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- Marketing is not concerned with products but with creating value. How can value be created in financial services?
- There is a vast range of institutions engaged in offering financial services and a very wide range of offerings.
- There is still a tendency to ‘sell’ financial services. The increasing momentum of the S-DL view has profound implications for the way in which services are viewed by financial institutions (FIs). The concept of co-creation of value will bring about changes in the way that services are classified, produced and consumed.
- Corporate social responsibility (CSR) and related activities have been taken up by FIs, but, in spite of the outward manifestations of CSR, it is not clear how it really influences the way in which FIs conduct their business.
- The credit crunch may encourage FIs to move towards a customercentric perspective of marketing or S-DL view of value co-creation.
- A method of analysing the macro environment is essential for financial institutions, including such factors as political, economic and sociocultural environments and technology.
- Regulation by governments, central banks, financial authorities and other agencies has not been successful in bringing about responsible and sustainable behaviour in financial institutions.
- The micro environment can be analysed using a model developed from stakeholder theory that includes shareholders but also other stakeholders, such as managers and suppliers.
- Financial institutions are closely linked, lending and borrowing from each other. By adopting sustainable behaviours, consistently applied and practised, there is an improved chance of a longer-term view being taken.
- Marketing is generally concerned with developing strategies that have a medium- to long-term horizon; environmental scanning is central to this.
- This chapter discusses customer in financial services, whether B2C or B2B
- Customers can use rational models of decision-making in selecting financial services, with decision-making units often playing a role. Nonrational models have been suggested by postmodern contributions to marketing
- Customers perceive risk in the consumption of financial services owing to lack of service qualities, and may lack involvement.
- Satisfaction with financial services can exist at various levels according to the different types of services consumed.
- Customer loyalty operates at attitudinal and behavioural levels, with many customers being inert.
Business and consumer behaviour in financial services, unlike other areas of marketing, shares some common characteristics.
- Segmentation, targeting and positioning are key strategic activities, driving much of the marketing that financial institutions carry out.
- There is some tension as the larger banks have to adapt to targeting those segments that fit with their strategic objectives – for example, growth – while maintaining their connection with the segments that generate their profits.
- Indications show that serving the segments chosen by the financial service providers can be incompatible with the desired efficiencies of standardized offerings. Furthermore, many of us expect bank services as a matter of course; yet quite clearly bank shareholders expect a return from their investment, which raises the question of serving customers who do not fall into the desired segments.
- Positioning for financial service companies, brand and products is not easy to achieve, with overlaps and ambiguities arising.
In this chapter, we have explored the role of information in the marketing of financial services. FIs have to meet the requirements of regulatory bodies, as well analysing customer and market data to develop strategies. In order for FIs to make the most of the information that they collect, the organization itself has to have a learning culture so that it can move forward, learning through experience. FIs use the information that they have collected on their customers to develop strategies for a number of marketing activities as follows:
- Develop relationship marketing strategies.
- Cross- and up-sell financial services to customers that they have selected through analysis of their data.
- Through analysis, understand how to manage customer attrition or defection, customer satisfaction, customer persistence.
- To gain insight into managing customer share and size of wallet.
- To develop and maintain information systems that deliver value to selected segments and customers.
The chapter has also discussed loyalty schemes and their contribution to customer loyalty in the financial services sector. Information and research is increasingly subject to ethical scrutiny and all organizations have legal, social and ethical obligations to collect and manage customer information.
In this chapter, the following key points have been discussed:
- The nature of relationship marketing (RM): strategies and contexts for developing relationships, both interpersonally and in digital environments, using mobile devices and the Internet.
- Relationship marketing extends beyond the FI and the customer to include a range of stakeholders, such as employees and suppliers.
- Relational drivers, including customer satisfaction and trust and relational benefits.
- Creating relationships with stakeholders – for example, suppliers and referral markets – as a means of enhancing customer satisfaction and internal markets.
- Relationships with consumers and businesses: similarities and differences. Does RM work in consumer markets?
- There is a great deal of work to be done in financial services in achieving differentiation in a commoditized marketplace.
- In an increasingly virtual world of communications, where consumers have a growing role in branding, managers have to be aware of the consumer influence.
- The value of services is defined in terms of value-in-use by the consumer and stakeholders, with implications for managing the brand.
