Unit 3-Marketing of Financial Services

7/28/2019 Unit 3-Marketing of Financial Services

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Marketing of Services


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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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Definition

A bank is a financial institution that accepts

deposits & channels the money into lending

activities.


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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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Market segmentation based on customer

ProfileRetail Banking

Commercial Banking

Corporate Banking

NRI Banking

Investment Banking


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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 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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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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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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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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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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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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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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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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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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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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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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Market Segmentation for Insurance

Individuals

Institutions

Industry Trade


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Product Life Insurance

Accident Insurance

Health Insurance

House Insurance

Liability Insurance

Travel Insurance

Commercial Insurance Property Insurance

Automobile Insurance


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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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.

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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.



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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.



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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



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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.



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Thank You

Documents

Unit 3-Marketing of Financial Services