Principles of Marketing Financial Services - Essay Example

Principles of Marketing Financial Services Abbey is one of the UK's leading personal financial services company. It offers a full range of personal financial services including mortgages and savings, bank accounts, loans and credit cards, long term investments policies, critical illness and unemployment cover, and household finance. The company operates in the UK, Europe, and the US. It is headquartered in London, UK and employs about 25,000 people. Abbey is one of the leading providers of mortgages, savings, protection and self- invested personal pensions in the United Kingdom and is one among the largest bank in UK. The Group's principal activity is the provision of major financial services and residential mortgage lending. The Group's financial services includes Banking and Savings which provides residential mortgages, savings and banking & consumer credit; Investment Protection consists of three principal segments: protection, investment and savings & pensions; General Insurance includes non-life insurance products and residential home insurance; Treasury Services was structured into three business areas: Asset and Liability Management, Financial Products and Short Term Markets; Group Infrastructure comprises Central Services, Financial Holdings and the results of certain small non-core businesses and Portfolio Business Unit which includes Wholesale Banking. Around the world, financial services organizations are driven to increase revenues while decreasing costs. They need the ability to quickly go to market with new products, deepen customer relationships, increase revenue per customer, and improve the accuracy of their strategic decision making. At the same time, they need to control operational and compliancy costs, ensure interoperability of existing applications and infrastructure, and provide seamless interactions with their customers. All within an increasingly complex compliance environment. High-performance financial institutions understand the link between operational performance and financial performance. The ability to uncover and turn vital insights into operational value levers-such as customer- facing activities, exposure to credit risk, and market share-and link them to financial value levers like operating margin, loan-loss ratios, and cost of assets in a timely and accurate fashion is key to optimizing overall performance and driving value creation -> Abbey An Overview : Vision: Abbey's vision is to be the outstanding financial services company in the UK. It is the sixth largest bank in the United Kingdom and aims to achieve the largest position in the market. Purpose: The purpose of Abbey is to achieve above average growth in share holder value over the long term by meeting stake holders needs. Products and Services: A detailed and more specific description about the products and services offered by Abbey includes - Current Accounts, Credit Cards, Loans, Mortgages, Insurance, Investments and Pensions, Savings, ISAs and Child Trust Fund. Strategies Implemented : The right mixture of strategies which suits the market place and customers are being implemented so that there would be an optimum utilization of resources and maximization of profits can be achieved. -> SWOT Analysis : Its main strength is its expert knowledge of finance. This meant that it should focus on this area. Its main weakness is its size. As only the sixth largest bank it could not offer the same range of products as bigger banks. This meant that it should offer a simple range. The main opportunity was to provide simpler products which customer would better understand. The main threat is from other banks, who might want to take over Abbey, so it needed to become stronger This indicates that it is highly essential to launch a range of products which are easier to understand. Various measures needs to be taken in order to make the customer understands the products and services offered in a simpler and easier way. An important measure to be taken is related to branding of the products offered. -> Performance Measurement: The year 2005 had been a successful year for Abbey, a comparative approach reveals an excellent progress in reducing costs across the business, and clear signs of sustainable revenue growth were also indicated. The year indicated an increase in the market share of new business in mortgages and savings and various measures taken in the area of significant opportunities - such as current accounts, unsecured personal loans and investments - had a good outcome in building momentum. The key highlights of the profit performance for the year 2005 are - profit before tax of 596 million (2004: (21) million), with a net attributable profit of 420 million (2004: (151) million) trading profit before tax of 775 million increased 34% compared to 579 million in 2004, with the second half performance benefiting from an increase in revenues combined with lower costs resulting from the cost reduction programme; trading income was slightly ahead of 2004, and better than originally targeted at the start of 2005. During the year trading income has benefited from increased fee income, partially offset by a modest decline in spreads; trading expenses were 224 million lower than 2004, a reduction of 13%, well ahead of the original targeted savings for 2005 of 100 million a reduction in the trading cost: income ratio of 9.3% to 60.6% (2004: 69.9%); lending provision charges (after adjusting for 2004 write-backs) were higher by 54 million reorganization and other charges of 266 million (2004: 546 million), including the cost of compensation following remediation of 70 million relating to endowment misselling total customer loans of 99.3 billion, up 4%, and retail deposits of 62.0 billion, also up 4% compared to 2004 and a return on equity of 14.2%; (aboutabbey.com) In order to achieve a similar or more profitable outcome this year, it is highly important for Abbey to utilize their resources optimally and make full use of the opportunities - i.e., work on increasing