Marketing Financial Services - Case Study Example

Marketing is defined as “managing profitable customer relationships “ (Kotler Armstrong 28). Marketing is a way of approaching business, not simply a function that deals with sales and promotional material. Most industry sectors adopted a marketing mindset in the middle of the last century, but for financial services, it was not until government regulations were relaxed that banks found they needed to use marketing to win new customers and retain existing ones. The market in financial services is dominated by several large organisations, some specialising in specific financial products, such as pensions and life assurance, while others provide a full range of products, being a “one-stop shop” for a customer’s financial needs.

Financial services are broadly divided into retail and commercial activities. The retail area is further divided into personal and business, with products in each specifically for those customers. Many of the commercial activities are not marketed heavily as they are extremely specialised. They would fall within business-to-business marketing, as would marketing activities directed at business customers within the retail area. Banking is an unusual activity in that it requires customers to deposit the raw material required to do business – money.

What the banks do is limited by how much they hold on behalf of customers (savings and credit balances), compared with the amount they make available to other customers (through lending) and the relative risk associated with the funds held. Legislation also requires that banks maintain a specific ratio of capital assets available at all times. Financial institutions have to manage risk associated with default – overdrafts or loans not being repaid. This is usually reflected in the price of the produce – the “margin” or interest rate charged.

The higher the risk, the higher the rate charged. In some cases, banks will not permit overdrafts or provide