Buyer Behavior Analysis on Financial Products - Pocketbook - Case Study Example

Buyer Behavior Analysis on Financial Products/Services: The Case of Pocketbook Group Number: Class: Group Members: Table of Contents Table of Contents 2 1.0 Introduction 3 2.1 Buyer Behavior Analysis 4 2.1.1 Consumer Behavior Analysis 4 2.1.2 Market Segmentation Analysis 6 3.1 Conclusion 10 4.1 Recommendations 10 References 13 Appendix 1: Consumer Decision Making Process 16 Appendix 2: The Attitude of Consumers in Online Banking 17 1.0 Introduction The manner in which financial services are conducted nowadays has changed considerably as a result of technological innovation, consumers’ needs and competitive pressure (Wessels & Drennan, 2010). Different financial services such as accounts’ transfer of funds and online purchasing of financial services and products have brought convenience to many customers since transacting using traditional modes of banking can at times be hectic. However, this has been made easier through technological innovation (Funfgeld, 2009). To this end, this report aims to investigate the buyer behavior analysis on financial products and/or services; this will be realized through an in-depth analysis of a case study of The Pocketbook. Cunningham, Young and Gerlach (2009), point out that consumers are moving from traditional services towards technologically innovative services because of the convenience that comes with it. Softwares have been developed by many organizations in order to achieve this end; a good example is Pocketbook, a mobile application. It has the capability of consolidating several bank accounts and providing related information, as well as advising on the consequences of late payment of bills. Financial institutions need to look into this form of banking to tap into the potential market for profit maximization (Bouwman et al, 2007). They should develop and implement banking services on the internet and encourage customers to use these services because of the advantages associated with it. According to Curran and Meuter (2005), consumer behavior analysis and market segmentation are effective means of reaching out to customers and potential markets. This is because measuring consumer attitudes is useful in the prediction of consumer behaviors and conducting this analysis will be helpful in business improvement (Bouwman et al, 2007). The project will focus on buyer behavior analysis in relation to financial products or companies. This will require a discussion of the trends in consumer behavior and attitudes, in the finance and banking industry, as well as a discussion on its market segmentation and recommendations on the way forward in relation to the use of pocketbook. 2.1 Buyer Behavior Analysis 2.1.1 Consumer Behavior Analysis The behavior of consumers in relation to financial transactions plays an important role in the development and implementation of financial services and products (Bouwman et al, 2007). It is for this reason that increased environmental turbulence, globalization, competition, cooperation and changes in consumer preference are indications that the most important thing for financial institutions is attracting and maintaining customers (Funfgeld, 2009). Consumer behavior in mobile and online banking is influenced by several factors, such as motivation and age of the consumer. Additionally, the purchasing behavior of consumers is influenced by financial products on purchase. Laforet and Li (2005) assert that development of new channels for financial delivery and increased competition are changing the behavior of consumers. This is because consumers have the option of purchasing particular financial products and switching banks more easily. In doing this, consumers go through, or are likely to go through a five stage process of making decisions that involve recognition of the problem, searching for a solution, analysis of available alternatives, choosing the most applicable alternative and evaluation of the outcome. This is illustrated by Appendix 1 below. However, changing from traditional modes of banking to mobile or online banking depends on the attitude of consumers. Further, Laukkanen et al (2007) add that, changing from traditional modes of banking to mobile banking is largely influenced by the maturity levels of the population, their literacy and confidence levels, as well as the extent of internet infiltration. Prior knowledge in the use of computers and satisfaction or dissatisfaction with banking services in use has an influence on online banking usage and attitudes (Lichtenstein and Williamson, 2006). Positive experience about online services creates positive belief in consumers about future use of online financial services. Consumers moved to self service transactions from traditional modes of service because of several reasons that include slow service speed in banks, inconvenient opening and closing hours, and inadequate staff to serve a large number of customers at a go. On the other hand, negative past experience discourages consumers from using online financial services and it takes the effort of financial institutions of encouraging such consumers in order to have confidence in online banking again. Further to positive attitudes regarding online banking, such as service oriented, affordability, faster and ease of using, influences commitment on the part of employees (O’ Donnell et al, 2007) (See Appendix 2 below). Service oriented refers to the belief that online banking provides consistent and good service, affordability is in relation to the comparison made regarding other channels of delivery, faster refers to putting into consideration the speed of other channels of delivery, and ease of use is the belief of effortlessness in using online banking compared to other payment modes (Walker and Johnson, 2005). Therefore, financial institutions have the responsibility of ensuring these positive attributes about online financial transactions are maintained. Therefore, it is important for financial institutions to retain customers, as well as sell basic investment and insurance products with high margins for increased profitability (Wang, Lin and Luarn, 2006). However, there are challenges facing mobile or internet banking that have a negative impact on consumer perception and use of the same. Security concern is one of the major reasons keeping consumers away (Wessels and Drennan, 2010). O’Donnel et al (2007) opine that other consumers lack knowledge on availability and use of internet banking, there are those who find it not to be user friendly and some consumers lack access to the internet. 