MBFB 3073

MARKETING OF FINANCIAL SERVICES

ROLE OF MARKETING IN FINANCIAL SERVICES

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NUZUL AKHTAR BAHARUDIN
 Learning Outcomes
After studying this topic you should be able to:
define marketing
discuss the elements of marketing
define services.
differentiate between product and services
Describe main characteristics of financial services
that make it different from goods

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 Learning Outcomes (cont..)
discuss the marketing mix
describe the environmental factors affecting
financial services

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1.0 INTRODUCTION
MARKETING?
The process of planning & executing the
1) conception,
2) pricing,
3) promotion and
4) distribution
of ideas, goods and services.

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 But,
Many financial services organizations just
concerned in ensuring that they operated
efficiently with little thought for what their
customers really wanted or needed.

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 1.1 WHAT IS MARKETING?
Process by which individuals and groups obtain
what they need and want through creating and
exchanging products and value with others.

Simply put:

Marketing is the delivery of customer satisfaction

at a profit.

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It is,

A transaction – exchanges of goods and/or

services for money or for other goods and
services with:
1.both buyers and sellers must be willingly
participate,
2.both must be able to benefit from the
transactions,
3.both must have knowledge of what is
available in a market.

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Marketing and Sales Concepts
Contrasted
Starting
Focus Means Ends
Point
Selling Profits
Existing
Factory and through
Products Promoting Volume

The
The Selling
Selling Concept
Concept

Profits
Customer Integrated
Market through
Needs Marketing
Satisfaction

The
The Marketing
Marketing Concept
Concept
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Marketing Objectives
 To attract new customers
 To keep current customers
 To make profits

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 Consumers

Capabilities
Performance

Competitors
Coordination

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1. Consumers
Consumers are central to marketing. Person who
buy/using the goods/services sold/provided by the
organizations.

the organization needs to know:

1. who its customers are?
2. what they expect?
3. what they want?

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What are Consumer’s Needs, Wants
and Demands?
 Needs - state of felt deprivation for basic items
such as food and clothing and complex needs such
as for belonging. i.e. I am hungry.
 Wants - form that a human need takes as shaped

by culture and individual personality. i.e. I want a

Nasi Lemak and Teh Tarik for my breakfast today.
 Demands - human wants backed by buying

power. i.e. I have money to buy this meal.

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Value gained from owning a product and costs of obtaining the
product is Customer Value

Product’s perceived performance in delivering value relative to

buyer’s expectations is Customer Satisfaction

Total Quality Management Involves improving the quality

of products, services, and marketing processes

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2. Organizational Capabilities

 The capability and the readiness of the organization to

provide the products/services
 Consumers are very different and trying to meet each

one’s need will be impossible and very expensive.

 Organization must ensure that it creates a match

between what its consumers want and the type of

products it is
capable of supplying.

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3. Competitors
 The other organizations who provide same/nearly
same products/services to the consumers.
 Organization must consider how well their product or

service performs relative to the competitors in

addition to how well it meets consumer needs.
 If the competitors have a better offer, then the

organization may lose customers.

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4. Coordination
 Marketing is important and relevant throughout
an organization and not to the marketing
department only!
 It is important to ensure that:

- there are good links between different functions

within a business and different levels of
management.
- the marketing activities and market awareness
guide an organization over time.

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5. Performance
 The positive result of the organization marketing
strategy.
 Marketing will usually increase costs but when

conducted successfully, it will also help to increase

sales and profits.

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• It involves a wide range of activities.

• Organization must develop an appropriate marketing

strategy and marketing mix.

• Marketing strategy defines the organization’s target

markets and identifies the ways in which to present the
products to those market

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Marketing Strategy
End customers Organizational
customers

Defines the organization’s target markets and

identifies the ways in which to present the
products to those markets.

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NUZUL AKHTAR BAHARUDIN 22
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
NUZUL AKHTAR BAHARUDIN 23
Marketing Mix

Refers to the marketing

variables, which the The Traditional
organization can use Marketing Mix
and control in
presenting products to = 4 P’s
the target market.

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G
O
O
D

SERVICE

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G
O
O
D

SERVICE

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SERVICES marketed performance,
thus performance is the product i.e.
performance is what the customers
buy.

