Sales and Marketing for Financial Institutions Essay Example
Sales and Marketing for Financial Institutions Essay Example

Sales and Marketing for Financial Institutions Essay Example

Available Only on StudyHippo
  • Pages: 15 (4081 words)
  • Published: April 7, 2017
  • Type: Research Paper
View Entire Sample
Text preview

What is marketing?

Marketing encompasses a range of coordinated activities, including product/service development and management, pricing determination, implementation of communication and promotion strategies (such as advertising and direct marketing), market research, branding and positioning establishment, and distribution organization. However, marketing goes beyond mere oversight of these activities. It is a management philosophy that prioritizes achieving and maintaining customer satisfaction (or value) – an ideology that should be ingrained in all organizational levels. Consequently, every employee within an organization bears the responsibility for this perspective, not just those in the marketing and sales departments. This viewpoint finds support from Ennew, Watkins and Wright (1995, p.

The concept of 'marketing' encompasses various organizational functions such as advertising, branding, packaging, pricing, product management, and distribution. However, it also represents a broader business philosophy that guides an org

...

anization's activities. This philosophy prioritizes long-term consumer satisfaction and requires the dedication of the entire organization to meet market needs in order to achieve success.

Creating a marketing orientation can be more challenging than simply developing marketing functions. This orientation emphasizes and dedicates itself to the market.
The core emphasis in marketing is ensuring customer satisfaction. The word "customer" originates from "custom" or "habit," indicating that the objective of marketing is to foster regular engagement with an organization. Essentially, there are two main customer groups - primary customers and secondary customers.

Customer satisfaction is crucial for any organization as it involves prioritizing the needs of the main customers, who directly purchase the organization's products or services. The characteristics of these primary customers can differ depending on the type of financial services and institution involved. For example, a retail bank's typical primary customer would be an

View entire sample
Join StudyHippo to see entire essay

adult living in suburbs who utilizes transaction accounts, credit cards, and home loans. Conversely, an institutional bank may consider senior executives and board members of large publicly-traded corporations with global operations as their primary customers. Primary customers consist of both current and recurring purchasers of an organization's offerings.

The organization must develop and implement retention strategies to keep existing customers and acquisition strategies to attract and convert prospective customers. Secondary customers include stakeholders who have an interest in the organization and its products or services, but may not directly purchase them. Examples of secondary customers include shareholders and government entities.

The organisation's reputation can be significantly impacted by individuals or groups such as regulators, media, the community, analysts, and suppliers. While their influence may not have immediate effects on revenue or profitability, it can greatly impact long-term results of customer acquisition and retention. Public relations (PR) professionals typically handle communication with these stakeholders, often reporting to the marketing division's leader. In some cases, PR is seen as a separate function reporting directly to the CEO, managing all corporate communications.

An important secondary customer group for an organisation is its own staff. If the employees are not supportive, it becomes difficult for the organisation to encourage its primary customers to have a positive view of it and its products and services. Therefore, the needs and attitudes of frontline employees, support staff, management executives, and the board must be considered in the development and implementation of any marketing activity. The following excerpt titled 'Required reading 1' provides a brief introduction to the discipline of marketing, specifically focusing on the unique characteristics of financial services.


Relationship between

corporate and marketing strategies

Marketing activities are conducted within the broader framework of an organisation's overall corporate strategy.

The organization's marketing goal is to acquire and retain customers, which helps achieve its overall objectives of revenue growth and increased profitability. Corporate strategies involve coordinating the critical functions of marketing, finance, production/service delivery, human resources, and information and technology management to ensure an effective organization.

Corporate strategy focuses on the entire organization, including the economic value, financing requirements, shareholder value, and dividend requirements. It develops a vision for the future of the business (Brown 1997, pp. 10–11). Corporate strategies address long-term considerations and include a vision, purpose or mission, corporate goals and objectives, and strategies.

Functional strategies

The corporate strategy is the overarching document, while functional strategies or plans provide practical expression to the goals and objectives set out in the corporate strategy.

These functional strategies typically include the finance strategy (or budgets), the human resources strategy, the operational strategy and the marketing strategy. Therefore, marketing, while a central activity within an organisation’s overall pursuit of its goal or mission, is just one subordinate expression of how the organisation’s corporate or strategic objectives will be achieved. To be both effective and efficient, all the various functional strategies must work together.

