A highly unique and specialized branch of marketing, the marketing of financial services includes a gamut of complex activities – both pre-sales and post sales.
Financial Institutions are always on the prowl to increase their account balances, increase their customer base, retain customers, post high profits and in turn acquire new customers. All this and much more relevance to the financial services marketing activity can be achieved through some understanding of the strategic perspectives of financial services. Moreover, a buyer’s market has made its presence in the financial services industry, making it necessary to imbibe a strategic insight into this marketing activity. Predicting consumer behavior, market segmentation and targeting a niche market all form part of the strategies to market financial services. Competitive markets, intricate product characteristics and intangibility have made the job of the financial service-marketer very profound and challenging.
In the direction of achieving excellence in marketing through easy and anywhere banking, it can be said that financial institutions have made great progress in educating their customers.
A generous mention may be made on the recent proliferation of the Internet as a medium of knowledge and communication that has helped customers become aware of the various products offered by different financial institutions. A virtual relationship of trust is being established between the financial institution and the customer, given the increased access to financial data across the board about various products and services offered by the financial institution the customer transacts with and the competitor financial institution. This relationship remains the key substance when it comes to marketing financial services. It should also be kept in mind by the marketer that such relationships are built when right services are marketed to the right customer.
Financial Institutions are always on the prowl to increase their account balances, increase their customer base, retain customers, post high profits and in turn acquire new customers. All this and much more relevance to the financial services marketing activity can be achieved through some understanding of the strategic perspectives of financial services.
In the era of increasing financial priorities, maximization of financial goals and achieving income through financial investments, the Indian financial sector has seen mushrooming growth of financial institutions. Offering a gamut of services and attracting new customers with unique services has been an age-old tactic used by these financial institutions. Competition for banks and financial institutions is in the form of rival institutions that adopt unique marketing strategies to attract new customers and retain old ones.
For instance, UTI Bank in India, in an attempt to carve for itself a special position in customer service and support, started offering call centre facilities to its customers, in order to address issues faced by customers, and eliminate the load that branch operators would handle. A dedicated helpdesk and a single window service helped in standardizing replies to customers.
Technology helps Financial Institutions identify where they are lacking and how these gaps can be sealed. Services like online banking, online bill-payments for insurance premiums and credit cards, online trading and E-Broking have all become very popular in recent times, thus helping financial institutions overcome the challenge of reaching customers and making financial services more user-friendly.
For example, the ICICI Bank offers mobile banking that has many perceived advantages.The iMobile service launched by the ICICI Bank is a downloadable Mobile Banking Application. Working on GPRS and SMS, this application works on all GSM mobile phones. This free-to-use application offers facilities like fund-transfer, demat, credit card and bill payment services, mobile recharge, locator services, and others all on the cell phone through a single, secure application.
NetSafe – a hidden gem in secure online shopping
Online shoppers are often concerned about revealing their credit card information. The way NetSafe works is that it uses the balance in your account (Savings account or Credit Card Balance) to “generate” a temporary credit card – a valid Visa Credit Card no, expiry date and CVV number. However, the credit card number is valid for use only for 24 hours, and only up to the limit that you set (which limit must of course be within your account balance). Therefore:You don’t have to reveal your own credit/debit card number and the only risk you carry is for the limit that you set for your Netsafe card and that too only for 24 hours.
ICICI’s E-Broking services through its website icicidirect.com remains a pioneer in the field of offering e-services to its clients involved in online stock and derivatives- trading. This website serves as a platform for interaction between the investor and the stock market.
Reliance Money, which offers mutual fund advisory services, helps customers redeem their mutual fund investments without as much as a phone call. A customer may withdraw the necessary amount with the help of a simple ATM withdrawal and the appropriate amount is debited in the customer’s investment account.
Achieving customer loyalty is one of the basic challenges that financial institutions face.
Given the increasing number of banks and financial institutions and increasing number of customers and investors to achieve financial goals in a systematic manner, financial institutions are faced with the challenge of achieving customer loyalty, through which they can sell, cross-sell and up-sell their products. Customer Relationship Management plays a vital role in achieving customer loyalty.
