Marketing of Services Process - Essay Example

The World Marketing Association (WMA) s, ‘Marketing is the core business philosophy which directs the processes of identifying and fulfilling the needs of individuals and organizations through exchanges which create superior value for all parties’ (Chapman, 2003). This implies, be it marketing of products or services, that customer satisfaction is paramount. Nevertheless, due to competition, every industry market being totally customer-oriented, the marketing of products differs from marketing of services. Again, marketing financial services differs significantly from general marketing of products and services. The financial services sector would include banking, life assurance and pensions, investment management and asset servicing apart from general insurance, corporate finance, and broking services sectors. The factors that affect the financial services industry are the government regulation and deregulation from time to time, global competition, changing customer preference behavior. Availability of skilled staff is essential. Marketing financial services, irrespective whether it is face-to-face or through direct marketing channels, comes with a high cost. If human element is eliminated, the electronic set up costs is high. Marketing of services is a bigger challenge than marketing of products. Various reasons account for this and hence strategic marketing plans have to be devised for this. The most important differentiation is that products have well defined parameters and the customer can base his decision to some extent on that. Services on the other hand are intangible. In services marketing, it depends to a large extent on the customer. Two different people would react differently to a given situation. Marketing a product is on the premise that there is a market of millions. Hence, all related services like delivery, demonstration and after sales service can be built accordingly. As far as marketing financial services is concerned, each individual is a market in himself. Customer relationship management is essential here. Transactional analysis is important because it helps to derive customer knowledge to offer and improve the services. The service staff can also be trained based on this information. In marketing financial services, various factors have to be taken into account. Financial services come with a high element of risk attached to it. Marketing of products and general services require the four P’s (product, price, place and promotion) but in marketing of financial services two more P’s are important – people and process. Human interaction is important in services marketing which is not so essential in marketing products. Once a product is purchased, you may never see his face again. Selling services is an entirely different concept. The industry has to attract, motivate and retain skilled staff who can sell their products. Due to advanced Information Technology, processes like delivery of financial services have undergone dramatic change. In the banking industry, the expectations of customers would differ between branches and even between locations. Singh (2002) HSBC, India says that in marketing financial services, what matters is meeting consumer expectations. Of late, consumers and financial institutions found value in non-human delivery (Lee, 2002). The financial services sector has moved to direct selling in the form of phone, mail, or computer transactions but it depends upon the products as well as the location and the people. With the ageing population, human interaction is preferred to non-human delivery. In marketing of services like the travel trade, experience is sold to the consumer. If the expectations of the tourist are not raised too high and he gets more than he expected, he is sure to return to the same agent. In marketing a product, the relationship with customer is transaction based but in providing services, customer relationship management is essential. As far as airlines are concerned, the experience of waiting in the queue to purchase the ticket itself should be a pleasant experience to make him a repeat customer. FedEx, being in the service industry in which reliability and control is very important for customer satisfaction, purchased their own planes to offer better service. Even though they had product differentiation, they did not get hold of a market share of more than 21% even after four years of being in business. The possible reason could be lack of human interaction. A competitor can capture the market just by market analysis, understand the customer expectation and meeting them. Anybody who has the purchasing power can buy a product but marketing services requires proper segmentation. Demographic date is very essential for service providers. The basis for market segmentation becomes entirely different for the airlines industry. Airlines would target the business tourists and the holidaymakers separately. They even have price differentiation for the two segments. For instance, they can charge a higher price from the business who has to travel at short notice and on a particular date but the prices can be lower for a tourist who can be flexible on his travel dates. To market financial products, PEST analysis is essential. The target customers in financial services are the ageing population who wish to invest their pension. Government regulations play an important role. The ageing population makes up the bulk of the financial services market. Due to higher life expectancy, and