Marketing Of Financial Services 284b1c
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MARKETING OF FINANCIAL SERVICES
Marketing is concerned with Identifying customer needs and determining ways in which the organization is able to meet the needs in a profitable manner (both goods and service) are matched with market and through which the customers are able to enjoy the products. Marketing of financial services means marketing of something of a promise. The most important fact in marketing of the financial service is that, setting of a promise, complicate the task of a marketer since the marketer find it difficult to identify the time where the service states degenerating or where the service falls. So thus marketing of financial services is considered as customer satisfaction engineering. The following are some of the important steps which an organization providing the financial services should take to embrace marketing. This first step is to define objective in clear and specific which could be achieved during a defined period of time. For eg in the banking sector the bank should set up goals for the growth of deposits. The next step is to collect information about present and potential customers in order to identify their specific needs. Marketing is undertaken for this purpose and on the basis of market research appropriate financial products should be developed to satisfy the needs of different segment of customers. For each segment identified the likely volume of business likely cost of reaching the business, likely long term prospects of profitability and likely parameters of marketing strategy have been determined. The following model has been developed by Arthur Median is show the marketing approaches to a banking service. •
Identify the customer’s financial needs and wants.
•
Develop appropriate banking products and services to meet the needs of the customers.
•
Determine the prices for the products, and services developed.
•
and promote the products to the Existing and potential customer of financial services.
•
Set up a suitable distribution channel and banking Branches.
•
Forecasting and researching of future market needs.
Nature of financial service Marketing The marketing of financial services require a separate approach from the marketing of goods. Service are typically distinguished from goods, on the grounds of •
Intangibility
•
Inseparability
•
Heterogeneity
•
Perishability
•
Simultaneity
•
Fiduciary responsibility
Intangibility This is the main distinguishing feature, since services are processes on experience rather than physical objects and therefore cannot be processed. A customer may purchase a particular service that typically has nothing to display as a result of the purchase. It is important to that intangibility has essentially two meanings. At one level it is concerned with the fact of service are impalpable in the sense it has no physical form. On the other sense intangibility cannot be defined and may be difficult to understand. Inseparability:- The second factor distinguishing financial services from goods is inseparability. Services are essentially acts and experiences means that they must be produced and consumed simultaneously. Heterogeneity:- The interaction between the consumer and service namely heterogeneity. The quality of services typically depends on personal interaction as the consequences the chance of variability in service is very high. The characterization of service as an act rather than an object leads to the emphasis on the individuals providing the service and their interaction with the customer.
Perishability:- This is another
distinctive feature namely perishability. Services are
produced on demand and cannot be inventoried so it needs a short distribution channel than goods. Simultaneity:- Another distinguish feature of services is simultaneity. Services cannot be delivered to the customer or . For availing the services it is essential that the are brought to the provider or the provider go to the s. Fiduciary responsibility:- This is an additional feature of financial service marketing. In marketing of financial services fiduciary responsibility refers to the implicit responsibility of financial services organization for the management of the customers’ funds and the nature of financial advices supplied to the customers in of quality reliability and safety of the products it supplies. The responsibility is much in case of financial organizations. In case of a bank the raw materials used to produce financial services are deposits of customers. In case of selling a loan product the bank as the responsibility to the person who are taking loan at the same time it has the responsibility to the person who had invested their money in the bank.
Marketing strategy: - Marketing strategy encomes the 4ps’ of the marketing mix product, price, promotion and place and seeks 10’ attract the target audience. The design of a particular marketing mix that will be used in based on the distinctive needs of the targeted market segment. The marketing mix product strategy The success of a product is contingent on how will it compares with the competitor products in satisfying the target market needs or wants. Pricing strategy Selling a product at a price the target market seeks as same with the products previewed benefits is the key is the marketing success. Promotion strategy This focus on communicating the availability of products or service to the target market. Advertising campaigns point of purchase materials and products publicity are the main elements of promotion. The development and the implementation of attention getting informative and persuasive communication techniques is vital to creating market awareness for the bank products. Bank’s typically communicate with the customer through print advertising in the newspapers and magazines. Direct marketing through direct mark and statements inserts and point of purchase advertising through Brokers and posters in the banks. Now the banking programmes and Internet are normally been used to communicate to the customers in the modern era of growth. Place or distribution strategy This refers namely concerned with making the products available at the desired time and place the two important elements of the distribution strategy for the banks are site location and case of access. As the result, many banks have ed nation wide automatedteller-machine (ATM) networks to maximize the number of locations where the customers can access their banking need. Many banks now a days are providing telephone banking service and the banking services that enable the customers to perform the transactions and make the s enquires 24 hrs a days and 7-days a week.
Basic bricks for marketing strategy Some of the key elements which are the basis for formulating the strategies are as follows. 1. Customer focus:- The customer focus is to be incorporated in marketing management and back office operations that has immediate access to the customers. 2. Capturing the growth opportunities:- In competitive world information technology is available to note what the competition offer. To gain upper hand any smart business unit should identify the new business opportunities and identically anticipate the new business opportunities and acute demand which are easily sale able to the customers and also evaluate the risk return scenario of the project. 3. Successful differentiation:- Success in competitive world information demands a unit ability to create a different product image in the minds of the targeted customer. The product offered by the company must be rated as different and superior to others in the line and should be priced competitively. 4. Innovation and management ability:- Ultimately the success of the firms marketing strategy depend on whether it is an innovative and the extend of its innovators. Expertise management is the ability to operate with new and information customers and the market place. 5. Quality and professionalism:- Much more than in product markets service markets are prons on subject factors of image, reputation quality of services and the professions in the management. Service quality, delivery system and process and time liners and conformity with the specification are the pre-requisite for a successful marketing strategy. Segmentation Market segmentation is an element of the marketing strategy recognizer the wisdom of specializing to suit the needs of a segment of market rather than trying to be “all things to all people”. Market segmentation is the process of subdividing a market into groups of customers who have similar products or customer needs. Through segmentation it allows any subset of the market to be targeted with a distinct marketing max.
Marketing customer Informative (MCIFs) system is a software programme that organizes the information of the household and individual and sort or summarizes the information similarity and differences among the groups of customers. Because of this focus it also referred to as relationship management systems. The importance of MIFs:•
MCIFs can greatly assist clear-customer focused marketing efforts.
•
Banks use the information generated by MCIFs to identify profitable customers and single service customer as well as markets with potentials for cross sales activities.
•
MCIFs system allows banks to identify the most and the least profitable products and branches as well.
•
MCIFs system offers modeling capabilities that permit bankers to run test scenario that predict the effect that such changes as new fees, increases in minimum balance requirement and declining cost will have on profitability.
•
The data generated by an MCIFs are critical in preparing strategic reports too and are used to strategic marketing Initiatives.
Four Conditions for an Effective Segmentation Firstly the characteristics of a segment must be Identifiable and measurable. Secondly it should be accessible that means it must be possible to reach the segment effectively with proper marketing strategies. Thirdly the segment must have the potential to generate profile. Fourthly each segment should react uniquely to different marketing efforts. Which means each segment should have potential customers who are responding quickly Strategies for Market segmentation Market can be segmented in a number of different ways. A bank should choose an approach that subdivides the market into groups that differ in some distinct way from one another in respect of their preferences. Some principal Segmentation alternative are:•
Geographic Segmentation
•
Demographic Segmentation
•
Psychographic Segmentation
•
Volume Segmentation
•
Benefits Segmentation
•
Geographic Segmentation:- This divides the market according to the geographic units. A firm might decide to market different products in different areas or to market their products in certain areas since a bank cannot have location everywhere .It must be carefully allocate its limited resources to meet its business goals. It may locate its new branch offices in most promising geographic market area.
•
Demographic Segmentation: - This categorizes the manner in of population characteristics. Such as age, sex, income, occupation and position in the life cycle. For example the banks establish an executive banking group specifically for ants and doctors has taught an occupational segment. The bank also develop an equity credit line aimed at homeowners with income in excess of 30,000 is targeting another specific demographic segment
•
Psychographic Segmentation:- This enacts classifying the markets in behavioral according to life style, socialism or personality profits. For eg. A bank might identify the young, professional on the fast react as the premier market segment for credit card sales.
•
Volume Segmentation:- This refers to the market attempt to distinguish heavy, medium and s of a product. In much business a small proportion of the s generate a large portion of the sales. This is called “pareto principle”.
•
Benefit Segmentation:- This is the process of categorizing the market in of the man
produce. Related benefit sought by different groups for example. A bank
practices geographic segment the same bank may also practices industrial segmentation. Once an organisation has identified the markets segment the next slip is to select the target markets.
