Marketing Financial Services - Essay Example

1 MARKETING FINANCIAL SERVICES INTRODUCTION This report will focus on the financial services industry and how marketing affects that industry. MCorp conducted a survey with 67 financial services firms of various sizes, across multiple lines of business, to determine the top branding and marketing priorities for 2005. The top 10 marketing priorities were: Acquire New Customers 26% Customer Retention 24% Work on the Brand 19% Profitability 16% Increase Awareness 14% Efficiency/Resource Allocation 9% Improve Customer Metrics 9% Improve Customer Service/Satisfaction 9% Increase Market Share 7% Up-sell/Cross-sell Services/Products 7% The top 10 branding priorities were: Brand Consistency/Integrity 17% Internal Buy-in 17% Brand Positioning 16% Consistent/Supportable Brand Promise 14% Brand Awareness 13% Research 11% Finesse Delivery/Reach 10% Touch point Management 10% Metrics/Measurement 9% Customer Brand Experience 9% These priorities depict what customers want and what is important to their financial success and how marketing affects the financial services industry. CUSTOMER ACQUISITION The greatest asset of any consumer finance business is its base of customers. In the current competitive market, acquisition of profitable customers is tricky and tough. Nurturing the relationship into long-term profitable assets require lots of perseverance, innovation, and research. All customers are different, and to acquire the value they bring, they need to be treated differently. There are many methods to acquire customers. Advertising is one of the foremost methods. US Advertising Spending by Financial Services companies by media 2003 & 2004 (as a % of total spending).....Source: TNS Media Intelligence & Advertising, June 2005: 2003 2004 TV 27.7% 31.15 Newspaper 23.8% 22.4% Magazine 14..7% 15.5% Cable TV 12.9% 12.5% Internet 14.7% 12.5% Radio 3.2% 3.0% Outdoor 3.1% 3.0% Acquiring new customers through email and direct mail marketing are other methods that .are fast and cost-efficient. With the help of thousands of interest categories demographic information, and behavioral targeting, you can find the exact people you are looking for and then giving you the information you need to convert these prospects into customers through email and direct mail marketing. CUSTOMER RETENTION Customer retention marketing is a tactically-driven approach based on customer behavior. It's the core activity going on behind the scenes in relationship marketing, loyalty marketing, database marketing, permission marketing, etc. Here's the basic philosophy of a retention-oriented marketer: 1. Past and current customer behavior is the best predictor of future customer behavior. Example: Take these two groups of potential buyers who surf the net: People who are a perfect demographic match for your site, but have never made a purchase online anywhere and people who are outside the core demographics for your site, but have repeatedly bought online at many different web sites If you sent a 20% promotion to each group, asking them to visit and make a first purchase, response would be higher from the second group than the first group. It works because actual behavior is better at predicting future behavior than demographic characteristics are. 2. Active customers are happy (retained) customers; and they like to win. They like to feel they are in control and smart about choices they make, and they feel good about their behavior. Marketers take advantage of this by offering promotions of various kinds, ranging from discounts and sweepstakes to loyalty programs and concept approaches such as thank-you notes and birthday cards. If you want your customers to do something, you have yo do something for them, and if it's something that makes them feel good, then they're more likely to do it. Retaining customers means keeping them active with you. Interaction with your customers is encouraged even if only sending out a newsletter or a card. 3. Retention Marketing is all about action, reaction, feedback, and repeat. Marketing with customer data is a valuable conversation, but it has to be between the marketer and the customer, and you have to LISTEN to what the customer is saying to you. 4. Retention Marketing requires allocating resources. Some marketing activities and customers will generate higher profits than others. This means that when you have a choice, as you frequently do in marketing, instead of spending the same amount on every customer, you spend more on some and less on others. It takes money to make money. BRANDING The definition of branding is the creation of an identifiable entity that makes specific promises of value versus the definition of marketing, an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. No discussion of marketing is complete without a discussion of branding. Branding is used to create emotional attachment to products, services, and companies. Branding efforts create a feeling of involvement, a sense of higher quality, and an aura of intangible qualities that surround the brand name, mark, or symbol. Successful branding builds a atrategic awareness where people instantly recognize your brand and understand the distinctive qualities that make it better than your competition. Branding is more important today than ever due to advertising clutter, media fragmentation, commoditization of products and services, and the limitless choices we are offered in just about every category. Here are only a few benefits to creating a strong brand: A strong brand influences the buying decision and shapes the ownership experience. Branding creates trust and an emotional attachment to your product, service, or company. A strong brand can command a premium price and maximize the number the number of units that can be sold at that premium. Branding helps make bying decisions easier. In this way, branding delivers a very important benefit. In a commodity market where features and benefits are similar, a strong brand will help your customers trust you and create a set of expectations about your products or services without even knowing the specifics Branding will help you keep your customers from the competition and protect your market share while building mind share. Once you have mind share, your customers will automatically think of you first when they think of your product or service category. A solid branding strategy communicates a strong, consistent message about the value of your company and the intangibles surrounding your products or services. A strong brand signals that you want to build customer loyalty. A strong branding campaign will also show that you are serious and that you intend to be around for a while. A brand impresses your company's identity upon potential customers and builds a lasting impression of you. A brand will help you articulate your company's values and explain why you are competing in your market. PROFITABILITY Improving the return on investment (ROI) for your marketing initiatives requires a comprehensive approach to the measurement of marketing effectiveness and financial outcomes. A common definition of ROI involves looking at the cost of a marketing campaign relative to the profit generated. This approach comes from the original definition of ROI as used by finance people rather than marketing people. 