Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large Services marketing is a sub-field of marketing, The promotion of economic activities offered by a business to its clients. Service marketing might include the process of selling telecommunications, health treatment, financial, hospitality, car rental, air travel, and professional services.

1. Marketing
Financial Services
Marya Sholevar
Department of Banking and
Finance
Fall 2015

2. Why Services Matter
• Services dominate U.S. and worldwide
economies
• Services are growing dramatically
• Service leads to customer retention and loyalty
• Service leads to profits
• Services help manufacturing companies
differentiate themselves

3. Chapter 1 Marketing
• Marketing is the activity, set of institutions, and processes for
creating, communicating, delivering, and exchanging offerings that
have value for customers, clients, partners, and society at large
• Services marketing is a sub-field of marketing, The promotion of
economic activities offered by a business to its clients. Service
marketing might include the process of selling telecommunications,
health treatment, financial, hospitality, car rental, air travel, and
professional services.

4. Why do firms focus on
Services?
• Services can provide higher profit margins
and growth potential than products
• Customer satisfaction and loyalty are
driven by service excellence
• Services can be used as a differentiation
strategy in competitive markets

5. Service Can Mean all of These
• Service as a product

Customer service
• Services as value
add for goods
• Service embedded in a tangible product

6. Difference between Tangible &
Financial Services Marketing
One of the major problems facing the promoters of financial
services as opposed to tangible products, is that services
cannot be experienced in a tangible manner.
Services cannot be:

Touched,

Tasted,

handled, or

purchased in bulk like tangible products.

7. Financial Services

8. Financial Services Institutions

Retail, corporate, investment and private banks
• Mutual funds, investment trusts
• Personal and group pensions
• Life and general insurance and reinsurance companies
• Credit card issuers
• Specialist lending companies
• Stock exchanges
• Leasing companies
• Government saving institutions
• Brokers and agents

9. Financial Services Environment:
A number of external forces have exerted
influence on the sector, including:
1- Socio-economic factors: play an important
rule in determining the demand for financial
services. Ex. Changes in the distribution of
income and wealth and patterns of consumption.
2- Regulatory environment: Regulations have
played a major role in shaping the behavior of
suppliers and offering increased protection to
consumers. Serve to strengthen the procedures
and practices already set in place.

10. 3. Technology: Traditionally paper-based
systems have become fully automated,
providing greater flexibility and scope for
expansion. Without a doubt, technology holds
the key to future long-term success for financial
institutions, from innovative distribution
channels, which are both cost efficient and
effective at delivering customer service, to
customer databases, which enable better use
of target marketing

11. Characteristics of services,
1. Intangibility:
1. Inseparability or Simultaneous Production and Consumption
1. Heterogeneity
1. Perishability
1. Inability to own services

12. Implications of Intangibility
• Services cannot be inventoried
• Services cannot be easily patented
• Services cannot be readily displayed or
communicated
• Pricing is difficult

13. Implications of Heterogeneity
• Service delivery and customer satisfaction
depend on employee and customer
actions
• Service quality depends on many
uncontrollable factors
• There is no sure knowledge that the
service delivered matches what was
planned and promoted

14. Implications of Simultaneous
Production and Consumption
• Customers participate in and affect the
transaction
• Customers affect each other
• Employees affect the service outcome
• Decentralization may be essential

15. Implications of Perishability
• It is difficult to synchronize supply and
demand with services
• Services cannot be returned or resold

16. The growing competition in
financial services
The financial services industry has undergone much
change in the last two decades. In much of the United
States and Western Europe, there has been a wave of
deregulation that has made competition borderless, not
only in internal markets but also across national borders.
This growing competition in financial services is forcing
companies to improve, among other things, their
marketin and communications activities.

17. The importance of relationships
and trust in financial services
• Relationships and trust are very important in financial
services. Because products and services are ofte
complex, and in many cases also require some degree
of customization, customers place a certain amount of
trust in the company or supplier that they choose. The
relationships between the customer and the company
also tend to be longer in comparison with other
industries, such as consumer goods or services, where
customer churn rates can be much higher.
• Paying more attention to relationship marketing coming
from this need of trust in financial marketing.

18. Relationship marketing
• Relationship marketing can be defined as “an
asymmetrical and personalized marketing process.
This process takes place in the long run, results in
some bilateral benefits and rests on an in-depth
understanding of customer needs and
characteristics” (Perrien and Ricard 1995).

