Market Entrance of New Products From The Islamic Bank of Britain - Case Study Example

Market entrance of new products from The Islamic Bank of Britain, IBB Name Institution Market entrance of new products from the Islamic Bank of Britain, IBB Introduction Self Invested Personal pension is among the major product available in the Islamic Bank of Britain (IBB). This product is in line with the laws and principles of Islamic law. For any banking product to sell in Islamic cultures, it has to be consistent with Islamic/ Sharia laws. For instance, Islamic law prohibits usury, the collection and payment of interest, investing in businesses that are considered unlawful like selling of alcohol or pork (Azarian, 1988). For one to invest in Islamic cultures, the investments must conform to sharia laws for them thrive well in such traditions. A self invested personal pension scheme is among the individual pension policies approved by the government of UK that allows people to make investment decisions on their own by holding investments with the bank until retirement and then start to draw pension incomes. In this scheme, one is permitted to have a say in how their pension income is to be invested. The investor may decide to take the money in lump sum or in periods or decide to re-invest. This type of pension has an advantage over other pension schemes since it allows the owner to be flexible and select investments of their own. Some investments may include individual shares and stocks, deposit account, savings products, investing in commercial property, unit trusts among others (Scholnick, 1996).As an agent of IBB, There will be selling self invested personal pension policy to customers within the country and even internationally. In addition to this, the essay will also introduce a new type of investment in the agency which is investment in commercial property there will be a major in buying, leasing and selling offices, shops and factory premises. The target is to get customers for the new pension scheme as well to attract them in the new investment. Customers will pay funds to the new pension scheme and give them an opportunity to invest within the bank’s premises. The proceeds from the investments are re-invested or kept until he or she retires then they start earning pension income (Pollard & Samer, 2007). Target market and positioning. The new business of self invested personal pension targets all customers irrespective of gender, age, social status, level of income, geographical location or even religion. All religions including the selective Islamic religion are targeted. It is a banking product that is consistent with the Islamic principles and guided by Islamic economics. For example, no exchange of interest involved since Islamic law prohibits that and again it is a lawful business. This new pension investment targets all people enjoy control over their personal investments, those who are looking for ways of consolidating all their pensions in one pool or pot, and those people who may want to keep their money invested even after retirement to draw income at a certain age. People who earn low and may not afford to invest in commercial property may as well benefit from other investments offered like deposit accounts or savings (Scholnick, 1996). One creates a diverse portfolio within the many possibilities. This is an advantage over other schemes offered by other companies like insurance companies who only deal with insurance policies. This type of investment targets local, national and international market. With the introduction of technology, one is able to do mobile banking without necessarily having to visit the bank’s agency premises. Another advantage is that a customer who owns commercial property and premises may sell them to our agency and be offered valuable tax relief. The funds are re-invested within our plan but managed by the owner of the pension or a legal representative. There are also other tax benefits on inheritance. Incase one dies before retirement, his or her benefits are allocated to the spouse or dependants (Pollard & Samer, 2007). The parties involved may agree meaning that one may enjoy benefits even before retirement. Investors may be permitted to make choices about what assets to buy, lease or sell and determine when those assets are to be acquired or disposed off. Marketing mix Marketing mix is a phrase that is used to describe the different kinds of choices and decisions an organization or a company has to make before bringing the product in the market. The marketing mix helps to define the marketing aspects so as to position the product successfully (Liu, 1997). Product decisions A product is an item, tangible or intangible that satisfies the demands and desires of the consumer. Products undergo a life cycle starting from the growth phase, maturity period and then a period of decline when sales fall. Research about a product is thus necessary to tackle the challenges that may arise. Banking products are always intangible. The main focus which is in property investments to provide pension income in return have relative advantages over other pension schemes, this type of investment is compatible with the customs and habits of all religions including the Islam. As a flexible pension product, Self invested personal schemes are sharia compliant and will permit Muslims to invest a series of assets either buying or selling of shops or office premises. This type