BAB 5 - Consumer Behaviour Consumer Banking

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1 TOPIC 5 CONSUMER BEHAVIOUR AND CONSUMER BANKING

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TOPIC 5

CONSUMER BEHAVIOUR AND CONSUMER BANKING

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5.1 The Study of Consumer Behaviour The study of consumer behaviour is the study of how individuals make decisions to spend their valuable resources, such as time, money and effort, on consumption related items. Beyond the facets of how and why decisions, marketing researchers also consider the uses consumers make of the goods they buy and their subsequent evaluations. Thus, consumer behaviour refers to the behaviour that consumers display in searching for purchasing, using, evaluating and disposing of products and services that they expect will 2 SATISFY THEIR NEEDS.

PEMBAHAGIAN PASARANPembhgian Pasaran adalah merupakan langkah pertama dlm membuat pemasaran pasaran. Kotler & Armstrong (1996) Merupakan satu proses membahagian pasaran yg besar & mpyi pelbagai keperluan, ciri & gelagat kpd pasaran yg lebih kecil, yg mana individu2 di dlm setiap segmen mpyi keperluan, kehendak & gelagat pembelian yg sama.3

PROSES PEMBAHAGIAN PASARAN

SEGMEN 1

PASARAN

PEMBAHAGIAN PASARAN

SEGMEN B

SEGMEN C

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5.2 Market Segments In developing a marketing strategy for financial services, a bank must determine their target in a product market to whom it will direct its marketing efforts. This is known as market segmentation; one of two pillars of marketing, in addition to positioning.

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TUJUAN ASAS SEGMENTASI ADALAH UTK MEMBAHAGIKAN SESUATU POPULASI KPD KUMPULAN2 YG BERLAINAN DI MANA INDIVIDU2 DALAM SETIAP KUMPULAN ITU MPYI KEPERLUAN YANG SERUPA. UNTUK MENSEGMENTASIKAN PASARAN, BERBAGAI ASAS/PEMBOLEHUBAH DIGUNAKAN. ANTARANYA ASAS YG DIGUNAKAN IALAH I) DEMOGRAFI ii) GEOGRAFI, iii) PSIKOGRAFI & Iv) GELAGAT.

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Buyers of bank services have unique needs and wants, and each buyer is potentially a separate market. Banks would do well trying different segmentation bases, alone or in combination, to find the best way to identify a market structure. This is better known as CUSTOMER PROFILING.

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5.2.1 Demographic Demographic segmentation divides the market into groups based on variables such: religion, race and age, nationality gender, Education family size, income, occupation,This list is not exhaustive as other variables may from time to time be adopted as a segmentation variable. 8

DEMOGRAPHIC VARIABLES ARE POPULAR for segmenting customer groups as the variables are easier to measure than other types of variables. The demographic characteristics are also commonly used in conjunction with other segmentation bases to assess the size and potential of the target market and to reach it efficiently.

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Maklumat demografi penting diketahui sebelum asas2 segmentasi yang lain boleh digunakan secara efektif dalam membuat penilaian saiz pasaran Segmentasi demografi sangat penting/popular kerana keperluan pengguna berubah mengikut perubahan ciri2 demografinya.10

5.2.2 Geographic Geographic segmentation divides the market into different geographic regions such as States (kedah,perlis,penang,perak, etc) Regions (NR,SR,ER & WR) Cities (Asetar,Kangar,Spetani,Ipoh,Kelang) Countries (Msia,Thailand,Indonesia).

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The bank may decide to focus on a few, paying attention to the distinguishing characteristics associated with each location. The needs of urban customers would differ significant from that of rural dwellers. Kws majoriti penduduk melayu, bank will embarks on ASB loan, chinese bank tumpu pada saving/fixed deposit. Kws indusri bank will fokus on commercial loan. Kws urban-Pinj. Perumahan Kws luar bandar/pendalaman-Pinj. Kredit mikro12

E.g. Pasaraya borong Carrefour telah membuka cawangannya di bandar2 utama seluruh Malaysia. E.g.Pizza Hut di Malaysia memperkenalkan pizza yg halal & bercita rasa tempatan seperti pizza berperisa sate sbgi salah satu daya tarikan produknya & tdk menawarkan pepperoni pizza (tidak halal) seperti yg dilakukan di Amerika BSN membuka cawangan hampir di seluruh pelusuk negeri di Malaysia dibandar & diluar bandar.13

