Marketing Financial Services

Benjamin Franklin may have discovered electricity but it was the man who invented the meter who

made all the money

Marketing revisited:The evolution of marketing

PRODUCTION CONSUMPTION

“PROSUMPTION”

“First, consumers have more money to lavish on their specialisedwants; second…. As technology becomes more sophisticated thecost of introducing variations declines.”Alvin Toffler 1970

Oya yubi sedai (the thumb tribe): modern consumers demand modern methods

• Dell – configure and buy

• Lands End – custom denim jeans

• Proctor and Gamble – Community Corner

• Pearson – Pop Idol

• Fidelity – DIY Funds supermarket

A new kind of consumer?

New consumer

Time

Experiential

ITDemanding

Educated

Complexity

Entitlements

4Ps versus 4Cs

• Product

• Price

• Place

• Promotion

• Consumer needs and wants

• Consumer costs (time, money, effort)

• Convenience

• Communication“In today’s consumption led economy using the 4Ps as the basis for marketing strategy misses a fundamental point: consumption is enactedby consumers and therefore they – and not products – should be the starting point of marketing strategy orientation” (Baker 2004)

Core concepts of marketing

Identify and definecustomer value

Marketing effort•Provide value•Communicate value•Deliver value

Customer satisfaction

Achieve organisational goals

Needs, wantsdemands

Products, servicesideas

Understand value from the consumer’s perspective

Nike trainers

FEATURES BENEFITS PERSONALVALUES

DELIVER SATISFY

“Air pocketSole”

“Power bridge” “EnhancedPerformance”

GoodhealthWellbeingKeep fitBelongSelf image

Marketing as integrative function…..

Competitive strategy

Product/marketSegments

Segment 1--Segment n

Focus on KEYsegments

Business system•Operations

•Distribution

•Sales

•Service

•Customer

Focus on KEYbusiness stages

….delivering sustainable marketing advantage

• SOURCES• Reputation• Brands• Tangible assets• Knowledge• Customer service • People

• STRATEGY• Segment focus• Differentiation• Distribution• Process/quality/price

Positioning the business for “value centric” marketing

Focus on consumer value•Identify and define value•Provide value•Communicate value•Deliver value

Competitiveanalysis

differentiationSelect features to deliver benefits

Marketpositioning

Targetmarket

CompanyAnalysis

Customeranalysis

Segmentation

(Based on Bradley 2003)

Understand value creation

Scope of strategic marketing

• Identify value to be provided by understanding the customer’s perception of value

• Provide the value expected by establishing a superior value position

• Communicate the value through a positioning and brand strategy

• Deliver the value through appropriate pricing and distribution choices

Reflection

• Consider the concept of value in relation to tangible benefits

• Consider the concept of value in relation to intangible benefits such as money transmission, deferred payment or asset protection

What do financial products do?

• Money transmission

• Credit facilities (long term secured, short term unsecured)

• Personal and family protection

• Asset protection

• Capital investment (risk differentiated)

• Regular savings (risk differentiated)

Generic business types

• Market making activities• Wholesale investment services• Packaged investment manufacturing• Investment retailing• Wholesale lending services• Packaged loan manufacturing• Loan retailing• Back office services

Who do we buy from?

• Post Office• Building Societies• Banks• Insurance companies• Investment trust

companies• Stockbrokers• Credit card companies

• Supermarkets• Financial advisers• Mortgage advisers• Double glazing salesmen• Garages• Vets• Doctors and dentists• Global industrial

conglomerates

Complexities in distribution: how many ways can you buy a Halifax

mortgage?• Retail branch

• Mortgage adviser

• Mortgage wholesaler (via above)

• Direct response

• Etail

• Etail (Intelligent Finance branded)

The changing face of financial services distribution – emergence of multi-channel

distributionHistoric position• Direct to customer

(retail channel)• Intermediation

Current position• Direct to customer

(retail, etail or direct response)

• Intermediation• Third party distributor

owned brand (retail, etail or direct response)

Exploring generic product types: money transmission

Current accounts (retail and etail), credit transfer, DDM

• Savings hybrid

• Mortgage hybrid

• Interest paying CA

• Mortgage interest offset CA

Generic product types: capital investment

Deposit based (loan)• Savings/deposit

account• Some national

savings• Retail, etail, direct

response• Risk free• Tax deducted at

source

Asset backed (own)• Collective equity

investments (UT/IT/ISA/Bonds

• Retail, etail, direct response, intermediaries

• Risk differentiated• Different tax

treatments

Generic product types: credit facilities (non-cash payment)

Short term unsecured• Credit card (interest

bearing core debt or interest free)

• Personal loans (credit risk differentiated)

• HP (debtor/creditor supply agreements)

• Lease purchase• Overdraft

Long term secured• House purchase

(including FTB, movers, equity release)

• Credit risk differentiated• Investment (B2L)• Home

improvement/consolidation loan

• Business borrowings

Generic product types: protection

Insurance • Home, contents, car• Health (private health

care, medical expenses, critical illness)

• Income (short term credit, long term phi)

• Warranties/extended warranties

• Breakdown

Assurance• Temporary (term)• Permanent (whole life)• Hybrid (with savings)-

endowment• Employment related

(DIS/DISWP)

Generic product types: regular saving

Deposit based• Regular savings

account• Monthly cash ISA• Friendly Society

Asset backed• Monthly equity ISA• Regular premium

UT/IT plan• Endowment• Personal pension• AVC/FSAVC

The marketing challenge: clarity from complexity

• Understand value from the consumers’ perspective• Review and evaluate distribution channels• Understand differential profitability of distribution channels• Develop distribution strategies that capitalise on strengths• Understand what influences customers’ channel buying

decisions• Understand what factors influence consumers’ product

buying/provider decisions• Develop a strategy enabling you to benefit from as many

transactional relationships with the customer as possible• Understand how customers view the relationship between

marketing mix elements