the market share of their new products current accounts, unsecured personal loans and investments. A detailed description of the product related activities - such as brand share, sales, target market , market share etc is required in order to view the current situation and also to define measures and strategies to gain fruitful outcome. The financial services industry sells the products it thinks customers want. It then tries to persuade them to buy. This is called a product - led market. Abbey carried out market research at many instances to know what customers really wanted. It then provided the products. This is called a customer-led market. Thus we see 'customer' is given high importance and strategies have to be implemented to retain the existing customers and attract new customers. One of the pre-requisite to gain customer satisfaction is to provide simpler products which the customers can better understand. Communication plays a pivotal role, it is an essential practice to make the customer understands the benefits of the products and services offered. Besides this, the other major task is related to branding. Traditionally, branding is a concept associated with physical products and consumer packaged goods companies. A quantum leap is occurring in the influence of brands in financial services. Mega merger mania and global deregulation is driving the rise of global brands. Many large banks are re-branding all its global retail operations under one corporate brand. In the UK, market shifts such as the increasing consumer interest in financial decision-making and the Internet as a channel, are forcing companies to invest in brand building exercises with consumers. At the same time, powerful consumer brands such as Virgin and Sainsbury's in the UK have successfully launched financial services with no previous experience, but with loyal consumer relationships. Branding is transforming the way financial services are communicated, just as surely as IT systems are transforming the way banks do their business -- and assisting new brands to set up banking without branches. The main reason behind this being that the brand is fast becoming the major competitive asset for financial services companies and also the role of the brand within the management of business is changing dramatically and the way businesses operate is changing as a result. Although some long- established banks and insurance companies still see their brand merely as an aid to awareness and recognition, the new entrants and those institutions that are radically transforming themselves put the brand at the center of their corporate strategy. This means they are aligning all their communications, operations and systems to their brand mission and values. In addition, they are working to make all of their employees effective ambassadors for the brand. These companies say that the brand symbolizes all that makes them different, so they are trying to ensure that their individuality is transmitted in all their activities. One such company which is working rigorously in improving its brand image is Abbey and due to this it is able to make its position stronger in the present market. The changing role of brands from a marketing tool to an organizational principle for business is part of an historical trend. Brands were first regarded merely as trademarks (brand names and logos), which differentiated one product or service from another. Abbey implements a large number of strategies on brand management and the concept of brand differentiation is extended into whole visual identity systems with guidelines for everything from packaging to advertising. The idea behind this is to differentiate the look of the products offered. More recently, it has been recognized that brands define ongoing relationships through the power of their personalities and values, which further differentiate the branded products and services from their competitors. Initially, In Abbey only the customer relationship was considered. Now, the leaders in brand management recognize that brands define relationships with all their key audiences -- notably investors and employees. They also acknowledge that relationships and values relate to behaviors. Thus in one way the employees have a relationship with their brand that is the counterpart of the intended customer relationships. Thus the recognition that Abbey's brands now serve as much more than just an identity system can be illustrated by the concept of the "brand iceberg." Like a real iceberg, only a small proportion of the brand's mass and power is visible. The rest is intangible and hidden. Here ,effective brand management requires attention to the hidden brand elements as much as to the visible ones. This is the main measure which is highly advisable to be followed in Abbey in order to maximize their profits and retain their position in the market. This is not just through its visual expression but also through intangible elements such as proactive investor relations and employees who deliver the brand values in customer interactions. Consequently, they ensure that all the interdependent elements of brand management have been revised to reinforce the brand strategy. -> Branding Strategies: Abbey has three choices when it comes to brand strategy. It can introduce - Line extensions : Abbey can introduce additional items in a given product category under the same brand name, such as an additional service , a guaranteed growth plan, a more simpler and profitable savings scheme and so on. The line extensions can be introduced as a low-cost, low - risk way to introduce these new products in order to meet consumer desires to utilize excess capacity. Brand extensions: This defines that Abbey can use one of its successful brand name to launch new or modified products in a new category. Brand extension gives the new product instant recognition and faster acceptance. The main advantage in following this branding strategy would be incurring low advertising costs. Multibrands: Multibranding offers a way to establish different features