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7/28/2019 Unit 3-Marketing of Financial Services
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Marketing of Services
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Marketing of Services
Evolution of banking
First evolved in Egypt & Greece centuriesago.
In India, the establishment of General bankof India in 1786 marked the origin of thebanking system in India.
Banking emerged in the organized sector inthe 19th century & developed significantly inthe 20th century.
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Marketing of Services
Definition
A bank is a financial institution that accepts
deposits & channels the money into lending
activities.
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Marketing of Services
Market Segmentation in Banking Industry
The basis of any segmentation is marketneeds or the customer base.
Earlier Banking segmentation was done ongeographic & demographic basis.
But later it was found that it is not suitable
due to change in the customer profiles &their needs.
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Marketing of Services
Market segmentation based on customer
ProfileRetail Banking
Commercial Banking
Corporate Banking
NRI Banking
Investment Banking
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Marketing of Services
Based on Customer Need, the loan market
can be divided intoConsumer Finance
Trade Finance
Corporate Finance
Project Finance
Venture Capital
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Marketing of Services
Marketing Mix
Product may be in the form of Core Product (BasicService offered & Augmented product (Supplementservices)
Core Products Saving Accounts
Salary Saving Account
Current Account
Fixed deposit
Loans (Two wheeler, home, personal, home-equity)
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Marketing of Services
Core Products (Contd..)
Overdrafts, credits, smart card
Payment services of utility bills
Advisory & Consultancy services
Augmented Product:-
Net, Phone, mobile, ATM, Mobile ATM banking,home banking
24-hours customer Care serviceAnytime & anywhere banking (customer is allowed to
conduct transactions in any of the banks branches)
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Marketing of Services
Pricing:-
Traditionally, the main source of revenue forany bank was the interest on investments &loans.
Modern sources of income for banks:-
The annual charges for credit & debit cards
PenaltiesCharges for payment of Utility bills
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Marketing of Services
Pricing (Contd.)
Pricing should take care of the cost of funds, the
administrative expenses, the credit losses
incurred & the expected profits. Pricing policyshould be dynamic that changes with the
changes in other elements of the product mix.
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Marketing of Services
Place
Electronic channels of distribution have become quitestrong with technological innovations which givesgreat flexibility & convenience to customers.
Conventional & modern distribution channels are :- Bank branches
Call Centers
ATMs
Internet banking & home bankingPlastic cards
Mobile offices & mobile ATMS
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Marketing of Services
Place (contd)
Some banks have their ATMs & extension Counters inthe premises of External organizations. E.g. banksATM in the premises of Corporate or Universities.
To reduce Operational costs, banks have cometogether to run ATMs that can be used by customers ofany bank.
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Marketing of Services
People
Very important marketing mix as banker can sell theloans & saving schemes as per customer requirements &can also inform them of the various benefits involvedwith the scheme which are not clear directly.
Process It plays a significant role in winning customers &
increasing market share. It is the processes in a bank that
determine the efficiency of its operations & quality ofservice delivery to customers. E.g. reduced time fortransactions, Processing of high value cheques, Demanddrafts preparation etc.
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Marketing of Services
Physical EvidenceAmbience, building & lawns
Air-Conditioned branch offices & ATMs
Furnished lounge for customers in queueAmenities like Newspapers, drinking water etc. for
customers
Displayed Awards & certifications like ISO 9001
Displayed achievements, financial results, businessmilestones
Cheque books, customers letters & brochures etc.
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Marketing of Services
Recent Trends in banking Branding banking services have become very
important in view of increased the competition &
little differentiation between services. More competition from NBFCs
Banking Industry is trying to make the best use oftechnology, while trying to avoid the pitfalls involved.
Banks have become more customer oriented & offercustomized services to meet individual needs
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Marketing of Services
Recent Trends in banking There is an increased focus on the high net worth customs
as they contribute more to the business.
Banks have been offering 24 hrs. service to customers all365 days of the year through their customer care center &anywhere, anytime banking service.