5.2.3 Psychographic Psychographic segmentation divides the market into groups based on their social class (kedudukan dlm masyarakat), lifestyle (gaya hidup)or personality characteristics (perwatakan). . Faktor psikografi dikatakan boleh membuat perbezaan demografi menjadi tidak penting, kerana pengguna dlm demografi yg sama selalunya mempunyai psikografi yg berbeza.14

Contoh: suri rumah berusia 30 tahun (Age) dari kelas atasan lebih cenderung membeli barangan keperluan di pasar raya, manakala suri rumah berusia 30 tahun (Age)dari kelas bawahan pula lebih gemar membeli keperluan hariannya di kedai runcit atau di pasar basah. Contoh: Golongan tua lebih gemar menjlnkan transaksi perbankan di kaunter (tradisional method) berbanding golongan muda (teknologi oriented) Cth: golongan muda suka motor berbentuk sporty Yamaha Rx-Z , tua Honda ex-5. Muda-stria neo,honda jazz, Tua-Waja/Volvo

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Tdpt beberapa pemboleh ubah yg boleh digunakan pemasar utk mensegmenkan pasaran menggunakan asas psikografi iaitu: 1) Kelas sosial cth: masyarakt kelas atasan memilih kws eksklusif bagi pembelian rumah, perabut import & kereta mewah. Sebaliknya masyarakat kelas bawahan hanya akan membeli rumah murah, perabut tempatan yg lebih murah & kereta biasa.16

2)Gaya/corak hidup- cth: seseorg yg pentingkan kesihatannya tdk akan keberatan utk membelanjakan pendapatannya utk membeli vitamin, barangan herba & sbginya. Sebaliknya seseorg yg tdk mementingkan kesihatan lebih rela membelanjakan wangnya utk keperluan lain drp membeli pil2 kesihatan. (kos tinggi & mahal!)17

3)Personaliti- sering digunakan di dlm membuat segmentasi bagi produk kosmetik & pakaian. Cth: pengguna yg bersifat agresif sering dianggap berkeinginan utk mencuba sesuatu yg baru & luar biasa. Oleh itu rekaan kosmetik bewarna terang & pakaian yg unik biasanya diperkenalkan utk pengguna jenis ini.18

5.2.4 Behavioural (Segmentasi menggunakan asas gelagat) A similar segmentation base, behavioural, categorised the market based on their knowledge, attitudes, uses or responses to a product Life cycle marketing focuses on the idea that a consumer at each different stages of life will have different buying behaviour that can be influenced by his/her social class and lifestyle.19

Consumers use products to express their social identities. Credit card-exclusive image. Ferari,merz vs toyota. The use of symbols provides a powerful means for marketers to convey product attributes to consumers. For example, expensive cars, designer fashions and diamond jewellery - all widely recognised symbols of success - frequently appear in advertisements to associate products with affluence or sophistication. Executive loan offer by Maybank. Reflect status/symbol elite. Gold card-reflect exclusive 20 member!

contd Pemasar selalunya menggunakan pembolehubah dalam asas gelagat seperti situasi penggunaan, faedah dicari, status pengguna, kesetiaan, peringkat kesediaan untuk membeli, dan sikap dalam usaha mentakrifkan segmen2 yang wujud dalam pasaran

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Contd. 1) Situasi penggunaan-contohnya masyarakat Jepun yg menggunakan the bukan sekadar untuk minum pagi atau petang tetapi sebagai sebahagian daripada upacara keramaian & menyambut tetamu mereka. 2) Faedah dicari- contohnya membeli ubat gigi Colgate dengan extra pudina ialah untuk kesegaran mulut, dan membeli kereta Perodua Kancil kerana penggunaan minyaknya yang lebih ekonomi berbanding dengan kereta2 lain 3) Status pengguna-pasaran boleh dibahagikan kpd bukan pengguna, pengguna berpontensi, pengguna pertama kali dan pengguna biasa.22

Contohnya utk mengalakkan penduduk Msia supaya melabur dlm Amanah Saham Wawasan 2020, kerajaan telah menjlnkan kempen yang berbeza iaitu kpd kump. yg tlh melabur, golongan yg berpotensi utk melabur, dan golongan yg belum melabur. Selalunya syarikat2 kecil akan menumpukan usaha pemasarannya ke atas pengguna sedia ada supaya pengguna tdk mudah berpaling kpd keluaran sykt lain. Ini kerana mengekalkan minat pengguna sedia ada adalah lebih mudah daripada menarik minat pelanggan baru (Kotler 1996)23

