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

By:

Nadeem M. Firoz

B.Com (Hons), M.Com (Univof Peshawar); MBA, Ph.D(USA)

School of Bus (AACSB)

Montclair State University, New Jersey

AL-HUDA CENTRE OF ISLAMIC BANKING & ECONOMICS



Introduction

Experts in Islamic Financing

Easiest way to understand the Islamic financing conce pt

Easiest way to understand the non Islamic financing conce pt

Is Interest free is free?

Im portance of Marketing

Marketing for non Marketing Executives

Easy lay man model of Marketing: E NTGAMIKR



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 loansharking

Charging more than conventional interest



A case of House Building FinanceCorporation (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

C-king

4P¶s-contl

8uncontl





Needs & Wants

Maslow's hierarchy of needs:

Needs cannot be created

Satisfaction of the needs and wants of the customer

5. Self-actualization

4. Self-esteem3. Social

2. Safety

1. Physiological



So What?

PHYSIOLOGICAL

House, Education, Car, Etc.

Through Equity loan: Safest loan in

the world

Case 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. Productdifferentiated

marketing-

5. Marketdifferentiated

Marketing

5. Target marketing

One 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.V

ariability 3. Perishability

4. Inseparability



So What? Intangibles

Converting Intangibility to

Tangibility

Build on a relationship



So What? Tangibles

Tangibles: No problemhere

oGetting into a house

oGetting a car oGetting 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. Findcommunities with devout Muslims who are most likely to purchase Islamic financingproducts

± 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 localMuslim residents in the surrounding community.

± Develop a comprehensive website which details all aspects of your bank¶s Islamicfinancing products, BUT focus on direct sales, as a Majority of mortgage products arepurchased face-to-face

Offer Promotional Discounts

± To encourage Word-of-Mouth advertising offer ³refer a friend´ discounts on your nextmortgage 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, counselfrom 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 ³War 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 ³as-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 Share

to

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 Consultant

IntegrationMatrix structure



So What? Matrix

CEO

banker banker banker

Mktg



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 area

2. Advertise

3. Follow examples4. Hire Consultants

5. Offer Alternatives to Mainstream Banking

6. Similar but Different

7. Major Markets

8. Market Potential

9. Multiple Designs

10. Medium of Exchange

11. Sharing the Risk

12. Based on Honesty

13. Belief that God is Watching out for you

14. 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



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