Marketing of Financial Services

Marketing of Financial Services

CHAPTER 1 INTRODUCTION The forces of deregulation, advancing technology and general trend towards globalisation have vastly increased the competitive pressures within the financial services market that has in turn affected both the structure and operation of financial service providing firms like banks. Banks are providers of financial services, financial intermediaries and key participants in a nation's payment system. As such banks play a major role in the economy and in the financial well being of a nation. In India since 1992, deregulation, technology, and aggressive competition fostered more changes in the banking industry than it has experienced in its entire history. Precisely because of competition, providing financial services in an able manner requires an excellent marketing orientation. Banks now operate in a situation of keen competition in their financial service activities, whether it is canvassing of deposits, extending credit line or in selling ancillary services. With the liberalization of the banking sector and entry of more players, banks need to become market oriented with new and innovative schemes, at competitive prices available at the place the customer needs them and delivered with efficiency and quality of service

Role of Marketing 2

Marketing of Financial Services The key objective of an organization’s marketing efforts is to develop satisfying relationships with customers that benefit both the customer and the organization. These efforts lead marketing to serve an important role within most organizations and within society. The organizational level, marketing is a vital business function that is necessary in nearly all industries whether the organization operates as a for-profit or as a not-for-profit. For the for-profit organization, marketing is responsible for most tasks that bring revenue and, hopefully, profits to an organization. For the not-for-profit organization, marketing is responsible for attracting customers needed to support the not-for-profit’s mission, such as raising donations or supporting a cause. For both types of organizations, it is unlikely they can survive without a strong marketing effort. Marketing is also the organizational business area that interacts most frequently with the public and, consequently, what the public knows about an organization is determined by their interactions with marketers. For example, customers may believe a company is dynamic and creative based on its advertising message.

At a broader level marketing offers significant benefits to society. These benefits include:  Developing products that satisfy needs, including products that enhance society’s quality of life

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Marketing of Financial Services  Creating a competitive environment that helps lower product prices  Developing product distribution systems that offer access to products to a large number of customers and many geographic regions  Building demand for products that require organizations to expand their labour force  Offering techniques that have the ability to convey messages that change societal behaviour in a positive way (e.g., anti-smoking advertising)

Objective of Marketing The main objective of marketing may be mentioned below:

1. Creation

of

demand

and

securing

consumers

satisfaction: 4

Marketing of Financial Services Marketing is consumer oriented activity. Marketing tries to create demand of it is product through advertising and sales promotion measures. Consumer’s satisfaction is the ultimate end of all business activity. The business cannot last long without consumer’s satisfaction. The potential growth of the company is possible, if consumers are satisfied. Business has its own profit motive. Earning is directly related to sales, which is affected by consumer’s satisfaction.

2. Retaining reasonable market share: Survival of the enterprise depends upon capturing reasonable share of the market. Marketing helps the enterprise in positioning itself firm in the market. The success of marketing depends upon capturing more share of the market.

3. Building goodwill: The competent and capable marketing management sells quality product at reasonable price and thus goodwill of the enterprise is built. Marketing adopts various image building activities by popularizing products at convenient outlets. 4. Profitable sales volume: Marketing management refers to all business activities, which are consumer oriented. It is the sincere effort of marketing management to maximize the profit of the company. As profit is directly related to sales, so the marketing management to maximize the profit of the company. As profit is directly related to sales, so the marketing management tries to increase its sales by

market

development,

product

development,

market

penetration and diversification. The management looks for the opportunities and tries its best to avail of then opportunities. It is the duty of the market management to undertake profitable operation and maximize the profit of the business. 5. Service to the social organisations: 5

Marketing of Financial Services Social responsibility must be assumed by the business. These days business is assumed to have a social outlook, so it must earn its profit by rendering service to the following section: (a) Employees: i. Payment of fair wages. ii. Providing job security. iii. Scientific selection and training iv. Human treatment. v. Promotional avenues. (b) Consumers: i. Producing sufficient quantity of goods and supplying at ii.

reasonable price and appropriate place Supplying pure, useful and unadulterated goods.

CHAPTER 2 EVOLUTION OF MARKETING CONCEPTS 1. The Exchange Concept: Trade has existed since man was able to produce a surplus. The first kind of this trade was called barter system. It means exchanging goods with one another. During the 1800s the world was facing industrial revolution. People were shifting from agricultural to industrial products, their income was increasing and they demanded new products. The products had a commanding position since whatever produced, was demanded and consumed by the customer.

2. The Production Concept: 6

Marketing of Financial Services This concept is an oldest of the concept in business. It holds that consumer will prefer products that are widely available and inexpensive. Managers focusing on this concept concentrate on achieving high production efficiency, low costs, and mass distribution. They assume that consumers are primarily interested in product availability and low prices. This orientation makes sense in developing countries, where consumers are more interested in obtaining the product than in its features.

3. The Product Concept: This orientation holds that consumers will favour those products that offer the most quality, performance, or innovative features. Managers focusing on this concept concentrate on making superior products and improving them over time. They assume that buyers admire well-made products and can appraise quality and performance. However, these managers are sometimes caught up in a love affair with their product and do not realize what the market needs. Management might commit the “better-mousetrap” fallacy, believing that a better mousetrap will lead people to beat a path to its door.