Example

The interrelationship of functional strategies is exemplified by an organisation's corporate strategy and its objective to have the largest share of the Australian superannuation funds management market by the end of 2013. The broad goals of the various functional strategies can be as follows: Marketing strategy: Considering entering new market segments, developing new products or services, pricing to gain market share, promoting to attract

key customer segments and distributing to satisfy them. Operational strategy: Demonstrating how all these services can be provided and distributed and how customers who use them can be serviced effectively.

The HR strategy is centered on ensuring the availability of individuals with the necessary skills in sufficient number and variety. Conversely, the finance strategy aims to guarantee adequate funds for implementing these strategies as needed. One practical application of this knowledge would be incorporating marketing strategies into your organization's corporate strategy. It is essential to identify specific objectives within the corporate strategy that have a strong focus on marketing.

Both explicit and implicit activities require a focus on target customers or audiences. If your organization has a separate marketing strategy from the corporate strategy, it should establish objectives. The overall success of an organization depends on its ability to compete against other organizations offering similar products or services in a specific market. There are numerous theories that explain how an organization can achieve and maintain a competitive advantage in such an environment, with marketing playing a crucial role. Two notable theories include Porter's competitive strategy theory, which was introduced by Michael Porter as a significant breakthrough in strategic thinking during the 1980s and suggests three bases for gaining market advantage, and the marketing warfare and positioning theories advocated by Al Ries and Jack Trout.

According to Porter (1985), competitive advantage can be achieved through three strategies: cost leadership, differentiation, and focus. Cost leadership involves becoming the lowest cost producer in the industry by selling a standard or no-frills product and obtaining cost advantages from all sources. Differentiation focuses on being unique in the industry by meeting the important

needs perceived by buyers and positioning the firm accordingly. Focus involves selecting a specific segment or group of segments in the industry and tailoring strategies to exclusively serve them. These strategies were defined by Porter (1985) on pages 12-13 for cost leadership and page 4 for differentiation.

Porter argues that organizations must have a competitive strategy in order to operate effectively. This strategy should provide customers with something valuable (e.g.

Porter (1980, p. 4) states that competition in an industry is influenced by various factors such as lower prices, increased perceived value, and specialization and expertise. These factors enable organizations to provide more value at a lower cost compared to competitors, making competitive advantage crucial for success.

If a company lacks a competitive advantage, it risks being seen as similar to other businesses in the market. This lack of differentiation means customers have no specific reason to choose them over others. The competitive advantage should bring value to customers and ideally be exclusive and hard for others to copy. In competitive environments where customers have choices, competitors can easily enter or leave markets, and there are readily available alternatives for products and services.

Bonds are a substitute for shares as an investment, as well as property, and where market power can be influenced by the relative strength of suppliers and buyers, not just the organization and its competitors.
Positioning theory and marketing warfare theory
Two complementary models of competitive strategy are ‘positioning theory’ and ‘marketing warfare theory’, both popularized in the 1980s by Al Ries and Jack Trout. According to positioning theory, an organization’s corporate strategy should be developed in response to customers’ perception of its products or

services compared to competitors. The organization's main objective is to establish a clear market ‘position’ in the minds of consumers. Marketing warfare theory aims to draw parallels between corporate competition and military strategy, with market share seen as disputed territory. Corporate success, therefore, involves defeating competitors to achieve dominance in market share within a specific industry or market segment.

Key trends affecting financial services marketing include the deregulation of markets, the growth in personal wealth, globalisation, and technology. The deregulation of markets has eliminated barriers to competition from outside national borders and non-traditional competitors such as retailers offering financial services, insurance companies entering banking, and banks entering stockbroking and insurance markets.

The removal of barriers to organizations seeking growth in national and international markets has resulted from this deregulation. This is particularly relevant to the financial services market due to the trend of increased personal wealth in developed economies and government policies emphasizing reduced government involvement. Privatization of government assets, retirement savings requirements, and user-pay policies in health and education exemplify this trend. In economies like Australia and the United Kingdom, which were previously heavily government-controlled, the rise in personal shareholdings and superannuation holdings has driven significant growth in both retail and institutional sectors of the financial services industry.
Furthermore, globalization has been amplified by the deregulation and liberalization of global markets, enabling organizations to compete globally.

