Marketing of Financial Services (Nepalese Context)

Marketing of Financial Services

Nepalese Context

Sohan Babu Khatri
CEO
Three H Management
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Sohan Babu Khatri - Introduction
Professional Engagements:
• CEO – Three H Management Pvt. Ltd
• Director of Board – Grand Bank Nepal Ltd , Just-One Nepal

Adjunct Faculty:

• Ace Insititute of Management
• Kathmandu College of Management
• London Chamber of Commerce and Industries – International Qualification

Background:
• Bachelor’s of Civil Engineering (BE Civil) - Pulchowk Campus, Institute of
Engineering, Nepal
• Masters of Business Administration (MBA - Finance and Marketing),
Bangalore University, India
• Certified Financial Manager (CFM), Centre of Financial Management, Bangalore
• Licensed International Financial Analyst (LIFA) - Charter Holder – International
Research Association, Cambridge, Massachusetts

Key Questions
• Do we have conceptualization of marketing in
the decision making process of financial
service organizations ?
• Or is it only sales we are focusing on ?

• Have we related the functional responsibilities
of each department to the broad marketing
strategy of the organization ?
– Do we have marketing strategies at place ?

.....
• Are we advertising and promoting as per the
requirement placed by fund management
strategy of the organization or are we
askings questions related to the customer
value and then everything else comes after
that ?

• Are we into Responsive Marketing, which
attunes and responds to the changing needs
of customers, society and environment ?

..........
• Do we realize that marketing is unavoidably a
social concern ?
– Marketing activities involve a persuasive role in
the formation of public opinion

• The matching of marketing with the financial
services is the formulation of an overall
marketing strategy which suits the savings
and investement preferences, needs and
requirements, likes and dislikes of customers.

...........
• Do we ever study behavioral profile of the
customers and develop marketing information
system
– So that the marketing decision coil more
dynamism in its nature and move with the
customers and market.
• Have we tried to be creative and innovative
while carving out our marketing strategies and
tactics ?
– Aren’t we commoditizing financial services by not
trying to be different ?

...........
• Do we concentrate our efforts in designing core and
peripheral services equally ?
– Any one of them can be entry route for bringing in
customers to your organization.

• Are we continually putting efforts to create a
“financial departmental store” out of our organization
?
• Do we realize that financial services marketing is a
managerial approach and a social process equally ?
– The professionalism helps in drawing a balance between
the two

Getting into the basics


The Value Triad

3 Basic Elements of a Value Proposition

Customer

Value
Proposition
Product Application

10

What should be at the heart of any
business process, strategy and goal ?

Financial Service providing
organizations are not exceptions


"Understand, you do not understand, you will
not understand, you cannot understand all your
customers but still you have to do your best to
understand them."


Do we value ?

•Individual customers
•Small depositers
•Households
•SMEs

Things to Understand
• The psychology of how consumers think, feel,
reason, and select between different alternatives
(e.g., brands, products, and retailers);

• The psychology of how the consumer is influenced
by his or her environment (e.g., culture, family,
signs, media);

• The behavior of consumers while making marketing
decisions;

……….
• Limitations in consumer knowledge or information
processing abilities influence decisions and
marketing outcome;

• How consumer motivation and decision strategies
differ between products that differ in their level of
importance or interest that they entail for the
consumer; and

• How marketers can adapt and improve their
marketing campaigns and marketing strategies to
more effectively reach the consumer.

Understand “Consumer Behavior”

 It blends the elements of
– Psychology,
– Sociology &
– Economics.

Key Points
• Refernce Group works in choosing Financial
Services

• The impact of consumer behavior on society
is also of relevance. For example,
aggressive marketing of easy credit, may
have serious repercussions for the national
economy.

Four Main Applications

• Designing service/products of the
company to suit consumer choices

• Carving better marketing strategies /
marketing campaigns

• Designing better service/product deliveries

• Creating better marketing channels.