4. The Selling Concept: This is another common business orientation. It holds that consumers and businesses, if left alone, will ordinarily not buy enough of the selling company’s products. The organization must, therefore, undertake an aggressive selling and promotion effort. This concept assumes that consumers typically show buying inertia or resistance and must be coaxed into buying. It also assumes that the company has a whole battery of effective selling and promotional tools to stimulate more buying. Most firms practice the selling concept when they have overcapacity. Their aim is to sell what they make rather than make what the market wants. 7

Marketing of Financial Services The selling concept starts with the seller and its focus is on existing product, it being seller-oriented. The company believes in aggressive selling and other promotions. Customer value and satisfaction are no concern for the seller. The firm produces the products first and then figures out ways to sell and make profits. Different company department operate without coordination

5. The Marketing Concept: This is a business philosophy that challenges the above three business orientation. Its central tenets crystallized in the 1995s. It holds that the key to achieving its organizational goals (goals of the selling company) consists of the company being more effective than competitors in creating, delivering, and communicating concept rests on four pillars: target market, customer needs, integrated marketing and profitability. Marketing orientation starts with the customer and the company strives to learn customer needs and wants. Develops appropriate products or services to satisfy the customer. Business is viewed as a customer need satisfying activity. All departments coordinate their activities and the focus is on customer needs. Profits are an outcome of doing the job well by the company. It requires reliable company wide information system and maintains it. All departments are responsive to informational inputs. Everybody understands the critical role played by marketing, a fact visibly demonstrable when the head of marketing is part of top management

6. The societal Marketing Concept: This concept holds that the organizations task is to determine the needs, wants, and interest of target markets and to deliver the desired satisfaction more efficiently than competitors (this is the original Marketing Concept). Additionally, it holds

8

Marketing of Financial Services that this all must be done in a way that preserves or enhances the consumers and the society’s well-being. This orientation arose as some questioned whether the Marketing concept is an appropriate philosophy in an age of environmental deterioration, resource shortages, explosive population growth, world hunger and poverty, and neglected social services.

7. The Relationship Marketing Concept: Relationship marketing is changing the way marketers use traditional media channel to build brand image and awareness. Marketers are not just re-allocating a budget between existing media choices. The aim is to build relationship instead of a onetime sale, which is termed as a transaction. With more companies turning into relationship, marketing more money is being funnelled into proprietary media for communicating directly with consumers. Relationship marketing centres on developing an on-going relationship with consumers across a family of instead products and services. Its purpose is to build a long-term bond between the company and consumer.

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Marketing of Financial Services

CHAPTER 3 FINANCIAL PRODUCT IN INDIA Financial products refer to those instruments that help you save, invest, get insurance or get a mortgage. The major types of financial products are:

1. Shares and Stocks: These represent ownership of a company. While shares are initially issued by corporation to finance their business needs, they are subsequently bought and sold by individuals in the share market. They are associated with high risk and high return. Returns on shares can be in the form of dividend payouts by the company or profits on the sales on shares in the stock market. Shares, stocks, equities and securities are words that are generally used interchangeably. Equities are a type of security that represents the ownership in a company. Equities are traded (bought and sold) in stock markets. Alternatively, they can be purchased via the Initial Public Offering (IPO) route, i.e. directly from the company.

2. Bonds: They are issued by companies to finance their business operations and by governments to fund expenses like infrastructure and social programs. Bonds have fixed interest rates, making the risk associated with them lower than that with shares. The principal or face value of bonds is recovered at the time of maturity. Bonds are fixed income instruments which are issued for the purpose of raising capital. Bonds issued by the Government carry the lowest level of risk but could deliver fair returns. 10

Marketing of Financial Services

3. Treasury Bills: These are instruments issued by the government for financing its short term needs. They are issued at a discount to the face value. The profit earned by the investor is the difference between the face or maturity value and the price at which the Treasury bill was issued.

4. Options: Options are rights to buy and sell shares. An option holder does not actually purchase shares. Instead, he purchases the rights on the shares.

5. Mutual Fund: These are professionally managed financial instruments that involve the diversification of investment into a number of financial products, such as shares, bonds and government securities. This helps to reduce an investor’s risk exposure, while increasing the profit potential. This investment avenue is popular because of its cost-efficiency, risk-diversification, professional management and sound regulation. You can invest as little as Rs. 1,000 per month in a mutual fund. A mutual fund allows a group of people to pool their money together and have it professionally managed, in keeping with a predetermined investment objective. The portfolio manager trades the fund’s underlying securities, realizing a gain or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual stocks

6. Certificate of Deposits: Certificate of deposits (or CDs) are issued by banks, thrift institutions and credit unions. They usually have a fixed term and fixed interest rate.

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Marketing of Financial Services Investing in bank or post-office deposits is a very common way of securing surplus funds. These instruments are at the low end of the risk-return spectrum.

7. Annuities: These are contract between investors and insurance companies. Wherein the latter makes periodic payments in exchange for financial protection in the event of an unfortunate incident.

8. Insurance: A contract in which one party agrees to pay for another party’s financial loss resulting from a specified event (for example, a collision, theft, or storm damage).

9. Banking: Banks

are

financial

intermediary

institution

for

receiving, lending, and safeguarding money as well as conduction other financial transactions. There are several types of banks: nationalized banks, foreign banks, private banks, cooperative banks, agricultural credit unions, small industries development banks and investment banks.

CHAPTER 4 FUNCTIONS OF MARKETING This function involves the transfer of ownership of goods from producers to the users of goods. It involves:

1. Buying and assembling: Buying is the first step of marketing. In case of manufacturing concerns, raw material is purchased and trading concern purchase finished goods, buying is marketing function, because it refers to decision-making by marketing management 12

Marketing of Financial Services as to the time, quantity, quality, price and sellers goods to be bought. Goods may also be assembled or collected from different sources and made available to the users.

