Marketing of Financial Services

PAPER 5 : MARKETING OF FINANCIAL SERVICES
Full Marks : 100

Module A: The Role of Marketing

• Introduction- The Marketing Function- The Comparative Development of Marketing for Banks and Financial Institutions. Elements of Marketing.
  

Module B: Customer Behavior and Market Segmentation

• Introduction- Consumer Behavior and Attitudes- Types of Market Segmentation-Segmentation of Retail vs Corporate Markets.
  

Module C: Branch Location and Distribution

• Introduction- Means of Distributing Financial Services- Locating Bank Branches- New Technology and Branching- Creating the Branch Image.

Module D: Advertising and Communication

• The Roles of Advertising- Advertising Channels- Promotions- Publicity- The Contribution of Advertising and Communications to Marketing Programmes of Financial Institutions.

Module E: Product Development and Pricing

• Product Development and Segmentation- Special Features of Product Development-Product Development Strategies- the Implications of New Technology for Bank Product Development. Pricing Systems- Methods of Pricing- Price Policies: Strategic V. Tactical Goals- the Marketing Programmes of Financial Institutions.
  

Module F: Marketing Strategies of Financial Institutions

• Introduction- Corporate Planning- Formulating a Marketing Strategies for Banks and Financial Institutions, Implementing Marketing Strategy. Marketing Strategy of New Products.

Module G: Marketing Administration

• Administering the Marketing Programme- Administration of Retail V. Corporate Financial Markets. Future Outlook.
  

Module H: Marketing Research in Financial Institutions

• The Role and Functions of Marketing Research in Financial Institutions- The Research Methodology- Evaluating Marketing Research Programmes- Applications of Marketing Research in Financial Institutions.
  

Module I: Marketing of Financial Services in Bangladesh

References 

1. Andrew, Kenneth. Bank Marketing Handbook.
2. Arthur, Mechian. Bank Marketing Management.
3. Kotler, Marketing Management

  ------------------------Syllabus End--------------------

Q. What do you mean by strategic business unit (Nov’11)?

Strategic business unit (SBU): In business, a strategic business unit is a profit center which focuses on product offering and market segment. strategic business units typically have a discrete marketing plan, analysis of competition, and marketing campaign, even though they may be part of a larger business entity.

An strategic business units may be a business unit within a larger corporation, or it may be a business unto itself or a branch. Corporations may be composed of multiple strategic business units, each of which is responsible for its own profitability. General Electric is an example of a company with this sort of business organization. Strategic business units are able to affect most factors which influence their performance. Managed as separate businesses, they are responsible to a parent corporation.

An example of a strategic business unit is General Electric. Product offering typically encompasses a strategic business unit.

Q. Define service differentiation with features (Nov’11).

Service differentiation: The concept of being different is very much essential in today’s world of cut-throat competition. The difference of one product from its competitor is the revenue that it earns. Products have to be different in order to survive the competition. It is not just the domestic competition but also the competition from and in abroad, as one country produces and sells in another country while some other countries produce and sell in our country. The targeted customers have many options. Choosing among options is always based on differences, implicit and explicit. So, one must differentiate in order to attract the customer and make him/her buy the product.

Creating differentiation in one’s own product and services is a better way to avoid competition. One can offer a number of possible options in products to the customers. Every type of customer can choose a product which he/she likes. In this way, low-end, mid-end or high-end customers, all of them will have a product choose from. Common differentiations include, speed, performance, quality, responsiveness, availability, ease or integration.

All the above mentioned points are for a tangible product. But, how can we differentiate services. It is easy when the differentiation of variables is tangible as in the case of product but, difficult in case of services. If the product has not many tangible features, then adding value-added services to the product is one of the methods. This process is called service differentiation.

The main features of service differentiation:

Ease in ordering: Corporations like Dell, Baxter Healthcare and web-based services like peapod and net grocer have eased the process of placing an order. One does not have to step out of the house to buy the product.

Delivery: it is related to how well a product or a service is delivered to the customer with speed and accuracy. The best examples are again Dell, which delivers its products right at the doorstep of the customers.

Installation: it refers to the work undertaken to make the product operational at the prescribed location. Buyers of heavy equipment expect good installation service. Differentiation by installation is particularly important for companies that offer complex products such as computers and machinery.