In order to achieve customer loyalty, banks and financial institutions follow relationship marketing that goes a step ahead of just market segmentation. A true example of customer service, HSBC Bank’s new global premier is a service that is a culmination of various financial products and services, offered to affluent customers. As David Griffiths points out, “There are around 47 million mass affluent consumers in Asia-Pacific, and their numbers are growing and their needs are evolving.” These affluent customers ask for ease, sophistication and value added services like enabling money-withdrawal with just walking into the bank. This financial service offered by the HSBC Bank helps these customers grow their wealth and enjoy additional financial security and extremely qualitative rewards.
If CRM is one process that is taken up by financial institutions to achieve customer loyalty, cross-selling and up-selling are some initiatives taken up.
The advantages of cross-selling and up-selling include reduced customer-acquisition costs, decreased services costs and marketing costs and communication costs.
Also, since the customer track record is already checked, it helps marketers of financial services go ahead and sell other financial services without having doubt. It helps increase the financial institution’s spread also, because of selling more services to the customer.
Product customization for different segments
Product customization is now an invariable activity at financial institutions. Customizing products and services for different segments of customers like rural customers and women has been an indelible exercise.
Services like Women’s Cards and Petro cards have been introduced by many banks in order to reach more customers. “Financial service companies are the leading industry in marketing to women for a very good reason: their livelihood depends on knowing where the money is, and where it’s going.” As the Boston Consulting Group rightly pointed out, “there are more women in the global workforce at present, at all income levels and all ages.” Also, features like single parenting, matriarchal families and women occupying senior executive positions are all very universal these days. It has become necessary to sell financial services to women inclusive of emotions, personalization and illumination.
One more effective strategy employed by many marketers is to acquire customers from competitor financial institutions by taking referrals of customers with high net-worth and sponsoring social events.
One of the greatest financial services marketing challenges that financial institutions today face is, educating its customers and also the general public about the various benefits of the services offered. Terms like inflation, budgeting, credit and others are explained in a lucid manner so that the customers can comprehend the same and come forward to use these products and services. Processes like electronic fund transfers, usage of demat accounts and others may also be illustrated.
Information Security and Customer data
Information Security is no longer an option for financial institutions. It has become mandatory that banks and financial institutions follow a regular information security process so that the large amounts of customer data as well as internal data is securely stored and used for various marketing and operational purposes. Information Security systems designed by companies like Wipro are being extensively utilized.
Another challenge that corporate customers of banks and financial institutions face is the security challenge of internet payment gateways. Financial Institutions like Citibank, HDFC and ICICI have successfully created their payment gateways to facilitate customers in bill payment, fee payment and other transactions. Since these online payments are generally made from online shopping malls like eBay and some educational institutions, the issue of security while transacting becomes important.
Data mining in financial institutions has helped reveal information about customers’ credit-worthiness, customers’ credit history and financial position. It has helped financial institutions target specific consumer markets. Data mining performs a number of tasks like classification of data, clustering and market basket analysis. It also uses mathematical analytics like Regression to identify some relationships between customer behavior and customer purchases. But financial institutions are often faced with the problem of achieving this kind of personal data of customers. The cost involved in collecting such primary research is often found to be high. So, to avoid this cost, financial institutions resort to collecting information at the initial stages itself.
The challenge of achieving partnerships in the card business, in selling insurance and creating networks through ATMs has existed as and when development of banks and financial institutions happened and customer acquisition happened. The costs associated with partnerships in banking and ATM Networks have now been overcome through deducting charges from the customer’s accounts if there is usage of a different bank’s ATM for a particular transaction. Bancassurance and Co-branded cards have always been subject to challenges like following procedures of the particular third party insurance company whose insurance the bank is selling. For overcoming this, banks generally appoint insurance representatives of that particular insurance company to sell the service. In case of co-branded cards the financial institution faces challenges at the agreement stage- like lack of documentation, lack of showing relevant information about credit-worthiness, etc. This is generally overcome by requesting for thorough customer information and customer referrals.
A wholesome perspective towards overcoming challenges in marketing financial services is necessary. For this purpose, it is important to understand some best practices in the industry. Leading banks have followed some very interesting strategies to overcome challenges like marketing to various customer segments. Developing winning marketing strategies with the help of innovation and customer acquisition, and keeping in mind the regulatory aspects is the key to success in marketing financial services.