5.2.4 Psychographic/Demographic Psychographic/Demographic profiling is particularly useful in creating customer profiles for service marketers. It provides a meaningful insight for segmenting mass markets, providing direction as to which promotional appeals to use, and selecting advertising media that is most likely to reach the target market.24

5.2.5 Geo-demographic This segmentation scheme is based on the notion that people living close to one another are likely to have similar financial means, tastes, preferences, lifestyles and consumption habits. This technique is useful when potential prospects can be isolated in terms of where they live. Mumbai-india Damasara-kl Bukit indah -jitra25

5.3 Maslow's Hierarchy of Needs Maslow's hierarchy seeks to explain why people are driven by particular needs at a particular time of their lives. His answer is that human needs are arranged in a hierarchy, from the most important to the least important. In order of importance, they are : physiological needs, safety needs, social needs and Esteem needs 26 self-actualisation needs

Figure 5.1 - Maslow's Hierarchy of Needs

Source: Marketing, 4th ed., by Philip Kotler and Gary Armstrong, 1997. Prentice Hall.

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5.4 Segment Characteristics in Banking In consumer banking or corporate banking, the banks target the segment that adheres to the common characteristics that typify an "ACE" customer. These customers are likely to be Asset-Rich (the ability to pay), Credit-worthy (the willingness to pay), and Exclusivity (possess the desire for exclusivity).***ACE-JAGUH/HEBAT/ORG YG PANDAI DLM SATU2 PERKARA!28

Firstly, the competition among banks in consumer banking is targeting customers who have the ability to repay, and a banker will look for assets that can provide security to the bank. Secondly, the customer must be credit-worthy. Even for credit card customers, he must have the ability to repay and the inclination to repay. The third characteristic is the exclusivity desire. A bank product should be designed in such a way that the customer likes it because of exclusiveness.29

The first two criteria also apply for corporate customers. However, in targeting small- and medium-enterprises, the bank will have to assess the credit worthiness of the board of directors because they control the company.

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The need for the exclusivity design of bank products is one of the reasons why banks adopt the account relationship management. The relation manager is hired exclusively to service corporate customers. He is likely to know what kind of products to provide for his customers needs.31

5.5 Segmentation Criteria It is evident that there are several ways to segment a market, although; not all segmentation are effective. In order for segments to be useful in selecting the target market, they must fulfil the criterion of effective segmentation. Also the optimum number of segments must be identified beyond which overall profits will begin to decline. The application of the following criterion may help define the potential profitable market segments.32

1) The segment should be large or profitable enough to justify the expense in serving the segment in terms of product development, promotion, etc. 2) The segment should preferably be the largest homogenous group worth pursuing with a tailored marketing programme, e.g. high network individuals (HNWI). The customer profile fits the ACE characteristics.33

3) However, it should be sufficiently heterogeneous (different) in relation to other markets so that customers will respond differently to some aspects of the marketing strategy. Otherwise, this defeats the purpose of the above qualifying criteria.

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4)

The segment characteristics should be measurable as to the size, purchasing power; among other variables, to determine the potential of the segment.

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5)

The segments should exhibit adequate stability over time so that the marketing efforts will have enough time to get the desired response from targeted segments.

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6)

The variables used to segment the market must provide directions on how to reach the segments, so that the segments could be effectively served.

THE FIRST THREE (1,2 & 3) CRITERIA ARE QUALIFYING CRITERIA, WHILETHE REMAINING ONES (4,5 & 6) ARE DETERMINING CRITERIA..37

Continue! 5.6 MARKET TARGETING 5.6.1SEGMENT STRATEGIES 5.7 COGNITIVE DISSONANCE 5.8 CONSUMER BANKING 5.8.1 WHY IS THERE A SUDDEN INTEREST IN CONSUMER BANKING? 5.8.2 PRODUCT & SERVICES 5.8.3 TECHNOLOGY IN CONSUMER BANKING (self study!)38

5.6 Market Targeting Market segmentation reveals a bank's market-segment opportunities. The bank then evaluate the various segments and decide on the target segment based on the segment size and its growth potential, its structural attractiveness and the bank's objectives and resources.39

Contd.. The largest or fastest growing segments are not always the most attractive for banks. Small banks may lack the skills or resources to serve these segments, or that these segments are very attractive to banks with larger resources, thus making it too competitive for the smaller banks.40

Contd.. A segment may have the desirable size and growth but still may not be attractive due to low profitability. For instance, the segment would be less attractive if it has too many current and potential competitors and potential substitute products already exist.