2.1.2 Market Segmentation Analysis According to Wang, Lin and Luarn (2006), market segmentation in the financial services sector is helpful in understanding and serving customers with varying needs. Competitive pressure has increased the need for conducting market orientation and acquisition of knowledge on market segments (Laukkanen and Cruz, 2009). This is because segmentation analysis has several benefits, including serving customers in a better way leading to customer satisfaction. The retention and loyalty of customers leads to a record of positive performance by financial institutions. Segmentation analysis establishes financial behavior patterns that groups individuals according to needs (Laforet and Li, 2005). Currently, age is the major groups used in financial services marketing. This category reveals the attitudes and behaviors towards finance; achieved through a focus on management of finances for individuals in the categories. Fungfeld (2009) contends that a consumer’s attitude towards a certain product or service is an indication of the likelihood of buying the product or service. Bowman et al (2007) opine that the overall attitude is related to how the consumer will behave towards the product or service. Behavior might change over time, but past behavior can be used in predicting future behavior. Generally, it is established that younger people have less interest in matters to do with finances; they attach less importance to saving and enjoy spending (Fungfeld 2009). It is for this reason that they do not see the need of financial institutions. This trend is different from the older generation that focuses on the future and attaches so much importance to saving for future use. However, it has been established that a strong relationship exists between technology acceptance and age. Consumers who are younger would be attracted by hi- tech banking services. Also, they would prefer the convenience and time saving offered by mobile and online banking compared to older consumers (Laukkanen and Cruz, 2009). Young consumers find it boring to queue in banking halls to be attended to regarding financial transactions. Others do not have the time because of tight work and school schedules. This group of consumers would prefer conducting their financial transactions wherever they are without having to go where the financial institutions are physically located. On the contrary, the old generation prefers the orthodox way of doing things, physically going to financial institutions to undertake transactions. Some are not familiar with how to use the internet and would prefer the traditional way of doing things. Therefore, since internet banking is a new development in the financial sector and financial institutions are trying their best to convince consumers to use online services, young consumers need to be pursued by financial institutions in the implementation of online banking. This will ensure that the internet is used in helping young consumers in managing their finances. In addition, Walter and Johnson (2005) are of the opinion that the young age group needs to control excessive spending for financial management. Pocketbook was developed a year ago with the objective of making personal finance simple where consumers have the capability of managing their finances online without any charges. This may include monitoring financial transactions using a single device such as checking account balances, extracting financial statements, transfer of funds and paying bills. This is helpful because it allows for control of bills, minimize bank charges, avoid penalties due to late payment of bills and maintain saving and budget goals (Pocketbook, 2013). Young consumers would be thrilled to have such services at their disposal leading to the success of Pocketbook in internet banking. This application has already been ranked as one of the best applications for financial management by the iPhone compared to financial institutions such as PayPal and other well established Australian banks. However, this application runs the risk of being copied by other competitors who may want a high customer base in the market. Understanding financial needs is important in providing adequate products and services. It is also helpful in marketing existing services and predicting how people will respond to new services under consideration of being introduced in the market (O’Donnel et al, 2007). Refining segmentation and implementation of specific services and products is important for financial institutions to meet needs of clients. Wang, Lin and Luarn (2006) further note that the understanding of financial behaviors and attitudes allows for effectiveness of financial services. It also creates the need of improving how financial matters are handled. 3.1 Conclusion Technological innovation, consumers’ needs and competitive pressure have changed the manner in which financial services are conducted. Consumers are embracing online financial services and moving away from traditional modes of transactions, but this change also depends on the attitude of the financial consumer. In addition, past experience on internet use has an impact on the decision of the consumer. While positive experience has an impact of encouraging the use of online services, negative experience discourage consumers from using the services. Attracting and retaining customers is important for increased profitability. However, there are challenges facing mobile or online consumers such as security concerns, lack of knowledge on internet use and inability to access the internet. Market segmentation, on the other hand, is important in understanding and serving customers effectively. Behavior patterns are established, and individuals are grouped according to needs. Age qualifies to be used in market segmentation, but a focus on young consumers is significant to this research. 