of business operates without interest as stated in the Islamic law. Investments must exclude unethical business practices like gambling, pornography tobacco among others (Pollard & Samer, 2007). One of the attractions is that the investor can use the pension funds in investing in other areas like buying property. As an agent selling the new product from IBB, loans will be granted to people who have no enough money to buy and own houses and property. The rent from the property is used to cover the mortgage loan and the rest remain in the Self invested personal pension fund to enable him enjoy benefits in the future. This investment pension scheme offers investment advantages over other conventional personal pension schemes, such as diversification potential, flexibility and pure investment choice. They are not restricted to a certain choice as it is with other ordinary schemes. The customers can still enjoy other banking services like invest in bonds, stocks, individual quoted shares, and other types of investments. The main focus is introducing the new product (Liu, 1997). As a result of its investment flexibility, the investor ought not to change the contract if they want to switch investments. For instance, if one wishes to increase or decrease funds to a higher or lower risk, in terms of tax exemptions and other benefits, retirement options they only need to come into consensus with the bank or the agent. This new product offers a number of tax advantages. Customers enjoy tax relief on property for tax purposes provided that they are within the required limits. Accumulated benefits are free from income tax liability and capital gains tax. Incase one dies before retirement, his or her benefits are allocated to the spouse or dependants (Liu, 1997). Self pension schemes are an attractive destination for existing pensioners currently in other schemes. For other conventional schemes, members are likely to have multiple pensions and when brought together to buy this new pension scheme, fees is reduced and the person will be in a position to access better investment services. With other standard pension schemes, investments are managed by someone who in this case is the company or organization or a client on your behalf. For SIPPS one is given the opportunity to choose and maintain their own investments. There is again an option of pay an authorized person of your choice to manage and make decisions on your behalf (Gronroos, 1997). Sales expectation. It is a major challenge to forecast sales for a new product since it involves estimations and guessing. However, in this line of business forecasting may not be a big challenge since it only involves buying, selling and leasing property on behalf of the customer and investing the proceeds for the retirement benefits of the client. With research on new local and international markets, modifications and introduction of new property investments combined with substantial promotion and advertisement, sales are expected to increase by twenty percent within the first year and fifty percent within the second year. In this case buying, selling and leasing of office premises will work better. Customers who had initially invested in customer deposits and savings will be maintained for the new venture. They will be able to focus still on property investment (Scholnick, 1996). Pricing decisions Pricing is the act of determining what the seller would receive in exchange for the products. Poor pricing decisions may affect any business not only in the banking industry. This is a very crucial decision which requires sound research and comparisons with other prices of conventional pension schemes. Pricing depends on factors like manufacturing or initial cost of obtaining the product, competition, market condition, quality and brand of product. Pricing is fundamental aspect in any business and it is a component of the marketing mix (Borden, 1965). In this case, for the new venture to attract potential customers and help keep current customers for the other investments, a relatively low cost is relevant for a start. This also covers the profit maximization objective. For a start, the price of obtaining a self invested personal pension will be slightly lower than that of the other conventional schemes so as to attract customers. This concept is also known as Loss leader. For instance, if the price of the cheapest personal scheme is 50 US Dollars, then it will go for 45 Dollars. For the second year, changes will be made to adjust the prices and benefits to enable the new investment compete effectively with others. However, care will be taken when adjusting the prices. Pricing is one factor that hampers may hamper the bank’s ability to be customer centered and to manage their relationship with customers. For example, to buy a building from a client, price should capture among others the rates of water, electricity, maintenance, cleaning, refurbishment, heating and hair conditioning (Scholnick, 1996). Channels of distribution Channels of distribution refer to the intermediaries through which a good, product or a service passes until it reaches the end consumer. The channels may include wholesalers, retailers, distributors and internet especially in the banking industry. Using many channels to make the product reach the final consumer creates a complex system and this may make distribution management difficult. Moreover, a long distribution channel reduces the