- A brand may need to reflect the identity of the customers/stakeholders and their communities rather than the FI itself, making a significant switch from aggrandizing the brand to maximizing customer value.
- UK and US FI brands have been weakened in the credit crunch, leaving European brands in a strong position to capitalize on their limited involvement in the toxic debt fall-out. If FIs are really seeking a brand that is relevant to a rapidly changing environment, then the credit crunch should prompt some radical action.
- A customer rarely goes shopping for a financial service; instead a product or offering is acquired and consumed for the benefit or value. They may also be purchased to avoid a particular outcome.
- New interpretations of marketing emphasize that customers seek value and that all a company can do is make a value proposition; the customer will derive value-in-use from the product/offering.
- New product development is more successful if the process is built around teams and involves a loop process.
- Service quality and service recovery are important parts of the offering as they form part of the customer experience.
- Products are eliminated from the product range when they cease to meet customer needs.
- Affinity cards offer opportunities for FI and customers, where a number of benefits can be amalgamated.
- Pricing in financial services quite often involves fees deducted from customer accounts, leaving the customer disempowered. FIs operate in mature and saturated markets with little opportunity for creative pricing strategies.
- Attempts to build relationships are undermined if customers face charges that they perceive as being unfair. FIs may be tempted to behave opportunistically in pricing owing to lack of transparency in the services.
- Customer expectations are now that price is a major determinant when choosing a financial service, although customers remain less aware of pricing in financial services.
- There is scope for FIs to think more creatively about pricing, especially within a framework of corporate and marketing objectives, asking how they may integrate pricing into strategies for retaining and acquiring customers.
- A value-based approach to pricing in financial services may generate more flexibility in pricing based on brand cues and perceptions of risk and quality.
- FIs now use a range of distribution channels, from the branch to the Internet, but the way in which the customer accesses it is part of the service itself.
- Customers will use different channels for different financial services, often based on what they consider to be convenient. Channel adoption depends in a range of variables that may include convenience, perceived usefulness or perceived ease of use. Multichannel banking is concerned with understanding and managing customer interactions across a range of channels.
- Purchases of financial services equally take place through diverse channels, either owned by the provider or via an intermediary. As the distribution of financial services becomes increasingly remote, providers face the challenge of building relationships that are based less on the personal interaction that occurs in the branch. Supermarkets are well poised to increase their status in personal financial services post-credit crunch.
- Earlier haste to migrate customers to cheaper channels has given way to promotional activities that feature phone numbers of local branches and call centres in the customers’ own country. Indeed, the role of the branch is being redefined, although financial service providers may choose alternative approaches to how the branch ‘fits’ in a multichannel environment. Crime, or the perceived level of crime, inhibits the penetration of alternative channels in the United Kingdom.
- Service quality remains as important as ever in managing channels and distribution. Remote channels may not be adequately resourced by FIs, with e-mails often unanswered.
- Marketing communications is a major marketing activity in financial services, but there is a shift from supply-driven advertising to demanddriven marketing solutions.
- There are three key strategies that underpin marketing communications activities – pull, push and profile – which interact and which will change in emphasis according to circumstances.
- Marketing budgets are best set by defining clear communication objectives that are measurable.
- The marketing communications mix consists of a number of different promotional activities, from advertising to public relations, and once more an integrated campaign will consist of a ‘mix’ of these activities.
- Going global requires an awareness of cultural matters, with particular attention to any imposition of western values. Glocalization is one strategy that recognizes that brand and promotional messages need to manage marketing communications both at global and local level.
- The credit crunch could enable FIs to rethink their IMC strategies and how they can re-engage their customers.
The link between objectives and strategy is demonstrated.
- Marketing strategies for financial services have been considered and evaluated in this chapter, especially considering strategies for growth highlighting the difficulties for FIs.
- A discussion of offensive and defensive strategies has shown how FIs need to balance the acquisition and retention of customers.
- Developing niche strategies and following the idea of being a niche company is considered in financial services, pointing out the problems of this strategy in a mature marketplace.
- FI adoption of corporate social responsibility is considered, with gaps identified between the rhetoric on the websites and evidence from green charities.
- Opportunities for companies largely unaffected by the credit crunch are evaluated, and whether they are able to maximize their advantage.
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