Financial service Product design Product A product is anything that can be offered to market for attention, acquisition, use or consumption that might satisfy, a want or need. In a banking context all banking service (checking of savings a/c COD, Safe keeping service, lock box operation cash management service are also products. Form a marketing point of view a product has 5 different aspects. 1.
the core product
2.
the generic product
3.
the expected product
4.
the augmented product
5.
the potential products
The core product: it is the essential benefit that the customer is buying eg. The conveniences of being able to pay for goods and services with cheques
The generic product: It provides that benefit eg: the basic product - cheque The expected product: - It includes the product features that customers assume will be part of the product Eg:- Prompt and accurate clearance of cheques, accurate monthly statement and ability to access the amount through ATMS The augmented product It includes all specific features and benefits that help the marketer differentiate the product from the comptetions Eg: Package product unit s and can provide a number of customer benefits such as no annual fee, credit cards, loan discounts and bonus rates on CD’s
Banking products are augumented by the level and quality of service provided to the customer, the reputation of the bank, physical environment of the bank, the brochures and other printed materials provides to the customer, and any specific brand names given to the products. The potential product It includes all the modification that the product might undergo over time. Eg; Access through a special display telephone or an ATM that dispense a snap shot checking statement.
Development and test marketing in financial sector Some bank develop banking product or service delivery system that are new to the market. The following are the various stage in new pdt development 1. exploration and idea generation 2. product screening 3. concept of testing 4. business analysis 5. product development 6. Test marketing 7. Implementation and commercialization 8. evaluation Exploration and idea generation •
In a bank, new product ideas might come from ongoing research to help identify consumer banking needs that are not being met. o They might come from management or other employees o Some firms offer cash incentives to employees for generation new product ideas. Ideas might also come from customers, banks in other parts of the
country, or from competing banks. Also, an idea for a new product occasionally comes from banking regulators o Idea generation is to find, in a structured, goal oriented manner, new ways to serve the bank’s customers in a meaningful way Product screening •
Ideas for new products, must be screened against product objectives product policy and company resources
•
A preliminary judgment must be made as to whether an idea deserves further study.
•
Each idea for a new product must also be evaluated to ensure that it does to take business away from existing products.
Concept testing •
It is the function of consumer marketing research, but it does not simply entail asking a large No. of consumers what they think of a new pdt idea
•
It is best to first assemble small focus groups to explore reaction to a new pdt concept. This type of research is called qualitative research. It can provide insight into how the product might be positioned or promoted.
Business Analysis This stage in the development of a new pdt involves developing a written business case and recommendation based on the results of market analysis, Production feasibility analysis, marketing strategy development and cost and revenue projections. The business analysis includes ing materials that indicate there is sufficient demand for the product and show that the product fits in with the bank’s over all goals and objective Product development During this stage, the bank determines whether it is feasible to produce or provide the product / service at a cost and quantity that will make the product’s retail price attractive to customers. The elements of the product that will be particularly important to customers must be identified at this point and clearly highlighted as the product is designed.
This is also the stage at which the promotion, distribution and pricing strategies are developed. The development stage involves production of the prototypes / samples of the new product In banking the development phase for a new savings product would require modification of the savings computer system by the programming staff, the design of forms and documents to be used in setting up the a/c’s and the writing of procedures for the branch staff to follow in completing the forms and processing them. Test marketing Consumer goods manufacturers usually test market new products. If a company to try out a new product in one / two geographic Markets , Perhaps using a different promotional approach in each market to test their relative effectiveness. Test marketing is increasing in banking too. The benefits of test marketing are that the banks can assess customer response as well as familiarise employees with the planned new products. Test marketing can be expensive and time consuming however, and can offer competitors an opportunity to quickly copy the bank’s new product/ Service It is beneficial to move quickly from the test marketing stage to a full – scale implementation of the product Implementation or commercialization This is the stage at which a company commands its resources to a full – scale introduction of the product to the market. Introducing a new banking product requires heavy involvement by the marketing department. A great deal of money is invested in advertising and sales promotion. The launching of new product is often tied to an employee incentive campaign to boost initial sales. At the same time the bank might offer a to the customer for purchasing the new product Evaluation The final stage in developing a new pdt involves the use of primary an secondary research to monitor the progress of the new pdt in relation to the company’s goals.
Effecting monitoring enables the bank to take corrective action where needed, as well as gain additional knowledge that will facilitate the introduction of the next new product.
PRICING
Pricing strategy for financial product Pricing decision may relate to pricing new product or changing prices of existing products. A bank should consider changing the price of an established product when. 1. There is a sudden change in the banks costs. 2.
The competition initiates a price change.
3.
The establishment of a new price becomes permissible as a result of a change in
regulations. Pricing Strategies When pricing a new product (where it is new to the firm, new to the market or both) bank management will have at least three general objectives in mind. 1. Getting the product accepted 2. Maintaining strength in the market in the face of competition. 3. Creating profit. Two of the most important strategies for pricing new product are skimming pricing and penetration pricing. Skimming pricing:- Skimming pricing is a strategy that involves setting a high initial price for the product so as to skim the cream of demand for the product. Thus strategy is especially suitable for products that are new to the market for the following reasons. 1. The amount of the product that can be sold is less likely to be affected by price when the product is new than it will be later, when competition has more of an influence. 2. A skimming price strategy allows the marketer to attract customers who are less price sensitive before lowering price to attract those who are more price sensitive.
3. A high initial price may help the new product achieve an image of audit and prestige. 4. A skimming price can be used to test the demand for a product. It is preferable to begin with a high price and then reduce it rather than to begin with a low price and then have to raise it to
cover Unforeseen costs or to capitalize fully on the
popularity of the product. Penetration pricing Penetration is the opposite of skimming. It uses a low initial price as a means of capturing a large share of the market as early as possible. Thus strategy warrants serious consideration when one or more of the following conditions exist. 1. The quantity of product sold is highly sensitive to price, even in the introductory stage of the product life cycle. 2. Substantial economies in production or distribution costs can be achieved with large volume of sales. 3. The product will face the threat of strong competition soon after introduction or at the time of introduction. 4. There is not an elite market for the product that is no group of potential customers is likely to be willing to pay a price to obtain the product early. Other pricing strategies Three other pricing strategies may be used either in pricing new products or repairing existing ones. 1. Perceived value pricing: - This strategy is based not on the Question “what does it cost us to deliver thus product”? but rather on the question” what is the perceived value of this product to the customer”? The more tangible and intangible features that are added to a product, the higher the perceived value of the customer and consequently, the higher price that can be charged. To use perceived value pricing effectively, a firm must reduce the customers price sensibility or the price elasticity of demand by differentiating the product, trying other products to it or adding nonprice benefits.
Consumers willingness to pay for perceived value helps justify a bank’s expenditure to develop an image or position in the market and to make the necessary investment to provide a high level of customer service. The bank with a regulation for quality products and a high level of personalized service, and whose overall image among the target market is highly favorable, will be able to change slightly higher fees than its competitors. Customers who feel that the employers at there bank know them, treat them personably and professionally are eager to help them are not likely to shop around to save a few dollars on a checking or to get a slightly higher interest rate on a certificate of deposit. 2. Relationship pricing. :- Relationship pricing strategies encourage customers to have
multiple s and services with the bank. Thus encouragement is
provided in the form of lower fees, higher savings interest rates, or lower loan interest rates for customers with multiple ants. Some examples are 1. Allowing combined balances in all s to offset balance requirement for no charge checking. 2. Pricing higher rates on deposits and charging lower rates on loans or reducing loan application fees for customers who have both checking and saving with the bank and maintain a specified combined monthly balance. 3. Charging a lower rate on personal loans to a customer who agrees to have the monthly payment automatically deducted from has or checking s. 4. Charging a lower general fees, or lower interest rate to credit card customers who also have a checking or saving s. 5. Paying a higher interest rate on larger savings or certificate of deposit balances. To use relationship pricing effectively a bank must have either an integrated system that enables the various computer application for checking, saving and loans to communicate with one another or a monthly updated central information file linking all relationship for each holder. Three benefits accure to the bank that uses relationship pricing. 1. Economic 2. The second benefit relates to customer retention 3. The third benefit is or should be increased profitability.
3. Behaviour modification pricing:- Thus strategy uses pricing to get customers to take certain actions that will lower costs for the bank. For example, a bank in an automated letter network must pay on interchange fee when the customer uses another banks ATM. To discourage its customers from using ATM’s of other banks and thus causing it to pay the interchange fee, a bank often charges customers more for using other banks ATM than for using its own. Thus pricing strategy will work only to the extent that demand is elastic that is that customer will choose the lower-period attainable rather than pay the higher fee. In addition the bank’s ATM must be conveniently located. If they are not, customers who use ATM’s frequently may decide to move there s to a bank with more convenient ATM location. Why Banks change prices 1. The number of s or market share has declined. 2. Prices are too high relative to the competition and relative to the benefit of the product. 3. Prices are too low, given cost increases or heavy demand. 4. The bank prices seems higher to customers than they really are 5. The product has been enhanced, adding cost to the bank or value to the customer.
Guidelines of Service Pricing The following are the guidelines for pricing of services. 1 . The pricing strategy should be such that demand fluctuations are successfully handled. 2.
