Marketing Financial Services: HSBC Inc - Essay Example

?Marketing Financial Services HSBC Inc. XXXXX XXXX Number: XXXXXXX of XXXXXXXX XXXXXXXXX XXXXXXXX Tutor’s Name: XXXXXXX Date of Submission: XX – XX – 2011 Introduction Marketing of commercial banks has a number of issues as well as opportunities. This paper aims at discussing the SWOT analysis of one of the famous global banks, i.e HSBC Inc. The paper will first provide an overview of the company and will also discuss in detail the reasons for choice of the bank. This will be followed by a detailed SWOT analysis of the company. Here several different aspects of the company like, marketing tools used by the company, the issues faced in terms of the customers, control system issues faced by the company and several other elements will be discussed. Overview of Company The Hong Kong and Shanghai Banking Corporation Limited (HSBC) group is one of the most global banks and the company has been able to reach out to a wide range of markets. Most of the principal companies of the group opened over a century ago and the companies have had a wide range of achievements and also provide excellent variety. The company has differentiated its brand name and image and is recognised by the slogan of ‘The World’s Local Bank’ (HSBC, 2011). The bank is headquartered in London and is among the largest banking and financial services organisation. The company has over 8000 offices across 87 different countries and is listed on the London, Hong Kong, Paris, Bermuda and New York stock exchanges. The company caters to a wide range of customers and serves as many as 100 million customers across the globe based on four of its main services, i.e. Performance financial services, commercial banking, Private banking and also the global banking (HSBC, 2011). Reasons for Choice The main reason to choose this bank is the international nature of the bank. Also, HSBC is among the very few banks equally famous in Europe, America as well as Africa and Asia. The company’s brand name and image that it has created allows it to become a name for every home. Also, HSBC has been extremely successful in marketing itself over the years and the bank has developed a strong brand image across the globe. Hence this is worth studying. SWOT Analysis of HSBC The table below provides a gist of the SWOT of HSBC. A detailed analysis has been included below the table Strengths Weaknesses * Strong Brand Image * Well Capitalized * Strong Market Presence * Global Presence * Excellent Marketing Strategies * Strong Performance During the economic slowdown as well * Strong use of Information Systems * Excellent Online Systems * Strong ability to stay in track with market need * Focus on different target markets * Strong and well developed marketing strategies at a global level * Although the company has performed well during the economic slowdown, higher risks and compromise of activities has been present * Large losses due to the Sub Prime Crisis * High Mortgage rates, without considering the external fall in rates * Employee Issues * Lacking strong customer care * Brand Image * Loss of the global marketing director Peter Stringham led to various confusions and chaos Opportunities Threats * The strong capitalization of the company opens various options to acquire better assets * Available capital for take over * HSBC has a strong position in the market and this can be used effectively to outperform other banks * Trusted Bank across the globe thereby giving it higher chances for better recognition world wide * Issues like the Sub Prime *Falling property rates leads to higher defaults from the home owners there by leaving the bank with high bad debts * Recent financial losses has impacted the customers as well as the stakeholders thereby leading to reduced trust in the bank HSBC has created a business and brand image which has been constant across the world. The company has been able to make a number of acquisitions across the globe and HSBC has been gained great success in terms of the corporate brand that it has built. The company has used excellent marketing strategies and has been able to transfer the brand equity of the acquired brand into its own. The company has used a wide range of marketing tools to help develop this brand image. HSBC’s main strength has clearly been the ability of the company to use the new media marketing tools as effectively as the traditional marketing tools. The development of a website for internet banking has been among the few success factors for the company. The online medium has been a major success factor for HSBC and has allowed the company to effectively reach out to a wide range of customers across the world. Although HSBC has been among the few companies with major focus on customers, the customer service that the company provides has been faced with numerous complaints and issues. HSBC’s customer care has been accused to be unreliable, inaccurate and also has been found to have lacking product knowledge. The company’s customer service although very effective in a few countries, clearly has been found to be faulty and disappointing. For example based on the customer reviews of the HSBC customer care, it has been noted that HSBC customer care has been marked as ‘terrible’. As described in the words of the website, “HSBC is ranked #344 out of the 374 companies that have a CustomerServiceScoreboard.com rating with an overall score of 19.21 out of a possible 200. This score rates HSBC customer service and customer support as Terrible” (Customer Service Scoreboard, 2011). In terms of the current issues faced by the company, one of the major issues has been the financial losses that the company has incurred due to the high levels of defaults of home owners and the Sub Prime crisis. The company has been found to be faced with a credit crunch of almost $25 billion which were mainly due to the failure to repay by the customers. “HSBC's $2.6bn of write-downs, caused by a fall in value of investments held by its investment banking arm and a $3.2bn charge for US customers failing to pay their loans on time, takes its credit crunch hit to $25bn” (Treanor, 2008). Post the issues in 2008 relating to the subprime crisis, the company was also faced with issues due to the global economic slowdown. The company was led to cut jobs and was required to close down less profitable programs. However due to the excellent strategies that the company has adopted over the years, despite the economic slowdown, HSBC was found to report a profit of $13.3 billion in 2009 (Rafner, 2010). HSBC however was affected by the credit crunch and the company faced financial crisis where it was required to cut back on the compensation levels of the employees to meet up and sustain through the financial crisis. As has been highlighted by Rafner, “The story cited HSBC's decision to refrain from giving its chief executive officer a pay raise of as much as 40 percent in 2010 after investors opposed the idea. BusinessWeek cited the public outrage over high executive compensation following the U.S. taxpayer bailout of the banking system for the shareholders' reluctance to approve such a large pay raise” (Rafner, 2010). Finally, in terms of the control systems use by the company, it is evident that HSBC is focused on ensuring that the customers of the bank pas through the credit checks and have strong credit histories. The company has adopted the use of Experian – Scorex systems to ensure successful decision making across the world. Keith Gabriel, the head of marketing for Experian-Scorex, explains: “As new or existing customers of the bank apply for a new credit facility, the solution will enable HSBC to grow its portfolios while controlling the level of risk. Banks want new customers, but they also need to make sure that the customer applying for the product will adhere to the terms and conditions” (Marketing Technology, 2006). It is clear that HSBC focuses greatly on the risks and is presently using a system which can help reduce the risks for the company. It is evident from the report, that HSBC is focused on ensuring customer benefits and also customer service is a key focus. By adopting the control system, the company can strike a balance between the needs of the business, like increasing volumes, reduced operational costs and also controlling the credit risks, with the needs of the customers which include excellence in customer service, and also appropriate product offers and accurate marketing. In simpler terms the company is focused on strong customer service management. HSBC Marketing Present Issues and Challenges Marketing for financial institutions is dependent on the customers and a major factor is the customer satisfaction. Millions of customers with multiplying expectations from banks and the advent of large number of innovations and advances have forced the banks to change their strategies in terms of acquisition and retention of customers. In the wake of this, it is very essential that even a single customer is not lost (Webster, 1988). Moreover, the banks also require understanding why a particular customer switches the service provider, the reasons behind and the solutions to his problem. Apart from this, the banks should also be able to reach the customers easily. It is also to be understood that not all customers are equally important. Dobni and Luffman (2000), in their research work have indicated that each customer is to be valued, but in a different way. According to them, the focus has to be shifted and care is to be taken to serve the most essential customers in the best possible manner. This in turn helps the company provide higher customer satisfaction. In the current times, irrespective of the industry, it is important that companies use the customer relationship marketing as their main marketing tool. This is also popularly known as customer relationship management. CRM is a business strategy that has been built around the notion of being customer-centric. The main aims are to have optimum revenue by better customer satisfaction through improved contacts at each client touch point. This is possible by an improved understanding of customers, on the basis of their demographics and purchasing patterns and a better interface with the customer at all touch / contact points (Learn that, 2007). Dr. Thomas F Huertas, the Director of Wholesale Firms Division explains, “from the perspective of the regulator, the future of retail banking in the UK should have three characteristics. First, it should be fair to consumers. Second, it should not be unfair to shareholders, in the sense that capital requirements should be