19. Relationship marketing in
financial services
• In financial services, products are often complex and have a
longterm nature.
• Relationship experiences play a central role in the overall
financial decision-making and in providing important benefits
and advantages to customers. Additionally, there is a
relatively high level of perceived risk, which highlights the
particular importance of customer relationships in the
marketing of financial services, both to personal as well as
corporate clients.
• Another factor seen to contribute to relationship building and
maintenance is trust. Trust is seen as a valuable aspect in a
relationship which reduces perceived uncertainties and risk
and is seen as a key factor in successful relationships

20. Marketing of financial services
• The vast majority of literature in the financial-services arena
has focused on consumer-oriented financial services. This
has addressed the importance of the core product, pricing,
service, and communications of financial services and
products.
• There are three basic approaches to marketing financial
services: buyer side, seller side, and dyad.
• Seller-side research is a more traditional marketing approach
• Buyer-side studies tended to be based on questionnaires and
non-interactive methods.
• Dyadic studies generally address interaction or, less
frequently, a network approach

21. Buyer & Seller
• From a buyer’s point of view - a market is any
place where goods, services, or ideas are
bought and sold.
• From a seller’s point of view - a market is a
group of people with needs and the financial
ability and willingness to satisfy those needs.
• Markets are all around us!
• Marketing brings the producer and the
consumer together

22. Traditional Marketing Mix
All elements within the control of the firm
that communicate the firm’s capabilities and
image to customers or that influence
customer satisfaction with the firm’s product
and services:
• Product
• Price
• Place
• Promotion

23. Traditional Marketing Mix
• Price
Pricing Strategy Importance of:
• knowing the market
• elasticity
• keeping an eye on rivals

24. Traditional Marketing Mix
• Product

25. Traditional Marketing Mix
• Product
Methods used to improve/differentiate the product and increase sales
or target sales more effectively to gain a competitive advantage e.g.
• Extension strategies
• Specialised versions
• New editions
• Improvements – real or otherwise!
• Changed packaging
• Technology, etc.

26. Traditional Marketing Mix

Promotion
• Strategies to make the consumer aware of the
existence of a product or service
• NOT just advertising

27. ClTraditional Marketing Mixick
to add Title
• Place
• The means by which products and
services get from producer to consumer
and where they can be accessed by the
consumer
• The more places to buy the product and
the easier it is made to buy it, the better
for the business (and the consumer?)

28. Expanded Mix for Services –
The 7 Ps
 Product
 Price
 Place
 Promotion
People
All human actors who play a part in service delivery and thus influence the
buyer’s perceptions: namely, the firm’s personnel, the customer, and other
customers in the service environment.
Physical Evidence
The environment in which the service is delivered and where the firm and
customer interact, and any tangible components that facilitate performance or
communication of the service.
Process
The actual procedures, mechanisms, and flow of activities by which the service
is delivered—the service delivery and operating systems.

29. Expanded Mix for Services –
The 7 Ps
• People
– People represent the business
– The image they present can be important
– First contact often human – what is the lasting image
they provide to the customer?
– Extent of training and knowledge
of the product/service concerned
– Mission statement – how relevant?
– Do staff represent the desired culture
of the business?

30. Expanded Mix for Services –
The 7 Ps
• Process
• How do people consume services?
• What processes do they have to go through to
acquire the services?
• Where do they find the availability
of the service?
– Contact
– Reminders
– Registration
– Subscription
– Form filling

31. Expanded Mix for Services –
The 7 Ps
• Physical Environment
• The ambience, mood or physical presentation of
the environment
– Smart/shabby?
– Trendy/retro/modern/old fashioned?
– Light/dark/bright/subdued?
– Romantic/chic/loud?
– Clean/dirty/unkempt/neat?
– Music?
– Smell?

32. Expanded Marketing Mix for
Services

33. Ways to Use the 7 Ps
Overall Strategic Assessment
• How effective is a firm’s services marketing mix?
• Is the mix well-aligned with overall vision and strategy?
• What are the strengths and weaknesses in terms of the 7
Ps?
Specific Service Implementation
• Who is the customer?
• What is the service?
• How effectively does the services marketing mix for a
service communicate its benefits and quality?

34. Boston Consulting Group Matrix
Relative Market Share
High
Low
High low
STAR
Strategy→ “Build”
PROBLEM CHILD
Strategy→ “Build” or
“Harvest” or
“Divest”
CASH COW
Strategy→ “Hold”
DOG
Strategy→ “Harvest”
or
“Divest”

35. Boston Consulting Group Matrix
1) Star
Where the bank would make investments in order to build
up or expand its Business Units (BU),
1) Cash Cow
Where the bank would invest just enough money to hold
the BU share at the current level,

36. Boston Consulting Group Matrix
3. Problem Child
Where the bank allows market share to decline in order to
maximize short-term profitability & cash flow,
regardless of the long-term effect,
3. Dog
Where the bank sells or phases out the BU & reinvest
resources.

