Marketing Financial Services

Second edition

by Jillian Farquhar and Arthur Meidan

Key terms

a priori: a term originally referring to deductive reasoning, therefore in segmentation referring to predetermined segments

ATMs: automated telling machines more often referred to as ‘holes in the wall’, where customers can conduct transactions such as cash withdrawals, pay in money and check balances

behavioural segmentation: groups customers according to some extent of the way in which they have behaved, e.g. frequency of purchase, amount purchases

brand communities: often referring to online consumers who share a passion, or even a hatred, for a brand

business relationships: where relationship marketing started. Relationships with consumers followed when the benefits of relationships between businesses became evidents

channel strategy: the overall approach that an FI adopts in how it interacts and delivers its offerings

co-branding: bringing two or more brands together to mutually enhance all the brands through association

communications loop: a communications model that illustrates the importance of feedback in effective communication

communications objectives: setting clear aims for communicating with target groups

competitive strategies: strategies that enable the organization to compete against its rivals

corporate branding: where the company is the dominant brand, e.g., HSBC, instead of product brands or sub-brands
corporate social responsibility: a term indicating a company’s approach to behaving in accordance with social, ethical and business norms through self-regulation

corporate social responsibility: in marketing terms, this refers to adopting practices that, at least, do no harm or aim to achieve good

cultural values: different groups will interpret images and words according to their upbringing/education etc.

customer relationship management (CRM): usually refers now to the systems that support relationship marketing

customer satisfaction: originally the aim of marketing. Customer satisfaction does not necessarily lead to profitability

customer-centric: FIs’ actions are centred on the meeting and satisfaction of the customer

demographics: of human population, e.g. age, educational achievement

digital environment: as opposed to the physical environment, usually refers to the Internet, but increasingly to mobile devices, televisions etc.

dynamic segments: segments are not fixed and will change in nature, size and desirability

electronic channels: non-personal channels such as the Internet and mobile devices

ethical codes: codes that an FI follows in order to practise marketing or business according to moral values

evoked set: a set of products already in the memory of the customer which are under active consideration in the choice process

financial inclusion: a strategy to ensure that segments or groups of people not normally targeted by FIs are accorded basic financial services

fixed pricing: refers to charges that FIs make for being overdrawn, late payments etc. which are non-negotiable

geographic segmentation: a means of grouping customers according to where they live or work. Increasingly based on postcodes
globalization/global communications: communications that can transcend national, regional and cultural boundaries

growth strategies: strategies that will enable the organization to grow
independent financial advisers (IFAs): an important channel in the delivery of financial services to customers (see www.unbiased.co.uk)

inertia: a consumer state in which choices are made from habit and a lack of motivation to find an alternative product/provider
information management: the activities that support the collection and supply of information to stakeholders, sometimes referred to as
knowledge management

integrated marketing communications: interlinks a set of communication media to achieve an overall objective

internal marketing: an acknowledgement that staff need to be satisfied and partners in relationships with the provider to be able to generate service quality

involvement: a process in which a consumer will process information regarding a product/provider

lifetime value: a metric that attempts to calculate the value of a customer to an FI during the time that the customer remains with the FI

loyalty programmes: schemes that a FI develops to foster customer loyalty, often consisting of rewards to customers

loyalty: a state in which services a customer displays both a positive attitude and repeat purchase behaviour to a provider

macro environment: the wider business environment, including global economic and social trends
marketing communications mix: the various components that make up marketing communication, such as advertising and increasingly powerful digital communication

micro environment: the FI’s own operating environment, its competitors, customers and stakeholders

mobile banking: financial transactions that can be conducted via mobile devices

Multichannel banking: the provision of financial services via a number of different channels; the customers choose such channels they wish
dependent in the service/time, etc. access
offering: a term that covers both the product and the way in which it is delivered to the customer

outcomes: are customer loyalty and positive word-of-mouth communication

PEST analysis: one of the various analytic tools used to organize a scan of the macro environment (political, economic, social and technological)

post hoc: a means of segmenting customers on an analysis of their behaviour, usually using data based on behaviour

price bundling: where a number of products are grouped together to the customer in which some of the products generate revenue for the FI and some do not

pricing by channel: the practice where customers pay lower prices for using lower-cost channels. Hard to implement since customers tend to use a range of channels

pricing strategies: a range of approaches that an FI can adopt for pricing

product elimination: a process where products that no longer generate value to the FI are removed from the product portfolio

protection strategies: strategies that enable organizations to respond to harsh or volatile conditions

psychographic: segmentation where grouping is based according to lifestyle data or assumptions

rates: usually refers to the interest either paid or received on many financial products such as savings accounts, credit cards and mortgages

re-branding: when a company chooses to either strengthen an existing brand or to use a single brand instead of a number of sub-brands, e.g., Aviva

relationship marketing: when marketing is designed to engage customers in ongoing purchases through the establishment of a dialogue

relationship pricing: a pricing approval limit around an individual customer satisfaction

risk: refers to a perception that a product or the non-purchase of a product may have negative outcomes

satisfaction: an outcome in which customer expectations of a product/experience are met

securitization: a means of distributing risk in financial services through aggregating debt vehicles in a pool and then issuing new instruments

service quality: usually refers to the gap (or lack of one) that may occur between the customer’s expectation of the service and their perception of it

service recovery: a process in which an FI attempts to put right a service mistake or error in order to satisfy the customer

service-dominant logic: an evolving term that argues that services are now dominant in the marketing exchange

services: an offering in which the dominant part s intangible, which is the case in most financial services

servicescape: the in which the service is delivered/consumed

stakeholder environment: stakeholder theory states that shareholders at customers are not the only groups that an organization needs to serve and that there are a number of parties to whom it has responsibilities, such as employees

stakeholders: a group of organizations or people to whom a company has some kind of responsibility or duty. Includes shareholders but recognizes that there are other groups, such as employees

strategy: plans the allocation of resources to enable the FI to meet its organizational objectives.

sustainability: strategies and practices that focus on the long-term future of the organization and its stakeholders

switching: occurs when customers change from one provider to another, often to obtain better prices or services

technology: in the context of financial services, technology embraces the systems that underpin the delivery of the services, the information systems and the digital revolution driving fundamental changes in marketing, e.g., marketing communications

TOWS analysis: a straightforward, popular way of analysing the capabilities of the organization and its responses to the current environment

transparency: availability or disclosure of information to market participants

trust and commitment: both these constructs are central to the establishment of relationship marketing

value co-creation: where consumers are enabled by the service provider to use the offering in such a way that they can create their own value

value: the aim of marketing is to create/deliver an offering that allows the consumer/stakeholder to derive benefits particular to their needs/wants