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Craig Tapper July 25
Marketing of Financial Services Introduction: The role of
Marketing in Modern Financial Services Organizations
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Marketing is just trying to persuade people to buy things.Firms only do it because otherwise people wouldnt know
about them and they might go to the competitors!!!
What is marketing?
Why is it important to an organisation?
Why is it important to customers?
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Marketing is so basic that it cannot be considered a separate function.It is the whole business seen from the point of view of its final result,that is, from the customers point of view Business success is notdetermined by the producer but by the consumer
Peter Drucker (1973)
Marketing is the delivery of customer value and satisfaction at a profit.The goal of marketing is to attract new customers by promisingsuperior value, and to keep customers by delivering satisfaction
Kotler, Keller & Burton (2009)
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Although selling and advertising are highly visible aspects of marketing
practice, they are only part of a larger marketing mix a set ofmarketing tools that work together to affect the marketplace. We definemarketing as a social and managerial process by which individuals andgroups obtain what they need and want through creating and exchangingproducts and value with others.
Kotler et al (2008 p.5) the process of creating and delivering value to key stakeholders..
The American Marketing Association (2004)
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Products and services (the things that are traded)
Value (the thing that the product or service adds forthe customer and that they exchange with the firm -both parties need to get Value)
Value changes over time and is different for differentcustomers
Key Concepts from these definitions
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Needs = felt deprivation
Wants = specific individualshape of the need
Demand - wants backed bypurchasing power
Products = anything offered tosatisfy wants
Exchange = value given &received by customer &organisation
Results in a transaction
Markets = a set of existing andpotential buyers for aproduct.
Key definitions in Marketing
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Any act, performance or experience offered by one party to another
Essentially intangible and not involving ownership of anything
Production may or may not be tied to a physical product
Processes (economic activities) providing time, place, form, problemsolving or experiential value to the recipient
Something that can be bought or sold but cannot be dropped on yourfoot!
What is a service?
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72% of Australias GDP comes from services (Economist IntelligenceUnit Feb 2007)
80-90% of all new jobs will come in services (RBA June 2006)
They come about in the later development stages of anations economy
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Sector 1950 1960 1970 1980 1995 2010
Agricultural products 42 29 17 10 9 7
Minerals 14 17 13 20 13 11
Manufactures 34 42 47 39 38 28
Services 10 12 23 31 40 54
Source: IBIS Information Services
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Horizon 1Physical GoodsAgricultureMiningManufacturingMetals
Chemicals etc
Horizon 2 ServicesCommunicationsRetailTourismFinance
TransportHospitalityBusiness Services etc
Horizon 3 Information &knowledge basedBiotechnology and healthNew information economy
Time
Economic Development (GDP per capita)
Source: McKinsey & Company
1900 2000
Waves of Economic Development
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Source: Stace & Dunphy (2007 p.38)
Industrial economy Service economy Knowledge economy
First Curve
Second Curve
Capital & resourcesProduction
Offshore marketsTrade
Marketing
KnowledgeConsumersGlobal marketsE-commerceRelationships
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Source: Stace & Dunphy (2007 p.38)
Industrial economy Service economy Knowledge economy
First Curve
Second Curve
Specialist functionsCorporateness
Horizontal & verticalintegration
Business processesTangible assets
Flexibility
& competenceIndividuals &networksVirtualintegrationCultureIntangible
assets
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Value 2005
$USD Bn
% change
00-05 p.aWorld 2,415 10
North America 422 5
South & Central America 68 8
Europe 1,245 12
European Union (25) 1,121 12
Commonwealth of Independent States 42 20
Africa 57 13
Middle East 55 11
Asia 525 11
Japan 108 8
China 74 20
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Balanced
Tangibledominant
Intangibledominant
Salt
House
CarTailored
Suit
Fast-foodRestaurant
Hotel
AirTravel
TheatreTeaching
Balanced item = 50:50
Financial
Services
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The hollowing out effect - internationalisation and globalisation (low-technology labour intensive activities move to low labour cost countries)
Deregulation and privatisation (government services sold off, international
and national consolidation of services to achieve scale and scope) Social change (rise of global middle class and emerging middle class; two
income households)
Professional services & franchises (increased competition, growth in demandand lower regulation on marketing)
Technology (access to information; driving service innovation) Global wealth & investment market (decline in state pension as source of
retirement, growth of personal investment industry)
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Intensifying competition isdriving marketing investmentand innovation
Increasing marketingorientation
Service quality philosophybecoming increasinglyimportant
Increasing numbers andsophistication of financialservice value chains and use offranchising
Technology driving:
More innovative andsophisticated delivery systems
Increased customer self-serviceand DIY
Increase capacity and relianceon data mining, manipulationand CRM strategies
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Customers dont obtain ownership
Services are intangible
Services are inseparable (customers are involved)
Services perish and cannot be stored
Services are variable (quality is hard to maintain)
Services are harder for customers to evaluate
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Most service products cannotbe inventoried
Intangible elements usuallydominate value creation
Often difficult to visualize
Customers may be involved inproduction
Other people are often part ofthe product
Operational inputs and outputs
tend to vary more widely
Time frequently assumesgreater importance
