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Marketing and Financial Services:An Overview
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Lecture structure
What are financial services?
The financial services industry
Marketing Marketing services
Financial services
Technology Corporate social responsibility
Summary
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Basic Terms
Services: an offering in which the dominant
part is intangible, which is the case in most
financial services
Value: the aim of marketing is to create/
deliver an offering that allows the consumer
/stakeholder to derive benefits particular to
their needs/wants
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What are financial services?
Financial services are any service or product of
a financial nature that is traded in financial
markets (financial instruments)
Can be classified e.g. Do they have a fixed or
variable interest rate? How long to they take to
mature? Are they offered by a deposit-taking or
non-deposit taking intermediary?
Financial services cover an extensive range of
instruments e.g. in consumer marketplace on
equity release schemes and long-term care
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What are financial services?
The marketplace for financial services is extensive
global marketplace and increasingly so
wide range of customers e.g. retail consumers,
business/corporate customers, other financial
institutions
The key activity of FIs is intermediation, which means
that they create assets for savers and liabilities forborrowers, which are more attractive to each than
would be the case if the parties had to deal with
each other directly
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Figure 1. Overview of financial services
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We use the term financial institutions (FIs) throughout the book as itembraces the diversity of players in the business of financial services:
Retail, corporate, investment and private banks
Mutual funds, investment trusts
Personal and group pensions Life and general insurance and reinsurance companies
Credit card issuers
Specialist lending companies
Stock exchanges
Leasing companies
Government saving institutions
Brokers and agents
Supermarkets and retailers provide financial services e.g. Big Bazaar
What are financial services?
Some examples
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Marketing
Marketing is discipline and practice that allowspractitioners and theorists to learn more about
markets and customers, to provide companies
with knowledge to gain competitiveadvantage.
Focus of marketing activity is
consumer/customer, who has to gain benefitfrom offering for satisfaction to occur.
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Marketing
Customer satisfaction not sufficient to gain the levels of
customer loyalty or retention, so new definition of
marketing is
Marketing is the activity, set of institutions, andprocesses for creating, communicating, delivering,
and exchanging offerings that have value for
customers, clients, partners, and society at large
(www.marketingpower.com).
Concept of value now central to definition. Focus
extends beyond the customer to society at large.
Emphasis is on the exchange of offerings that have value
for that extended marketplace.
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Marketing services
New perspective on marketing of services isemerging based around value where customer hasrole in the service (co-creator of value). Customercreates his/her own value based on the way thatthe service is used (value-in-use)
value of the offering arises from the way in whichthe user/consumer uses it e.g. Internet-onlycurrent accounts , 24/7 access
Service is dominant component of any offeringthrough the application of specialized skills andknowledge, where customer is always the co-producer
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Marketing services
Theme in the service-dominant logic view of marketing
is that customers are resources and that marketing is
achieved with the customer through co-creation of
value. How might this concept translate into financial
services? Product complexity means that the FI usually
has better information about product than the
customer (asymmetric information). The service-dominant logic view of marketing (S-DL)
would be to maximize knowledge that the FI has, both
about the customer and the product, to create a
product that generates value to both parties.
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Draw upon FI resources (internal and
external)
overcome resistances
Collaboratewith
customers &
stakeholders
Co-create
financial service
offering
Co-create
value through
systems
Co-create value
proposition
with customer
Co-create
dialogue &
relationship
Service dominant-logic in financial services
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Conventional approach to services
marketing
Services marketing has a marketing mix which consists of
eight Ps
Product element: features of the core offering and
bundle of supplementary services . Many car insurancepackages feature a hire car in case the car is undriveable,
legal cover in case of a dispute and/or breakdown cover.
Place and time: how service is delivered to the
customer. Basic financial services available 24/7 orduring a working day (via automated telling machines).
Other services available through personal interaction
with FIs or representatives
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Process: how service is created and consumed (or
even co-produced). Ex : Bankbazaar.com,Insurance
pundit.com
Productivity and quality arguably inseparable.Productivity concerns how inputs of the service are
translated into outputs. Quality of service offering is
whether service is fit for purpose. Regulation try to
ensure that financial services meet customer
expectations.
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People: branch staff, call centre staff and back office
staff support creation of new services and systems,
sell the services, building and maintaining
relationships Promotion and education: Promotion could relate
advantages of particular FI over its rivals. Education
informs how the service can benefit customers and
ways in which they can derive additional benefits.
Regulation also influences the way in which
marketing communications are developed.
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Physical evidence: Bank branches resemble
contemporary retail spaces with strong
merchandising. Elsewhere branding and the use of
symbols create a tangible aspect to services Price and user costs: customers pay for their
financial services either directly or indirectly. Banks
are regulated as to the way in which they can
advertise the rates or charges that they make. Bank
charging has become a highly contentious issue in
financial services.
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Financial services Services can be classified to develop appropriate marketing strategies
Financial services vary enormously, as mentioned above e.g. investment services to wealthyand financially literate customers are high in customization and differentiation, ATMs arelow in both but offer value creation for the consumer.
Doyle (2002) classifies financial services as competitive but other aspects of hisclassification, such as customer contact, goals, ownership and type of market, vary,depending upon the nature of the service and to whom it is being supplied.
What unifies financial services is that they are often hard to evaluate, they are offered
through a range of delivery systems, there is opportunity for co-production and they aregenerally acquired as a means of achieving an end.
FI marketers operate in business-to-consumer (B2C) or business-to-business(B2B).
Bank websites indicate that they initially divide their markets into severalcategories e.g. premier banking, personal banking, business and corporatebanking, global banking and markets and private banking (see
www.hsbc.com). Private banking offers special levels of financial relationships to customers
who have been identified as core affluents, high net worth, ultra high networth and also whether they are old or new money .
AXA insurance cites three possible markets: personal, business andintermediaries (www.axa.co.uk).
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Technology
The impact of technology on financial services has beenremarkable and ranges from automated telling machines (ATMs)
to Internet-only banks
Information systems track transactions and store customer
information. Technology has also lowered barriers to entry enabling
supermarkets and other retailers to enter the marketplace
Significant changes that have occurred in financial services in the
last few years include the growing use of technology in the delivery and consumption of services,
the growth in customer confidence in the consumption of financial services,
the globalization of financial services (though perhaps less noticeable at
retail level), the increase in regulation and the profitability of the providers.
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Summary
Marketing is not concerned with products but with creatingvalue. How can value be created in financial services?
Vast range of institutions engaged in offering financialservices and a very wide range of offerings.
Still a tendency to sell financial services. Momentum of theS-DL view has profound implications (FIs). Concept of co-creation of value will bring about changes in the way thatservices are classified, produced and consumed.
Technology has changed financial services industry and
customer experience significantly Corporate social responsibility (CSR) apparently adopted by
FIs, but, not clear how it really influences the way in whichFIs conduct their business.