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Contd.. Some segments would also be dismissed as they are not congruent with the bank's long-term objectives. Although the segments may be tempting in it self, it may divert the bank's attention and energies away from its main goals.

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Contd.. The bank could adopt one of three market coverage strategies for a target segment, consisting of a set of buyers which share common needs and characteristics, that it decides to serve.

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5.6.1 Segment strategies The bank may decide to ignore segment differences and go after the whole market with a single offer. The offer will focus on the common needs rather than the differences in the needs of the consumers. Product designs and marketing programmes are aimed at appealing to the largest possible number of buyers. This form of undifferentiated marketing provides cost economies due to the narrow product line and lower 'production' costs44

Contd.. In adopting a differentiated marketing strategy, the bank targets several segments by designing different offers for each. This strengthens consumers' overall identification of the bank with the particular product category as focus is on specific needs of the consumers. There will be a greater incidence of repeat sales because the offer would better match customer needs.45

Contd.. The third form of market coverage strategy, concentrated marketing is most appealing to banks that have limited resources. Concentrated marketing (niche marketing) is an excellent way for attaining a large share of one or a few sub-segments.

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5.7 Cognitive Dissonance Cognitive dissonance theory advocates that discomfort or dissonance occurs when a consumer holds conflicting thoughts about a belief or an attitude. For instance, when consumers have made a commitment to buy a product, particularly an expensive item such as an automobile, they often begin, to feel cognitive dissonance when they think of the unique, positive qualities of the brands not selected.47

Contd.. When cognitive dissonance after a purchase or purchase commitment, it is called post-purchase dissonance. Because purchase decisions often require some amount of compromise, post-purchase dissonance is quite normal. Nevertheless, it is likely to leave consumers with an uneasy feeling about their prior beliefs or actions - a feeling they tend to resolve by changing their attitudes to conform with their behaviour.48

Contd.. Possible post-purchase experience has significant ramifications for marketers, who have to build post-purchase strategies into their promotional campaigns. What makes post-purchase dissonance relevant to marketing strategies is the premise that dissonance propels customers to take cognitive steps to reduce the unpleasant feelings created by rival thoughts.49

Contd.. In addition to such consumer-initiated tactics to reduce post-purchase uncertainty, a marketer can relieve consumer dissonance by including messages in its advertising specifically aimed at reinforcing consumer decisions, offering stronger guarantees and warranties, increasing the number and effectiveness of its services, or providing detailed brochures on how to use its products correctly.50

Contd.. Segmentation is one of two main pillars of marketing. Segmentation identifies the target market and provides a profile of the target customers.

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5.8 Consumer Banking Consumer banking refers to the provision of financial services to individuals and small companies. The customer base mainly consists of individuals from all walks of life - students, clerks, factory workers, professionals and company executives. Thus consumer-banking products range from the all-in-one deposit accounts to flexible personal loans. The examples include educational loans, housing loans, lifestyle loans, club membership loans and margin financing on stocks. These are commonly advertised and promoted in the newsprint media.

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5.8.1 Why is there a sudden interest in consumer banking? There are three main reasons that account for the banks' entry into this market sector. 1.Firstly, banks realise that economic development has brought about a growing middle class with strong purchasing power and certain affluence. They want the comfort and prestigious things in life and they are confident of earning more.53

Contd..2. Secondly, banks are also experiencing shrinking profit margins from their corporate banking. Thus, they might find it easier to levy higher charges on retail clients. Banks generally price 2% to 3% higher in lending rates on consumer loans than corporate loans.

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Contd..3. Thirdly, consumer banking provides a steady source of fund to the bank. Not only is there stability in deposit growth, retail deposits are often a cheaper source of fund. It helps the bank to lower the cost of funds and therefore further improve interest margins. This leads to higher profitability.55

5.8.2 Products and services Since the 1980s, basic consumer banking facilities, such as cash and cheque deposits and withdrawals, have undergone tremendous changes from limited branch operation hours to extension of business into off-office hours to 24-hours self-service ATM electronic banking services.56

Contd.. The emergence of home and telephone retail banking delivery systems have also brought about greater convenience to' the-customers. Joint marketing effort between retailers and banks is common.