Distribution may be via non-physical channels
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Narrow definitions of what marketing means by financialservices managers and poor appreciation of marketing
Differentiation is harder
Limited data on competitive performance
Costing is harder
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Understand and identify surrogate cues (things that dontrelate to the service performance)
Ensure that the cues are in line with customer expectations
Differentiate the offer and signal it using the cues
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ProductPrice
Promotion
Place
People
Process
Physical evidence
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HumanResource
Management
Customers
Marketingmanagement
Operations & info techmanagement
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Financial Service benefits are harder to establish
Customer behaviour and experience are more important
Managing the service encounter is vital
Design of the service factory and delivery system iscentral to creating the encounter
Use of channels needs more thought
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TechnicalCore
Equipment
Servicepeople
Interior &exterior
facilities
Thecustomer
Othercustomers
Othercustomers
AdvertisingSales calls
Billing/statementsMiscellaneous mail,phone calls, faxes etc.Websites and emailsRandom exposures tofacilities/vehiclesChance encounters with
service personnelWord of mouth
Backstage(Invisible)
Front-stage(visible)
Other contact pointsService operations system
Service delivery system
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Satisfaction; Quality;
Brand loyalty
Organisation
Employees Customers
Internal
marketing Traditionalmarketing
Relationshipmanagement
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Cultural Values and Norms
Cultural Values and Norms
Service encounter:Understandingcustomers intrinsic
needs & valuesMood statesRole theoryScript theoryCommunication styleAttribution theory
Post-purchase stage:
Customer satisfaction
Perceived quality
Customer complaintbehaviour
Service recovery
Pre-purchase stage:
Recognition of needs
Information searchEvaluation ofalternatives
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Role of women; gender relations Role of the family Attitudes to age and authority Collective vs. individual focus Religious observances Cognitive styles Hours of work Communication protocols Importance placed on loyalty; conspicuous consumption
SOCIAL CONVENTIONS
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AESTHETICS
Symbolic meaning of art, architecture, dance, folklore, drama
Importance of symbols such as employment, title dress,
hairstyle, jewellery, brands, etc.
LEVELS OF CULTURE
National
Regional
Industrial
Organisational
Financial Services Marketing CulturalConsiderations
Fi i l S i M k ti g C lt l
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DEMONSTRATIONS OF CULTURAL DIFFERENCE
Time
Space
Language (what is meant)
Familiarity
Consumption
Business customsNon-verbal communication
LANGUAGE
Financial Services Marketing CulturalConsiderations
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1. Power distance (equality or hierarchy in interpersonal relations)
2. Uncertainty avoidance (societys risk attitude)
3. Individualism/collectivism (reliance on self or others)
4. Masculinity/femininity (extent and source of caring for weakermembers of society)
5. Long versus short-term orientation
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Power Distance Scores
Australia, Great Britain & Germany 36
Netherlands 38
USA 40
Japan 54
South Korea 60
Singapore 74India 78
China 77
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Uncertainty Avoidance Scores
Singapore 8
Sweden and Hong Kong 29
China 40
USA 46
India 48
Australia 51
Germany 65
Japan 92
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Masculinity vs. Femininity ScoresSweden 5
Netherlands 14
China 46
Singapore 48
China 55
Australia 61
USA 62Germany & Great Britain 66
Japan 95
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Individualism vs. Collectivism
India 14
China 15
Singapore 20
Japan 46
Germany 67
Netherlands 80
Great Britain 89Australia 90
U.S.A 91
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1. Functional risk (Will it work?)
2. Financial risk (Is it worth it?)
3. Temporal risk (Will it be a waste of time and effort?)
4. Psychological risk (How will I be treated?)
5. Social risk (What will they think of me?)
6. Sensory risk (What problems will there be?)
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Seek information from trusted sources
Rely on reputation
Seek warranties & guarantees
Seek guidance about alternatives
Look for trial
Use of the internet
Loyalty to existing providers
Look for tangible quality signals
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The importance of the service encounter itself
The separation of the purchase and consumption phases
The impact of mood and emotion (affect) on serviceconsumption and evaluation
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Expectations(E)
Confirmation
PerceivedPerformance
(P)
ComparisonProcess
Dissatisfaction DelightMere
satisfaction
Negativedis-confirmation
ExperienceWord of mouth
MarketingcommunicationsAwareness ofcompeting brands
Positivedis-confirmation
P = E P > EP < E
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The 5 Cs
Customers
Company
Competitors
Collaborators
Context
Context looks at key externalenvironments including:
Political
Economic
Socio-Cultural
Technological
Legal & regulatory
Environmental (nature)
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Corporate strategic plan(s)
Business Unit Plans
Functional Plans to support these...(eg Marketing, Production, Operations, Finance, IT, HR, etc)
Shareholder or stakeholder value
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Production Orientation =consumers favour products that areaffordable and available so improveproductive efficiency!
Product Orientation = consumersfavour products that are high
quality, performance and features,so improve the product!
Sales Orientation = consumers needto be persuaded to buy, so sell!!!
Marketing orientation = understandcustomer wants and needs and deliversatisfaction better than alternatives!!
Societal Orientation = deliversatisfaction and meet wants & needs
in a socially responsible andsustainable fashion!
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Customer centric or strongly customer oriented
Involved in continuous customer research and gainingcustomer insight
Integrate all activities with the customer as the focus
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Body copy
Bullet