Customer training: It refers to how the seller provides training to the buyer about the product and how to use it. General Electric supplies and installs expensive X-rays equipment in hospitals but also gives extensive training to the staff of hospitals about using the machines.

Customer consulting: It refers to the data, information systems and advising services that the seller offers to buyers. For example, the Rite aid drugstore chain’s communication program, called the Vitamin Institute provides customers with research so they can make more educated judgments and feel comfortable asking for help. On the web, Rite Aid has teamed up with drugstore.com to offer even more comprehensive health related information.

Maintenance and Repair: It refers to the post-sale services which generally include maintenance and repair services. Automobile manufacturers are often seen providing free services initially for the automobiles.

References: www.helpwithassignment.com

Q. What do you mean by product line (Nov’11)?

Product line: A group of related products manufactured by a single company.  In marketing jargon, product lining is offering several related products for sale individually. Unlike product bundling, where several products are combined into one group, which is then offered for sale as a unit, product lining involves offering the products for sale separately. A line can comprise related products of various sizes, types, colors, qualities, or prices.

For example, a cosmetic company's makeup product line might include foundation, concealer, powder, blush, eyeliner, eye shadow, mascara and lipstick products that are all closely related. The same company might also offer more than one product line.

References: http://www.investopedia.com
                       http://en.wikipedia.org

Q. What do you mean by competitive strategies (Nov’11)?

Competitive strategies: Competitive strategies are the method by which you achieve a competitive advantage in the market. There are typically three types of competitive strategies that can be implemented. They are cost leadership, differentiation and a focus strategy. A mixture of two or more of these strategies is also possible depending on your business' objectives and current market position.

Cost leadership: The aim of this strategy is to be a low-cost producer relative to your competitors and is particularly useful in markets where price is a deciding factor. Cost leadership is often achieved by carefully selecting suppliers and production techniques to minimize production, distribution and marketing costs. However you need to be aware of any serious loss in quality that may render low cost ineffective.

Differentiation: A differentiation strategy seeks to develop a competitive advantage through supplying and marketing a product that is in some way different to what the competition is doing. If developed successfully this strategy can potentially reduce price sensitivity and improve brand loyalty from customers.

Focus strategy: This strategy recognizes that marketing to a homogenous customer group may not be that effective a strategy for the product the business is selling. Instead the business focuses its marketing efforts on a different selected market segments. That is, identify the needs, wants and interests of the particular market segments and customize marketing techniques to reflect those characteristics.

References: http://toolkit.smallbiz.nsw.gov.au

Q. What do you mean by Consumerism (Nov’11)?

Consumerism: Consumerism is a social and economic order that encourages the purchase of goods and services in ever-greater amounts. Early criticisms of consumerism are present in the works of Thorstein Veblen (1899). Veblen's subject of examination, the newly emergent middle class arising at the turn of the twentieth century, comes to fruition by the end of the twentieth century through the process of globalization. In this sense, consumerism is usually considered a part of media culture.

The term "consumerism" has also been used to refer to something quite different called the consumerists movement, consumer protection or consumer activism, which seeks to protect and inform consumers by requiring such practices as honest packaging and advertising, product guarantees, and improved safety standards. In this sense it is a movement or a set of policies aimed at regulating the products, services, methods, and standards of manufacturers, sellers, and advertisers in the interests of the buyer.

For example, an industrial society that is advanced; a large amount of goods is bought and sold. Sometimes referred to as a policy that promotes greed, consumerism is also coined as a movement towards consumer protection that promotes improvement in safety standards and truthful packaging and advertisement. Consumerism seeks to enforce laws against unfair practices implement product guarantees.

References: http://www.investopedia.com
                       http://en.wikipedia.org

Q. What is the Marketing Communications Mix (Nov’11)?

The Marketing Communications Mix: The Marketing Communications Mix is the specific mix of advertising, personal selling, sales promotion, public relations, and direct marketing a company uses to pursue its advertising and marketing objectives.

Advertising: Any paid form of non personal presentation and promotion of ideas, goods, or services by an identified sponsor.

Figure: Marketing Communication Mix

Personal selling: Personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships.

Sales promotion: Short-term incentives to encourage the purchase or sale of a product or service.

