Marketing Financial Services Benjamin Franklin may have discovered electricity but it was the man who invented the meter who made all the money

Marketing revisited: The evolution of marketing PRODUCTION CONSUMPTION “PROSUMPTION” “First, consumers have more money to lavish on their specialised wants; second…. As technology becomes more sophisticated the cost of introducing variations declines.” Alvin Toffler 1970

Oya yubi sedai (the thumb tribe): modern consumers demand modern methods Dell – configure and buy Lands End – custom denim jeans Proctor and Gamble – Community Corner Pearson – Pop Idol Fidelity – DIY Funds supermarket

A new kind of consumer? New consumer Time Experiential IT Demanding Educated Complexity Entitlements

4Ps versus 4Cs Product Price Place Promotion Consumer needs and wants Consumer costs (time, money, effort) Convenience Communication “In today’s consumption led economy using the 4Ps as the basis for marketing strategy misses a fundamental point: consumption is enacted by consumers and therefore they – and not products – should be the starting point of marketing strategy orientation” (Baker 2004)

Core concepts of marketing Identify and define customer value Marketing effort Provide value Communicate value Deliver value Customer satisfaction Achieve organisational goals Needs, wants demands Products, services ideas

Understand value from the consumer’s perspective Nike trainers FEATURES BENEFITS PERSONAL VALUES DELIVER SATISFY “Air pocket Sole” “Power bridge” “Enhanced Performance” Good health Well being Keep fit Belong Self image

Marketing as integrative function….. Competitive strategy Product/market Segments Segment 1 - Segment n Focus on KEY segments Business system Operations Distribution Sales Service Customer Focus on KEY business stages

….delivering sustainable marketing advantage SOURCES Reputation Brands Tangible assets Knowledge Customer service People STRATEGY Segment focus Differentiation Distribution Process/quality/price

Positioning the business for “value centric” marketing Focus on consumer value Identify and define value Provide value Communicate value Deliver value Competitive analysis differentiation Select features to deliver benefits Market positioning Target market Company Analysis Customer analysis Segmentation (Based on Bradley 2003)

Understand value creation

Scope of strategic marketing Identify value to be provided by understanding the customer’s perception of value Provide the value expected by establishing a superior value position Communicate the value through a positioning and brand strategy Deliver the value through appropriate pricing and distribution choices

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

What do financial products do? Money transmission Credit facilities (long term secured, short term unsecured) Personal and family protection Asset protection Capital investment (risk differentiated) Regular savings (risk differentiated)

Generic business types Market making activities Wholesale investment services Packaged investment manufacturing Investment retailing Wholesale lending services Packaged loan manufacturing Loan retailing Back office services

Who do we buy from? Post Office Building Societies Banks Insurance companies Investment trust companies Stockbrokers Credit card companies Supermarkets Financial advisers Mortgage advisers Double glazing salesmen Garages Vets Doctors and dentists Global industrial conglomerates

Complexities in distribution: how many ways can you buy a Halifax mortgage? Retail branch Mortgage adviser Mortgage wholesaler (via above) Direct response Etail Etail (Intelligent Finance branded)

The changing face of financial services distribution – emergence of multi-channel distribution Historic position Direct to customer (retail channel) Intermediation Current position Direct to customer (retail, etail or direct response) Intermediation Third party distributor owned brand (retail, etail or direct response)

Exploring generic product types: money transmission Current accounts (retail and etail), credit transfer, DDM Savings hybrid Mortgage hybrid Interest paying CA Mortgage interest offset CA

Generic product types: capital investment Deposit based (loan) Savings/deposit account Some national savings Retail, etail, direct response Risk free Tax deducted at source Asset backed (own) Collective equity investments (UT/IT/ISA/Bonds Retail, etail, direct response, intermediaries Risk differentiated Different tax treatments

Generic product types: credit facilities (non-cash payment) Short term unsecured Credit card (interest bearing core debt or interest free) Personal loans (credit risk differentiated) HP (debtor/creditor supply agreements) Lease purchase Overdraft Long term secured House purchase (including FTB, movers, equity release) Credit risk differentiated Investment (B2L) Home improvement/consolidation loan Business borrowings

Generic product types: protection Insurance Home, contents, car Health (private health care, medical expenses, critical illness) Income (short term credit, long term phi) Warranties/extended warranties Breakdown Assurance Temporary (term) Permanent (whole life) Hybrid (with savings)- endowment Employment related (DIS/DISWP)

Generic product types: regular saving Deposit based Regular savings account Monthly cash ISA Friendly Society Asset backed Monthly equity ISA Regular premium UT/IT plan Endowment Personal pension AVC/FSAVC

The marketing challenge: clarity from complexity Understand value from the consumers’ perspective Review and evaluate distribution channels Understand differential profitability of distribution channels Develop distribution strategies that capitalise on strengths Understand what influences customers’ channel buying decisions Understand what factors influence consumers’ product buying/provider decisions Develop a strategy enabling you to benefit from as many transactional relationships with the customer as possible Understand how customers view the relationship between marketing mix elements