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 Services may include whatever things that we
do daily from turning on a light, watching
TV, telephoning, mailing letter, writing
cheque, buying soda from vending-machine
or sending clothes to the cleaner or eat nasi
lemak at a mamak stall.

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Examples of Service Industries
 Health Care
 hospital, medical practice, dentistry, eye care
 Professional Services
 accounting, legal, architectural
 Financial Services
 banking, investment advising, insurance
 Hospitality
 restaurant, hotel
 Travel
 airline, travel agency, theme park
 Others
 hair styling, pest control, plumbing, lawn maintenance, counseling services,
health club, interior design

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 FS deals with individuals, organizations and their
finances – there are services that are directed
specifically at people’s intangible assets (money or
wealth).

 Including banking, insurance, stock trading, asset

management, credit cards, foreign exchange, trade
finance and venture capital.

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What makes FS different from goods?
1.Intangibility
2. Inseparability
3. Perishability
4. Heterogeneity
5. Fiduciary responsibility
6. Long term 31
7. Highly individualized marketing system
8. Lack of special identity
9. Geographical dispersion
10. Two-way information flow

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1. Intangibility
 Services do not have physical form and cannot be
seen, touched, displayed, felt or tried in advance of
purchase.
 It is an experienced of performance or benefit.
 It involves customer in the production process e.g.
money transmission or the used of ATM.

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Implications of Intangibility
Services cannot be inventoried.

Services cannot be easily patented.

Services cannot be readily displayed or

communicated.

Pricing is difficult.

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2. Inseparability
 Services are produced and consumed simultaneously
(impossible to separate production and consumption
or distribution of financial services).
 What concerns is the creation of time and place
utility i.e. the services are available at the right time
and at the right place (it is concerned of real time).
 Staff and customer involve in the production process.
 Time is often a key element in good service.
Customers are sensitive to time.

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Implications of Simultaneous
Production and Consumption
Decentralization may be essential.

Mass production is difficult.

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3. Perishability
 Services cannot be stored. Its depends on the
demand of the customers.
 Services offered present an inability to build and
maintain stock for some future time period. It is as a
result of real-time nature i.e. simultaneous
production and consumption.

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Implications of Perishability
It is difficult to synchronize supply and demand with
services.

Services cannot be returned or resold.

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4. Heterogeneity
 Variability means the services are not standardized
and service experience may vary.
 Due to inseparability in production and
consumption lead to financial services to have
diverse variation in quality to meet the needs of
different customers in different areas.
 It is impossible to standardize the output.
 Quality of service is highly dependent on the
personnel conducting the transaction.

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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.

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5. Fiduciary responsibility
 Refers implicitly to the management of their
customers’ funds and the nature of financial advice
to their customers.
 Customers must have highly confidence and trust
not only to the financial institution but the
personnel behind it.

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6. Long term
 In terms of continuing relationship or time lag
before the benefits are realized.

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 7. Highly individualized
marketing system
 A bank transactions create a client relationship
between bank and customer.
 Thus many banks are induced to locate branches of
their outlets as conveniently as possible to serve their
customers.

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8. Lack of special identity
 To the public, often one financial service is very much
similar to one another.
 Thus each bank must find a way to establishing its
identity, may be emphasized on package which
consists of branch location, staff, services, reputation
and advertising.

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9. Geographical dispersion
Banks have many branch network in any size and
scope in different areas to provide benefits of
convenience internationally, nationally and locally.

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 10. Two-way information flow
 The banker-customer relationship involves a series of
regular two-way transactions over an extended time
period. For example the frequent visit to a branch,
checking the account balances, issuance of cheque
book or bank statement.
 In this way, bank would able to capture information
from customers.

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1.5 MARKETING MIX: 4 P’S
Product
Price
Promotion
Place (Distribution)

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1. Product
 The things to be marketed to the end
user. Referring to goods/services.
 The feature and benefits received, the

brand, packaging and etc.

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2. Price
 Value that will purchase a finite
quantity, weight, or other measure of
a good or service.
 What the customer must pay in

money terms in order to get a product

or services.