4.1 Recommendations The implementation of internet banking should not be uniform in different age groups. The migration target should be the young consumers. This is because they have a familiarity with the internet as a result of using it in their day to day lives. It includes the use of mobile phones applications in performing a range of tasks and financial management application such as pocketbook would not be an exception. In addition, young consumers attach less importance to saving money and financial investments. This makes them the potential customers for financial institutions. Concentrating on this age group of financial consumers in the implementation of internet banking will lead to extensive use of the services in financial management because most of them prefer the convenience of using the internet. Furthermore, the identification of the customer segments and prediction of their development is important in the implementation of pocketbook in the market. As such, an undertaking to indemnify incurred losses of unauthorized use under specific circumstances should be conducted as it builds confidence in customers. Consumers need an assurance that their accounts are safe from unauthorized interference and that, in case of any inconveniences caused, financial institutions will be held responsible. Doing this will allow consumers to recover money lost under the circumstances. This should be achieved through informing consumers of the security measures to be undertaken. Also, information related to security aspects should have non- technical and simple presentation form for ease in comprehension by all the intended recipients. Addressing the issue of security will lead to an increase in the number of online financial transactions and since young consumers are the intended segment to be pursued by financial institutions. Issues such as lack of internet banking awareness, difficulty in using internet banking and resisting change are some of the obstacles that could be solved through a wider publicity for education of consumers. Opinions held by a good number of consumers falling under this category are based on ignorance as a result of a lack of internet banking awareness as well as resistance to change. Publicity of online financial services will create awareness of the importance of this kind of transaction. It will also teach consumers on how to use online banking and consumers will have an opportunity of getting as much information as possible regarding this financial service. Doing this will lead to the implementation of online financial services and increase the number of young consumers who will shift from the traditional mode financial transactions. Measures of having an upper hand in competition from other mobile banking applications is through registration of patents that would prevent other companies from copying Pocketbook mobile banking application. Doing so would render any contrary action illegal liable to strict penalties of the law. In addition, an establishment of competitive advantage in the market would include a reduction of internet transaction costs to ensure loyalty of customers. This could prevent customers from switching to other banks or alternative delivery modes. Usually, consumers avoid certain transactions because of the high costs that are involved. Also, majority of young consumers do not have permanent jobs and high costs involved in financial transactions will discourage them from using the services. Therefore, free online transactions such as those offered by pocketbook will encourage them to use the application for their financial transactions. To add on, since the application is absolutely free, some will be encouraged to give it a try since they have nothing to lose. Some might end up shifting to online banking if they discover that the application is not so bad after all as they imagined. Continued customer satisfaction with online banking will attract more customers and ensure their loyalty that will prevent switching to other banks or different financial institutions. References Bouwman, H et al 2007, ‘Barriers and Drivers in the Adoption of Current and Future Mobile Services in Finland’, Telematics and Informatics, vol. 24 no. 2, pp. 145-60. Cunningham, L, Young, C E and Gerlach, J 2009, ‘A Comparison of Consumer Views of Traditional Services and Self-service Technologies’, Journal of Services Marketing, vol. 23 no. 1, pp. 11-23. Curran, J M and Meuter, M L 2005, ‘Self-service Technology Adoption: Comparing Three Technologies’, Journal of Services Marketing, vol. 19 no. 2, and pp. 103-14. Funfgeld, B 2009, ‘Attitudes and Behaviour in Everyday Finance: Evidence from Switzerland’, International Journal of Bank Marketing, vol. 27 no. 2, pp.108- 123. Laforet, S and Li, X 2005, ‘Consumers’ attitudes towards online and mobile banking in China’, International Journal of Bank Marketing, vol. 23 nos. 4/5, pp. 362-380. Laukkanen, T and Cruz, P 2009, ‘Comparing Consumer Resistance to Mobile Banking in Finland and Portugal’, in Filipe, J and Obaidat, M S (Eds), e-Business and Telecommunications, Springer, Berlin, pp. 89-98. Laukkanen, T et al 2007, ‘Innovation Resistance Among Mature Consumers’, The Journal of Consumer Marketing, vol. 24 no. 7, pp. 419-27. Lichtenstein, S & Williamson, K 2006, ‘Understanding Consumer Adoption of Internet Banking: An Interpretive Study in the Australian Banking Context’, Journal of Electronic Commerce Research, vol. 7, no. 2, pp. 50- 66. O’Donnell, J et al 2007, ‘Australian Case Studies in Mobile Commerce’, Journal Theoretical and Applied Electronic Commerce Research, vol. 2 no. 2, pp. 1- 18 Pocketbook 2013, Personal Finance Made Simpler, Smarter and Secure, viewed 14 September 2013 Walker, R H & Johnson, L W 2005, ‘Towards Understanding Attitudes of Consumers who use Internet Banking Services’, Journal of Financial Services Marketing, vol. 10, pp. 84- 94. Wang, Y, Lin, H and Luarn, P 2006, ‘Predicting Consumer Intention to Use Mobile Service’, Information Systems Journal, vol. 16, pp. 157-179. Wessels, L & Drennan, J 2010, ‘An Investigation of Consumer Acceptance of M- banking’, International Journal of Bank Marketing, vol. 28 no. 7, pp. 547- 568. Appendices Appendix 1: Consumer Decision Making Process Appendix 2: The Attitude of Consumers in Online Banking Read More