37. The Ansoff Model- BCG matrix
Ansoff identified 4 strategies following the
BCG
Matrix:
1) Market Penetration,
1) Product Development,
1) Market Development, and

38. The Ansoff Model- BCG matrix
BCG
CURRENT MARKET NEW MARKET
C
U
R
R
E
N
T
N
E
W
Market
Penetration
Market
Development
Product
Development
Diversification

39. The Ansoff Model- BCG matrix
1) Market Penetration
This strategy is the least risky of the 4 strategies because it
involves increasing market share in existing markets.
1) Product Development
The bank is already well known in its current market
place but there is an identified need for new products
to meet the changing needs of this market.

40. The Ansoff Model- BCG matrix
3) Market Development
The bank is already known for its current products, but the
strategy is to take these products into a new market.
3) Diversification
With this strategy, the bank is moving into new market with
new products.

41. McKinsey model
The McKinsey model argues that businesses should
develop their growth strategies based on:
• Operational skills,
• Privileged assets,
• Growth skills, and

Special relationships.
Growth can be achieved by looking at business
opportunities along several dimensions,
summarized in the diagram.

42. MARKETING CHALLENGES
FOR FINANCIAL SERVICES
Financial products and services are a particular type of good that
pose special challenges to marketing. These challenges
include the following:
1. Intangibility. Financial services meet a general monetary
rather than a specific tangible need.
2. Inseparability. Financial services are produced and
distributed at the same time.
3. Limited Differentiation. Financial services are very much
alike.
4. Trust. Financial service provision involves an intimate
relationship between the producer and the consumer

43. MARKETING CHALLENGES
FOR FINANCIAL SERVICES
5. Geographic Dispersion. Because proximity is a key factor in
financial service provision, large financial institutions must
offer a wide branch network,numerous sales points, or
doorstep services to ensure the satisfaction of regional and
local needs.
6. Fiduciary Responsibility. The primary responsibility of a
depository is to guard the interests of the depositors.
7. Labor Intensity. Financial service provision is highly labor
intensive.

44. Unit Investment Trusts
(UITs)
• A Unit Investment Trust (UIT) is a pooled investment
vehicle which generally buys and holds a fixed portfolio
of professionally-selected securities to achieve a stated
investment objective.
• UITs are offered in units which represent an undivided
ownership stake in the underlying assets of the trust.
• Trust maturities are predetermined and fixed. Like
mutual funds and closed-end funds, UITs are organized
as investment companies and are regulated by the
Investment Company Act of 1940.

45. Unit Investment Trusts
(UITs)
Product Highlights:
• Ease of ownership: UITs carry a relatively low minimum
purchase price, often $10 per unit for equity trusts and $1,000
for fixed income trusts.
• Professionally-selected portfolios: Teams of experienced
investment professionals research and choose securities they
believe will best meet goals established for each portfolio—
with a buy and hold focus to help meet long-term investment
objectives.
• Diversification: UIT portfolios can be diversified across many
different securities, offering portfolios for almost any asset
allocation. This diversification can help to reduce risk

46. Unit Investment Trusts
(UITs)
• Secondary market availability: Most UIT sponsors maintain
a secondary market, creating an opportunity for investors to
find shorter maturities, higher returns and exposure to retired
strategies otherwise unavailable in the primary market.
• Daily pricing and liquidity: UITs are priced at the end of
every business day.
• Transparency: Trust holdings are disclosed in the
prospectus, upon initial deposit, and listed daily on the
sponsor’s website.
• Distribution frequency: For fixed income UITs,interest is
typically paid monthly, rather than semiannually or annually.

47. Unit Investment Trusts
(UITs)
• A range of terms or maturities: For equity trusts,
maturities typically range from fifteen months to five
years, while for fixed income trusts, maturities typically
range from five to thirty years.
There are two primary categories of UITs: equity
(stock) trusts and fixed-income (bond) trusts. Within
these categories, many trusts are available to suit a
variety of investment objectives and risk levels.

48. Equity UITs
Equity UITs are portfolios of domestic and/or
international stocks chosen for their potential to
provide dividend income and/or total return
The three most common types of equity UITs are
strategy trusts, sector trusts and index trusts
• Strategy trusts: A strategy UIT follows a
predetermined investment strategy.

49. Equity UITs
• Index trusts: These trusts are portfolios of stocks
based on certain market indexes
• Sector trusts: Sector UIT portfolios are primarily
comprised of investments in companies that are
involved in a specific industry, such as
pharmaceuticals, energy, technology, utilities,
financial services or health care—to name a few

50. Fixed-Income UITs
Many fixed-income UITs consist of a single category or
pool of bonds that may include:
• Corporate bonds (including investment grade and/or high
yield bonds)
• International bonds
• Government securities
• Municipal bonds
• Mortgage-backed securities
These trusts come with a stated average maturity and
terminate when the last bond in the trust is called or
reaches maturity.