Business islamica magazineIsLAMIc FInAncE EvOLUTIOn

By Joy Abdullah

soCial media as a growth driVer in retail islamiC FinanCe

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from anti-social to Pro retail

What do consumer marketing and retail Islamic Finance have in common? Well, for starters, retail Islamic finance can take a leaf (or rather the entire book!) out of consumer marketing and utilise that available body of knowl-edge to develop business strategies that are consumer centric in order to achieve organic growth. Or more specifically, utilise social media as a means of engaging with the consumer and achieving growth.

Post the global financial cri-sis and the resultant reces-sion, marketers across the globe are unanimous in ac-

knowledging that the consumers have had significant changes in the way they are interacting with brands and organisations. One of the key factors for this change is the rise of social media usage and the group exchange taking place through on-line and interest based communities, which has blurred the geographical borders of communication.

So how does social media, with its’ multitude of interest-based commu-nities, drive growth for the retail Is-lamic finance category?

LET’S START AT THE VERy BEGINNING. The Islamic finance industry has, so far, neglected retail banking de-spite the fact that retail banking can provide it with a funding base more stable than the current, main whole-sale and investment business. Ana-lysts say a number of retail custom-ers would switch from convention-al banks to Islamic banks for pure-ly religious reasons but customers would move if it was understood that Islamic retail financial products provided better earnings. “Unfortu-nately most Islamic retail banks do not appeal to this big segment in the market place,” Sameer Abdi told the Reuters Islamic Banking and Fi-nance Summit in Bahrain. Islamic Finance, post the glob-al financial crisis, has continued its’ steady ascendance across the globe. But each end market (coun-try) presents differing positions in terms of market maturity. This is coupled with issues on standardis-ation, regulations and products that appear to be a “me-too” of the con-ventional retail products. The net re-sult is this: a retail consumer mar-ket that is bewildered and perplexed

and without a full understanding of what is the benefit of a particular Is-lamic finance based retail product and not finding any easy means of obtaining this information! In this bewilderment, one common element that clearly comes through is the scant knowledge and research in the sector that has been impeding its expansion. Senior industry leaders have been crying out for increased levels of ed-ucation, awareness and change of perception. Daud Vicary Abdullah, Global leader of Islamic Finance at Deloitte said, “ I would like to press on with my theme of E.P.l. – Edu-cation, Perception and liquidity – as I sense that most things that are happening in the world of Islamic Fi-nance revolve around these three important key-note themes.” “It is evident that Islamic Finance In-stitutions (IFIs), largely driven by commercial goals, have not done enough to converse the fundamen-tal nature of educating and com-municating Islamic Finance’s social and economic value propositions.

Moinuddin Malim, CEO of Dubai -based Islamic banking entity Mashreq-Al-Islami, for his part said, “The only factor that is causing a hindrance towards the growth is lack of aware-ness. Islamic banking is in its infan-cy stage being just 35 to 40 years old. There’s a lack of awareness about it, so more time and money need to be spent on research and development. The growth that has been seen so far has been due to demand, but there are areas which need to be strengthened, especially the expansion of a product and ser-vice base for all segments, to com-pete effectively with the existing fi-nancial systems.” Given this clamour for education, awareness and a change in percep-tion, let’s take a quick look at why retail Islamic Finance is essential

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and how retail actually makes log-ical and profitable business sense:

1. ORGANIC GROWTH:As a profit making business enti-ty (and every Islamic retail banking entity is a profit making enterprise), generating organic growth is a key strategic area to focus upon. How do we achieve organic growth?

Best practices from consumer mar-keting show this can be done:• by offering a number of products that are needed and useful to the consumers AND• that facilitate their lifestyles AS WEll AS • by cross-selling the products Customers have evolved in their need for financial services and in the current, post recessionary eco-nomic scenario, they are looking for financial products and services which are inexpensive and yet pro-vide them with a higher return on their investments. The key here is to remember:• An existing retail customer is some-one who is already favourable and pre-disposed towards the retail brand AND

• It’s less expensive to increase us-age from an existing customer than it is to acquire, educate and create usage from a new one.Thus, by interacting with the exist-ing customers, and listening to them to understand their needs, the exist-ing products can be cross-sold (at a lower cost) and additional prod-ucts that have a captive market can be introduced. Cross-selling is a fre-quently and commonly used tech-nique in consumer marketing in or-der to maximise the brand’s share of consumers’ wallet and to keep brand loyalty while ensuring growth in mar-ket share and revenue contribution.The opportunity in retail Islamic fi-nance is to improve service stan-dards and deliverables in terms of communicating the ‘value proposi-tion’ of the brand better while simulta-neously reducing all operating costs. But current consumer offers (in re-tail Islamic banking) have often just been a clone of what the convention-al banks offer i.e. with limited training on how to “fit” a product based on the potential consumers’ need.