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Contd.. Personal loan products, e.g. residential loans, car loans, margin financing, and study assistance schemes, are neatly tailored to match individual needs. Citibank even allows its customers to choose their own repayment terms. In addition, it also takes the initiative to consolidate accounts such that credit balance in the deposit or investment product account would automatically be transferred to offset the debit balance in the loan accounts.58

Contd.. "All-in-one" deposit products are one of the many innovative packages. In Singapore, Hong Kong Bank attempts to attract customers from different levels of income group by implementing a multitiered interest rate to its Prime account holders.

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Contd.. Credit cards, free gifts, lucky draws and frequent flyer programmes are not unusual as promotional gimmicks to gain market share. With the liberalisation of the Employees Provident Fund and increased public education in financial investment, it is possible that in future consumers interest will shift to non-deposit investment instruments. New consumer banking products and services will be offered by banks.60

5.8.3 Technology in consumer banking In the past, customers could only withdraw cash over the counter at bank branches. Today, they can withdraw cash at ATMs outside bank branches, supermarkets, petrol kiosks and bus terminals at their own convenience. Bank transactions through ATMs are processed on-line and linked to the bank's central mainframe where customer records are updated almost instantaneously. Besides cash withdrawals, consumers can also request for account balances, new cheque books, transfer funds across accounts and even 61 apply for new shares on the screen.

Contd.. Home and telephone banking also helps consumers to execute their requests. One typical example is Citibank's 24-hours phone banking system. It is a telecommunication system directing customer enquiries to a specific banking officer or banking facilities, not through a receptionist, but through a centralised computer processing unit. Advances in technology make telephone banking more user-friendly and thus there will be a push for more electronic products in banking62

Contd.. As technology is taking consumers into a cashless society, credit cards, debit cards, stored value cards and smart cards are commonly used to settle purchases for groceries, air tickets, petrol, bills for meals at restaurants, making telephone calls and even taking public transportation. Such purchasing habit has become a major concern to banks so much so that those banks who do not follow the trend would seem antiquated and may lose out in the consumer banking battle.63

Contd.. The bricks-and-mortar distribution system will be playing a less important role in the future. This is largely because branch network is costly to maintain and more risky (exit price is involved). However, it will continue to be an essential step in establishing physical footholds in new markets.64

Contd.. The business activities carried out at the counter will also be different, with more new products being offered. The major function of the branch will soon be replaced by more consultation and advisory services for financial planning, investment, tax and legal matters. A new generation of skilled and knowledge based employees will be stationed in the branch to answer customer enquiries. Banks have also upgraded the appearance of banking halls to keep up with the customer expectations and to induce an atmosphere of 65 trust and confidence.

Contd.. McCoy et al (1994) reported a market research which showed that consumers' choice of distribution channel is dependent on market segment and geography. Thus, banks need to have a thorough understanding of their existing consumers' wants and preferences before committing any heavy investment in developing new delivery systems.66

Contd.. A study conducted by the Bank Administration Institute in 1993 further highlighted that 95% of self-service oriented consumers would prefer doing banking facilities outside of the branch to in-house branch services. The mix-channel users felt more comfortable with slightly more branch service and equal basis on self-service channels.

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Contd.. All these changes to bank delivery systems have become a race for market competence and survival. Customers are demanding greater convenience, flexibility and accessibility. Changing lifestyles and spending patterns have led to the need for more appropriate distribution channels too. As consumers become more computer literate, they become more sensitive to the speed of product delivery. Thus, increased emphasis is given to automation of delivery systems. 68

Contd.. On the supply side, significant economic growth has contributed to the increase in middle class and a more affluent customer base. Singapore, Hong Kong, Japan and Australia enjoy a high level of retail banking products and services. Changes in the mix of delivery systems are further supported by the existence of established infrastructure and communication networks.69

Contd.. The compliance with bank capital adequacy requirements (CAR) has compelled banks to be more efficient in their deployment of funds. Every dollar lent must be accounted for in terms of risk and return. Therefore, consumer banking with its high interest margin and fee-based income provides an attractive alternative to generate high returns.

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