Public relations: Building good relationships with the company’s various publics by obtaining favorable publicity, building up a good "corporate image", and handling or heading off unfavorable rumors, stories, and events.

Direct marketing: Direct communications with carefully targeted individual consumers to obtain an immediate response and cultivate lasting customer relationships.

References: http://www.themarketingguywhodrivessales.com

Q. What is window dressing (June’13)?

Window dressing: Window dressing is a term that describes the act of making a company's performance, particularly its financial statements, look attractive.

A strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings.

How It Works/Example: Let's assume Company XYZ wants to look attractive to potential acquirers. It might do some window dressing by announcing much higher sales projections, obtaining and holding a lot of cash, or making other announcements that are likely to raise the stock price, even if only for a short time. The objective is to make a favorable impression on potential acquirers.

Companies are not the only ones to engage in window dressing. Mutual funds do it as well, often by cutting their losses and buying high-fliers (sometimes that are not even in the fund's investment sector) near the end of a reporting period.

References: http://www.investinganswers.com

                       http://www.investopedia.com

Q. What is Customer Loyalty (June’13)?

Customer Loyalty: Customer loyalty is all about attracting the right customer, getting them to buy, buy often, buy in higher quantities and bring you even more customers. However, that focus is not how you build customer loyalty.

You build loyalty by-

1.      Keeping touch with customers using email marketing, thank you cards and more. 
2.      Treating your team well so they treat your customers well. 
3.      Showing that you care and remembering what they like and don’t like.
4.      You build it by rewarding them for choosing you over your competitors. 

5.      You build it by truly giving a damn about them and figuring out how to make them more success, happy and joyful. 

Figure: Customer Loyalty Cycle

In short, you build customer loyalty by treating people how they want to be treated. Does your marketing plan include strategies and tactics for customer loyalty & customer retention?

References: http://www.customerloyalty.org

Q. What is musharaka product (June’13)?

Musharaka product: Musharaka is a contract of partnership between two or more parties in which all the partners contribute capital, participate in the management, share the profit in proportion to their capital or as per pre-agreed ration and bear the loss, if any, in proportion to their capital/equity ratio.

In the Islamic Banking context, the Islamic Bank may be a partner with its client for running a business where both of them contribute capital, either both of them or the client alone take part in the management of business as per terms of the contract and share the profit as per agreed ration or bear the loss, if incurred, as per their capital/equity ratio.

Q. What is Millionaire Deposit Scheme (June’13)?

Millionaire Deposit Scheme: Millionaire Deposit Scheme (MDS) Account is a time specified monthly deposit scheme for clients where the deposited money will become one million on maturity.

Features and Benefits:

1.      Tenor: 4, 5, 6, 7, 8, 9 and 10 year’s term;2.      Deposit on monthly installment basis;
3.      Attractive rate of interest;
4.      Account can be opened at any working day of the month;
5.      Monthly installment can be deposited through a standing debit instruction from the designated CD/SB Account;
6.      Monthly installment can be deposited in advance;
7.      An account can be transferred from one branch to another branch of the bank;
8.      Credit facility for maximum of 2 years can be availed at any time during the period of the scheme;
9.      Allowed to open more than one MDS Account for different amount at any branch of the Bank;

But these features and benefits can be varied bank to bank.

Q. What is Mobile Banking and Internet Banking (June’13)?

Mobile Banking: Mobile banking is a system that allows customers of a financial institution to conduct a number of financial transactions through a mobile device such as a mobile phone or personal digital assistant.

Mobile banking differs to mobile payment's which involves the use of a mobile device to pay for goods or services either at the point of sale or remotely, analogously to the use of a debit or credit card to effect an EFTPOS payment.

The earliest mobile banking services were offered over SMS, a service known as SMS banking. With the introduction of smart phones with WAP support enabling the use of the mobile web in 1999, the first European banks started to offer mobile banking on this platform to their customers. Mobile banking has until recently (2010) most often been performed via SMS or the mobile web.

Internet banking: Online banking (or Internet banking or E-banking) allows customers of a financial institution to conduct financial transactions on a secured website operated by the institution, which can be a retail bank, virtual bank, credit union or building society.