2. CONSUMER SEGMENTATIONIt’s critical to take into account that

consumers (Muslims and non-Mus-lims) are individual people with spe-cific, individual needs and lifestyles. These needs change as the con-sumer proceeds through his/her various milestones in life (first job, getting married, having the first kid, buying a house, etc.) At each of these milestones in the consumers’ life they have a pressing need for banking products and services that ‘benefit’ them and are not a general “one-size-fits-all” types.Consumer marketing dives deep into consumer segmentation in or-der to target specific groups to ful-fil a need that they have and create a competitive advantage as well as establish a brand differentiator. Re-tail Islamic finance has yet to make effective use of such in-depth con-sumer segmentation (which can be based on various socio-economic and cultural parameters) and anal-ysis on product sales and consum-er buying behavior. In practice, re-tail Islamic finance broadly has two segments: a) Premium services for the HNW (High Net Worth individual) and b) The rest of the target consumer population. By researching and segmenting the consumer groups strategically (i.e. marketing objective to be in sync with the business objective and thus identify the types of consumers that would be most profitable and sus-tainable) and analysing the con-sumers’ lifestyle (to identify poten-tial product requirements), behavior and preferences (of types of bank-ing services), the retail marketing team can identify potential product requirements and forecast consum-er profitability (for the organization). This kind and amount of in-depth analysis would clearly bring forth an “opportunity cost evaluation” i.e. the analysis will aid the retail marketing team to clearly quantify and identify which types of products or services not to pursue. This aids in conserv-ing resources which can be chan-nelled back into other consumer en-

Business islamica magazineIsLAMIc FInAncE EvOLUTIOn

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gagement activities in order to in-crease the individual consumer prof-itability.

3. PORTFOLIO EXPANSIONAn additional advantage, of doing in-depth consumer segmentation and mapping their lifestyles and key mile-stones in life, would be the ability to foresee potential products that would have a ready market. This would aid in bringing about products that would be viewed as innovative and paral-lel to existing conventional products, thus creating a product differentiator. Simultaneously, the lifestyle analysis of a consumer would enable the re-tail marketing team to look at provid-ing solutions through a suite of prod-ucts taken together by the consumer i.e. “package two or more products and cross-sell” at a single charge to the consumer. Such service inno-vations would help tremendously in expanding the retail product portfo-lio while providing profitability.

The key to all this are the consum-ers. Today, many consumers are us-ing social media through which their purchasing and brand relationship behaviour are influenced.Today social media acts as the glue holding like-minded individuals and in-terests together across the globe. It’s this individual interest area that can be used to spread effective under-standing of what is Islamic Finance.Social media can be a mixed bag of tricks. Utilising it, effectively, re-quires having strong consumer in-sights, based on the multi-cultural aspects of the online communities that are the foundation for an effi-cient social media strategy.

Given the current debates on stan-dards, retail product acceptance across all borders, the need to focus on liquidity management, and etc., the issue is can social media be an effective way to spread the ideas/logic of Islamic Finance to widen the industry’s appeal and generate mass acceptance?

TO ACHIEVE THIS, SOME STEPS ARE REQUIRED:1. Identify what are the key interests of the primary target group—the youth as they provide the opportu-nity to develop long term customers. 2. Identify certain common, inter-ests, such as online games. Take for instance Sudoku which is not exact-ly a social game but a logic-based puzzle. Sudoku has an enormous online following and has spread like wildfire in countries such as Japan and the UK. 3. Identify industry trends that youth could follow or latch on to such Ap-ple products, some of which have become fashion statements in terms of trendiness and that, in turn, spawns tremendous word of mouth online brand through discussion fo-rums and blogs.

SO HOW CAN SOCIAL MEDIA BENEFIT RETAIL ISLAMIC FINANCE?1. Stock-trading games: A Shari’ah-compliant stock-picking competition that can ignite interest at the col-lege/university level – once again a key target –ensuring the applica-tion contains Islamic finance com-ponents (i.e. cash is held/routed through no-interest accounts, no comingling of funds, etc.).2. Trends: Highlight how Islamic banking is growing and occurring in different parts of the world. Put out information on specific (and prob-ably common) products such as housing loans, educational loans—how the contracts are structured; why is there Takaful built-in into the product; highlight the benefit of the product vis-à-vis conventional prod-ucts, and more.

SUCH APPLICATIONS WOULD FULFIL TWO CRITICAL REQUIREMENTS: A. Initially, they will build greater in-terest in the Islamic Finance indus-try from amongst the College/Uni-versity students. This brings in a tal-ent pool considering a career and

enable the industry to have good, forward thinking, solution-oriented customers for whom to deliver prod-ucts based on consumer needs. B. Thereafter, the games and sim-ulations will allow for non-industry based consumers to also look at the industry and its overall message. Through such planned activity, re-tail Islamic Finance products would start being evaluated on their ratio-nal (product oriented) benefits and thereby appeal to the non-Muslim community and be a part of main-stream finance. Introducing such options would enable the industry to communicate with the youth in their own language and interest ar-eas thus drawing them to view (the information), participate (by playing the games or commenting on the trends for e.g.) and start to have a better understanding of what the Is-lamic Finance industry is all about. Such consumer fulfilment would lead to engagement between the in-dustry and end users. This engage-ment would lead to, most important-ly, a better knowledge of Islamic Fi-nance leading to a demand genera-tion which in turn would lead to the development of products that the market needs and thus provide a sustainable and profitable business operation for the IFI.A strategic brand marketing profession-al with expertise in business and brand planning, Joy’s competency is in creat-ing synergies in the business plan objec-tives and assisting the brand to deliver growth and profitability. Such synthesis of strategic planning enables Joy to aid brands in having a strong engagement with brand stakeholders. He has writ-ten many articles on the importance of ethical brand marketing encompassing brand reputation management, brand risk, employee-brand relationship and CSR. Articles, by the author, on Islamic Business can be viewed at http://rewir-ingbusiness.com/rewb-islamic-busi-ness-centre/rb-islamic-business-blog/. Joy Abdullah is a Senior Consultant at Daily Baraka Ltd and can be reached at joyabdullah@gmail.com.