2. Selling: It is a process, whereby goods and services flow finally to the consumers. Selling function involves: (a) Planning production of need based goods. (b) Discovery of the market for goods and sales promotion for creating demand. (c) Salesmanship, advertising and sales promotion for creating demand. (d) Determining terms of sales and price, quantity, quality, nature of packing and delivery etc. (e) Transfer of title and possession goods. Selling creates demand for products.

3. Physical supply of goods: Marketing management has to decide about the distribution of goods. This function involves: (a) Transportation: Transportation facilities the transfer of products from one to other place. It reduces the distance between the producers and consumers. These days the business uses road, rail, water and air transport for acquiring goods and also for distribution of goods. Marketing management will have to take into consideration of goods. Transport plays an important role in localizing the industry and the nature and type of goods to he produced. (b) Warehousing: There is wide gap between the production and actual sales of goods. This is why marketing management is required to make necessary arrangement of storing the raw material and finished goods.

4. Transfer of Ownership and Products: 13

Marketing of Financial Services It involves the following function which facilitates the transfer of goods and ownership: (a) Product planning and development: Effective product planning anticipates the wants and expectations of the consumers and develops the accordingly. It requires improvement in the existing product and development of the new product. Decision regarding size, design, colour, packaging, quality etc. have to be reviewed from time to time. The policy of product differentiation and highlighting the unique and novel features of the product should be adopted. The enterprise should always he prepared to produce goods to suit the ever changing needs to the customer. (b) Standardizing, grading branding and labelling: Standardizing is the process of making goods perfectly identical to the model product. Standardizing and grading make goods easily marketable. In case of standardization, the product contains certain desirable qualities like durability, safety, utility, and special features such as design, weight, colour and size. Standardization facilitates the purchasing and selling of the product. Goods are sold by description. In India ISI mark issued by the Bureau of Indian standard guarantees the quality of the product. In case of grading, product into different classes of uniform characteristics. Grading is adopted generally in food rains, cotton, tobacco, fruits, apples, mangoes, minerals etc. Fixing and securing remuneration prices from the product is the objective of grading. (c) Advertising and sales promotion: It creates demand for goods among new customers can sustain the demand for goods among existing consumers. Promotion Includes all the activities of the manufacturers to influence the behaviours of buyer through communicating. It is the process of 14

Marketing of Financial Services communicating, persuading and motivating consumers. Sales promotion refers to those activities which supplement both selling and advertising, displays, demonstration and exposition. It is a form of mass communication.

CHAPTER 5 MARKETING APPROACHES ADOPTED BY BANKS Marketing strategies play a very important role in determining the growth of the financial services industry. Various marketing strategies adopted by the major financial service providers like banks and are discussed below:

1. Banks: The marketing and distribution strategies of banks are different in urban and rural areas due to diverse demographic and socioeconomic nature of these markets. Private Banks are mostly concentrated in urban areas due to higher income, better infrastructure, higher investor base and concentration of commercial activities in the urban areas of the country. The distribution channel used by such banks includes bank branches, ATM’s, internet banking, phone banking, direct selling agents, call centres, etc. The distribution networks developed by public banks in urban as well as rural areas are a result of policy measures due to which the number of public sector bank branches is higher as compared to private or foreign banks. Private sector banks are also penetrating into the rural areas by using the non-branch delivery systems like the Business Facilitator (BF) model or 15

Marketing of Financial Services Business Correspondent (BC) model proposed by RBI in 2006. Under the BF model, banks utilize the network of intermediaries such as creating awareness and educating on the financial products, collecting and processing information of Borrowers, selling banking products and financial services to rural household, etc. The activities in a Business Correspondent model include all those of the BF model and further include disbursing small value credit, etc. Intermediaries under these models have knowledge about the local population and provide feedback about the requirement of the local population. As the local population has trust in these intermediaries it is possible to cross-sell various products. Cross-selling helps in customer retention, reduces customer acquisition costs. It also benefits the customer through fair prices for the products, easier processing and customized products. The usage of such non branching delivery channel has been very less. However, with rising incomes in the semi urban and rural areas, there is further scope for private banks to adopt such nonbranching delivery models. In addition to the branch and nonbranch delivery system adopted respectively by public and private sector banks; banks also use simple-to-use cash dispensing and collecting machines similar to ATMs which have operating instructions in vernacular language too. Banks have also initiated “credit plus” services such as setting up of rural training centres for small enterprises, farmers clubs, knowledge centres, credit counselling centres for educating the semi-urban and rural population with respect to minimizing yield risk and price risk in agriculture. This, further, leads to lower lending rates and lower credit risk.

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Marketing of Financial Services

CHAPTER 6 MARKETING OF FINANCIAL SERVICES 1. India: India has a diversified financial sector, which is undergoing rapid expansion. The sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. The financial sector in India is predominantly a banking sector with commercial banks accounting for more than 60 per cent of the total assets held by the financial system. India's services sector has always served the country’s economy well, accounting for about 57 per cent of the gross domestic product (GDP). In this regard, the financial services sector has been an important contributor. The Government of India has introduced reforms to liberalise, regulate and enhance this industry. At present, India is undoubtedly one of the world's most vibrant capital markets. Challenges remain, but the future of the sector looks good. The advent of technology has also aided the growth of the industry. About 75 per cent of the insurance policies sold by 2020 would, in one way or another, be influenced by digital channels during the pre-purchase, purchase or renewal stages, as per a report by Boston Consulting Group (BCG) and Google India.