Service prices should be based on costs so as to take in to the cost of tangible clues of intangible Services.
3.
The pricing strategy should be such as to provide value addition and quality indication to the customers.
4.
The pricing strategy should be such as to cope-up with the degree of competition.
Short-term Pricing Tactics in Service Industries Price Tactics Differential or flexible pricing
Objectives a. Build primary
Forms / Examples a. Price time
demand during non-
differentials (eg.
peak time
Telephone services)
b. Even out of
b. Customer ability
fluctuations in
(housing loans and
demand
rate of interest increasing with principal) c. Service product price differentials (barber shops) d. Place differentials (discount at hotels
Discount pricing
a. To enable service
during off seasons) Telephone corporation
production and
offering lower tariffs for non-
consumption to take
peak periods
place. b. To encourage actions like early payments, bulk purchase or peak Diversionary pricing
usage To make customer visit
A service station may offer
Guarantee pricing
office at least once to avail
certain discount on car wash
basic service at a discount
only but for other repairs or
and with that experience try
maintenance jobs charge the
out others a. To enable high
full rate. Employment agencies charge
quality operator to
either or both the parties after
compete with others
the assignment gets over
b. To satisfy a customer seeking clear assurance before High price maintenance
paying for it. To hold out against the price
Cellular phones services
pricing
threat of the low priced
pricing.
sellers and the customer Loss leader pricing
associate price with quality To charge a reduced price for
To attract first time trials, a
the first order with a hope to
restaurant offers a discount
get further business at better
on the day of inauguration.
prices.
DISTRIBUTION
Distribution strategy Distribution strategy is mainly concerned with making the product available at the deserved time and place. Even the right product for a market segment provides limited satisfaction or none at all if it is not available when and where consumers want it. Accordingly, two important demands of distribution strategy for banks are sets location and case of access. Furthermore, the current social environment places a heavy emphasis on time as well as convenience. As a result many banks have ed automated letter networks to maximize the number of location where customers can access there s. Many banks also provide telephone banking, services and pc banking services that enable customer to performer transactions and make 24 hours a day, 7 days a week. Since banking products and services are largely intangible, they are difficult to separate from the people who distribute them. There is especially true at the time the customers initiates the relationship with a bank, but it also applies to the say-today servicing of s. Although the use of technology has reduced with tellers, there will always be a need for personal customer services, whether it be in person or by phone. The growing implementation of customer relations and sales training programmers in banks reflect managements recognition of the importance of the human demand in the banks distribution strategy.
Eight channels of distribution for Bank sources ATM card Credit card Debit card Telephone Personal computer Branch Automated Loan machine Virtual branch ***********************
DEVELOPMENT OF FINANCIAL SERVICES Ideas that have survived the screening process are then worked up into specific service concepts that is to say, the basic idea for the new product must be translated into a specific of features and attributes which the product will display. At this stage it is common to test this newly defined product and to identify consumer and market reactions in order to make any necessary modifications to the product before it is launched. •
Screening the ideas
•
Concept development tested
•
Marketing strategy development-who should be target consumers, pricing stability
•
Business analysis
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Service development-infrastructure
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Market testing
•
Commercialization. NPD strategy
Idea generation
Idea screening
Development and Testing
Product Launch
1. New product development strategy:- A clear strategy is important to ensure that all those involved understand the importance of NPD and what the organizations wishes to achieve. The process of NDP is to be orientated towards taking advantage of new market segments, seen as crucial to the continued competitiveness of the organizations, required to maintain profitability, or designed to reduce excess capacity or even out fluctuating demands. The ideas that should be considered are likely to vary according to the purpose of the NDP programme. 2. Idea generation:- Ideas may be generated from both inside and outside an organization. Ideas may be generated internally from specialize NPD teams, from employee or suggestions. Externally, ideas may be generated based on customer , market research, specialist new product development agencies or by copying competitions. 3. Idea screening:- The variety of ideas produced at idea-generation stage. Idea screening means deciding in advance, a set of criteria to be used when ideas are evaluated:
•
Doest the idea fit with the organizations strategy?
•
Does the idea fit with the organizations capabilities?
•
Does the idea appeal to the right market segments?
•
Is the idea variable in of cost and profit?
4. Development and Testing:-At this stage it is common to test this newly defined product and to identify consumer and market reactions in order to make any necessary modifications to the product before it is launched. 5. Product launch:- At this stage the major decisions are essentially of an operational nature-decision regarding the timing of launch, the geographical location of the launch and the specific marketing tactics to be used in of that launch. Test Market A rest market, in the field of business and marketing, is a geographical region or demographic group used to gauge the viability of a product or service in the mass market prior to a wide scale roll-out. The criteria used to judge the acceptability of a test market region or group includes: 1.a population that is demographically similar to the proposed target market; and 2. relative isolation from densely populated media markets to that advertising to the test audience can be efficient and economical. 1. The test market ideally aims to duplicate ‘everything’ – promotion and distribution as well as ‘product’ – on a smaller scale.
Test Marketing Procedure 1.determine the number of cities 2. selection of the cities 3. duration of the test 4. collect necessary information 5. take necessary actions •
Where should we communicate this?
•
When do the communications need to take place?
ADVERTISING AND SALES PROMOTION The Fourth P: Promotion It is now established that there are clear differences in information usage between goods and services. First, the difference is that consumers of services are less likely to purchase without information than those of goods. Second, the consumer of services will prefer personal sources over impersonal sources of information. And third, the basic characteristics of services have implication for communication strategy. The above three influence the decision regarding the a) Communication Objectives b) Target Audiences, and c) Planning of each of the sub elements in promotion mix Promotion Objectives The basic objectives of the promotion mix are; 1 . Develop personal relations with client (personal relations might result in satisfaction, more than their service offer) 2.
Make a strong impression of competency, honesty and sincerity.(professional orientation to service transaction so as to win buyer's confidence in seller's ability to deliver the service)
3.
Should be able to use indirect selling techniques (creating derived demand or act as a buying consultant)
4.
Manage to maintain a fine image by positive word of mouth.
5.
Packaging and customization
Adverting is only one element of the promotion mix, but it often considered prominent in the overall marketing mix design. Its high visibility and pervasiveness made it as an important social and encomia topic in Indian society. 1.
Advertising is the dissemination of information by non-personal means through paid media where the source is the sponsoring organization. Advertising may be defined as the process of buying sponsor-identified media space or time in order to promote a product or an idea. The American Marketing Association, Chicago, has defined advertising as “ any from of nonpersonal presentation or promotion of ideas, goods or services, by an identified sponsor”. ment is a mass communicating of information intended to persuade buyers to by products with a view to maximizing a company’s profits. The elements of advertising are: (i)
It is a mass communication reaching a large group of consumers.
(ii)
It makes mass production possible
(iii)
It is non-personal communication, for it is not delivered by an actual person, nor is it addressed to a specific person.
(iv)
It is a commercial communication because it is used to help assure the r of a long business life with profitable sales.
(v)
Advertising can be economical, for it reaches large groups of people. This keeps the cost per message low.
(vi)
The communication is speedy, permitting an r to speak to million of buyers in a matter of a few hours.
(vii)
Advertising is identified communication. The r sings his name to his ment for the purpose of publicizing his identity.
Financial Services Advertising Financial advertising, depending on the product, is governed by regulation and the Advertising Standard Authority and, depending on the subject matter, additionally by statutory regulation under the Financial Services and Market Act 2000 (“FSMA”) and under the Consumer Credit legislation. Advertising:- Advertising Paid non personal communication delivered through various media and designed to inform, persuade, or remind of a particular audience. Nature of advertising •
Advertising is distinguished from other forms of promotion as follows.
•
It has a verbal and/or visual message.
•
The sponsor of the message is identified
•
Delivery is through recognizable media
•
There is payment by the r to the media for carrying the message
•
rs are increasingly being able to reach specific audiences with tailormade messages.
•
Advertising can be classified by the target audience to which is directed.
•
Consumer advertising generally appears in mass media and is directed to end consumers: may be product or institutional in nature.
The Advertising Plan As pointed out earlier, advertising plan and decision making focus on three crucial areas; objectives and target selection, message strategy and tactics, and media strategy and tactics. Let us elaborate on these points. 1. Objectives and Target Selection:-An important part of the objective is the development of a precise, disciplined description of the target audience. It is often tempting to direct advertising at a broad audience; but everyone is a potential customer. It is best to consider directing the advertising to more selected groups to develop stimulating copy. It is quite possible to develop several campaigns, each directed at different segment of the market, or to develop one campaign based on multiple objectives.