profit. Channels of distribution are a component of business marketing mix represented by ‘P’ for price (Gronroos, 1997). For this new investment of SIPP, technology will be the main delivery channel to make the service available to both the new and potential customers. Customers may call certain lines, agree on terms and make payments through their personal mobiles. Again, opening new sub-branches will enable reach customers in local villages. To areas that are not served by the agent, this service will be offered through the post office where the post office is the main cash handler. Payments, balance requests and transfers will be made through the website or mobile phones. However, the main channel is direct selling where customers will visit the Agent premises and agree terms and conditions together (Borden, 1965). Promotion Promotion is an aspect of the marketing mix commonly referred to as marketing. It is the process of raising customer awareness of a product, a good, a service or a brand; generating sales and creating product loyalty. Promotion is a term which is used for advertising, direct marketing, publicity, personal selling and sales promotion. The main objectives of promotion are sales increases, creation of the products image, to retaliate competition, acceptance of new products among others (Gronroos, 1997). It is a challenge when marketing Banks because they do not offer material products for the consumers. Banks should strive and keep current customers and get them to buy new services. As an agent selling this new type of pension scheme, the following methods and techniques will be applied in making the new investment appear attractive. Offering free items and gifts among them certificates and household items will help attract customers. For example, partner with a known local car company and allow customers to enter into a draw to win a car. Word of mouth attracts customers. Convince them that the new investment in property has benefits. Internet and mobile technology has enhanced online banking. Include descriptions of the new investment to allow customer deliberate on a decision of whether to invest or not. Offering separate specialized cards for the customers for example cards for students, owners of small businesses with low interest rate. However this may not work for all Muslims (Pollard & Samer, 2007). All these may be costly so for the first year, it is necessary to begin with word of mouth and online promotion so as to avoid bigger costs then engage in the rest by the second year. Since IBB was the first to introduce sharia complaint banking to the UK and through its popularity, being an agent of this bank and selling self invested personal pension schemes, promotion will not be hard because it’s a popular bank worldwide (Borden, 1965). Conclusion In the current world, people do not prefer a pension company which decides how their savings are invested and managed. They prefer to control and manage their own investments and decide how their money grows to benefit them at old age and after retirement. Self invested personal pensions come in such cases. One can choose the investments they want to invest in and put their savings into and keep control over the investments. In addition, self invested personal pension schemes can be managed and controlled online owing the developments in internet and technology. One can sign in online banking portals and check their pension account balances and where the money is being invested. This scheme is also suitable for people who wish to gather all their pensions in one pool before they retire or those who want to keep their money still invested after retirement. For example, a sale of one building may be enough for future pension schemes. Chances are the new line of business will be a success considering all the benefits of self invested personal pensions. However, the new type of product may be criticized by some quarters of the Muslim society. They may argue that the bank does not adhere strictly to the Sharia laws as they may term the proceeds from investing in commercial property as interest commonly referred in their culture as ‘riba’. They may not consider the time value of money (Azarian, 1988). References Azarian, R. (1988). Outline of an Economic Sociology of Islamic Banking: International journal of Business and Social science, (3), 134-340. Borden, Neil H. (1965). The Concept of the Marketing mix. In Schwartz, G. Science in marketing. Wiley. P. 286ff. Retrieved 2013-11-04. Gronroos, C. (1997). Management Decision: Journal of Management History,35, (4), 322-339. Khan, S. (1986) Islamic interest free banking. IMF Staff Papers, (33), 1-27. Lauterborn, B. (1990). New Marketing Litany: Four Ps Passe: C-Words Take over. Advertising Age, 61(41), 26. Liu, L. (1997). Retirement Income Security in the United Kingdom: Journal on Advisory Council on Social Security, (1), 28-33, 102-234 & 158-159. McLean, R. ( October 19, 2002). The 4 C’s versus the 4 P’s of marketing. Custom fit online. Retrieved from http://www.customfitonline.com Pollard, J. & Samers, M. (2007). Islamic banking and finance: Postcolonial political econothe and the decentring of economic geography, 32 (3), 313-330. Scholnick, B. (1996). Asymetrical adjustment of commercial bank interest rates: Journal of International Money and finance, (15), 485-496. Vision and Values: Islamic Bank of Britain. 2010-12-31. Archived from the Original on 3 May 2011. Read More