2. United State of America: 17

Marketing of Financial Services Financial markets in the United States are the largest and most liquid in the world. In 2014, finance and insurance represented 7.2 percent (or $1.26 trillion) of U.S. gross domestic product. Leadership in this large, high-growth sector translates into substantial economic activity and direct and indirect job creation in the United States. Financial services and products help facilitate and finance the export of U.S. manufactured goods and agricultural products. In 2011, the United States exported $92.5 billion in financial services and had a $23.0 billion surplus in financial services and insurance trade (excluding re-insurance, the financial services and insurance sectors had a surplus of $59.5 billion.) The financial services and insurance sectors employed million people in 2014. The securities subsector of the industry shows great potential for employment growth, with a 12 percent increase expected by 2018. According to the U.S. Department of Labor, 888,600 people were employed in the securities and investment sector at the end of 2014. Investment in the U.S. financial services industry offers significant advantages for financial firms. In 2012, at least 132 of Fortune’s Global 500 companies have chosen to locate their headquarters in the United States to take advantage of its creative, competitive, and comprehensive financial services sector. The industry offers the greatest array of financial instruments and products to allow consumers to manage risk, create wealth, and meet financial needs.

3. United Kingdom: 18

Marketing of Financial Services The

financial

services

sector

includes

banking,

insurance, securities dealing, derivatives and fund management. Related professional services include legal services, accounting and management consulting. The UK is the world's leading centre for cross-border financial and related professional services. London is core to the UK's leading position, but other cities such as Edinburgh and Glasgow in Scotland; Birmingham, Bristol, Leeds, Liverpool, Manchester, Norwich, Reading and Sheffield in England; Cardiff in Wales; and Belfast in Northern Ireland are also important financial centres. The UK has the fourth largest banking sector globally, the third largest insurance sector, the second largest fund management industry and the second largest legal services sector. The UK's position in many global wholesale financial markets has strengthened over the past decade. Today, London and the wider UK have the leading share of trading in many international financial markets such as foreign exchange trading (41% of the global total), OTC derivatives trading (49%), cross-border bank lending (17%) and international insurance (22%). The UK is also the leading European centre for investment and private banking, hedge funds, private equity, exchange traded derivatives and sovereign wealth funds. Financial and related professional services also help the wider economy and facilitate people's everyday lives. 90% of households purchase at least one insurance product, UK fund manager help protect and grow £4.0 trillion in financial assets, mortgages help home ownership for 90% of the population and there around 9,000 bank branches in the UK.

19

Marketing of Financial Services

4. China: Due to China’s historic economic expansion in the last two decades, capital is no longer scarce – companies are looking for more sophisticated ways to manage their financial dividends and the consumer demand for financial services is on the rise. This has resulted in a dramatic increase in market size for financial services of all kinds. Financial intermediation, essentially the sum total of deposits and loans, totalled approximately RMB1.77 trillion, or approximately US$280 billion, in 2009. At the end of 2010, total Chinese banking assets topped RMB94.3 trillion (US$15 trillion), up 20 percent from the previous year. In 2010, China produced US$5.6 billion in investment-banking revenue – the largest in Asia. China’s total insurance premium volume has grown RMB160.9 billion (US$25 billion) to RMB1.45 trillion (US$225 billion). 20

Marketing of Financial Services China’s focus on developing its financial services market has driven foreign direct investment in financial services which increased 122 percent from 2007 to 2010. This growth has the potential to create tremendous opportunities for U.S. banks, investors and insurance providers. Am Cham Shanghai member companies are focused on accessing this growing market and in fact have taken a lead role in China’s financial service market ranking second in financial service exports to China behind Japan. U.S. financial services play a key role in the larger effort to increase U.S. service exports, an area where the U.S. has significant competitive advantages, and achieve the objectives of the National Export Initiative (NEI)

Marketing of Bank

1. India: The Indian banking system, by habit and tradition, considered deposit growth as the business objective and other parameters

such

as

productivity,

profitability,

customer

satisfaction, etc. were considered less important. In view of the competitive surroundings in which a bank is compelled to function, there is need for formulation of a strategic action plan for its marketing efforts. A marketing strategy, in general, is a systematic, appropriate and feasible set of concepts and actions through which the institution strives to achieve its goal of customer satisfaction and profitable survival. Strategy should be designed after taking into account the strengths and weaknesses of the organisation. For example, a bank or branch with clientele from various segments could think of “market penetration” by offering the existing range of services to existing customers. On the other hand, a bank which is having expanding business through new branches or branches which are not facing acute 21

Marketing of Financial Services competition could think of “Market Development” by offering the existing services to new customers. However, the real marketing challenges arise from the institution’s capability to design new product range for their customers of various segments. The strategy, therefore, lies in increasing the client base and consolidating the relationship with existing and new clients through existing or newly developed products. The operational aspects of strategies for marketing contain actions such as development of Relationship Banking, designing of effective delivery system, ensuring customeroriented services and modifying the system into a personal selling organisation. In western banking, officials assigned the job of personally contacting the customers and offering the services at doorsteps had been able to make a significant impact on the development of business for their organisations. The importance and role of personal selling and customer contacts in the marketing efforts of a banking institution stem from the success of such efforts in many banking institutions all over the world. The implementation of the strategies is as crucial as its design in ensuring successful marketing. The communication of the adopted strategies to different tiers of the institution and ensuring of its proper understanding by personnel at all levels is essential for successful implementation of the strategies. The communication becomes difficult in organisations which have substantial branch network spread over a large geographical area. The field staff at the branch level should be trained to implement the strategies after modifying them to suit the environment in which they are operating. The knowledge of the local environment, demographic features and cultural aspects is an 22

Marketing of Financial Services essential requirement for the field staff involved in marketing efforts for the organisation.