Consumer Buying Behavior


EVALUATION OF ALTERNATIVES

TOTAL AWARENESS CONSIDERATION CHOICE BUYING
SET SET SET SET DECISION

Types of Consumer Buying
Behavior


Determined by
• Level of Involvement in purchase decision.

• Importance and intensity of interest in a
product in a particular situation.

• Buyers level of involvement determines why
he/she is motivated to seek information
about a certain products and brands but
virtually ignores others.

BUYING ROLES
 INITIATOR: The first person to suggest the idea of
buying.
 INFLUENCER: A person whose views impact the
buying decision.
 DECIDER: The person who decides on what, when &
where to buy the product or service.
 BUYER: The actual purchaser.
 USER: The person who uses/consumes the product
or service.

 INFORMER, MAINTAINER, DISPOSER

Buying Behavior

High Low
Involvement Involvement

Significant differences Variety
between Brands Complex
BB Seeking BB

Few differences Dissonance Habitual
between Brands Reducing BB BB

PURCHASING FINANCIAL
SERVICES IS HIGH
INVOLVEMENT
PURCHASE
DECISION

Where are we now ?

High Low

BB Seeking BB


High Low

BB Seeking BB


Educate and inform customers – Relationship Marketing should be focus

High Low

BB Seeking BB


Create significant Branding and Differentiation
– Innovation and Creativity is the key

Risks in high involvement purchases

Value and Satisfaction

Based on this equation, the marketer can increase the
value of the customer offering by
(1)raising benefits,
(2)reducing costs,
(3)raising benefits and reducing costs,
(4)Raising benefits by more than the raise in costs, or
(5)lowering benefits by less than the reduction in
costs.

MARKETERS SHOULD
MAKE EVERY EFFORTS
TO REDUCE THESE
RISKS FOR CONSUMERS

• The purchase of the same product does not
always elicit the same Buying Behavior.
• Product can shift from one category to the
next.

For example:
– Buying financial services for various purposes
• Just disposing savings
• Investment for children’s education
• Taking business loan vs. personal loan

Three factors affecting Consumer
Behavior


Personal Factors
• Unique to a particular person.

• Demographic Factors: Sex, Race, Age, Family
Lifecycle Stage, Income, Employment etc.

• Who in the family is responsible for the decision
making.

• Young people purchase things for different reasons
than older people.

Psychological Factors
a) Motives
b) Perception
c) Ability and Knowledge
d) Attitudes
e) Personality
f) Lifestyles

Advertisers that
use comparative
advertisements
(pitching one
product against
another), have
to be very
careful that
consumers do
not distort the
facts and
perceive that the
advertisement
was for the
competitor.
Average supermarket
shopper is exposed to
17,000 products in a
shopping visit lasting
30 minutes-60% of
purchases are
unplanned. Exposed
to 1,500
advertisement per
day. Can't be
expected to be aware
of all these inputs,
and certainly will not
retain many.

Social Factors
• Consumer wants, learning, motives etc. are
influenced by

a) Opinion leaders,
b) Person's family,
c) Reference groups,
d) Social class and
e) Culture.

Utilizing the understanding of
Consumer Behavior in Financial
Services


• Gain reputation and trust
– With diminishing trust, comes diminishing loyalty
• Focus on customer loyalty and the opportunities
among existing client base
• Understand Risks and Opportunities in Market
• Understand Risk Perception of customers and
market – find out the factors that shape up it.
• Focus on Customer Relationship Management
• Strive for Customer Satisfaction – Delight Them
• Understand Customer Need and its state.

• Awareness and Knowledge level of
customers is increasing
• Customers are being ever demanding
• They are technologically more oriented
• Multipurpose bank vs. Specialist Bank –
Strategic Decision
• Increase service quality.
– Customer Service Quality is decided by
Customers
• Reduce time of service and increase access

• Communicate message around ethical
practices, relationship and commitment
towards satisfaction.
• Design loyalty programs

How to analyze Consumer
Behavior in Banking

Build Business Intelligence
Use Consumer related analytics


Example: Findings of the study

Decision aspects for selecting a bank: (Example of India)

 Rate of interest  ATM gives deposit
facility
 Convenience
 Overdraft protection
 Easy loans plan

 Free checking options  Small business loans

 Online payment easy  One-stop-shop
48

To reap the maximum benefits from data
analytics, firms have to invest in the right
technology, hire the right people and
develop standardized and robust processes
of data collection, data retrieval, data
analysis and strategy implementation.