2. Message Strategy and Tactics:- Message strategy must decide what the advertising is meand to communicate – by way of benefits, feeling, brand personality, or action content. Once the content of the campaign has been decided, decisions must be made on the bnest-most effective-ways of communicating that content. The decisions such as the choice of a spokesperson, the use of humor or fear or other tones, and the selection of particular copy, visuals, and layout, are what we call “ message tactics” 3. Media Strategy and Tactics:-Message strategy is concerned with decisions about how much is to be allocated to create and test advertising copy, media strategy concerns decisions on how many media rupees to spend on an advertising campaign. 4. Media tacties:- Comprise the decisions on which specific media (television, radio, magazines, etc) or media vehicles (Reader’s /digest, etc) to spend these dollars. Sales Promotion:- Sales promotion is one of the most loosely used in the marketing vocabulary. We define sales promotion as demand. Stimulating devices designed to supplement advertising and facilities personal selling. In other words, sales promotion signifies all those activities that supplement, coordinate and make the efforts of personal selling and advertising more effective. It is non recurrent in nature which means it cant be used continuously. Definition of sales promotion:- According to American Marketing Association “Those marketing activities other than personal selling advertising and publicity that stimulate consumer purchasing and dealer effectiveness such as display shows and exhibitions demonstrations and various non-recurrent selling efforts not in the ordinary routine”. W.J Stanton defines sales promotion as all those activities other than advertising, personal selling, public relations and publicity that are intended to stimulate customer demand and improve the marketing performance of sellers. •
Demand-stimulating devices designed at supplement advertising and facilities personal selling.
•
Sales promotions include such things as coupons, in-store displays, s, trade shows, in-store demonstrations , and contents.
•
The target for these activities may be middlemen, end s, or the producer’s own sales force.
Objectives of Sales Promotion The basic objectives of sales promotion are:(i)To introduce new products:- To induce buyers to purchase a new product, free samples may be distributed or money and merchandise allowance may be offered to business to stock and sell the product. (ii)To attract new customers:- New customers may be attracted through issue of free samples, s contests and similar devices (iii) To induce present customers to buy more:-Present customers may be induced to buy more by knowing more about a product, its ingredients and uses. (iv) To help firm remain competitive:- Sales promotions may be undertaken to meet competition from a firm. (v) To increase sales in off season:- Buyers may be encouraged to use the product in off seasons by showing them the variety of uses of the product. (vi) To increase the inventories of business buyers:- Retailers may be induced to keep in stock more units of a product so that more sales can be effected.
MENT AND SALESPROMOTION OF FINANCIAL SERVICES Promotion: This includes advertising , sales promotion, publicity , and personal selling , and refers to the various methods of promoting the product, brand, or company advertising The American marketing association defines advertising as "the placement of announcements and persuasive messages in time or space purchased in any of the mass media by business firms, nonprofit organisations, government agencies and individuals who seek in form and or audience about their products, services, organisations or ideas". Paid advertising takes place; •
print media(magazines and news papers)
•
Broadcast media(radio and television)
•
out door and transit advertising
•
Direct marketing
•
Online through the world wide web
•
ments in newspapers, magazines, brochures, leaflets, circulars, mailings, e-mails, text transmissions. fax transmissions, catalogues, follow-up literature and other electronic and printed material posters and other promotional media in public places, including moving images cinema and video commercials ments in non-broadcast electronic media, including online ments in paid-for space (eg banner and pop-up ments) viewdata services marketing databases containing consumers' personal information sales promotions ment promotions
Product advertising focuses on selling a specific product or services Goal of advertising is to inform, influence, and persuade the target market It create awareness to the target audience SEBI'S CODE OF MENT 1.
ANY MENT SHOULD BE TRUTHFUL.FAIR AND CLEAR
2.
IT SHOULD BE FACTFUALLY CORRECT AND NOT AN EXAGGERATED OR MIS LEADING STATEMENT
3.
IT SHOULD NOT CONTAIN ANY PROMISE OR GUARENTEE OF INCOME OR APPRECIATION OR ANY OTHER GAINS
4.
CORPORATE MENT SHOULDNOT BE GIVEN DURING THE PERIOD,SUBSCRIPTION IS OPEN. PRODUCT MENT IF GIVEN SHOULD NOT REFER TO CORPORATE PERFORMANCE
5.
IT SHOULD NOT CONTAIN ANY INFORMAL INFORMATION NOT GIVEN IN THE PROSPECTOUS.
6.
DURING THE PERIOD SUBSCRIPTION IS OPEN, NO STATEMENT SHOULD BE GIVEN TO THE PRESS ABOUT THE STATE OF SUBSCRIPTION OR OVER SUBSCRIPTION PRACTICE
OF
THE
COMMITTEE
OF
ADVERTISING
Personal sales Oral presentation given by a salesman who approaches individuals or a group of potential customers: Live, interactive relationship Personal interest Mention and response Short-term incentives to encourage buying of products: Instant appeal Anxiety to sell
SALES PROMOTION RULES The sales promotion rules are designed primarily to protect the public but they also apply to trade promotions and incentive schemes and to the promotional elements of sponsorships. They regulate the nature and istration of promotional marketing techniques. Those techniques generally involve providing a range of direct or indirect additional benefits, usually on a temporary basis, designed to make goods or services more attractive to purchasers. The rules do not apply to the routine, non-promotional, distribution of products or to product extensions, for example the suitability of one-off editorial supplements (be they in printed or electronic form) to newspapers and magazines. Promoters are responsible for all aspects and all stages of promotions. Promotions should be conducted equitably, promptly and efficiently and should be seen to deal fairly and honourably with consumers. Promoters should avoid causing unnecessary disappointment.
MARKET RESEARCH Market research is the identification of customers' financial needs and wants and forecasting and researching future financial market needs and competitor's activities. It is the systematic design, collection, analysis. and reporting of data and findings relevant to a specific marketing situation facing the company. The Marketing Research Process • Define the problem and research objectives • Develop the research plan • Collect the information • Analyze the information • Present the findings • Make the decision Research Approaches In the marketing research, the primary data can be collected in five main ways: through observation, focus groups, surveys, behavioral data, and experiences.
Observational research Fresh data can be gathered by observing the relevant actors and settings. Consumers can be unobtrusively observed as they shop or as they Consume products. Focus Group Research
A focus group is a gathering of six to ten people who are carefully selected based on certain demographic, psychographic, or other considerations and brought together to discuss at length various topics of interest. Participants are normally paid a small sum for attending. A professional research provides questions and probes based on a discussion guide or agenda prepared by the responsible marketing managers to ensure that the right material gets covered. Survey Research Companies undertake surveys to learn about people's knowledge, beliefs, preferences, and satisfaction. It can also put the questions to ail ongoing consumer run by itself or another company. It may do a mall intercept study by having researchers approach people in a shopping and ask them questions. Behavioral Data Customers leave traces of their purchasing behavior in store scanning data, catalog purchases, and customer databases. Much can be learned by analyzing these data. Customer's actual purchases reflect preferences and often are more reliable than statements they offer to market researchers.
Experimental Research The most scientifically valid research is experimental research. The purpose of experimental research is to capture cause-and-effect relationships by eliminating competing explanations of the observed findings. The design and execution of the experiment eliminate alternative hypotheses that might explain the results, research and marketing managers can have confidence in the conclusions. Experiments call for matched group of subjects, subjecting them to different treatments, controlling extraneous variables, and checking whether observed response differences are statistically significant. Researchers have a choice of three main research instruments in collecting primary data. They are; Questionnaires Qualitative measures Mechanical devices
Once the sampling plan has been determined, the researcher Must decide the subject should be ed on the basis of the methods like; Mail questionnaire Telephone Interview Personal Interview Online Interview
Consider the example of market research in bank marketing; Marketing begins with information about the market in which the bank operates. In the field of bank marketing research is important. The bank which really practices marketing or which is market oriented, while thinking of introducing anew type of cheque system or a tic" service for example, will not make a decision on the alternatives until it has found out what its customers want. Market research is the process by which a bank attempts to obtain the customer and the competitor information Marketing research is an. integral part of the decision making process. Market research in banking is an essential tool of marketing for affective planning. It can be used to gather more knowledge about the market in which the bank is operating. With the help of this marketing research new service can be developed and existing services can be improved. Better and more effective promotion programmes can be designed which can be accepted by the customers. Marketing research serves as a communication channel between tile market and the bank. The single most important reason for undertaking market research is to improve the quality of managerial decision making, Market Research in Indian Banks The following broad areas of market research were considered for the studies in Indian Banks are: New service development New service product acceptance Research and development of existing financial service Bank image study
Measuring bank’s advertising effectiveness Measurement of market potentials Market research of competitive service product Customer’s opinion study Customer profile study, and Market share analysis Most of the market research studies were conducted for internal use and no formal reports were prepared. It is important to note that the subjected or issue researched by the bank; Most important subject for market research is the customer service/customer profile/opinion studies. In the case of Indian Banks only three banks have researched the Market Share Analysis. Rural areas are also a part of the market research activities. Study on all India Savings and Deposit Trends and Patterns Measuring bank’s advertising effectiveness Bank’s advertising and Publicity and its image among consumers Survey on personal finance and banking.