2. United State of America: The middle market has always represented a critical client base for US banks; through over the last decade some have focused their cash-management services more on large companies. With these customers proving increasingly difficult to serve profitably, it’s time to pay renewed attention to the middle market – companies with $40 million to $500 million in annual revenues – where growth is stronger and margins look more attractive. Historically, middle-market bank customers have been unwilling to incur the administrative cost of switching to a new institution, even when they were dissatisfied with their present service. McKinsey, however, has identified critical moments when banks can establish a new cash-management relationship with them. To take advantage of these evergreen opportunities, Banks must overcome a number of internal sales and service challenges. Doing so will require better low-cost service, segmented product and service offerings, world-class account planning, and revamped sales organizations. These moves can increase

a

bank’s

revenues

from

middle-market

cash

management by 10 to 12 percent in just 18 months. Cash-management revenues from the middle market, amounting to some $16 billion a year, are growing by 3 to 5 percent annually. By contrast, revenues from the large corporate 23

Marketing of Financial Services sector are growing by about 1 percent. Banks active in the middle market show that it’s margin are higher partly because smaller companies have less negotiating leverage and partly because they are less likely to sweep their relatively small balances from noninterest-bearing accounts into interests-bearing products. These small numbers add up to a profitable business. Middle-market companies are interesting not only because of their growth and margin potential but also because they increasingly desire sophisticated solution to their cashmanagement needs. In this segment there is growing demand for services such as remote capture and payables automation. Moreover, middle-market CFOs, unlike counterparts at large companies, usually can’t draw on in-house capabilities to meet all their needs internally. Banks thus have new opportunities to sell more value-added products. Timing is easier to address. The opportunity is especially ripe at three key moments. The first comes when a customer’s bank merges: many middle-market customers seem prepared to contemplate change if they think that the integration process will be painful. The second opening occurs when a company expands rapidly, whether by acquisition or organic growth. Companies that move beyond the small-business stage may quickly find them facing cash-management needs their existing banks can’t provide. The third opportunities comes when a customer’s leadership team (especially the CFO) changes, and the new regime wishes to make its mark. One way of doing so is to initiate a new financial-services relationship Devising a compelling and well-targeted offer is more daunting than offering it at the right time. In our experience, four factors can make it harder for a bank to meet the demands of middle-market customers. The first concern their expectations of 24

Marketing of Financial Services service and value. Second, banks too often overlook the nuances of the middle market, whose demand vary markedly by behaviour, size, and sector. Third is account planning? Fourth is organizational dilemma, arising mainly from ‘the traditional split between commercial-leading and cash-management operations. Although some institution have made progress on this front, the lead relationship manager at many banks still focuses on lending products at the expenses of cash-management ones. To attract and retain middle-market customers, banks follow these marketing practices: (i) Middle-market companies need extra support when they create new banking relationship- for example, when a bank makes a first sale to such a customer or cross-sells products to an existing (ii)

customer. The bank should have a single contact point to

(iii)

resolve problems. The customer service associate must either solve problem on his or her own or refer the customer to someone else in a clear hierarchy of problem

(iv)

solvers, not a chain of intermediaries. The customer must always have the sense of dealing with a single institution rather than a collection of disjoined processes that fail to

(v)

communicate. To provide creative tools that makes it easier for new customer to change banks or add new services as part of an existing relationship. For example many banks have developed a software package that automatically converts a new

25

Marketing of Financial Services customer’s data from the old file format to the (vi)

new one. Banks must recognise, above all, that middlemarket treasury officers have less time and fewer resources for cash management than their peers in larger organization. The letter have specialized finance staffs with different needs and work styles, whereas the financial controller of a middle-market company typically has to do

everything him- or herself. (vii) This brings in the need for a well-designed, intuitive, and well-integrated online portal, similar to the offering of a good personal bank but with more features and flexibility. Many banks offer electronic products like remote cheque capture, electronic data interchange, the outsourcing of payables, and payroll cards. (viii) Banks that provide the right loan at the right time (ix)

will tend to win more clients. Relationship managers should be rewarded for cross-selling cash-management products. 10 to 20 percent of their bonuses can be based on such sales. Equally important, their work must be judged by not only the initial purchase but also the actual use of the product, so that sales teams are more likely to sells customers the right one.

(x)

While the size of an individual middle-market account may not justify continuing high-level product support, banks should leverage their experts more effectively. When cash management is a customer’s primary need, banks should 26

Marketing of Financial Services consider assigning the entire responsibility for the relationship to a cash-management expert rather than a relationship manager who specialize in (xi)

leading. Growth only by acquiring new customers is not always feasible. To grow in the domestic market, banks will need to strengthen relationship with their current customers and innovate their

offerings. (xii) When banks do comes up with new products, the products often fail because they don’t focus enough on the consumer. For example the illdefined smart-card and electronic cash systems, which have yet to take off in the U.S. by contrast, the smart-card system in Hong Kong called “octopus”, which enables user to ride public transportation without having to buy tickets is a big hit. Banks should become more customers focused. (xiii) Internal changes can improve the chance of success. Citibank linked its customer service performance to sales success. It’s not only a brilliant way to improve customer service; it can also give the bank’s marketers greater insight into consumer needs than they ever had before. (xiv) Banks should look for new insight from the existing customer data. Most financial-service companies either don’t mine their data enough or don’t do it in a way that allows the information to reach product development. One tool that is often used in consumer products but frequently 27

Marketing of Financial Services overlooked in financial service is conjoint analysis. (xv) Successful bank innovation begins first by learning to look at things from the customer’s point of view and then trying to solve a problem. In the next few years, the “keep-it-simple” offering are likely to be the industry‘s big winners.

