Marketing Financial Services Unit 1

8/4/2019 Marketing Financial Services Unit 1

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Craig Tapper July 25

Marketing of Financial Services Introduction: The role of

Marketing in Modern Financial Services Organizations


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Marketing is just trying to persuade people to buy things.Firms only do it because otherwise people wouldnt know

about them and they might go to the competitors!!!

What is marketing?

Why is it important to an organisation?

Why is it important to customers?


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Marketing is so basic that it cannot be considered a separate function.It is the whole business seen from the point of view of its final result,that is, from the customers point of view Business success is notdetermined by the producer but by the consumer

Peter Drucker (1973)

Marketing is the delivery of customer value and satisfaction at a profit.The goal of marketing is to attract new customers by promisingsuperior value, and to keep customers by delivering satisfaction

Kotler, Keller & Burton (2009)


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Although selling and advertising are highly visible aspects of marketing

practice, they are only part of a larger marketing mix a set ofmarketing tools that work together to affect the marketplace. We definemarketing as a social and managerial process by which individuals andgroups obtain what they need and want through creating and exchangingproducts and value with others.

Kotler et al (2008 p.5) the process of creating and delivering value to key stakeholders..

The American Marketing Association (2004)


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Products and services (the things that are traded)

Value (the thing that the product or service adds forthe customer and that they exchange with the firm -both parties need to get Value)

Value changes over time and is different for differentcustomers

Key Concepts from these definitions


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Needs = felt deprivation

Wants = specific individualshape of the need

Demand - wants backed bypurchasing power

Products = anything offered tosatisfy wants

Exchange = value given &received by customer &organisation

Results in a transaction

Markets = a set of existing andpotential buyers for aproduct.

Key definitions in Marketing


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Any act, performance or experience offered by one party to another

Essentially intangible and not involving ownership of anything

Production may or may not be tied to a physical product

Processes (economic activities) providing time, place, form, problemsolving or experiential value to the recipient

Something that can be bought or sold but cannot be dropped on yourfoot!

What is a service?


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72% of Australias GDP comes from services (Economist IntelligenceUnit Feb 2007)

80-90% of all new jobs will come in services (RBA June 2006)

They come about in the later development stages of anations economy


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Sector 1950 1960 1970 1980 1995 2010

Agricultural products 42 29 17 10 9 7

Minerals 14 17 13 20 13 11

Manufactures 34 42 47 39 38 28

Services 10 12 23 31 40 54

Source: IBIS Information Services


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Horizon 1Physical GoodsAgricultureMiningManufacturingMetals

Chemicals etc

Horizon 2 ServicesCommunicationsRetailTourismFinance

TransportHospitalityBusiness Services etc

Horizon 3 Information &knowledge basedBiotechnology and healthNew information economy

Time

Economic Development (GDP per capita)

Source: McKinsey & Company

1900 2000

Waves of Economic Development


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Source: Stace & Dunphy (2007 p.38)

Industrial economy Service economy Knowledge economy

First Curve

Second Curve

Capital & resourcesProduction

Offshore marketsTrade

Marketing

KnowledgeConsumersGlobal marketsE-commerceRelationships


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Source: Stace & Dunphy (2007 p.38)

Industrial economy Service economy Knowledge economy

First Curve

Second Curve

Specialist functionsCorporateness

Horizontal & verticalintegration

Business processesTangible assets

Flexibility

& competenceIndividuals &networksVirtualintegrationCultureIntangible

assets


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Value 2005

$USD Bn

% change

00-05 p.aWorld 2,415 10

North America 422 5

South & Central America 68 8

Europe 1,245 12

European Union (25) 1,121 12

Commonwealth of Independent States 42 20

Africa 57 13

Middle East 55 11

Asia 525 11

Japan 108 8

China 74 20


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Balanced

Tangibledominant

Intangibledominant

Salt

House

CarTailored

Suit

Fast-foodRestaurant

Hotel

AirTravel

TheatreTeaching

Balanced item = 50:50

Financial

Services


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The hollowing out effect - internationalisation and globalisation (low-technology labour intensive activities move to low labour cost countries)

Deregulation and privatisation (government services sold off, international

and national consolidation of services to achieve scale and scope) Social change (rise of global middle class and emerging middle class; two

income households)

Professional services & franchises (increased competition, growth in demandand lower regulation on marketing)

Technology (access to information; driving service innovation) Global wealth & investment market (decline in state pension as source of

retirement, growth of personal investment industry)


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Intensifying competition isdriving marketing investmentand innovation

Increasing marketingorientation

Service quality philosophybecoming increasinglyimportant

Increasing numbers andsophistication of financialservice value chains and use offranchising

Technology driving:

More innovative andsophisticated delivery systems

Increased customer self-serviceand DIY

Increase capacity and relianceon data mining, manipulationand CRM strategies


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Customers dont obtain ownership

Services are intangible

Services are inseparable (customers are involved)

Services perish and cannot be stored

Services are variable (quality is hard to maintain)

Services are harder for customers to evaluate


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Most service products cannotbe inventoried

Intangible elements usuallydominate value creation

Often difficult to visualize

Customers may be involved inproduction

Other people are often part ofthe product

Operational inputs and outputs

tend to vary more widely

Time frequently assumesgreater importance

Distribution may be via non-physical channels


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Narrow definitions of what marketing means by financialservices managers and poor appreciation of marketing