As more corporate turns to the equity market to raisefunds, banks see more prospects in the retail, agriculture
& infrastructure segments apart from personal banking. There has been a complete shift in the promotional
strategies of companies as well, as banks tie up withcompanies from other sectors to leverage the synergies
involved.
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Marketing of Services
Insurance Industry
Insurance Industry in India has transformed becauseof wide range of structural changes. These changesare driven by main 3 reasons:-
Changes customer profile & increased expectations
Increased competition because of foreign players &private players.
Value added products from insurers & advancementin technology have also aided this transformation.
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Marketing of Services
Market Segmentation for Insurance
Individuals
Institutions
Industry Trade
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Marketing of Services
Product Life Insurance
Accident Insurance
Health Insurance
House Insurance
Liability Insurance
Travel Insurance
Commercial Insurance Property Insurance
Automobile Insurance
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Marketing of Services
Product (Contd) Baggage Insurance
Marine-Cargo Insurance
Insurance is a means of security, Investment or tax
saving. Companies are striving for brand building as
there is less of product differentiation.
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Marketing of Services
Price
Pricing of life insurance is generally donebased on the competition, prevailing rate of
interest etc. However it is the quantum ofrisk involved that ultimately decided thepricing of Insurance products. Higher the
risk involved , higher is the price.Pricing can also be done taking advantage of
the demand fluctuations in the market.
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Marketing of Services
Place The Volume of business generated depends on the
companys reach is the why place is important.A insurance company needs to offer a personalized service
to customers to lower their perceived risk & for that it
needs the services of a large number of able agents. LIC isthe market Leader with a network of 2048 branches, 1 lakhemployees & app. 7-8 lakh agents.
The core product is best sold through personal selling,with customized offerings.
The Other distribution channels like Internet, Advertising,telemarketing etc. can be used to provide supplementaryservices to customers.
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Marketing of Services
Place
Some Innovative Changes like Bancassurance .
It is the distribution of Insurance products through abanks distribution channel e.g.
1. Tata AIG tie up with HSBC2. Bajaj Allianze tie up with syndicate bank.
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Marketing of Services
Promotion
Personal Selling
Advertising
Sales Promotion (Discounts, reduced premiums, giftcoupons, future price discount & special serviceenhancement)
Tie-Ups (Banks , credit card companies or automobile
companies) Public Relations
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Marketing of Services
Process
The process of buying an insurance product & payingthe regular premium has become a simple process inthe recent times.
Technological changes have helped simplifying theprocess in the insurance sector. The customer can nowgather more information on the internet, which helpshim choose his service provider & the service that will
cater best to his needs. Customer can even purchase a policy on Line
Processes have to customer friendly & time saving.
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Marketing of Services
People Insurance needs to be sold; very few customers would
buy it in the absence of selling.
Therefore the importance of people increases inInsurance industry which is dominated by agents &
Insurance advisors. The agents ability to convince & persuade is the
determining factor in an insurance deal. Therefore agentsneed to be empowered to offer customized services to suit
the specific needs of customers. They need to be motivated through commissions &
awards to achieve higher targets.
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Marketing of Services
People
Insurance companies have realized that it is important tohire agents who can win the trust & confidence ofcustomers. Therefore they have started recruiting retiredemployees from banks who already have a customer base& can win customers confidence .
Now a days they are appointing house wives as agents
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Marketing of Services
Physical Evidence In Insurance marketing , providing physical evidence to
the customers is quite difficult. As in most cases thecustomer buys the policy from agent & does not visit theoffice of Insurance company. Therefore the office building,
infrastructure, equipment etc. contribute very little tophysical evidence
However a good ambience, well dressed & well behavedemployees, displayed certificates & achievements of thecompany etc. are some of the techniques to providephysical evidence.
The policy certificate & the receipt of the paymentcontribute to minimizing the perceived risk of customers.
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Marketing of Services
Recent Trends in Insurance Marketing
Govt. of India set up a committee on reforms (theMalhotra Committee) in April 1993. The committeerecommended the entry of private & foreign players intothe industry.