To access a financial institution's online banking facility, a customer having personal Internet access must register with the institution for the service, and set up some password (under various names) for customer verification. The password for online banking is normally not the same as for [telephone banking]. Financial institutions now routinely allocate customers numbers (also under various names), whether or not customers intend to access their online banking facility. Customer’s numbers are normally not the same as account numbers, because number of accounts can be linked to the one customer number. The customer will link to the customer number any of those accounts which the customer controls, which may be cheque, savings, loan, credit card and other accounts. Customer numbers will also not be the same as any debit or credit card issued by the financial institution to the customer.

To access online banking, the customer would go to the financial institution's website, and enter the online banking facility using the customer number and password. Some financial institutions have set up additional security steps for access, but there is no consistency to the approach adopted.

The common features fall broadly into several categories

A bank customer can perform non-transactional tasks through online banking, including -

• Viewing account balances
• Viewing recent transactions
• Downloading bank statements, for example in PDF format
• Viewing images of paid cheques
• Ordering cheque books
• Download periodic account statements
• Downloading applications for M-banking, E-banking etc.

Bank customers can transact banking tasks through online banking, including -

• Funds transfers between the customer's linked accounts

• Paying third parties, including bill payments (see, e.g., BPAY) and telegraphic/wire transfers

• Investment purchase or sale

• Loan applications and transactions, such as repayments of enrollments

• Register utility billers and make bill payments

 References: http://en.wikipedia.org/wiki/Internet_Banking

Q. Discuss the importance of strategic planning in the development of Bangladesh Banking Services (June’13).

Importance of strategic planning in the development of Bangladesh Banking Services: Strategic planning is the most important key for solving strategic tasks; it is the process of developing, controlling and maintaining a strategic balance between organizational goals and resources in the market environment. A strategic plan is a set of activities that are geared towards an organizations growth and success. Strategic management refers to the art of business planning at the highest possible level implemented by the company's leader or leaders and is focused on building a solid underlying foundation for a company.

Simply put, a strategic plan is the formalized road map that describes how your company executes the chosen strategy. A plan spells out where an organization is going over the next year or more and how it’s going to get there. Typically, the plan is organization-wide or focused on a major function, such as a division or a department.

A strategic plan is a management tool that serves the purpose of helping an organization do a better job, because a plan focuses the energy, resources, and time of everyone in the organization in the same direction.

If you’re thinking, “Hey, I’ve got this great book on business plans, so I’ll just use that to form my strategic plan,” be aware that strategic plans and business plans aren’t the same concepts.

A strategic plan is a management tool that C-level managers need to master and is for established businesses and business owners who are serious about growth. It also does the following:

1. Helps build your competitive advantage
2. Communicates your strategy to staff
3. Prioritizes your financial needs
4. Provides focus and direction to move from plan to action

A business plan, on the other hand, is a planning tool for new businesses, projects, or entrepreneurs who are serious about starting a business. A business plan

1. Helps define the purpose of your business
2. Helps plan human resources and operational needs
3. Is critical if you’re seeking funding
4. Assesses business opportunities
5. Provides structure to ideas

Key components of strategic planning:

Vision: Outlines what the organization wants to be, or how it wants the world in which it operates to be (an "idealized" view of the world). It is a long-term view and concentrates on the future. It can be emotive and is a source of inspiration.

For example, a charity working with the poor might have a vision statement which reads "A World without Poverty."

Mission: Defines the fundamental purpose of an organization or an enterprise, succinctly describing why it exists and what it does to achieve its vision.

For example, the charity above might have a mission statement as "providing jobs for the homeless and unemployed".

Values: Beliefs that are shared among the stakeholders of an organization. Values drive an organization's culture and priorities and provide a framework in which decisions are made. For example, "Knowledge and skills are the keys to success" or "give man bread and feed him for a day, but teach him to farm and feed him for life". These example maxims may set the priorities of self-sufficiency over shelter.

Strategy: Strategy, narrowly defined, means "the art of the general" -a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there. A strategy is sometimes called a roadmap - which is the path chosen to plow towards the end vision. The most important part of implementing the strategy is ensuring the company is going in the right direction - defined as towards the end vision.

So, we can say that strategic planning in the development of need for any organization not only Bangladesh Banking Services.

References:  http://en.wikipedia.org

http://www.dummies.com

http://www.techrepublic.com

Q. Graphically explain the major stages of a marketing strategy formulation (June’13).

Details are coming soon……

To be Continue.............