Is Islamic Banking Satisfying the Customer?Marketing Model: E-N-T- G-A-M-I-K-R

By:Nadeem M. FirozB.Com (Hons), M.Com (Univ of Peshawar); MBA, Ph.D (USA)School of Bus (AACSB)Montclair State University, New Jersey

Introduction

Experts in Islamic Financing Easiest way to understand the Islamic financing concept Easiest way to understand the non Islamic financing concept Is Interest free is free? Importance of Marketing Marketing for non Marketing Executives Easy lay man model of Marketing: ENTGAMIKR

So What?

Customer satisfaction requires total Marketing Integration

Satisfying customer at what cost?

Sellers Market of Islamic Financing

Lack of competition Lack of knowhow Analogy to MNC’s Sweat Shop & Child Labor Abusing of Orthodox Islamic Believers Exploitation of interest free idea and loan

sharking Charging more than conventional interest

A case of House Building Finance Corporation (HBFC)- WAPDA Town.

Nov 1, 2010Islamic Finance

House value at the time of loan Rs: 60,00,000 Loan of Rs. 3,10,000 Life of the loan 17 years Paid in last six years Rs. 5,000 a month

5X12X6= Rs 3,60,000 Principal reduced only Rs. 34,000 Principal remaining: Rs. 2,76,000 If paid today loan remaining with interest Rs.4,73,000 If paid in 17 years may be equal to 10,00,000

A Case of IMF. Conventional Finance

Interest only loans IMF/World Bank on December 21, 2005

– 19 countries loans down to zero – for countries with per capita income of less than $380/year– [This was due to the historic Multilateral Debt Relief Initiative (MDRI)]

Rich nations (G-8) write off $40 BN in debt - Heavily Indebted Poor Countries (HIPC)

62 countries were paying $10 BN each year in debt servicing

Example: Time 30 years

Loan $40 BN Paid Interest $120 BN

Principal remaining $40 BN – Finally to Zero after making 80 BN

So What?

Making a case for a case All the same Nothing is F R E E No money no Honey Lets try to Satisfy the customer (KING)

anyway

Environment

SWOT ------ Analysis

strength weaknesses internal micro

opportunity threats external macro

Marketing Internal & External

So What?

CHANGING THE DISADVANTAGE TO AN ADVANTAGE

Change weakness of the non Islamic banking system to an strength of Islamic finance.

In a debtor economy there is an opportunity to make partnerships using profit & Loss concept

Needs & Wants

Maslow's hierarchy of needs: Needs cannot be created

Satisfaction of the needs and wants of the customer

5. Self-actualization4. Self-esteem 3. Social 2. Safety1. Physiological

So What?

PHYSIOLOGICAL

House, Education, Car, Etc. Through Equity loan: Safest loan in

the worldCase of HBFC/WAPDA 3 Lakhs loan on

60 Lakhs property

Targeting

Bases of Segmentations Multiple segments Demographic- age income, sex, education Behavioristic- Product use- consumer or B2B markets Geographic- north east, southwest, east, west, Midwest, Psychographic- life style- social class, personality

Strategies

1. Mass marketing 4. Undifferentiated Marketing

3. Product differentiated marketing-

5. Market differentiatedMarketing

5. Target marketingOne defined markt

6. Target marketing - Concentrated

markt

So What?

1. Mass Marketing

4. Undifferentiated Marketing

Goods - Products

Goods Services - intangible Products – tangible   4 -- Problems/Nature/Issues/Concerns of Services 1. Intangibility 2. Variability 3. Perishability 4. Inseparability

So What? Intangibles

Converting Intangibility to Tangibility

Build on a relationship

So What? Tangibles

Tangibles: No problem here

oGetting into a houseoGetting a caroGetting education

Customer & Financing fit

Seeking Customer Satisfaction

So what?

Conduct Market Research– Study consumer behavior to identify consumer’s wants and needs– Target and segment the Muslim market by demographics and geography. Find

communities with devout Muslims who are most likely to purchase Islamic financing products

– Align consumers’ wants and needs with the organizations objectives– Materialize wants and needs into differentiated Islamic financing products

Create Consumer Oriented Marketing Program– Engage in a grassroots marketing program where banks reach out directly to local

Muslim residents in the surrounding community.– Develop a comprehensive website which details all aspects of your bank’s Islamic

financing products, BUT focus on direct sales, as a Majority of mortgage products are purchased face-to-face

Offer Promotional Discounts– To encourage Word-of-Mouth advertising offer “refer a friend” discounts on your next

mortgage payments

?

Integrating Islamic financing into your business– product design, training, processing, business structure, human resources policy and

employee relations management, and FDIC compliance - County specific Obtaining approval from Shariah boards

– body must have oversight of all significant business decisions – interpretations of Islamic law are constantly being debated among Islamic scholars,

not all Shariah boards are created equal Cost of launching Islamic products

– extensive MIS required to develop a product with little precedent in the United States – design and printing of new financial documents to support the new products, counsel

from Muslim and regulatory experts, and the training and hiring of staff members to support the new products

Stereotypes– United States - felt to be hostile towards the concept after the 9/11 terrorist attacks – Muslim - wary of western institutions as the recent “War on Terror” policies

?

Regional banks are in best position -focus on local Muslim community, conduct MIS, build up trust, focus on word

of mouth advertising

Control start-up costs-dedicate only a few staff members to develop business-service Muslim’s on an “as-needed” basis until business grows-use simple proven Islamic financing products (quick approval by Shariah

boards)

Continue MIS – to determine consumer’s evolving wants and needs

?

Market to non believers to expand the marketing pool:

Market Shareto

Market Size Micro lending

Amount - Price

Profit & Loss Cost of Capital

So What?

Partnership

Keep profit down to less than conventional interest rates to attract customers form all

markets (believers and non believers)

Information - Promotion

Strategy

Media Tactics Print: Magazines - Newspapers Out of home: Billboards - Transit - Flyers

Broadcast: Radio - TV

Word of Mouth:

So What?

Maximum information

Knowhow

Marketing ConsultantIntegrationMatrix structure

So What? Matrix

So What?

Existing Products New products

Existing markets 1.Marketi penetration

2. Product development

Existing Markets 3. Market development

4. Diversification

So What?

H Star ?

L Cash Cow Dog

MGR H L

RMS

Recommendations

1. Research your area2. Advertise3. Follow examples4. Hire Consultants5. Offer Alternatives to Mainstream Banking6. Similar but Different7. Major Markets8. Market Potential9. Multiple Designs10. Medium of Exchange11. Sharing the Risk12. Based on Honesty13. Belief that God is Watching out for you14. Investing in Ethical Products or Markets

So What?

M-A-R-K-E-T-I-N-G

E-N-T- G-A-M-I-K-R ©2010 Firoz

Questions/ Comments