Service Quality and Consumer Behavior

Don’t just sell a
product/service.
Sell an experience.
Sell an idea
Sell information
Sell knowledge
Sell sentiments
Sell concern.

“First step to understand
anything is to understand
the importance of
understanding”

Segment your market properly

And Design your Service Accordingly


Developing a Target Market Strategy

• Developing a target market strategy has
three phases:

1.Analyzing consumer demand / Selecting
Target Market
2.Targeting the market(s)
a) Undifferentiated
b) Concentrated
c) Multi-segmented
3.Developing the marketing strategy

Criteria Needed for Segmentation
• Segments must have enough profit potential
to justify developing and maintaining a MM
• Consumer must have heterogeneous
(different) needs for the product.
• Segmented consumer needs must be
homogeneous (similar)
• Company must be able to reach a segment
with a marketing mix
• Must be able to measure characteristics &
needs of consumers to establish groups.

Criteria for effective targeting of
market segments.
 To be an effective target, a market segment
should be:

(a) Identifiable
(b) Sufficiency
(c) Stable or Growing
(d) Reachable
(e) Actionable.

Segmentation and Targeting in
Financial Services
Examples – for Banks


• All variables of segmentation are important

• Yet Demographic and Psychographic variables are
more important

• Customer segmentation based on analytics for
customer risk, attrition, response likelihood and
other aspects are de rigueur in financial services

• Many banks are still not using the most advanced
predictive models—for example, customer behavior
models based on transaction data.

• Refining segmentation strategies with information reflecting
customer attitudes and sensitivities towards key business
issues can also enhance incremental profitability.
• As an example, banks can use testing within specified
segments to determine customer sensitivity to deposit rates.
• Deposit pricing sensitivity is an emerging concern for banks;
knowing the exact price point at which a customer will likely
defect is a powerful tool in improving customer retention
efforts.
• Adaptive control testing allows a bank to uncover hidden
customer sensitivities and drive profit-enhancing treatment
strategies into more granular customer sub-segments.

Example – Life Cycle Model
• If banks could choose their customers the way kids choose
sides on the playground, customers in the 18-to-35 age
bracket would be picked last. With their relatively small
incomes, low account balances and large student loan debts,
young customers aren’t exactly the sort over whom the
average bank salivates.
• However, banks need to that some of those impecunious
young customers might eventually turn into wealthy, profitable
customers.
• So banks need to pored through the bank’s data on its young
customers looking for sub-segments with a strong potential for
rapid income growth.
• Analysis identifies that medical school and dental school
students and interns as a group with a high potential to turn
into profitable customers.

………
• Bank put together a program to address the financial
needs of credit-strapped young medical
professionals, including help with student loans,
loans for medical equipment for new practices and
initial mortgages for their first offices.
• "Our opportunity lies in finding what the needs of the
customer might be so we can offer them additional
products and get them to a point where we’re
making some return.“

• Using this model (supplemented by focus groups, surveys and third-party
research) divides individual clients into five strategic life-stage segments:
1. Youth: These clients are younger than 18.
2. Getting Started: These clients, generally between 18 and 35, are
going through first experiences: graduation, first credit card, first car,
first loan, marriage, first child.
3. Builders: These clients, usually between 35 and 50, are in their peak
earning years. Typically they borrow more than they invest, as they
build families and careers. With many expenses, their primary goal is
to manage their debt load effectively.
4. Accumulators: Typically between 50 and 60, these clients are
worried about saving for retirement and investing wisely. They want
to know if they’ve saved enough to retire, if they’ll have to change
their lifestyle when they retire and if they’ll need to work to
supplement their retirement income.
5. Preservers: The primary needs of these clients, who are usually
older than 60, are to maximize retirement income and maintain the
lifestyle they desire. They typically manage multiple income sources
and are starting to do estate planning.