adequate, not excessive, and they should be risk based. Third, retail banking in the UK should be open to entry from all qualified parties, regardless of nationality” (Huertas, 2007). Considering the strict aspects of marketing for banks and financial institutes, it is clear that companies like HSBC need to be in complete compliance of all the rules and regulations. The marketing adopted by the bank focuses on the terms that HSBC is the ‘World’s local Bank’ and the main aim of the bank is to provide superior growth and also build on the Group’s heritage and investments (Report of Directors, 2007, p. 8). HSBC has also built its brand image and perception as one of the best places to bank as well as best place to work. HSBC has been one of the first few banks to bring in the online banking services as well as the TV banking services. However in the current times with the high intensity and growth of technology, the competitive edge that the company had with these aspects is now fading away. Hence it is crucial that the company now focuses on newer ways to gain a competitive edge. Also, another major issue in terms of the company’s marketing is that HSBC charges a lot higher than other banks both in terms of interest as well as mortgages. This again brings the company to a lower competitive advantage and can clearly be noted in the marketing as well. The main focus of the company now requires being on using its strengths to convert the weaknesses into positive elements of the business. Also, the company needs to use all the possible opportunities to overcome the challenge of the lacking competitive advantage. Here the main issue that the company currently faces is the loss that it has had in the recent time which has left a major impact on the business and has also led to lack of trust of the shareholders and the employees to a great extent. This forms a major challenge for the company. In terms of competition, although HSBC has been able to provide the customers with a wide range of options and services, there is a high competition that the company currently faces. The banking sector has slowly become an extremely competitive sector and here the bank now requires building its competitive advantage back. In terms of the marketing tools used by the company, it is evident that HSBC is more focused on the new media marketing rather than the traditional marketing tools. This again is both a positive as well as negative aspect. The new media marketing, i.e. e mail marketing, video marketing, and others, is very beneficial in meeting a certain target audiences, however the company needs to reach out to all target audiences and this is only possible by means of direct marketing and one on one marketing. According to Benady (2003), one to one marketing is an approach of account-based marketing. It aims at satisfying and meeting each and every customer’s need in a unique and individual manner. Conclusions: In conclusion, it is clear that HSBC has been among the few companies with an excellent ability to market itself. The company has been able to build an excellent brand images across the globe – ‘The world’s local bank’. The company has used a number of personnel from across the business and has been able to develop a marketing strategy to handle the various elements like creative advertising, media and also branding and direct marketing. The company’s major strength has always been the customer centric approach of marketing that it has adopted over the years and the ability to meet the needs of customers across the globe effectively. The company has several strengths like the single global brand image, as well as the ability to balance the needs of the centre with the requirements of the local markets. Although the company does face a few challenges and issues, the strengths and opportunities of HSBC are much higher and this will assist the bank in sustaining a strong position in the markets. Bibliography Benady, D. (2003). The Voice Squad, Sector Analysis: Telecoms. Precision Marketing , 19-21. Customer Service Scoreboard. (2011). HSBC. Retrieved February 13, 2011, from http://www.customerservicescoreboard.com/HSBC Dobni, C. B., & Luffman, G. (2000). Implemeting Marketing Strategy through a Market Orientation. Journal of Marketing Management , 895-916. HSBC. (2011). About Us. Retrieved February 13, 2011, from http://www.hsbc.com/1/2/about Huertas, T. F. (2007, June 06). The Future of Retail Banking in the UK. Retrieved February 13, 2011, from http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2007/0606_th.shtml Learn That. (2004). CRM Definition. Retrieved February 13, 2011, from http://www.learnthat.com/define/view.asp?id=292 Marketing Technology. (2006). HSBC awards global customer decisioning deal to Experian-Scorex. Bank Marketing International , Issue 190. Rafner, D. (2010, May 5). Effects of the Credit Crunch on HSBC. Retrieved February 13, 2011, from eHow: http://www.ehow.com/list_6463940_effects-credit-crunch-hsbc.html Report of Directors. (2007). NSBC Bank PLC. Retrieved February 10, 2011, from http://www.hsbc.co.uk/1/PA_1_5_S5/content/uk/pdfs/en/annual_results2007_report_dir_24.pdf;jsessionid=00007Y29E-JMYE3IjL6FjVx3k6-:11j74lc1 Treanor, J. (2008, May 13). HSBC attacked over fresh $5.8bn sub-prime hit . 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