The passage of the IRDA bill in 1999 initiated the reformsprocess.
By 2004, 12 Life Insurance companies & 9 general
Insurance companies were registered.
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Marketing of Services
Recent trends
Some of changes in Indian Insurance Industry over the pasthalf decade are :-
There is an increased awareness of Insurance among
consumers & so their expectations have gone up. The service portfolio of many Insurance companies have
expanded with the addition of Innovative services.
Market size has increased because of requirement of
specialized custom made services. Tech. developments & International standards have
improved the service Quality.
k i f i
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Marketing of Services
Portfolio Management
The growth of the Equity & debt markets inIndia has opened more avenues for investmentto the average Indian investor.
Definition of Portfolio Management:- Thisrefers to managing the funds of Individuals orInstitutional customers taking into
consideration their short-term & long termneeds. This involves maximizing the returns forthe customers while mitigating the risk.
M k i f S i
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Marketing of Services
Portfolio Management
Portfolio management needs the professionalexpertise of the portfolio managers, whotechnically analyze each investment option &
choose the ones that best suit the customerneeds.
It also involves distributing the available funds
among the investment options for the bestresults.
M k i f S i
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Marketing of Services
Market Segmentation
PMS are used by high net-worth individuals(HNIs) & corporate. However because of evolutionthe service is being extended to Individual
investors with an investments sum of even Rs. 5Lakhs. So market can be segmented into 3categories:-
1. Average Individual investor
2. High net worth individual
3. Corporate investors.
M k ti f S i
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Marketing of Services
Market Segmentation
The need of each segment is different. So the serviceprovider should target a specific segment.
Based on the services offered & the requirements of
the customer, the market can be divided into1.Discretionary services (Portfolio manager can take
independent investment decisions within the broadframework of asset allocation)
2.Non-discretionary services (Every decision requiresInvestors endorsement)
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M k ti f S i
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Marketing of Services
Price
Pricing is very important in the PMS sector as high fees can
turn awaythe potential customers towards mutual fund
schemes. Therefore pricing services competitively is almost
a necessity for the survival of the PMS companies.Pricing methods & the prices of these services vary from
service provider to service provider.
However, some of the most common used methods arepercentage of value of portfolio assets or a percentage of
returns.
M k ti f S i
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Marketing of Services
PeopleAs important investment decisions are taken
by portfolio managers so they are the veryimportant.
Portfolio managers are the most importantassets of a PMS company.
PMS dealing companies draw attention to
their expert managers in their advertisements& promotional campaigns.
M k ti f S i
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Marketing of Services
Place
One of the major factor for the growth of PMS
in India has been the time or expertise of the
individual & institutional investors.Internet as a Distribution channel offers greater
convenience & time saving to the investors.
However the role of people who convincecustomers for various investment options can
not be ignored.
Marketing of Services
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Marketing of Services
Promotion
Personal Selling & Price discounting
Some companies offer price discount schemewherein only the performance fee is charged,that is, the customers need to pay only if theirportfolio performs well.
PMS companies can have tie-up with reputedbanks to add credibility to their services.
Marketing of Services
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Marketing of Services
Process The process of portfolio management starts with
understanding the requirements of the customer & hisprofile.
This includes understanding his investment objectives,liquidity constraints, time horizon, tax status & risk profile.
The next step is the asset allocation to diff. segments of theportfolio like mutual funds, insurance, bonds, bankdeposits, real estate etc.
Finally the performance of the portfolio is tracked &necessary action is taken time to time to improve thereturns
Marketing of Services
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Marketing of Services
Physical Evidence
High value involved so high chances thatcustomer would visit the premises soinfrastructure & the ambience should convey
the message of trustworthiness of the serviceprovider & the quality of services.
Should display achievements, clearance from
regulatory bodies, Quality compliancecertification , past performance track etc.
Marketing of Services
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Marketing of Services
Thank You