3. United Kingdom: 28

Marketing of Financial Services UK is one of the cheapest countries to bank in. it has a special kind of account called ‘if-in-credit’ banking. The cost to the individual of running a typical current account in the UK is 70% lower than in similar countries. Due to growth in GDP, population, prosperity, and purchasing power of the people, the need for banking services is constantly growing. The marketing management process for banks involves the development of sales personnel, marketing programme support, customer relation and market performance. The way in which a bank delivers customer service depicts and communicates the bank’s philosophy of business to the customer. The success of banks in the UK depends on how they promote their products online and how they meet customers’ specific requirement. Thus banks need to have strong websites which give complete information, have easy-to-use interface, create product matches according to customers’ need and give comparative analysis so that customers can make decision easily. Bank should use quantitative and qualitative research methods, website analysis, customer feedback and user testing to deliver a customer-focus experience and satisfy the customers. The retail banking sector in the UK has commercial banks which deal with individual customers. Products like fixed, current and saving account as well as mortgages & loans are common in retail banking.

(i)

Retail banking in the UK is made up of the following: Multiple products (deposits, credit cards, insurance,

(ii)

investments and securities). Multiple channel of distribution (call centre, branches, internet and kiosks or ATMs).

29

Marketing of Financial Services (iii)

Multiple customer groups (consumer, small business and corporate). Banks benefit from the implementation of IT and the

new electronic delivery channels. For e.g. HSBC was the first to bring the concept of TV banking in the UK and Lloyds, Barclays and Nationwide have excellent online banking facilities.

4. China: Expansion abroad is a priority for China’s financial institutions. Given the current worldwide financial crisis, and relatively large amount of liquidity at their disposal, Chinese banks are in a good position to make meaningful progress towards this goal. However its experience with Non-performing Loans (NPLs) makes it cautious. For instance, the Bank of China has not gotten final approval yet for its announced 20% stake in Rothschild. Chinese financial institution initially moved overseas to serve corporate clients expanding their businesses abroad. Maintaining these clients’ business is a top priority today as well, 30

Marketing of Financial Services as increasing number of Chinese companies move overseas, and competition increase at home with the influx of foreign bank like Citigroup and Standard Chartered. These initial moves abroad came about via organic growth as well as M&A. Chinese banks are viewing expansion abroad as a way to get training in management, organization, and risk assessment. ICBC paid $5.6 billion USD for a 20% stake in South Africa’s Standard Bank last year, for example, not only to better serve the growing ranks of Chinese companies doing business in the region but to learn technical skills, management and operation techniques directly from their partners. Chinese financial institutions are using M&A to build more quickly a meaningful strategic presence abroad. The first major stake by a mainland Chinese bank in a European bank was made in July, 2007, when the China Development Bank (CDB) purchased a stake I Barclays bank CDB expects to learn from Barclay’s expertise in global commodity markets, investment banking, and risk management. The first strategic investment by a mainland Chinese bank in a U.S. bank was made last October when China Minsheng Bank bought 5% of UCBH Holding, the holding company of san Francisco’s United Commercial Bank, a bank catering mainly to small and medium-sized local ChineseAmerican run businesses. In September 2008, Bank of China announced its plans to purchase a 20% stake in French bank LCF Rothschild for 236.3 million euro’s ($340 million USD). The two banks will work together to develop asset management services for China’s newly wealthy once approval is given. Chinese banks still face significant rules and regulation, as well as degree of suspicion and protectionism as they move to expand abroad. One of the main reasons UCBH was willing to 31

Marketing of Financial Services partners with Minsheng Bank, for example, was, as a private bank Minsheng had minimal connections to the government, and thus the partnership was more likely to be approved by the Fed. Satisfying requirements of regulatory bodies like the Fed. In addition to financial return on investment, Chinese financial institutions’ push to acquire stakes in international heavyweights is in large part to get access to management, organizational, and technical expertise not yet fully developed at home, and assistance in developing new service areas, such as wealth management in the case of Bank of China and LCF Rothschild. Companies overwhelmingly agreed that finding people with experience in leading a cross-cultural operation overseas, and people with the necessary technical, managerial, and/ or operational skills is a top challenge in their push abroad. With the Wall Street calamity, Chinese financial institution have been increasing their recruiting of Chinese who worked in Wall Street and are now vying to come back to China. Chinese financial institution are generally moving first to developing regions, where the business of their Chinese clients is increasing most rapidly, though they continue to work towards building presence in North American and Western European countries as their ultimate goal. Even at present, Bank of China and ICBC focus more on State-run Enterprises and on political issues than on developing the services that carter to the needs of SMEs and retail clients. In the China market, they lag behind smaller private banks like China Merchants Bank in customer satisfaction.

