer education, and can help consumers understand the unique benefits of a financial service.

 Intangibility Financial services meet a general monetary rather than a specific tangible need. Accordingly, financial service providers must get their message across effectively and ensure an attractive image. A financial service cannot appeal to a depositor's senses, but rather provides them with an intangible benefit.

 Quality is Intangible The quality of financial services is rarely quantifiable. For example, the claims payout behavior of an insurance company is generally unknown to the majority of the company’s customers. This is because the sharing of risks across a large number of customers means that most policyholders may seldom experience losses firsthand.

Similarly, the long-term future returns of a mutual fund would be unknown for many years after the purchase of shares of the fund. It is the task of the financial services r to create an understanding and appreciation for the underlying qualities of an d financial offer. Compelling statements about the efficiency of the claims processing procedures of the company or overall customer satisfaction may help to accomplish this. In the case of a mutual fund, revealing the qualifications of the fund manager or the past performance of the fund may help convey the sense of quality that consumers may expect. Obviously, without advertising, these aspects of quality would remain largely unknown. While companies may attempt to make information about the quality of financial services available, few seem to understand how to make a case that is truly compelling.

 Inseparability Financial services are produced and distributed at the same time. The main concern of the marketer is therefore to provide the right service at the right place and time. This requires close proximity to customers. In addition, the packaging of the savings product is very important.

 Limited Differentiation - Getting to Square One Financial services are very much alike. Reasons for chore provider over another are often related to convenience. This is especially true for small depositors whose demand for a savings product in often not excessively dependant on interest rates. Companies that have managed to differentiate themselves in this highly crowded market, have done so by establishing strong, consistent and responsive brand identities. This is something financial services companies struggle with. There are various strategic frameworks that can be used to execute measurably successful advertising in financial services. These include elements like understanding the consumer’s decision making process, strategizing the communications process by which you connect, grasping consumers’ motivations and needs, and execution style. The applicability of a given framework depends on market characteristics, the overall strategy of the company, and the specific service being marketed, so there is no general consensus on which framework is the most valid in guiding a successful financial services advertising strategy. My recommended approach is a marketing audit from the outside-in, beginning with research to identify your unique marketing challenges. This involves benchmarking the competition for best and worst

practices, identifying your own internal strengths and weaknesses, and developing a set of recommendations and guidelines for brand and product positioning to propel rigorous execution of strategies and tactics that strongly differentiate your services and generate consumer resonance.

 Unexciting Products Consumer involvement with the benefits of an insurance policy, the rates of return on an investment product, or the checking services provided at a commercial bank rarely cause a great deal of excitement and enthusiasm. As a result, financial services are usually not associated with high levels of consumer involvement, excitement, symbolism, or emotions. In addition, the high level of complexity makes evoking positive emotional responses more challenging than it would be for consumer goods such as electronics. The quantitative and contractual nature of financial services requires considerable cognitive effort and mathematical processing before consumers can fully appreciate the merits of an d offer. Furthermore, there the considerable amount of internal consumer resistance to discussing personal financial matters makes for an audience that is at best generally uninvolved, and, at worst, resistant and defensive. The standard answer – stock photos of faces and families – simply doesn’t go the distance in humanizing the process.

 Consumer Trust Financial service provision involves an intimate relationship between the producer and the consumer. Thus, financial relationships are often built over a long period of time and are very sensitive to changes in mutual trust. Securing a sense of mutual trust between the consumer and the financial institution has at times been a challenge in financial services markets. Distrust affects both the consumer and the company, as both may feel uncertain about the underlying intentions of the other party. For example, a recent consumer survey shows that one in every four consumers will not hesitate to cheat their insurance company, if they have a chance to do so. These consumers may, for example, choose to misinform their insurance company about their individual risk characteristics when g up for an insurance policy, misrepresent the sequence of events that lead them to file a claim, or even neglect to disclose relevant information that may invalidate the insurance policy.

 Geographic Dispersion Because proximity is a key factor in financial service provision, large financial institutions must offer a wide branch network, numerous sales points, or doorstep services to ensure the satisfaction of regional and local needs. Except in the case of recent high-tech developments such as internet banking, financial institutions cannot hope to serve a large customer base if they only distribute their products and services centrally.

 Limited Ability to Visually Communicate Financial products may not always be communicated to consumers in ways similar to how consumer goods are d. An automobile manufacturer may feature its product using images and photographs, increasing the sensory input of the consumer and creating a sensation similar to consumption of the product. This increases the cognitive and emotional impact that advertising generates in the consumer. When you attempt to an insurance policy or investment product, the challenge is how to present an abstract, intangible product visually. The challenges in visual communication of financial services require experienced, attentive, and creative development of ad content in order to excite the viewer about the useful aspects of the financial service.

 Growth Balanced with Risk Selling financial products, particularly loan products, involves risk. Accordingly, organizational growth must be well balanced with the capacity of a financial institution to manage risk.

 Regulations The practice of financial services advertising is further complicated by the massive number of regulations that restrict the contents of financial services ments, and the number of regulatory agencies that closely monitor and influence ad content. Elaborate and complex sets of criteria need to be met in order to attain regulatory compliance. This restricts the r’s creative process, and makes the task of financial services advertising a highly unique specialization.

Marketers who are used to working in a highly regulated environment may not be as well versed in consumer marketing principles.

 Fiduciary Responsibility The primary responsibility of a depository is to guard the interests of the depositors. Systems and procedures, as well as financial services, must be structured accordingly.

 Labor Intensity Financial service provision is highly labor intensive. While automation, especially computerization, can effectively make transaction management more efficient, financial services, particularly savings services, remain dependent on the personal relationship between customers and the front-line staff of the institution.

Ways to Overcome Today's Challenges in the Financial Industry These are some strategies that help financial services managers meet the challenges of doing business in today's market.

 Attract and retain clients Banks and financial services firms have to stand out in the crowd by offering customers something extra. "The bottom line is there is nothing that can differentiate one bank from another, other than making a connection with customers," says Joe Sullivan, CEO of Market Insights. Make an emotional connection with the consumer and let them know you understand their financial needs. Then come at them with solution-based thinking, not product pushing. The financial services providers that help customers take ownership of their finances and teach them to become better money managers will have larger client bases.

 Know your customer

In a rapidly changing world, financial services providers must be aware that their customers are changing, too. Consumers are savvier and more aware of their finances than they were five years ago. The best providers engage customers and learn how their needs are evolving. If a bank or a business has not looked at its market or its customers to learn "what is going on with them in the last year, you don't know your customers."

 Promote confidence in the economy The economic crisis that began in 2008 is still very fresh in customers' minds. Though it did not have much impact in India but in US large financial institutions collapsed and the government bailed out troubled banks. The stock market lost value and in much of the country the housing market eroded. Now financial advisers are called on to provide factual evidence to customers that the economy is getting stronger.

 Use technology that customers expect "Technology has changed the expectations consumers and small businesses have of their bank". Clients use information on the Internet to compare financial service firms. Many customers are comfortable with managing their money online and they expect -friendly tools to do so. E-mail messaging and chat interaction may now be primary ways financial advisers communicate with clients. Companies must react to changes in technology to keep reaching customers in the most effective ways.

 Watch your reputation The financial services world is like high school in some ways: Reputations can be difficult to control or change. At the moment, consumers are not forgiving many of the companies that were front and center during the economic crisis.