*****************************
Marketing is concerned with Identifying customer needs and determining ways in which the organization is able to meet the needs in a profitable manner (both goods and service) are matched with market and through which the customers are able to enjoy the products. Marketing of financial services means marketing of something of a promise. The most important fact in marketing of the financial service is that, setting of a promise, complicate the task of a marketer since the marketer find it difficult to identify the time where the service states degenerating or where the service falls. So thus marketing of financial services is considered as customer satisfaction engineering. The following are some of the important steps which an organization providing the financial services should take to embrace marketing. This first step is to define objective in clear and specific which could be achieved during a defined period of time. For eg in the banking sector the bank should set up goals for the growth of deposits. The next step is to collect information about present and potential customers in order to identify their specific needs. Marketing is undertaken for this purpose and on the basis of market research appropriate financial products should be developed to satisfy the needs of different segment of customers. For each segment identified the likely volume of business likely cost of reaching the business, likely long term prospects of profitability and likely parameters of marketing strategy have been determined. The following model has been developed by Arthur Median is show the marketing approaches to a banking service. •
Identify the customer’s financial needs and wants.
•
Develop appropriate banking products and services to meet the needs of the customers.
•
Determine the prices for the products, and services developed.
•
and promote the products to the Existing and potential customer of financial services.
•
Set up a suitable distribution channel and banking Branches.
•
Forecasting and researching of future market needs.
Nature of financial service Marketing The marketing of financial services require a separate approach from the marketing of goods. Service are typically distinguished from goods, on the grounds of •
Intangibility
•
Inseparability
•
Heterogeneity
•
Perishability
•
Simultaneity
•
Fiduciary responsibility
Intangibility This is the main distinguishing feature, since services are processes on experience rather than physical objects and therefore cannot be processed. A customer may purchase a particular service that typically has nothing to display as a result of the purchase. It is important to that intangibility has essentially two meanings. At one level it is concerned with the fact of service are impalpable in the sense it has no physical form. On the other sense intangibility cannot be defined and may be difficult to understand. Inseparability:- The second factor distinguishing financial services from goods is inseparability. Services are essentially acts and experiences means that they must be produced and consumed simultaneously. Heterogeneity:- The interaction between the consumer and service namely heterogeneity. The quality of services typically depends on personal interaction as the consequences the chance of variability in service is very high. The characterization of service as an act rather than an object leads to the emphasis on the individuals providing the service and their interaction with the customer.
Perishability:- This is another
distinctive feature namely perishability. Services are
produced on demand and cannot be inventoried so it needs a short distribution channel than goods. Simultaneity:- Another distinguish feature of services is simultaneity. Services cannot be delivered to the customer or . For availing the services it is essential that the are brought to the provider or the provider go to the s. Fiduciary responsibility:- This is an additional feature of financial service marketing. In marketing of financial services fiduciary responsibility refers to the implicit responsibility of financial services organization for the management of the customers’ funds and the nature of financial advices supplied to the customers in of quality reliability and safety of the products it supplies. The responsibility is much in case of financial organizations. In case of a bank the raw materials used to produce financial services are deposits of customers. In case of selling a loan product the bank as the responsibility to the person who are taking loan at the same time it has the responsibility to the person who had invested their money in the bank.
Marketing strategy: - Marketing strategy encomes the 4ps’ of the marketing mix product, price, promotion and place and seeks 10’ attract the target audience. The design of a particular marketing mix that will be used in based on the distinctive needs of the targeted market segment. The marketing mix product strategy The success of a product is contingent on how will it compares with the competitor products in satisfying the target market needs or wants. Pricing strategy Selling a product at a price the target market seeks as same with the products previewed benefits is the key is the marketing success. Promotion strategy This focus on communicating the availability of products or service to the target market. Advertising campaigns point of purchase materials and products publicity are the main elements of promotion. The development and the implementation of attention getting informative and persuasive communication techniques is vital to creating market awareness for the bank products. Bank’s typically communicate with the customer through print advertising in the newspapers and magazines. Direct marketing through direct mark and statements inserts and point of purchase advertising through Brokers and posters in the banks. Now the banking programmes and Internet are normally been used to communicate to the customers in the modern era of growth. Place or distribution strategy This refers namely concerned with making the products available at the desired time and place the two important elements of the distribution strategy for the banks are site location and case of access. As the result, many banks have ed nation wide automatedteller-machine (ATM) networks to maximize the number of locations where the customers can access their banking need. Many banks now a days are providing telephone banking service and the banking services that enable the customers to perform the transactions and make the s enquires 24 hrs a days and 7-days a week.
Basic bricks for marketing strategy Some of the key elements which are the basis for formulating the strategies are as follows. 1. Customer focus:- The customer focus is to be incorporated in marketing management and back office operations that has immediate access to the customers. 2. Capturing the growth opportunities:- In competitive world information technology is available to note what the competition offer. To gain upper hand any smart business unit should identify the new business opportunities and identically anticipate the new business opportunities and acute demand which are easily sale able to the customers and also evaluate the risk return scenario of the project. 3. Successful differentiation:- Success in competitive world information demands a unit ability to create a different product image in the minds of the targeted customer. The product offered by the company must be rated as different and superior to others in the line and should be priced competitively. 4. Innovation and management ability:- Ultimately the success of the firms marketing strategy depend on whether it is an innovative and the extend of its innovators. Expertise management is the ability to operate with new and information customers and the market place. 5. Quality and professionalism:- Much more than in product markets service markets are prons on subject factors of image, reputation quality of services and the professions in the management. Service quality, delivery system and process and time liners and conformity with the specification are the pre-requisite for a successful marketing strategy. Segmentation Market segmentation is an element of the marketing strategy recognizer the wisdom of specializing to suit the needs of a segment of market rather than trying to be “all things to all people”. Market segmentation is the process of subdividing a market into groups of customers who have similar products or customer needs. Through segmentation it allows any subset of the market to be targeted with a distinct marketing max.
Marketing customer Informative (MCIFs) system is a software programme that organizes the information of the household and individual and sort or summarizes the information similarity and differences among the groups of customers. Because of this focus it also referred to as relationship management systems. The importance of MIFs:•
MCIFs can greatly assist clear-customer focused marketing efforts.
•
Banks use the information generated by MCIFs to identify profitable customers and single service customer as well as markets with potentials for cross sales activities.
•
MCIFs system allows banks to identify the most and the least profitable products and branches as well.
•
MCIFs system offers modeling capabilities that permit bankers to run test scenario that predict the effect that such changes as new fees, increases in minimum balance requirement and declining cost will have on profitability.
•
The data generated by an MCIFs are critical in preparing strategic reports too and are used to strategic marketing Initiatives.
Four Conditions for an Effective Segmentation Firstly the characteristics of a segment must be Identifiable and measurable. Secondly it should be accessible that means it must be possible to reach the segment effectively with proper marketing strategies. Thirdly the segment must have the potential to generate profile. Fourthly each segment should react uniquely to different marketing efforts. Which means each segment should have potential customers who are responding quickly Strategies for Market segmentation Market can be segmented in a number of different ways. A bank should choose an approach that subdivides the market into groups that differ in some distinct way from one another in respect of their preferences. Some principal Segmentation alternative are:•
Geographic Segmentation
•
Demographic Segmentation
•
Psychographic Segmentation
•
Volume Segmentation
•
Benefits Segmentation
•
Geographic Segmentation:- This divides the market according to the geographic units. A firm might decide to market different products in different areas or to market their products in certain areas since a bank cannot have location everywhere .It must be carefully allocate its limited resources to meet its business goals. It may locate its new branch offices in most promising geographic market area.
•
Demographic Segmentation: - This categorizes the manner in of population characteristics. Such as age, sex, income, occupation and position in the life cycle. For example the banks establish an executive banking group specifically for ants and doctors has taught an occupational segment. The bank also develop an equity credit line aimed at homeowners with income in excess of 30,000 is targeting another specific demographic segment
•
Psychographic Segmentation:- This enacts classifying the markets in behavioral according to life style, socialism or personality profits. For eg. A bank might identify the young, professional on the fast react as the premier market segment for credit card sales.
•
Volume Segmentation:- This refers to the market attempt to distinguish heavy, medium and s of a product. In much business a small proportion of the s generate a large portion of the sales. This is called “pareto principle”.
•
Benefit Segmentation:- This is the process of categorizing the market in of the man
produce. Related benefit sought by different groups for example. A bank
practices geographic segment the same bank may also practices industrial segmentation. Once an organisation has identified the markets segment the next slip is to select the target markets.