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Marketing of Financial Services

Marketing of Insurance 1. India: Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. It is the equitable transfer of the risk of a loss from one entity to another, in exchange for payment. In India, it has been eleven years, since the insurance market has been opened up, and the new entrants in to the market have set up shop in most of the cities. The public sector companies have already established themselves in the market. But there are multiple challenges face by theses insurance companies, of which two are critical:  Designing the products suiting the market  Using the right marketing strategies to reach all customer segments. While the companies have been quite successful in dealing with the first of these challenges using the existing product features and leveraging the technical

know-how of their partners, most are

still grappling with the right channel mix for reaching potential customers. The insurance industry of India consists of 52 insurance companies of which 24 are in life insurance business and 28 are non33

Marketing of Financial Services life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Out of 28 non-life insurance companies, there are six public sector

insurers,

which

include

two

specialised

insurers

namely Agriculture Insurance Company Ltd for Crop Insurance and Export Credit Guarantee Corporation of India for Credit Insurance. Moreover, there are 5 private sector insurers are registered to underwrite policies exclusively in Health, Personal Accident and Travel insurance segments. They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max Bupa Health Insurance Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd. In addition to 52 insurance companies, there is sole national re-insurer, namely, General Insurance Corporation of India. Other stakeholders in Indian Insurance market include licensed Agents (Individual and Corporate), Brokers, Common Service Centres, WebAggregators, Surveyors and Third Party Administrators servicing Health Insurance claims. Insurance Laws (Amendment) Act, 2015 provides for enhancement of the Foreign Investment Cap in an Indian Insurance Company from 26% to an Explicitly Composite Limit of 49% with the safeguard of Indian Ownership and Control. Insurance penetration of India i.e. Premium collected by Indian insurers is 3.90% of GDP in FY 2013-14. Per capita premium underwritten i.e. insurance density in India during FY 2013-14 is US$ 52.0. 34

Marketing of Financial Services

2. United States of America: US insurance leads are the potential customers to whom insurance companies sell their insurance policies. A USA insurance lead is one of the major means to attract customers and improve sales. US insurance leads prove to be valuable marketing methods. It enables companies to generate quality leads. This further makes it possible for companies to increase profits and ultimately achieve success. To further the development of the insurance sector in the US, the Congressional Legislation has indicated a green signal to various financial institutions, comprising insurance carriers, and banks to sell products of one another. Here are some ways to generate US insurance leads: Pay-Per-Click Methods: Insurance companies/ agents can leverage the internet to get quality US insurance leads. Companies can advertise on relevant website which in turn will help them to generate useful leads. These have more probability of getting converted into sales. Payment is usually based on the number of people who click on the insurance advertisement. Pay-For-Call Methods: This is a valuable USA insurance lead generation technology. Thus, an insurance company pays only for the leads which they receive a phone call from through advertising. This method is useful for insurance companies that have their own website.

Co-registration Methods: This is perhaps the perhaps the best method for generating targeted leads. It offers customers an easy and time efficient measure to choose a policy. In co-registration method, any visitor who 35

Marketing of Financial Services subscribe for a newsletter is given some options through check boxes. Visitors can check the option they want more information on, without being forced to fill the online filling process while subscribing for newsletters. The US insurance leads industry indemnifies against losses that occur from a number of perils. These perils may be due to accident, theft, damages due to fire, health issues, and disabilities or death. The USA insurance lead industry is growing faster than any other form of insurance in the US. In 2006, the US insurance sector had 2.3 million people employed on wage and salary jobs. Some of the major occupation in the insurance industry includes management, business, financial operation, administrative support and sales. Insurance sales agents are also called as ‘producers’, who may work independently or just tend to sale for one company Insurance marketing is basically just the marketing of insurance product marketing of this sort is an important tool when it comes to the business of insurance. The marketing of insurance readily happens in the life insurance department as well as non life insurance department. What type of advertising and marketing is most suitable for your insurance business? You must consider how much of budget you have and work from there. You also need to know who your target market is. For example, are you going to sale one type of insurance such as life insurance or a variety, such as health insurance, auto insurance and house insurance? What is the demographic you are aiming for? The more you know the better able will you be to figure out what type insurance marketing you should to grow your business. Online advertising is one marketing tool that is worth the money as the internet takes on more power at influence all of the time, having a web presence will put you on the cyber map and get 36

Marketing of Financial Services you notice. Block line advertising in trade journals, industry publication and periodicals is way to go. This is because industry professionals read these publications to keep in the know. Televisions ads and print ads are excellent form of insurance marketing. However the down side is that both can be very expensive. You may go way beyond your advertising budget if you decide to use either one of the methods. However if you can afford it then your best course of action is to either consult with an external advertising agency or hire one to help you develop campaign that is conductive to what you need most. Your goal of course is to gain exposure and to increase your sales. If you decide that print ads would suit your style and your budget just fine then coloured ads are the most expensive to produce but can be very appealing to the eye. You can also choose a “reverse type” for your advertisements. Think back to what black and white television looked like. The ad would have white lettering on a stark black background. The black background sets off the lettering and gives it that catchy effect. Life Insurance Marketing is one of the most strenuous jobs for those who are involved in the insurance marketing. It is because of the everlasting conflict between the insurance companies which want to profit the most and the insured person who wants to get as much compensation as possible from the insurance company. Commissions for the Life Insurance companies are very high and they seldom make profit out of the policies. Also the insurance policy need to be transparent so that the potential customer understands it totally and should not feel that they have been treated unfairly by the insurance company. What one can do is to change the public perception about the Life insurance companies. One can connect himself or herself with companies whose workers need a plan for Life Insurance. One can also go to crowded places and advertise for the Life Insurance 37