• Life-stage segments with other strategic
models such as profitability, potential, client
credit risk and client vulnerability (risk of
leaving the organization) onto the bank’s
objectives: retaining profitable customers,
growing customers with potential, managing
and controlling customers with higher credit
risk profiles and optimizing the costs of less
profitable customers.
• By doing so, they can identify opportunities to
make a difference in the market

• Many don’t do any customer segmentation at all, and those
that do typically don’t reap much value from the exercise
because they segment on the wrong criteria.
• Precise, needs-based customer segmentation is time-
consuming and difficult, and very much in its infancy.
• But it’s worth doing because it enables cost-effective
targeting of customers with product and service offerings that
match their needs.
• That kind of precise targeting obviates spending a bundle on
largely ineffective mass mailings—and alienating customers
with irrelevant offers. It’s the quintessential win-win:
Customers get what they want and subsequently buy more;
companies waste less money and increase sales and profits.

• For convenience, companies that are organized
along product lines often segment customers by the
products they buy.

• This approach, however, risks alienating customers
in two ways:
– Customers who happen to be in more than one segment
get bombarded with multiple uncoordinated offers.
– And big spenders in one product category who start
buying in a second category are justifiably miffed when
they’re treated as strangers.

• Banks should focus on managing life cycle
of customers.
a) Understand the lifecycle of needs of the
customer
b) Create a scheme that focuses on the
sophistication of these customers and their
needs
c) Develop a dynamic needs assessment
feedback loop that enhances awareness of
items a and b, above

Key understandings
• Create a proper markeing function/department
at strategic level which aims at creating long
term customer lifetime value and thus
grabbing it and always strives to lead by
delivering customer’s delight.

• Formulate and innovate product mix in tune
with the chnaging expectations of customers.

........
• Strive to get positive response in the market for
each step you take
– Keep market and customers at the core of decision
making process
• Give promotional measures a new look and the
creditibility for the same goes to the innovative
marketing which make the advertisement and
publicity measures creative.
• Sales promotion measure should act as
motivational tool and thus make ways for increasing
the market share.

.......
• Have non-price differentiation factors to differentiate
and brand yourself.
• Give transcendental priority to behavioural
dimension of customers which helps banks in rating
and evaluating the changing level of expectations.
• Inject qualitative transformation in the managerial
process of marketing financial services.
• Design core and peripheral services in the face of
social transformation programs and policies.
• Price, interest, fees, commission and discount
should be fixed for maintaining commercial viability
targeting common mass.

.........
• Create quality-gap by improving the quality of
marketing mix.
• Make contributions to the social
transformation process optimal which is not to
endanger the commercial viability.
• Create IT enabled Data Warehousing, MIS
and Business Intelligence-Decision Support
System (DSS) within the bank and exploit it to
carve out marketing strategies.

........
• Focus on developing your human resources to be
highly motivated market oriented human capital.

• Manage Relationship Marketing One-to-One
– Relationship marketing should not exist only on the lending
leg of the financial services

• Have relationship manager as the mobilizer of the
financial services
• Develop long-range and annual customer
relationship plan with clear objectives, strategies and
actions

..........
• Dont under-rate retention of customers as
compared to acquisition
– Create proper CRM system within organization
• Have bottom line as profit per employee and
profit per customer lifetime.
• Have CRM technologies, platforms and
analytics in place
– Measure, Measure, Measure
• Sell experience

For Good Relationships
• Initiate positive calls
• Make recommendations
• Candor in language
• Show appreciation
• Make service suggestions
• Use “We” problem solving language
• Get to problems
• Use Innovative communications
• Talk of “our future together”
• Accept responsibility

The END

Thank You

Sohan Babu Khatri
CEO
Three H Management

Marketing of Financial Services (Nepalese Context)

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