Financial service Product design Product A product is anything that can be offered to market for attention, acquisition, use or consumption that might satisfy, a want or need. In a banking context all banking service (checking of savings a/c COD, Safe keeping service, lock box operation cash management service are also products. Form a marketing point of view a product has 5 different aspects. 1.
the core product
2.
the generic product
3.
the expected product
4.
the augmented product
5.
the potential products
The core product: it is the essential benefit that the customer is buying eg. The conveniences of being able to pay for goods and services with cheques
The generic product: It provides that benefit eg: the basic product - cheque The expected product: - It includes the product features that customers assume will be part of the product Eg:- Prompt and accurate clearance of cheques, accurate monthly statement and ability to access the amount through ATMS The augmented product It includes all specific features and benefits that help the marketer differentiate the product from the comptetions Eg: Package product unit s and can provide a number of customer benefits such as no annual fee, credit cards, loan discounts and bonus rates on CD’s
Banking products are augumented by the level and quality of service provided to the customer, the reputation of the bank, physical environment of the bank, the brochures and other printed materials provides to the customer, and any specific brand names given to the products. The potential product It includes all the modification that the product might undergo over time. Eg; Access through a special display telephone or an ATM that dispense a snap shot checking statement.
Development and test marketing in financial sector Some bank develop banking product or service delivery system that are new to the market. The following are the various stage in new pdt development 1. exploration and idea generation 2. product screening 3. concept of testing 4. business analysis 5. product development 6. Test marketing 7. Implementation and commercialization 8. evaluation Exploration and idea generation •
In a bank, new product ideas might come from ongoing research to help identify consumer banking needs that are not being met. o They might come from management or other employees o Some firms offer cash incentives to employees for generation new product ideas. Ideas might also come from customers, banks in other parts of the
country, or from competing banks. Also, an idea for a new product occasionally comes from banking regulators o Idea generation is to find, in a structured, goal oriented manner, new ways to serve the bank’s customers in a meaningful way Product screening •
Ideas for new products, must be screened against product objectives product policy and company resources
•
A preliminary judgment must be made as to whether an idea deserves further study.
•
Each idea for a new product must also be evaluated to ensure that it does to take business away from existing products.
Concept testing •
It is the function of consumer marketing research, but it does not simply entail asking a large No. of consumers what they think of a new pdt idea
•
It is best to first assemble small focus groups to explore reaction to a new pdt concept. This type of research is called qualitative research. It can provide insight into how the product might be positioned or promoted.
Business Analysis This stage in the development of a new pdt involves developing a written business case and recommendation based on the results of market analysis, Production feasibility analysis, marketing strategy development and cost and revenue projections. The business analysis includes ing materials that indicate there is sufficient demand for the product and show that the product fits in with the bank’s over all goals and objective Product development During this stage, the bank determines whether it is feasible to produce or provide the product / service at a cost and quantity that will make the product’s retail price attractive to customers. The elements of the product that will be particularly important to customers must be identified at this point and clearly highlighted as the product is designed.
This is also the stage at which the promotion, distribution and pricing strategies are developed. The development stage involves production of the prototypes / samples of the new product In banking the development phase for a new savings product would require modification of the savings computer system by the programming staff, the design of forms and documents to be used in setting up the a/c’s and the writing of procedures for the branch staff to follow in completing the forms and processing them. Test marketing Consumer goods manufacturers usually test market new products. If a company to try out a new product in one / two geographic Markets , Perhaps using a different promotional approach in each market to test their relative effectiveness. Test marketing is increasing in banking too. The benefits of test marketing are that the banks can assess customer response as well as familiarise employees with the planned new products. Test marketing can be expensive and time consuming however, and can offer competitors an opportunity to quickly copy the bank’s new product/ Service It is beneficial to move quickly from the test marketing stage to a full – scale implementation of the product Implementation or commercialization This is the stage at which a company commands its resources to a full – scale introduction of the product to the market. Introducing a new banking product requires heavy involvement by the marketing department. A great deal of money is invested in advertising and sales promotion. The launching of new product is often tied to an employee incentive campaign to boost initial sales. At the same time the bank might offer a to the customer for purchasing the new product Evaluation The final stage in developing a new pdt involves the use of primary an secondary research to monitor the progress of the new pdt in relation to the company’s goals.
Effecting monitoring enables the bank to take corrective action where needed, as well as gain additional knowledge that will facilitate the introduction of the next new product.
PRICING
Pricing strategy for financial product Pricing decision may relate to pricing new product or changing prices of existing products. A bank should consider changing the price of an established product when. 1. There is a sudden change in the banks costs. 2.
The competition initiates a price change.
3.
The establishment of a new price becomes permissible as a result of a change in
regulations. Pricing Strategies When pricing a new product (where it is new to the firm, new to the market or both) bank management will have at least three general objectives in mind. 1. Getting the product accepted 2. Maintaining strength in the market in the face of competition. 3. Creating profit. Two of the most important strategies for pricing new product are skimming pricing and penetration pricing. Skimming pricing:- Skimming pricing is a strategy that involves setting a high initial price for the product so as to skim the cream of demand for the product. Thus strategy is especially suitable for products that are new to the market for the following reasons. 1. The amount of the product that can be sold is less likely to be affected by price when the product is new than it will be later, when competition has more of an influence. 2. A skimming price strategy allows the marketer to attract customers who are less price sensitive before lowering price to attract those who are more price sensitive.
3. A high initial price may help the new product achieve an image of audit and prestige. 4. A skimming price can be used to test the demand for a product. It is preferable to begin with a high price and then reduce it rather than to begin with a low price and then have to raise it to
cover Unforeseen costs or to capitalize fully on the
popularity of the product. Penetration pricing Penetration is the opposite of skimming. It uses a low initial price as a means of capturing a large share of the market as early as possible. Thus strategy warrants serious consideration when one or more of the following conditions exist. 1. The quantity of product sold is highly sensitive to price, even in the introductory stage of the product life cycle. 2. Substantial economies in production or distribution costs can be achieved with large volume of sales. 3. The product will face the threat of strong competition soon after introduction or at the time of introduction. 4. There is not an elite market for the product that is no group of potential customers is likely to be willing to pay a price to obtain the product early. Other pricing strategies Three other pricing strategies may be used either in pricing new products or repairing existing ones. 1. Perceived value pricing: - This strategy is based not on the Question “what does it cost us to deliver thus product”? but rather on the question” what is the perceived value of this product to the customer”? The more tangible and intangible features that are added to a product, the higher the perceived value of the customer and consequently, the higher price that can be charged. To use perceived value pricing effectively, a firm must reduce the customers price sensibility or the price elasticity of demand by differentiating the product, trying other products to it or adding nonprice benefits.
Consumers willingness to pay for perceived value helps justify a bank’s expenditure to develop an image or position in the market and to make the necessary investment to provide a high level of customer service. The bank with a regulation for quality products and a high level of personalized service, and whose overall image among the target market is highly favorable, will be able to change slightly higher fees than its competitors. Customers who feel that the employers at there bank know them, treat them personably and professionally are eager to help them are not likely to shop around to save a few dollars on a checking or to get a slightly higher interest rate on a certificate of deposit. 2. Relationship pricing. :- Relationship pricing strategies encourage customers to have
multiple s and services with the bank. Thus encouragement is
provided in the form of lower fees, higher savings interest rates, or lower loan interest rates for customers with multiple ants. Some examples are 1. Allowing combined balances in all s to offset balance requirement for no charge checking. 2. Pricing higher rates on deposits and charging lower rates on loans or reducing loan application fees for customers who have both checking and saving with the bank and maintain a specified combined monthly balance. 3. Charging a lower rate on personal loans to a customer who agrees to have the monthly payment automatically deducted from has or checking s. 4. Charging a lower general fees, or lower interest rate to credit card customers who also have a checking or saving s. 5. Paying a higher interest rate on larger savings or certificate of deposit balances. To use relationship pricing effectively a bank must have either an integrated system that enables the various computer application for checking, saving and loans to communicate with one another or a monthly updated central information file linking all relationship for each holder. Three benefits accure to the bank that uses relationship pricing. 1. Economic 2. The second benefit relates to customer retention 3. The third benefit is or should be increased profitability.
3. Behaviour modification pricing:- Thus strategy uses pricing to get customers to take certain actions that will lower costs for the bank. For example, a bank in an automated letter network must pay on interchange fee when the customer uses another banks ATM. To discourage its customers from using ATM’s of other banks and thus causing it to pay the interchange fee, a bank often charges customers more for using other banks ATM than for using its own. Thus pricing strategy will work only to the extent that demand is elastic that is that customer will choose the lower-period attainable rather than pay the higher fee. In addition the bank’s ATM must be conveniently located. If they are not, customers who use ATM’s frequently may decide to move there s to a bank with more convenient ATM location. Why Banks change prices 1. The number of s or market share has declined. 2. Prices are too high relative to the competition and relative to the benefit of the product. 3. Prices are too low, given cost increases or heavy demand. 4. The bank prices seems higher to customers than they really are 5. The product has been enhanced, adding cost to the bank or value to the customer.
Guidelines of Service Pricing The following are the guidelines for pricing of services. 1 . The pricing strategy should be such that demand fluctuations are successfully handled. 2.