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3. Promotion
 Activity that supports or provides
active encouragement for the
furtherance of a cause, venture, or
aim
 All the different forms of
communication with customers
about the organization and what it
offers.

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4. Place (Distribution)
 The movement of goods and
services from the source through
a distribution channel, right up to
the final customer, consumer, or
user, 
 The way in which a product or

service is made available to

consumers.

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THE FINANCIAL SERVICES MARKETING
MIX : 7 P’S
1. Product
2. Price
3. Promotion
4. Place (Distribution)
5. People
6. Physical evidence
7. process
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5. People
 Person who are involved in the
delivering the services.
 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.
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6. Physical Evidence
 Any tangible components that facilitate
performance or communication of the service.
 The environment in which the service is delivered
and where the firm and customers are interacted.
 Refers to anything tangible associated with a given
service such as:
the building that an organization occupies, or
Staff appearance or check book holders that are
provided for document.

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7. Process
 The actual procedures, mechanisms,
and flow of activities by which the
service is delivered—the service
delivery and operating systems.

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Basic Needs of Consumers for FS
Cash accessibility – provide access to cash.

Asset security – relates to two sub-needs:

i) The need for physical security of one’s
asset (i.e. protection from theft) and
ii) To protect the asset from depreciation,
thus consumer needs to get some return
on their money.

Money transfer – the need to move the

money around e.g. transfer from Perlis to
Johor.
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Basic Needs of Consumers for FS
(cont..)
Deferred payment – the need to delay
payment of goods and services at a
reasonable cost and time. The range of credit
cards and loans as an example.

Others financial and related services –

transmission of money and financial advises
which have increased lately.

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THE MAIN FINANCIAL SERVICES SECTORS
AND THEIR FUNCTIONS

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Banking System
1) Bank Negara Malaysia (BNM)
2) Banking Institutions
i. Commercial Banks
ii. Finance Companies
iii. Merchant Banks
iv. Islamic Banks

3) Others
i. Discount Houses
ii. Representative Offices of Foreign Banks

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Non-Bank Financial
Intermediaries
1) Provident and Pension Funds (EPF)
2) Insurance Companies
(including Takaful)
3) Development Finance Institutions
4) Savings Institutions
i. National Savings Bank
ii. Co-operative Societies

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Non-Bank Financial Intermediaries
(cont..)
5) Others
i. Unit Trusts
ii. Pilgrims Fund Board
iii. Houses Credit Institutions
iv. Cagamas Berhad
v. Credit Guarantee Corporation
vi. Leasing Companies
vii. Factoring Companies
viii. Venture Capital Companies

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1.6 ENVIRONMENTAL FACTORS
AFFECTING THE FINANCIAL SERVICES

Macro/ External Environment

Market/
External Environment

Organization/ Internal
Environment

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THE EXTERNAL /
MACRO ENVIRONMENT
Concerned with broad general trends within the
economy and society.
There are many framework can be used to guide an
analysis of macro-environment – the most common is
PEST analysis or STEP analysis.

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THE EXTERNAL /
MACRO ENVIRONMENT : PEST ANALYSIS

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 THE EXTERNAL /
MARKET ENVIRONMENT
Focus on the immediate features of the market in
which the firm operates.
There are many different approaches can be used to
understand what is happening in the market
environment – the most widely used is Porter’s Five
Force Analysis by Michael Porter.

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THE EXTERNAL / MARKET ENVIRONMENT :
PORTER’S FIVE FORCE ANALYSIS BY MICHAEL
PORTER

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THE INTERNAL ENVIRONMENT
Area in which the firm can exercise greater
control.
Requires analyzing an organization’s capabilities,
the resources of the organization and corporate
culture.
Also focus on internal structures, recruitment
and rewards system, internal communication and
the degree of centralization.

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Challenges and Questions for
Service Marketers
Defining and improving quality
Designing and testing new services
Communicating and maintaining a
consistent image.
Accommodating fluctuating demand
Motivating and sustaining
employee commitment
Setting prices

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Challenges and Questions for
Service Marketers (Cont..)
Organizing to facilitate strategic and tactical decision-
making
Finding a balance between standardization and
personalization
Protecting new service concepts from competitors
Communicating quality and value
to customers
Ensuring the delivery of
consistent quality service

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