Financial services organizations are increasingly expanding into other economies or markets, both within national borders and globally, in order to mitigate risk and leverage opportunities for global economies of scale. This trend is particularly prevalent among major multinational corporations in various industries who are seeking services from suppliers with global operations. Communication

technology, including the internet, plays a crucial role in enabling this expansion by providing real-time access to information and facilitating targeting of specific market segments without the need for physical presence or infrastructure.

Several social, economic, and political trends have influenced business practices in the financial services industry. These include deregulation, globalization, growth in personal wealth, and technological advancements. In light of these trends, it is important to consider how they will impact marketing strategies employed by financial services organizations.

It is essential to reflect on how these trends will shape the approach of these organizations towards their marketing efforts. Additionally, what can be expected regarding market categories such as retail banking, funds management, institutional banking or insurance due to these significant trends? According to Kotler et al., the 'marketing mix' is a crucial element in marketing strategies encompassing controllable market variables such as product price promotion and place.

According to Kotler et al. (2004, p. 109), the customer's interaction with a company's product or service offering is influenced by the 'four Ps' of marketing - product, place, promotion, and price. To effectively meet their marketing goals and deliver value to customers, a successful marketing program integrates these elements into a unified strategy.

According to Smith (2004, p. 111), an organisation can position itself in the marketplace by blending the variables that make up the marketing mix. Therefore, marketers must carefully plan and integrate their organisation's marketing mix.

The importance of pricing in the marketing mix is emphasized, along with the introduction of additional elements including people, process, and physical evidence. It underscores the necessity of customizing the marketing mix for each specific target customer segment.

Product includes everything related to

an organization's products or services, such as characteristics, physical qualities, specifications, packaging, quality, quantity options, warranties, and terms and conditions.

The term "product" refers to the customer's experience of goods or services and their relevance to the customer's specific needs or desires. In the financial industry, "product" typically pertains to a service rather than a physical item. Services differ from physical goods as they are intangible processes or experiences that cannot be physically owned by customers like a tangible product can be. However, it is common for us to use possessive language when discussing services (such as saying "my bank account" or "my holiday"), even though we do not truly possess the services themselves. For instance, a bank account represents our entitlement to have various financial transactions conducted on our behalf by the account provider, while a holiday ticket grants us access to transportation, accommodation, and recreational activities.

Despite appearing to be owned, financial services are not possessions in the traditional sense. This is because services primarily consist of experiences, making their most recognizable trait their intangibility. Essentially, services do not have a physical form and cannot be observed, touched, or exhibited prior to purchase. Intangibility is one of four fundamental characteristics used to differentiate services from tangible products like fast-moving consumer goods, durable goods, and major appliances. The other distinguishing characteristics are inseparability, variability, and perishability.

When purchasing a service, the customer does not receive a physical or tangible item that gives them a sense of ownership. Marketing services is therefore more complicated than marketing products. Unlike physical products that can be touched, felt, tried on, tasted, etc. for evaluation of their performance and benefits, services can

only be evaluated through the experience of using them, which requires making a purchase.

Inseparability: The presence or involvement of the customer is necessary for services to exist, unlike physical products such as cars which exist independently of customer purchases.

Variability: Services are highly dependent on the individuals and processes involved in their creation and delivery, as well as the outcomes of the service, whereas products are less influenced by these factors. For instance, if a customer purchases a 55 gram Mars Bar® today, it is likely to be similar to the one they bought a month ago.

Some services provide guaranteed outcomes under specific conditions. For example, if you leave your money with us for 90 days, we will pay you interest at a rate of 4.75% p.

Services can vary greatly depending on factors such as skill, knowledge, and prescience of individuals or processes that provide them. While some services, like legal advice, have a predictable outcome, others, such as investment advice, can be highly variable. Investments made today may yield different returns from those made a month ago. Hence, these services are considered to be highly variable.