Service prices should be based on costs so as to take in to the cost of tangible clues of intangible Services.
3.
The pricing strategy should be such as to provide value addition and quality indication to the customers.
4.
The pricing strategy should be such as to cope-up with the degree of competition.
Short-term Pricing Tactics in Service Industries Price Tactics Differential or flexible pricing
Objectives a. Build primary
Forms / Examples a. Price time
demand during non-
differentials (eg.
peak time
Telephone services)
b. Even out of
b. Customer ability
fluctuations in
(housing loans and
demand
rate of interest increasing with principal) c. Service product price differentials (barber shops) d. Place differentials (discount at hotels
Discount pricing
a. To enable service
during off seasons) Telephone corporation
production and
offering lower tariffs for non-
consumption to take
peak periods
place. b. To encourage actions like early payments, bulk purchase or peak Diversionary pricing
usage To make customer visit
A service station may offer
Guarantee pricing
office at least once to avail
certain discount on car wash
basic service at a discount
only but for other repairs or
and with that experience try
maintenance jobs charge the
out others a. To enable high
full rate. Employment agencies charge
quality operator to
either or both the parties after
compete with others
the assignment gets over
b. To satisfy a customer seeking clear assurance before High price maintenance
paying for it. To hold out against the price
Cellular phones services
pricing
threat of the low priced
pricing.
sellers and the customer Loss leader pricing
associate price with quality To charge a reduced price for
To attract first time trials, a
the first order with a hope to
restaurant offers a discount
get further business at better
on the day of inauguration.
prices.
DISTRIBUTION
Distribution strategy Distribution strategy is mainly concerned with making the product available at the deserved time and place. Even the right product for a market segment provides limited satisfaction or none at all if it is not available when and where consumers want it. Accordingly, two important demands of distribution strategy for banks are sets location and case of access. Furthermore, the current social environment places a heavy emphasis on time as well as convenience. As a result many banks have ed automated letter networks to maximize the number of location where customers can access there s. Many banks also provide telephone banking, services and pc banking services that enable customer to performer transactions and make 24 hours a day, 7 days a week. Since banking products and services are largely intangible, they are difficult to separate from the people who distribute them. There is especially true at the time the customers initiates the relationship with a bank, but it also applies to the say-today servicing of s. Although the use of technology has reduced with tellers, there will always be a need for personal customer services, whether it be in person or by phone. The growing implementation of customer relations and sales training programmers in banks reflect managements recognition of the importance of the human demand in the banks distribution strategy.
Eight channels of distribution for Bank sources ATM card Credit card Debit card Telephone Personal computer Branch Automated Loan machine Virtual branch ***********************
DEVELOPMENT OF FINANCIAL SERVICES Ideas that have survived the screening process are then worked up into specific service concepts that is to say, the basic idea for the new product must be translated into a specific of features and attributes which the product will display. At this stage it is common to test this newly defined product and to identify consumer and market reactions in order to make any necessary modifications to the product before it is launched. •
Screening the ideas
•
Concept development tested
•
Marketing strategy development-who should be target consumers, pricing stability
•
Business analysis
•
Service development-infrastructure
•
Market testing
•
Commercialization. NPD strategy
Idea generation
Idea screening
Development and Testing
Product Launch
1. New product development strategy:- A clear strategy is important to ensure that all those involved understand the importance of NPD and what the organizations wishes to achieve. The process of NDP is to be orientated towards taking advantage of new market segments, seen as crucial to the continued competitiveness of the organizations, required to maintain profitability, or designed to reduce excess capacity or even out fluctuating demands. The ideas that should be considered are likely to vary according to the purpose of the NDP programme. 2. Idea generation:- Ideas may be generated from both inside and outside an organization. Ideas may be generated internally from specialize NPD teams, from employee or suggestions. Externally, ideas may be generated based on customer , market research, specialist new product development agencies or by copying competitions. 3. Idea screening:- The variety of ideas produced at idea-generation stage. Idea screening means deciding in advance, a set of criteria to be used when ideas are evaluated:
•
Doest the idea fit with the organizations strategy?
•
Does the idea fit with the organizations capabilities?
•
Does the idea appeal to the right market segments?
•
Is the idea variable in of cost and profit?
4. Development and Testing:-At this stage it is common to test this newly defined product and to identify consumer and market reactions in order to make any necessary modifications to the product before it is launched. 5. Product launch:- At this stage the major decisions are essentially of an operational nature-decision regarding the timing of launch, the geographical location of the launch and the specific marketing tactics to be used in of that launch. Test Market A rest market, in the field of business and marketing, is a geographical region or demographic group used to gauge the viability of a product or service in the mass market prior to a wide scale roll-out. The criteria used to judge the acceptability of a test market region or group includes: 1.a population that is demographically similar to the proposed target market; and 2. relative isolation from densely populated media markets to that advertising to the test audience can be efficient and economical. 1. The test market ideally aims to duplicate ‘everything’ – promotion and distribution as well as ‘product’ – on a smaller scale.
Test Marketing Procedure 1.determine the number of cities 2. selection of the cities 3. duration of the test 4. collect necessary information 5. take necessary actions •
Where should we communicate this?
•
When do the communications need to take place?
ADVERTISING AND SALES PROMOTION The Fourth P: Promotion It is now established that there are clear differences in information usage between goods and services. First, the difference is that consumers of services are less likely to purchase without information than those of goods. Second, the consumer of services will prefer personal sources over impersonal sources of information. And third, the basic characteristics of services have implication for communication strategy. The above three influence the decision regarding the a) Communication Objectives b) Target Audiences, and c) Planning of each of the sub elements in promotion mix Promotion Objectives The basic objectives of the promotion mix are; 1 . Develop personal relations with client (personal relations might result in satisfaction, more than their service offer) 2.
Make a strong impression of competency, honesty and sincerity.(professional orientation to service transaction so as to win buyer's confidence in seller's ability to deliver the service)
3.
Should be able to use indirect selling techniques (creating derived demand or act as a buying consultant)
4.
Manage to maintain a fine image by positive word of mouth.
5.
Packaging and customization
Adverting is only one element of the promotion mix, but it often considered prominent in the overall marketing mix design. Its high visibility and pervasiveness made it as an important social and encomia topic in Indian society. 1.
Advertising is the dissemination of information by non-personal means through paid media where the source is the sponsoring organization. Advertising may be defined as the process of buying sponsor-identified media space or time in order to promote a product or an idea. The American Marketing Association, Chicago, has defined advertising as “ any from of nonpersonal presentation or promotion of ideas, goods or services, by an identified sponsor”. ment is a mass communicating of information intended to persuade buyers to by products with a view to maximizing a company’s profits. The elements of advertising are: (i)
It is a mass communication reaching a large group of consumers.
(ii)
It makes mass production possible
(iii)
It is non-personal communication, for it is not delivered by an actual person, nor is it addressed to a specific person.
(iv)
It is a commercial communication because it is used to help assure the r of a long business life with profitable sales.
(v)
Advertising can be economical, for it reaches large groups of people. This keeps the cost per message low.
(vi)
The communication is speedy, permitting an r to speak to million of buyers in a matter of a few hours.
(vii)
Advertising is identified communication. The r sings his name to his ment for the purpose of publicizing his identity.
Financial Services Advertising Financial advertising, depending on the product, is governed by regulation and the Advertising Standard Authority and, depending on the subject matter, additionally by statutory regulation under the Financial Services and Market Act 2000 (“FSMA”) and under the Consumer Credit legislation. Advertising:- Advertising Paid non personal communication delivered through various media and designed to inform, persuade, or remind of a particular audience. Nature of advertising •
Advertising is distinguished from other forms of promotion as follows.
•
It has a verbal and/or visual message.
•
The sponsor of the message is identified
•
Delivery is through recognizable media
•
There is payment by the r to the media for carrying the message
•
rs are increasingly being able to reach specific audiences with tailormade messages.
•
Advertising can be classified by the target audience to which is directed.
•
Consumer advertising generally appears in mass media and is directed to end consumers: may be product or institutional in nature.
The Advertising Plan As pointed out earlier, advertising plan and decision making focus on three crucial areas; objectives and target selection, message strategy and tactics, and media strategy and tactics. Let us elaborate on these points. 1. Objectives and Target Selection:-An important part of the objective is the development of a precise, disciplined description of the target audience. It is often tempting to direct advertising at a broad audience; but everyone is a potential customer. It is best to consider directing the advertising to more selected groups to develop stimulating copy. It is quite possible to develop several campaigns, each directed at different segment of the market, or to develop one campaign based on multiple objectives.