decrease in birth rate, government encourages delay in the retirement age. Longer working lives delays the pensions. The economic factors that affect investment are the low annuity rates. This discourages individuals from investing in pension funds. Competition in this sector is growing but then competition helps to maintain high standards in services. On the social front, those with inadequate pension would like to borrow but the affluent and the sophisticated ones look beyond to invest in companies that have a global reach. Technology plays a major role in efficient marketing of services. More and more financial institutions offer internet based services but the over 60s find this difficult. While this may serve adequate purpose in buying a tangible product or even booking a hotel online, to make a financial investment, those in their sixties would prefer a face-to-face interaction. Channel plays a major role in marketing. For marketing products, distributors are appointed. Marketing of services too have intermediaries called agents. This works particularly well in sectors like the travel trade. Here the travel agents need to be serviced with good commissions. The hotels and airlines depended till lately on the agents. Recently, airlines have been marketing their products directly to consumers through the internet. E-ticket is in and the role of the travel agent has reduced largely. Airlines are asking the travel agents to charge a lump sum amount on the ticket value and sell to those who still wish to buy tickets through agents. The airlines, on their part, extend this price reduction to the customer due to the highly competitive market. Hotel industry follows the same pattern. Marketing of financial services, on the other hand can be direct or through channels depending upon the product. Credit cards can be sold through direct means but bank loans and mortgages would require human interaction. Investment products can be sold through direct means. Direct marketing helps in sending out different messages to different segments, which means costs are under control, there is no wastage of time, detailed message to each group can be targeted. The limitation here would be the reliability of segmentation. If products like insurance are sold through own channels, it helps in cost control and gives flexibility in policy changes at short notice. The disadvantages are that due to high costs own setup would be limited and may reduce the number of personal visits from prospective customers. Agents spread out over a vast area are easily accessible to more people than through own offices. It may be cheaper to offer them commissions than to maintain own office. The risk however remains that they may be promoting competition products and would push the product, which is financially more rewarding for them. Marketing of other services like airlines and hotels on the other hand, are moving towards direct selling. Communication and branding are important specially to reach the customers through direct means. In marketing a product, normal advertising would suffice but for marketing financial services, if electronic means is used as a channel of direct marketing, brand has to be built. Brands convey many levels of meaning to the customer, such as product attributes (expensive, exclusive, no frills), functional and emotional benefits (financial security, feelings of having “made it”), and the values and culture of your company (Southwest Airlines is “fun”), says Bachmann (2003). Communication through a well-designed website has a positive effect on the company’s brand. The websites of a bank or a mortgage company should provide explanation of their background, products on offer, rates and how to contact. The existing customers should have easy access to their account details. The screen should not be jammed with unrelated offers. Marketing of services like airlines, need to offer allied services like travel insurance along with the products. Risk management is unique to marketing of financial services. The non-financial risks include fraud, systems failure of breach of compliance with government regulations, the financial risks require effective credit management. Effective risk management can help safeguard against financial loss as well as damage to reputation (PWC, 2006). Thus, we can conclude that the difference in marketing financial services occurs due to rise in customer needs and expectations. Longer working lives, increased personal wealth, ageing population, accessibility to more financial products makes the market more competitive. Thus, companies have to reduce costs while maintaining the standards of service. Regular innovation, proper market segmentation, usage of the right channel suitable to the product, companies marketing financial services can turn these challenges into opportunities to enhance customer relationships. References: Bachmann J (2003), What You Need to Know About Online Branding of Financial Services, 30 April 2006 Chapman R (2003), A Marketing Definition in Six Words, 30 April 2006 Lee J (2002), A key to marketing financial services: the right mix of products, services, channels and customers, Journal of Services Marketing Volume 16 Number 3 2002 pp. 238-258, 30 April 2006 PWC (2006), Enterprise-wide risk management (ERM), 30 April 2006 Singh R (2002), Marketing of Services in the latest episode of Strategic Marketing Forum, 30 April 2006 Bibliography: Mind branch, Financial Services Marketing to the Over 60s - Market Assessment, 30 April 2006 Read More