MFS Introduction

8/3/2019 MFS Introduction

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Marketing and Financial Services:An Overview


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Lecture structure

What are financial services?

The financial services industry

Marketing Marketing services

Financial services

Technology Corporate social responsibility

Summary


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Basic Terms

Services: an offering in which the dominant

part is intangible, which is the case in most

financial services

Value: the aim of marketing is to create/

deliver an offering that allows the consumer

/stakeholder to derive benefits particular to

their needs/wants


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Financial services are any service or product of

a financial nature that is traded in financial

markets (financial instruments)

Can be classified e.g. Do they have a fixed or

variable interest rate? How long to they take to

mature? Are they offered by a deposit-taking or

non-deposit taking intermediary?

Financial services cover an extensive range of

instruments e.g. in consumer marketplace on

equity release schemes and long-term care


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The marketplace for financial services is extensive

global marketplace and increasingly so

wide range of customers e.g. retail consumers,

business/corporate customers, other financial

institutions

The key activity of FIs is intermediation, which means

that they create assets for savers and liabilities forborrowers, which are more attractive to each than

would be the case if the parties had to deal with

each other directly


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Figure 1. Overview of financial services


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We use the term financial institutions (FIs) throughout the book as itembraces the diversity of players in the business of financial services:

Retail, corporate, investment and private banks

Mutual funds, investment trusts

Personal and group pensions Life and general insurance and reinsurance companies

Credit card issuers

Specialist lending companies

Stock exchanges

Leasing companies

Government saving institutions

Brokers and agents

Supermarkets and retailers provide financial services e.g. Big Bazaar


Some examples


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Marketing

Marketing is discipline and practice that allowspractitioners and theorists to learn more about

markets and customers, to provide companies

with knowledge to gain competitiveadvantage.

Focus of marketing activity is

consumer/customer, who has to gain benefitfrom offering for satisfaction to occur.


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Marketing

Customer satisfaction not sufficient to gain the levels of

customer loyalty or retention, so new definition of

marketing is

Marketing is the activity, set of institutions, andprocesses for creating, communicating, delivering,

and exchanging offerings that have value for

customers, clients, partners, and society at large

(www.marketingpower.com).

Concept of value now central to definition. Focus

extends beyond the customer to society at large.

Emphasis is on the exchange of offerings that have value

for that extended marketplace.


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Marketing services

New perspective on marketing of services isemerging based around value where customer hasrole in the service (co-creator of value). Customercreates his/her own value based on the way thatthe service is used (value-in-use)

value of the offering arises from the way in whichthe user/consumer uses it e.g. Internet-onlycurrent accounts , 24/7 access

Service is dominant component of any offeringthrough the application of specialized skills andknowledge, where customer is always the co-producer


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Marketing services

Theme in the service-dominant logic view of marketing

is that customers are resources and that marketing is

achieved with the customer through co-creation of

value. How might this concept translate into financial

services? Product complexity means that the FI usually

has better information about product than the

customer (asymmetric information). The service-dominant logic view of marketing (S-DL)

would be to maximize knowledge that the FI has, both

about the customer and the product, to create a

product that generates value to both parties.


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Draw upon FI resources (internal and

external)

overcome resistances

Collaboratewith

customers &

stakeholders

Co-create

financial service

offering

Co-create

value through

systems

Co-create value

proposition

with customer

Co-create

dialogue &

relationship

Service dominant-logic in financial services


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Conventional approach to services

marketing

Services marketing has a marketing mix which consists of

eight Ps

Product element: features of the core offering and

bundle of supplementary services . Many car insurancepackages feature a hire car in case the car is undriveable,

legal cover in case of a dispute and/or breakdown cover.

Place and time: how service is delivered to the

customer. Basic financial services available 24/7 orduring a working day (via automated telling machines).

Other services available through personal interaction

with FIs or representatives


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Process: how service is created and consumed (or

even co-produced). Ex : Bankbazaar.com,Insurance

pundit.com

Productivity and quality arguably inseparable.Productivity concerns how inputs of the service are

translated into outputs. Quality of service offering is

whether service is fit for purpose. Regulation try to

ensure that financial services meet customer

expectations.


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People: branch staff, call centre staff and back office

staff support creation of new services and systems,

sell the services, building and maintaining

relationships Promotion and education: Promotion could relate

advantages of particular FI over its rivals. Education

informs how the service can benefit customers and

ways in which they can derive additional benefits.

Regulation also influences the way in which

marketing communications are developed.


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Physical evidence: Bank branches resemble

contemporary retail spaces with strong

merchandising. Elsewhere branding and the use of

symbols create a tangible aspect to services Price and user costs: customers pay for their

financial services either directly or indirectly. Banks

are regulated as to the way in which they can

advertise the rates or charges that they make. Bank

charging has become a highly contentious issue in

financial services.


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Financial services Services can be classified to develop appropriate marketing strategies

Financial services vary enormously, as mentioned above e.g. investment services to wealthyand financially literate customers are high in customization and differentiation, ATMs arelow in both but offer value creation for the consumer.

Doyle (2002) classifies financial services as competitive but other aspects of hisclassification, such as customer contact, goals, ownership and type of market, vary,depending upon the nature of the service and to whom it is being supplied.

What unifies financial services is that they are often hard to evaluate, they are offered

through a range of delivery systems, there is opportunity for co-production and they aregenerally acquired as a means of achieving an end.

FI marketers operate in business-to-consumer (B2C) or business-to-business(B2B).

Bank websites indicate that they initially divide their markets into severalcategories e.g. premier banking, personal banking, business and corporatebanking, global banking and markets and private banking (see

www.hsbc.com). Private banking offers special levels of financial relationships to customers

who have been identified as core affluents, high net worth, ultra high networth and also whether they are old or new money .

AXA insurance cites three possible markets: personal, business andintermediaries (www.axa.co.uk).


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Technology

The impact of technology on financial services has beenremarkable and ranges from automated telling machines (ATMs)

to Internet-only banks

Information systems track transactions and store customer

information. Technology has also lowered barriers to entry enabling

supermarkets and other retailers to enter the marketplace

Significant changes that have occurred in financial services in the

last few years include the growing use of technology in the delivery and consumption of services,

the growth in customer confidence in the consumption of financial services,

the globalization of financial services (though perhaps less noticeable at

retail level), the increase in regulation and the profitability of the providers.


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Summary

Marketing is not concerned with products but with creatingvalue. How can value be created in financial services?

Vast range of institutions engaged in offering financialservices and a very wide range of offerings.

Still a tendency to sell financial services. Momentum of theS-DL view has profound implications (FIs). Concept of co-creation of value will bring about changes in the way thatservices are classified, produced and consumed.

Technology has changed financial services industry and

customer experience significantly Corporate social responsibility (CSR) apparently adopted by

FIs, but, not clear how it really influences the way in whichFIs conduct their business.

Documents

MFS Introduction