Perishability refers to the fact that a service has an expiration date, meaning that it cannot be offered or utilized after a certain point. For instance, it is impossible for a customer to purchase fire insurance for their house after it has already caught fire, and there is no market for booking seats on a plane once it has already departed. In both cases, the service has ceased to exist. This concept also applies to financial services, where the interest rate being offered is only applicable

if the customer invests their money at that particular moment.

If an investment is made tomorrow, it is likely that the rate and terms will be different, and today's offer will no longer be valid. Managing customer perceptions is crucial to overcome the challenges posed by intangibility, perishability, variability, and inseparability in service marketing. Marketers need to focus on creating a positive impression and differentiating their services through intangible cues or signals. For instance, the perceived value of being the world's largest stockbroker is directly related to an investor's perception of size. Similarly, the benefits of being Australia's oldest bank depend on a customer's understanding of longevity. Ultimately, customers can only evaluate these advantages based on previous experiences with similar services and their perception of the service's value.

The component of the marketing mix known as "place" usually refers to the physical or virtual space where the organization engages with customers, or the distribution channels used to sell products or services. Considering place also involves identifying the appropriate geographical region, industry, or customer age-group for targeting sales and distribution efforts.

Furthermore, the term "place" encompasses the process of physically delivering products or services to the market, which involves a variety of activities influenced by different intermediaries. Distribution channels within the financial services sector vary from retail bank branches and non-financial-services retailers to direct sales forces, telephone sales forces, brokers, direct marketing, and the internet.Distribution in the financial services industry differs from industries that produce physical products as it focuses on the delivery of services to consumers. This includes ensuring that services are conveniently available to customers in terms of location and timing. In the context of financial services,

distribution plays various roles such as providing appropriate advice and guidance on product suitability, offering a range of product solutions, enabling product purchases, establishing client relationships, facilitating product sales, offering relevant information about financial services, providing access to administration systems for ongoing product usage, managing customer relationships over time, and cross-selling additional products to existing customers. The ability to deliver goods and services through innovative and convenient channels has replaced the competitive advantage previously held by organizations with significant fixed assets (Ennew & Waite, 2007, p.252).Promotion refers to the dissemination of persuasive information about an organization's products, services, or brand in a marketing context. However, the effectiveness of promotion is becoming more challenging due to media saturation and the fragmentation of audiences into smaller groups. Additionally, audiences have a tendency to ignore promotional messages. Therefore, for promotion to be successful, proper planning and execution are essential.

It is crucial to integrate promotional and communication efforts in order to effectively convey a message. Using multiple methods to reinforce the same message is more powerful than constantly pushing a single message through the same method. When executed properly, promotion and communication play a significant role in the long-term success of any product, service, brand, or organization. Promotional activities in marketing encompass advertising, direct marketing, sales promotion, direct selling, and public relations.

Advertising

Advertising refers to the use of paid media to inform, persuade, and remind an audience about products/services or the organization itself.

It can consist of broadcast media advertising (e.g. television, radio, and the internet) as well as print advertising (e.g.

Newspapers, magazines, and brochures, as well as outdoor

advertising such as billboards, posters, transit advertising, signage, merchandising, and point-of-sales display activities, are all forms of marketing communication. Unlike mass-marketing activities like advertising, direct marketing involves sending promotional messages directly to consumers in order to stimulate specific purchasing actions. Response from consumers in direct marketing is often systematically monitored and evaluated. Direct marketing methods can include direct mail, electronic direct mail (EDM), direct-response advertising, catalogue marketing, and telemarketing.

Sales promotion refers to various tactics and incentives employed in the short-term and medium-term to encourage customers to make purchases. This can include methods like merchandising, point-of-sale promotions, loyalty and rewards programs, competitions, games, samples, redeemable coupons, cash-back offers, promotional discounts, and multiple-purchase opportunities.

Direct selling

Direct selling, also known as personal selling, is a marketing technique that stands on its own as an independent activity. It can occur at the customer's office, home, or at a designated location provided by the salesperson's organization, such as a retail outlet or branch. It can also occur through an intermediary (e.g. a third-party).

g. broker or agent). It generally involves either field sales staff (representatives), counter sales staff, telephone service staff or the staff of intermediaries.