2. Message Strategy and Tactics:- Message strategy must decide what the advertising is meand to communicate – by way of benefits, feeling, brand personality, or action content. Once the content of the campaign has been decided, decisions must be made on the bnest-most effective-ways of communicating that content. The decisions such as the choice of a spokesperson, the use of humor or fear or other tones, and the selection of particular copy, visuals, and layout, are what we call “ message tactics” 3. Media Strategy and Tactics:-Message strategy is concerned with decisions about how much is to be allocated to create and test advertising copy, media strategy concerns decisions on how many media rupees to spend on an advertising campaign. 4. Media tacties:- Comprise the decisions on which specific media (television, radio, magazines, etc) or media vehicles (Reader’s /digest, etc) to spend these dollars. Sales Promotion:- Sales promotion is one of the most loosely used in the marketing vocabulary. We define sales promotion as demand. Stimulating devices designed to supplement advertising and facilities personal selling. In other words, sales promotion signifies all those activities that supplement, coordinate and make the efforts of personal selling and advertising more effective. It is non recurrent in nature which means it cant be used continuously. Definition of sales promotion:- According to American Marketing Association “Those marketing activities other than personal selling advertising and publicity that stimulate consumer purchasing and dealer effectiveness such as display shows and exhibitions demonstrations and various non-recurrent selling efforts not in the ordinary routine”. W.J Stanton defines sales promotion as all those activities other than advertising, personal selling, public relations and publicity that are intended to stimulate customer demand and improve the marketing performance of sellers. •
Demand-stimulating devices designed at supplement advertising and facilities personal selling.
•
Sales promotions include such things as coupons, in-store displays, s, trade shows, in-store demonstrations , and contents.
•
The target for these activities may be middlemen, end s, or the producer’s own sales force.
Objectives of Sales Promotion The basic objectives of sales promotion are:(i)To introduce new products:- To induce buyers to purchase a new product, free samples may be distributed or money and merchandise allowance may be offered to business to stock and sell the product. (ii)To attract new customers:- New customers may be attracted through issue of free samples, s contests and similar devices (iii) To induce present customers to buy more:-Present customers may be induced to buy more by knowing more about a product, its ingredients and uses. (iv) To help firm remain competitive:- Sales promotions may be undertaken to meet competition from a firm. (v) To increase sales in off season:- Buyers may be encouraged to use the product in off seasons by showing them the variety of uses of the product. (vi) To increase the inventories of business buyers:- Retailers may be induced to keep in stock more units of a product so that more sales can be effected.
MENT AND SALESPROMOTION OF FINANCIAL SERVICES Promotion: This includes advertising , sales promotion, publicity , and personal selling , and refers to the various methods of promoting the product, brand, or company advertising The American marketing association defines advertising as "the placement of announcements and persuasive messages in time or space purchased in any of the mass media by business firms, nonprofit organisations, government agencies and individuals who seek in form and or audience about their products, services, organisations or ideas". Paid advertising takes place; •
print media(magazines and news papers)
•
Broadcast media(radio and television)
•
out door and transit advertising
•
Direct marketing
•
Online through the world wide web
•
ments in newspapers, magazines, brochures, leaflets, circulars, mailings, e-mails, text transmissions. fax transmissions, catalogues, follow-up literature and other electronic and printed material posters and other promotional media in public places, including moving images cinema and video commercials ments in non-broadcast electronic media, including online ments in paid-for space (eg banner and pop-up ments) viewdata services marketing databases containing consumers' personal information sales promotions ment promotions
Product advertising focuses on selling a specific product or services Goal of advertising is to inform, influence, and persuade the target market It create awareness to the target audience SEBI'S CODE OF MENT 1.
ANY MENT SHOULD BE TRUTHFUL.FAIR AND CLEAR
2.
IT SHOULD BE FACTFUALLY CORRECT AND NOT AN EXAGGERATED OR MIS LEADING STATEMENT
3.
IT SHOULD NOT CONTAIN ANY PROMISE OR GUARENTEE OF INCOME OR APPRECIATION OR ANY OTHER GAINS
4.
CORPORATE MENT SHOULDNOT BE GIVEN DURING THE PERIOD,SUBSCRIPTION IS OPEN. PRODUCT MENT IF GIVEN SHOULD NOT REFER TO CORPORATE PERFORMANCE
5.
IT SHOULD NOT CONTAIN ANY INFORMAL INFORMATION NOT GIVEN IN THE PROSPECTOUS.
6.
DURING THE PERIOD SUBSCRIPTION IS OPEN, NO STATEMENT SHOULD BE GIVEN TO THE PRESS ABOUT THE STATE OF SUBSCRIPTION OR OVER SUBSCRIPTION PRACTICE
OF
THE
COMMITTEE
OF
ADVERTISING
Personal sales Oral presentation given by a salesman who approaches individuals or a group of potential customers: Live, interactive relationship Personal interest Mention and response Short-term incentives to encourage buying of products: Instant appeal Anxiety to sell
SALES PROMOTION RULES The sales promotion rules are designed primarily to protect the public but they also apply to trade promotions and incentive schemes and to the promotional elements of sponsorships. They regulate the nature and istration of promotional marketing techniques. Those techniques generally involve providing a range of direct or indirect additional benefits, usually on a temporary basis, designed to make goods or services more attractive to purchasers. The rules do not apply to the routine, non-promotional, distribution of products or to product extensions, for example the suitability of one-off editorial supplements (be they in printed or electronic form) to newspapers and magazines. Promoters are responsible for all aspects and all stages of promotions. Promotions should be conducted equitably, promptly and efficiently and should be seen to deal fairly and honourably with consumers. Promoters should avoid causing unnecessary disappointment.
MARKET RESEARCH Market research is the identification of customers' financial needs and wants and forecasting and researching future financial market needs and competitor's activities. It is the systematic design, collection, analysis. and reporting of data and findings relevant to a specific marketing situation facing the company. The Marketing Research Process • Define the problem and research objectives • Develop the research plan • Collect the information • Analyze the information • Present the findings • Make the decision Research Approaches In the marketing research, the primary data can be collected in five main ways: through observation, focus groups, surveys, behavioral data, and experiences.
Observational research Fresh data can be gathered by observing the relevant actors and settings. Consumers can be unobtrusively observed as they shop or as they Consume products. Focus Group Research
A focus group is a gathering of six to ten people who are carefully selected based on certain demographic, psychographic, or other considerations and brought together to discuss at length various topics of interest. Participants are normally paid a small sum for attending. A professional research provides questions and probes based on a discussion guide or agenda prepared by the responsible marketing managers to ensure that the right material gets covered. Survey Research Companies undertake surveys to learn about people's knowledge, beliefs, preferences, and satisfaction. It can also put the questions to ail ongoing consumer run by itself or another company. It may do a mall intercept study by having researchers approach people in a shopping and ask them questions. Behavioral Data Customers leave traces of their purchasing behavior in store scanning data, catalog purchases, and customer databases. Much can be learned by analyzing these data. Customer's actual purchases reflect preferences and often are more reliable than statements they offer to market researchers.
Experimental Research The most scientifically valid research is experimental research. The purpose of experimental research is to capture cause-and-effect relationships by eliminating competing explanations of the observed findings. The design and execution of the experiment eliminate alternative hypotheses that might explain the results, research and marketing managers can have confidence in the conclusions. Experiments call for matched group of subjects, subjecting them to different treatments, controlling extraneous variables, and checking whether observed response differences are statistically significant. Researchers have a choice of three main research instruments in collecting primary data. They are; Questionnaires Qualitative measures Mechanical devices
Once the sampling plan has been determined, the researcher Must decide the subject should be ed on the basis of the methods like; Mail questionnaire Telephone Interview Personal Interview Online Interview
Consider the example of market research in bank marketing; Marketing begins with information about the market in which the bank operates. In the field of bank marketing research is important. The bank which really practices marketing or which is market oriented, while thinking of introducing anew type of cheque system or a tic" service for example, will not make a decision on the alternatives until it has found out what its customers want. Market research is the process by which a bank attempts to obtain the customer and the competitor information Marketing research is an. integral part of the decision making process. Market research in banking is an essential tool of marketing for affective planning. It can be used to gather more knowledge about the market in which the bank is operating. With the help of this marketing research new service can be developed and existing services can be improved. Better and more effective promotion programmes can be designed which can be accepted by the customers. Marketing research serves as a communication channel between tile market and the bank. The single most important reason for undertaking market research is to improve the quality of managerial decision making, Market Research in Indian Banks The following broad areas of market research were considered for the studies in Indian Banks are: New service development New service product acceptance Research and development of existing financial service Bank image study
Measuring bank’s advertising effectiveness Measurement of market potentials Market research of competitive service product Customer’s opinion study Customer profile study, and Market share analysis Most of the market research studies were conducted for internal use and no formal reports were prepared. It is important to note that the subjected or issue researched by the bank; Most important subject for market research is the customer service/customer profile/opinion studies. In the case of Indian Banks only three banks have researched the Market Share Analysis. Rural areas are also a part of the market research activities. Study on all India Savings and Deposit Trends and Patterns Measuring bank’s advertising effectiveness Bank’s advertising and Publicity and its image among consumers Survey on personal finance and banking.
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