and appeal to different buying motives. Abbey can introduce additional brands in the same category. However this strategy is not highly advisable as it involves high risks - i.e., each brand might obtain only a small market share and none may be very profitable. Thus we conclude that if Abbey adopts either of line extensions or brand extensions strategies more benefits could be derived. A mixture of both the strategies may really proved to be highly beneficial in maximizing the profits and minimizing the risks. Once the branding strategies are identified, a good and effective market programme for the brand in terms of product, price, place and promotion needs to be defined and implemented. Basically there are four clear types of brand use among financial institutions around the world. These are - Visual Identification, New Subsidiary Development, Catalyst for Corporate Change and Centerpiece of Corporate Strategy. The key difference between the first type of brand use and the others is that at the visual identification system level, the brand is externally focused only and little attempt is made to incorporate any core brand values within the management of the business itself. At the other levels, a greater or lesser effort is being made to address and inspire the workforce and other audiences (such as investors) through the brand. At the second and third stage, there is an active attempt to inculcate the brand values into employees' working approaches. At the fourth stage, the values have been integrated into the business processes and into corporate policies. The brand development team includes service, operations and sales people as well as marketing. Brand managers share responsibility for customer satisfaction, internal communication and monitoring/evaluation of the brand. Product: Current accounts, unsecured personal loans and investments are the three main products to be looked at this time. A development strategy is highly essential in order to give a successful launch to these products. An effective branding decision is another pre-requisite. Price: Abbey follows the concept of customer-led market. Pricing on services and related activities should be done in such a way that it is proves to be profitable both to the company and the customer. Place: The main area of market which Abbey is targeting at is UK. It is to be noted that Abbey is ranked sixth among the largest banks in the United Kingdom. The basic targeted market segment is thus UK and it is highly essential to follow different strategies in order to retain this position in the market. UK Retail Principles: When the UK market is targeted it is required to keep align with certain specific UK retail principles. These are : -> Customer satisfaction -> Market Positioning -> Employee -> Process of Incidence -> Financial management Promotion: Brand extensions could be the best practice to be followed in order to minimize the marketing or promotional costs involved in launching a new product or service. -> Actions Needed : The critical actions advisable for Abbey to maximize the value of its brands is as follows - Understand and bridge the gap between banking and marketing mentalities by establishing the financial value that brands bring to the business. Demonstrate ongoing, visible commitment to the brand across the whole senior management team. Align internal communications with brand values. Make the message meaningful and inspirational. Repeat it often and through multiple media. Manage the brand with a high and wide degree of participation, but control it centrally until the brand values are second nature to all. Build the brand philosophy and values into recruitment, training and HR practices as well as business processes. Measure brand performance in a manner that encourages customer bonding and not just awareness. Use employee performance appraisals to encourage behavior in line with the brand values. Those financial institutions that have succeeded in building a powerful corporate brand have done so through strong management and have used it to generate greater shareholder value, including the power of the brand in mergers. Conclusion : Abbey's goal is to be the leading provider offering only personal financial services in the UK via both direct and intermediary channels. Abbey intends to offer the highest level of service and advice to UK consumers, many of whom feel that they have not been well served by the UK banking industry .The combination of the heritage and familiarity of the Abbey brand backed by the experience, expertise and systems of Santander is driving Abbey's plans to become the best bank in the UK. The state-of-the-art in strategic management through the corporate brand sees Abbey as using their brand as the uniting symbol of their differentiated direction and values. The next stage will be for them to integrate brand values into their balanced business scorecards or other performance measurement systems. They will set targets for managers and staff related to the delivery of brand values in their daily work and their reward/bonus systems will recognize achievement in upholding brand values. Having implemented all that, Abbey could then start to report externally on the performance of their brand, demonstrating publicly how they have increased shareholder value. As long as shareholder value continues to be the yardstick by which equity markets evaluate company performance, and as long as intangible assets constitute over 80 percent of the companies market value, there will be unceasing pressure on company directors in financial services to show effective management of their most important intangible asset, their brand. REFERENCES : - -> James.E.Finch, 1996: The Essentials of Marketing Principles. -> Randall Geoffrey, 2000: Branding - A Practical guide to Planning your Strategy. -> Stephenson Roy, 2005 : Marketing Planning for Financial Services -> Tony Proctor, 2000: Strategic Marketing - An Introduction. -> William J Winston, 1986: Marketing for Financial Services. -> www.abbeyplc.com -> www.abbey.com Read More