Public relations
Public relations (PR), like direct selling, can be viewed as both a subset of marketing and a discrete, independent discipline. PR involves communicating information in the (potentially) most credible ways, creating or maintaining a positive image of the organisation or brand, and gaining favourable media coverage or publicity for the organisation or the brand. As distinct from other forms of marketing, the focus of PR is not always the primary customer — depending on the message, its audience might include the media, government, community, shareholders or

employees.

Price is a crucial element in the marketing mix and has a direct impact on product positioning and profitability. The relationship between price and profit is widely acknowledged, as well as the connection between price and volume. As a result, managers often overly rely on price to boost immediate demand or optimize short-term profits.

The impact of price on broader positioning objectives, such as perceived product or brand quality and brand image, is often poorly understood. When used effectively, price plays a crucial role in building customers' understanding and affinity with the product or brand. To achieve this, several questions need to be addressed. Firstly, is the price (in terms of money, time, and effort) clear? This means ensuring that customers understand what they will and will not receive. Secondly, is the price fair? Customers should perceive that they are receiving value for the money, time, and effort they are putting in. Lastly, is the price competitive? Customers should perceive that paying any additional price offers better value compared to alternatives from competitors. Superior value is achieved when a product or brand delivers either the same benefits as competitors at a lower cost or superior benefits at a similar or slightly higher cost. Price is an important factor in customers' perception of value as it explicitly states what they need to exchange. However, it may not explain all costs, such as time and effort required.

Nonetheless, the impact of price on services is a vital strategic element in positioning and communicating value. Consider the following questions:

  • How significant is price to you when purchasing a service (as opposed to a product)?
  • How much extra money are you willing to spend on a service (e.g., dentist, stockbroker, handyperson) based on the aforementioned questions?
  • If a service meets certain criteria but not others, how would this affect the acceptable price for you?
  • Furthermore, people, process, and physical evidence have been added to the original four Ps for services marketing. These additional elements were specifically developed to overcome the intangible nature of services (although they can also be applied to product marketing).

    Physical evidence is an important aspect for many organizations, including financial services organizations. It encompasses the tangible cues that customers use to evaluate their services. This includes factors such as the location and exterior of the building, the interior design and decor, as well as stationery, uniforms, and promotional materials.

    People also play a crucial role in services marketing. In retail financial services organizations, frontline staff who interact directly with customers at the service counter are particularly significant. These staff members must embody the brand values of the organization. This is because they directly impact customer satisfaction and shape customers' overall perception of the organization and its brand.

    Process is the operational system or method that organizations use to provide their services. By concentrating on developing efficient processes and procedures, financial service organizations can achieve several benefits. These include the ability to differentiate between standardized and customized services (e.g. banks' standardized transactions), adjust service capacity during peak and non-peak times, and increase customer participation (e.g.).

    Through the use of ATMs and online banking, customers can access their financial services more conveniently. Ennew, C & Waite, N (2007) discuss customer acquisition

    strategies and the marketing mix in their book Financial services marketing: An international guide to principles and practice (pp. 171-185). Sales and Marketing for Financial Institutions.

    • The extended marketing mix Price

    List price, discounts, allowances, settlement terms, and credit terms are all components of the extended marketing mix. The interaction between people is crucial in many service situations, as relationships play a significant role in marketing.

    • Product and service

    Variety Quality Design Features Brand name Packaging Sizes Add-ons Warranties Returns

    • Process Promotion

    Advertising Personal selling Direct marketing Synchronous marketing Target customers In the case of 'high contact' services, in particular, customers are involved in the process. Technology is also important in relation to conversion operations and service delivery. Intended positioning Placement for customer service

  • Demand chain management
  • Logistics management

  • Physical evidence

    Services are mostly intangible. Thus the meaning of other tools and techniques used in marketing is important.

    According to Kotler et al. (2004, p. 407), in addition to utilizing the marketing mix, a marketer's crucial responsibility is to establish, sustain, safeguard, and improve brands. A brand can refer to a name, such as the names of six different brands.

    Macquarie Bank, Salomon Smith Barney) a term (e.g. Hoover, Xerox) a

    Get an explanation on any task
    Get unstuck with the help of our AI assistant in seconds
    New