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Marketing of Financial Services

Paulina Papastathopoulou, Ph.D. Lecturer in Marketing

Department of Marketing and Communications

Athens University of Economics and Business

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Introduction to Marketing Management

Athens University of Economics and Business

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What is marketing?Marketing is a social and managerial process by which individuals obtain what they need and want through creating, offering and exchanging products of value with others (Kotler 1997).

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Definitions of marketing-related concepts (I)

Instincts. Human nature is full of instincts, such as hunger, thirst, protection against the forces of the environment etc. Needs. They are requirements for basic satisfaction.

Food, water, clothing, safety, belonging, esteemNeeds are not created by marketing, they exist in human nature

Wants. They are desires for specific need satisfiers They are numerous and may differ from person to person They are changing by the passage of timeThey are shaped by the political, economic, cultural and technological environment of a society

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Definitions of marketing-related concepts (II)

Demands. They are wants for specific products, backed by an ability and willingness to acquire them.

A want is transformed to a demand when backed by purchasing power

Product. It is anything that can satisfy a need or a want. It can be a physical good, a service or an idea

Every physical good is surrounded by a number of servicesIn most cases when people buy a physical good, they buy it for the services that it providesBroad-minded manufacturers focus on the services that surround their physical goods, not on the physical good itself

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Core product

Product characteristics

Packaging

Brand

Quality

Size

Appearance

Installation

Delivery & terms of payment

Warranties

After sales

service

Peripheral services

Kotler, 1986, Principals of Marketing

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Definitions of marketing-related concepts (III)

Value. It is the estimate of the consumer of the extent to which a product can satisfy his/her needs

Consumers can choose from a set of products Every product offers both functional value and symbolic valueDifferent products provide different levels of value Customers seek value maximization Since products are purchased at a cost, customers usually have to make a tradeoff between value maximization and ability to buy the right product

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Definitions of marketing-related concepts (IV)

Total customer value. It represents the aggregation of benefits that a customer expects from a good, a service or an ideaTotal customer cost. It is the aggregation of costs (monetary and non-monetary) that customers have to pay in order to locate, evaluate, purchase, use and divest a good, a service or an idea

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Definitions of marketing-related concepts (V)

Customer delivered value. It is the difference between total customer value and total customer cost.Customer satisfaction. It depicts a customer’s feelings of pleasure or displeasure, emanating from comparing a good’s, a service’s or an idea’s actual performance with his/her pre-purchase expectations

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Definitions of marketing-related concepts (VI)

Exchange. It is the process of obtaining a desired product from someone by offering something in returnTransaction. It is a process of value trading between one or two parties

Monetary transactions: A pays $100 to B, in order to acquire a desired value.Barter transactions: Non-monetary transactions, whereby products are traded for other products

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Definitions of marketing-related concepts (VII)

Market. It is the total number of potential customers (consumer or organisational) who have similar needs or wants and who are willing and able to engage in an exchange process that will result in the satisfaction of their needs or wantsMarket segmentation. The process of investigating the total market in order to detect sizeable parts, consisting of customers with similar and specific needs and wants

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Definitions of marketing-related concepts (VIII)

Targeting. It is the process of choosing one or more market segments and of concentrating corporate resources on them, in order to meet their needs and wants in the best way

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The Marketing MixThe marketing mix consists of a set of tools that companies operationalise and blend in order to pursue their marketing objectives in the target market. The traditional 4 P’s of the marketing mix are

The product The priceThe promotion The place

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The Stages of Marketing Adoption by Companies

Stage 1: Marketing is advertising, sales, promotion, and publicityStage 2: Marketing is smiling and a friendly atmosphere Stage 3: Marketing is innovationStage 4: Marketing is positioning of productsStage 5: Marketing is analysis, planning, implementation and control

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Marketing Management Marketing management is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organisational needs (American Marketing Association)

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Specific marketing work vs Marketing management (I)

Marketing work refers to specific marketing mix-related tasks and the people who perform it have clearly defined tasks e.g.,

Sales people do the sales Communications people do the advertising Statisticians do marketing researchFront-line staff in service organisations deal with customer service

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Specific marketing work vs Marketing management (II)

Marketing management is performed at a higher level of abstraction than marketing work, and involves compiling marketing programs that are a long-term guide for the day-to-day execution of a bundle of specific marketing tasks, e.g.,

Decisions on the composition of the product range (new product development, product modification, product elimination)Decisions on what segments to targetPricing decisionsLogistics and distribution decisions

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Types of a business’s orientation The orientation of a business refers to the philosophy that underlies marketing efforts:

The production orientation The product orientationThe sales orientation The marketing orientation

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The production orientation The philosophy of the firm is premised on the belief that customers will buy those products that are widely available and low in cost.

Managerial emphasis is placed on:producing what is compatible and synergistic with the existing production methods and technologymaximizing production efficiency (large production batches, standardized product)minimizing the production cost (economies of scale)achieving extensive distribution (making the product available in as many selling points as possible)

The philosophy ignores:the concept of value the advantages of adapting the production process to the requirements of different segments of a market

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The product orientation The philosophy of the firm is based on the assumption that customers will prefer products that offer quality, performance and possess innovative features

Managerial emphasis in based on:producing superior productsmodifying or improving them over time

This philosophy often results in:omission to involve customers in the process of developing new products or improving existing ones ignorance of the extent to which customers are willing to pay for superior quality and performance arrogance towards competitors marketing myopia

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The sales orientation This philosophy is based on the assumption that customers do not purchase enough of the firm’s product, when they are not pushed.

Managerial emphasis is placed on:bombarding customers with messages and material aiming at stimulating them buy more

This philosophy often results in:irritating and alienating customers negative word of mouth communication about the firm practices

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The marketing orientation (I) This philosophy is based on the principal that the best way to achieve corporate objectives is the concentration of all corporate resources on satisfying the needs and wants of target markets more effectively than competitors

Managerial emphasis is placed on:the understanding that the market has segments of customers withdifferent requirementsputting customers firstinvolving customers in the process of developing and improving products a willingness to change the way things are done in the firm in order to meet customers’ requirements more effectively orchestrating all functional areas towards the achievement of customer satisfaction (which is not the responsibility of the marketing department alone)

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The marketing orientation (II)This philosophy results in:

increased customer satisfactionenhanced customer loyaltypositive word-of-mouth communicationimproved business performance

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The sub-disciplines of marketingConsumer-products’ marketing Business to Business (B2B) marketingRetail marketingWholesale marketingServices marketingNot-for-profit marketingInternational marketing

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Further readingLevitt, T., (1960), “Marketing Myopia”, Harvard Business Review, Vol. 38, No. 4, pp. 45-56.Kohli, A.K. and Jaworski, B.J., (1990), “Market Orientation: The Construct, Research Propositions and Managerial Implications”, Journal of Marketing, Vol. 54, April, pp. 1-18.