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 and link them to operating margin is key to optimizing overall performance. CUSTOMER METRICS You may not know if your customer technologies are paying off because you may lack the right customer metrics. A recent focus on customer-centric technologies and applications has brought discussion about such metrics to the forefront. Companies are investing lots of money, but still see a relative lack of progress in identifying what value they're delivering to the enterprise. Blending financial and non-financial methods will help get a better analysis to effectively gauge the value and impact of customer metrics, call-center applications, and data mining. While most managers are willing to use nonfinancial metrics such as customer satisfaction, they can't readily translate them into business plans nor balance them with relative costs, returns, and other financial measures. Customer-centric technology refers to any software or hardware designed to automate and/or streamline a company's marketing, sales, and customer service functions.......the technologies and applications used to managed and communicate with external customers. It's a fairly broad range, but the following is most often used by financial executives: Contact/call-center automation Sales-force automation Customer self-service via the internet Integration of all customer-facing systems Personalization Wireless communication with customers E-mail marketing capabilities 24/7/365 access to service, support, and sales Integration of all customer-information bases Marketing campaign management Data mining Business-intelligence capabilities Improved decision-making with standard data systems and real-time analytical tools The growth of customer-satisfaction measurement is an extension of the long-held doctrine that it's cheaper to keep customers than to cultivate new ones. Measuring and managing customer satisfaction can improve relationships, and, in turn, incite customers to return and spend more. Behavior-centric value measures include customer satisfaction, customer spending, problems/complaints, and site visits, as well as noncustomer-centric measures such as lead generation, lead conversion, and sales-closing rates. Blending the metrics provides a more accurate view of the cost plus impact of customer-technology implementation, and, therefore, the relevant value proposition. Blended metrics include return on change, return on satisfaction, and return on customer value. CUSTOMER SERVICE/SATISFACTION Customer satisfaction occurs when service meets or exceeds expectations. The quest to improve customer satisfaction include, but are not limited to: Top management commitment Linking of customer service scores with employee and management monetary incentives Identification, measurement, and tracking of operationalvariables Customer-based improvement goals Plans for improving operational variables Incorporation of customer satisfaction skills into employee training programs Management of and plans for improvement of employee satisfaction Changes in corporate hiring practices Top management, through its actions, must show that customer satisfaction is important to it. This can be done by: Acknowledging areas where the company needs to improve Allocating appropriate resources to the improvement of customer satisfaction Involvement of management and employees in the development of plans for customer satisfaction improvement Linking management bonuses to satisfaction scores Clear and frequent communication of what is being done to improve customer satisfaction For customer-based improvement goals, you need to develop a plan for improving each identified area. Such plans need to be based on what customers really need, rather than what management believes to be a good goal. The keys to successful planning are to: Involve front-line employees and management in the planning process Make sure plans are specific Evaluate the success of plans once they have been put into place. This is done by measuring actual improvement in operations and customer satisfaction. Employee training programs should be modified to include: A description of the importance of customer satisfaction to the company Descriptions of what keep customers satisfied A description of customer satisfaction measurement programs, recognition programs, and incentive programs Specific employee-performance expectations with regard to keeping customers satisfied Unhappy employees will have difficulty in keeping customers happy. You should consider measuring the satisfaction level of employees, and then developing action plans to improve employee satisfaction. Certain types of people will do a better job of satisfying customers than will other types of people, regardless of the quantity of training, reward, and recognition programs. Once you have determined the types of employee behaviors that are important to customers, you should incorporate this knowledge into your hiring practices. INCREASING MARKET SHARE To increase market share, a business has to take customers from its competitors or attract new customers. Achieving this requires having a thorough understanding of both your base and that of rival businesses. Having the answers to the following questions will help you build a comprehensive picture of your market and your competitors and put you in a stronger position to win a bigger market share: Who are your existing customers Are there any other groups that may require your service that you haven't targeted before Can your service be used for other purposes that you had not previously thought of that could make it appealing to a wider market What are your competitors' strengths Do you have these too If not, why not And, should you have them Why do customers deal with your competitors What advantages do you have over your rivals that may attract their customers How can you communicate with your competitors' customers to get them to switch and come to you instead What is your unique selling point Apart from obvious rivals, are there any other ones with customers you may appeal to Are there customers who have stopped dealing with you Do you know why If not, you may want to ask them. Will you need to change pricing, marketing, distribution, or service levels Could those changes upset current customers Will your employees remain motivated If you're looking to increase market share, it's important to make sure your business is in good shape first. WORKS CITED Mcorp, Financial Services Expertise: http://www.mcorponline.com Emarketer http://www.emarketer.com/images/chart Jim Novo: ROI in Relationship Marketing, Customer Loyalty, and Retention http://www.jimnovo.com/ROI.htm A Crash Course in Marketing by Dave Dolak Introduction and Marketing Strategy http://www.davedolak.com/mstrat.htm Branding and Career Development Dave Dolak http://www.davedolak.com/brand.htm Marketing and Branding Priorities for 2005 Mcorp: Strategic Brand and Marketing Consultants http://www.mcorponline.com Marketing ROI Techniques http://www.marketingpower.com/aevent Solutions Drive High Performances in Financial Services http://www.businessobjectives.com Optimize-Ideas, Action, Results "Customer Metrics That Matter" article written by Bruce Guptill April 2003, Issue 22 http://www.optimizemag.com/article/showarticle.jhtmlprintablearticle Customer Satisfaction http://www.busrelab.com/tips/tip11.htm Options for Growth: Increasing Market Share http://www.businesslink.gov.uk :// Read More