Marketing of Financial Services Company. The Life insurance companies also offer fliers and hanging banners. One can also offer a free health check in a reputed place to the insured. Competition much tougher for the Life insurance companies as most of the companies offer similar types of premiums and facilities. So it has become very important for the life insurance companies to concentrate on Life Insurance Marketing and attract as many people as possible towards their company. The Life Insurance Companies prefer to go for Group Life Insurance for a group of people from a particular company or a family so that they get a group of customers and even if they compensate for some of them for various reasons they usually make it up with other’s premiums. They also get loss paper to control and also they provide better facilities for their clients. So to promote this type of policy they need to have social and industrial connection. Even for other policies like term life insurance and permanent life insurance one need to aware of making people realize the profit of the policy by various means before going for Life Insurance Marketing one actually needs to know the market target and the desires of the people who are actually seen as potential insurance customer. A very common way to promote a Life insurance company through Life Insurance Marketing is to make the name of the handling out pamphlets, hanging banners in populated areas and by providing exciting offers. Telephone marketing is another way of Life Insurance Marketing. One can see the telephone companies send message about various offers and they even make phone calls. Web insurance policies. The pop ups that one sees while using Internet are actually a very effective way of sending message across the potential insurance customers. 38

Marketing of Financial Services One should listen to the existing Life Insurance Policy Holders as well as the potential Life insurance policy holders and listen to what people who actually matters have to say. One common problem that the insured persons face is that the insurance companies do not inform its clients about the hike in the premium rates. This thing should be informed about everything related to his policy and the Life insurance Company should keep the transparency as much as possible. A Life Insurance Company should not charge different Life insurance client different charges for the same policy. This kind of policy gives the Life insurance policy holders the feeling that they are being treated unfairly and also that the Life insurance companies are also looking for profits and not the betterment of customer welfare. When a Life insurance claim is filed, especially for a very big hefty amount, the Life insurance Company should help out the policy holder in processing out the paperwork. One should not let bureaucracy enter and make it so difficult for the one making the claim so that the gives up his. This has always been a common tactic on the insurance company’s part to avoid paying claims claimed by the policy holder. This though makes a short term profit for the company but it hurts in the long run as the reputation of the company is hampered severely. People in this Life insurance industry should always try to keep in constant contact with the existing customers as well. The competition in the insurance market is so fierce today that no company wants to lose out on a customer to another company. Clients who are not contacted for a longer period of time normally fail to remain loyal to the insurance company and look for a different Life 39

Marketing of Financial Services insurance company. The company can keep the records of the client’s birthday and days like anniversary and sent him or her small tokens of love or loyalty at a regular basis. If the company can afford a little more it can send dinner coupons to the Life insurance policy holder. These things can be considered as an effective Life Insurance Marketing strategy.

3. United Kingdom: The UK insurance sector is an important part of the UK economy. There are two broad sectors in the UK insurance marketlong term insurance and general insurance. Long term insurance covers life insurance, pensions, annuities and income protection insurance. General insurance covers motor insurance, accident and health insurance, general liability insurance and pecuniary-loss insurance. 40

Marketing of Financial Services The main insurance products are life insurance, pension, property, casualty and health insurance. Competition in the UK insurance industry is intense and thus insurance companies are not able to increase premium rates. Direct line is the biggest brand within the Royal Bank of Scotland Insurance. It is UK’s leading personal lines insurer and No. 2 general insurer behind Aviva. Direct Line revolutionized the UK insurance market when it used strategy that insurance can be sold cheaper by cutting out brokers and dealing directly with customers by phone. Direct Line has now successfully expanded into the European Market UK insurance companies are now investing heavily in IT to expand and also to meet regulatory requirements of Solvency II. The    

challenges for the UK insurance industry are as follows:The emergence of a more knowledgeable customer base. Increase in online purchase and trading Increased volume of information to manage. New EU directives and accounting standards.

4. China In addition to governmental restriction and regulations, foreign insurance companies have also faced a number of Chinese market challenges. Reinsurance business is closed to foreign insurers. Joint venture management appears to be very difficult in China. For example, recently, three experienced senior managers of Sino-foreign JVs were removed from their management position in AXA Minmetals Assurance Co (France), Allianz Dazhong Life Insurance Co. (Germany), and China Life and Colonial Life Insurance Co. (Australia). There are a number of reasons for the management 41

Marketing of Financial Services Challenges. First, there are cultural differences such as conflict between the JV partners and lack of familiarity with the Chinese business climate leading to problem in the localization of international enterprises. For example, the foreign companies did not realize that many Chinese today have more interest in insurance or financial products that are closely linked to investment and financial management. An important area of competition will be for trained and experienced Chinese personnel. Another area of competition will be for the public’s confidence

CHAPTER 7 CONCLUSION Customers for financial services are changing in terms of their wants, needs, desires, expectations and problems and financial service providers have to understand who their customers are, what they prefer, why they buy, who makes the decision and how the consumer uses the product and service. In conformity with these changes, there should be changes in the Bank's services, training, attitudes and images, marketing strategies and patterns of organization and control. New technology driven products blended with the traditional ones and personalized 42

Marketing of Financial Services service will enable banks to extend a variety of financial services under one roof.

CHAPTER 8 BIBLIOGRAPHY Books: 43

Marketing of Financial Services Marketing of Financial service by Laila Dias Marketing of Banking Financial Services by P. Mohan

Reddy

Internet: Wikipedia www.sribd.com

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