Differentiation is harder

Limited data on competitive performance

Costing is harder


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Understand and identify surrogate cues (things that dontrelate to the service performance)

Ensure that the cues are in line with customer expectations

Differentiate the offer and signal it using the cues


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ProductPrice

Promotion

Place

People

Process

Physical evidence


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HumanResource

Management

Customers

Marketingmanagement

Operations & info techmanagement


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Financial Service benefits are harder to establish

Customer behaviour and experience are more important

Managing the service encounter is vital

Design of the service factory and delivery system iscentral to creating the encounter

Use of channels needs more thought


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TechnicalCore

Equipment

Servicepeople

Interior &exterior

facilities

Thecustomer

Othercustomers

Othercustomers

AdvertisingSales calls

Billing/statementsMiscellaneous mail,phone calls, faxes etc.Websites and emailsRandom exposures tofacilities/vehiclesChance encounters with

service personnelWord of mouth

Backstage(Invisible)

Front-stage(visible)

Other contact pointsService operations system

Service delivery system


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Satisfaction; Quality;

Brand loyalty

Organisation

Employees Customers

Internal

marketing Traditionalmarketing

Relationshipmanagement


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Cultural Values and Norms

Cultural Values and Norms

Service encounter:Understandingcustomers intrinsic

needs & valuesMood statesRole theoryScript theoryCommunication styleAttribution theory

Post-purchase stage:

Customer satisfaction

Perceived quality

Customer complaintbehaviour

Service recovery

Pre-purchase stage:

Recognition of needs

Information searchEvaluation ofalternatives


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Role of women; gender relations Role of the family Attitudes to age and authority Collective vs. individual focus Religious observances Cognitive styles Hours of work Communication protocols Importance placed on loyalty; conspicuous consumption

SOCIAL CONVENTIONS


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AESTHETICS

Symbolic meaning of art, architecture, dance, folklore, drama

Importance of symbols such as employment, title dress,

hairstyle, jewellery, brands, etc.

LEVELS OF CULTURE

National

Regional

Industrial

Organisational

Financial Services Marketing CulturalConsiderations

Fi i l S i M k ti g C lt l


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DEMONSTRATIONS OF CULTURAL DIFFERENCE

Time

Space

Language (what is meant)

Familiarity

Consumption

Business customsNon-verbal communication

LANGUAGE

Financial Services Marketing CulturalConsiderations


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1. Power distance (equality or hierarchy in interpersonal relations)

2. Uncertainty avoidance (societys risk attitude)

3. Individualism/collectivism (reliance on self or others)

4. Masculinity/femininity (extent and source of caring for weakermembers of society)

5. Long versus short-term orientation


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Power Distance Scores

Australia, Great Britain & Germany 36

Netherlands 38

USA 40

Japan 54

South Korea 60

Singapore 74India 78

China 77


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Uncertainty Avoidance Scores

Singapore 8

Sweden and Hong Kong 29

China 40

USA 46

India 48

Australia 51

Germany 65

Japan 92


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Masculinity vs. Femininity ScoresSweden 5

Netherlands 14

China 46

Singapore 48

China 55

Australia 61

USA 62Germany & Great Britain 66

Japan 95


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Individualism vs. Collectivism

India 14

China 15

Singapore 20

Japan 46

Germany 67

Netherlands 80

Great Britain 89Australia 90

U.S.A 91


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1. Functional risk (Will it work?)

2. Financial risk (Is it worth it?)

3. Temporal risk (Will it be a waste of time and effort?)

4. Psychological risk (How will I be treated?)

5. Social risk (What will they think of me?)

6. Sensory risk (What problems will there be?)


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Seek information from trusted sources

Rely on reputation

Seek warranties & guarantees

Seek guidance about alternatives

Look for trial

Use of the internet

Loyalty to existing providers

Look for tangible quality signals


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The importance of the service encounter itself

The separation of the purchase and consumption phases

The impact of mood and emotion (affect) on serviceconsumption and evaluation


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Expectations(E)

Confirmation

PerceivedPerformance

(P)

ComparisonProcess

Dissatisfaction DelightMere

satisfaction

Negativedis-confirmation

ExperienceWord of mouth

MarketingcommunicationsAwareness ofcompeting brands

Positivedis-confirmation

P = E P > EP < E


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The 5 Cs

Customers

Company

Competitors

Collaborators

Context

Context looks at key externalenvironments including:

Political

Economic

Socio-Cultural

Technological

Legal & regulatory

Environmental (nature)


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Corporate strategic plan(s)

Business Unit Plans

Functional Plans to support these...(eg Marketing, Production, Operations, Finance, IT, HR, etc)

Shareholder or stakeholder value


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Production Orientation =consumers favour products that areaffordable and available so improveproductive efficiency!

Product Orientation = consumersfavour products that are high

quality, performance and features,so improve the product!

Sales Orientation = consumers needto be persuaded to buy, so sell!!!

Marketing orientation = understandcustomer wants and needs and deliversatisfaction better than alternatives!!

Societal Orientation = deliversatisfaction and meet wants & needs

in a socially responsible andsustainable fashion!


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Customer centric or strongly customer oriented

Involved in continuous customer research and gainingcustomer insight

Integrate all activities with the customer as the focus


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Body copy

Bullet

Documents

Marketing Financial Services Unit 1