Different financial services in the financial service industry are banking, insurance, and mutual fund services. There is a different marketing strategy for each service.
These are described below:
Service Marketing Strategies for Banking Services
A bank is involved in accepting the deposits and directing the money into loaning activities. All the financial and similar needs of the customers are effectively fulfilled through bank marketing.
Delighting the customer is the prime objective of the bank. The relation between the customer and the bank depends on mutual trust.
Without trust, the customer is not going to deposit the money in the bank, and also without the trust, the bank is not going to pass the loan.
The simple mode of action of the banks is to Meet the money from the customers and gaining interest by offering to the needy people.
Therefore, apart from having capital, trust is required for starting banking services. For an effective marketing strategy of the banking services, it is essential for the service marketers to segment the customers and design a suitable marketing mix for different segments.
Market Segmentation of Banking Services
Different segments in different service sectors are as follows:
1. Agricultural Sector: In the agricultural sector, the categories requiring banking services are described in figure 8.1.
The banking needs of such categories are not identical due to the availability of infrastructural facilities, help of nature, improved or scientific system of cultivation, mechanization of agriculture, or the magnitude of risk.
2. Industrial Sector: In the industrial sector, the categories requiring banking services are cooperatives, tiny, and small, as well as large industries (figure 8.2).
These industries have different banking requirements that are why different banking services are designed for them.
3. Services Sector: Services sector provides the banks with a profitable business.
Different service sector categories that require banking services include the profit-making and the non-profit- making services (figure 8.3).
4. Household Sector: Different categories of the Household sector requiring banking services are as follows (figure 8.4):
i. Based on Income: On the basis of income, the household sector can be divided into different segments requiring the banking services, i.e., marginal income household, subsistence-level income household, low-income household, middle-income household, and high-income household.
ii. Based on Gender: The banking services for the household sector can also be segmented on the basis of the gender of the individuals. Men and women both have a different set of requirements for banking services.
5. Profession Sector: The banking services can also be segmented on foe basis of the profession of the individual (figure 8.5).
Different Professions are available for individuals to choose like bureaucrats, intellects, corporate executives, white and blue-collar employees, technocrats, etc. Banking organizations offer different sets of services for different professions.
6. Institutional Sector: In this sector, different types of institutions (figure 8.6) have different types of banking needs.
For example, the banking needs of not-for-profit organizations are very few. Similarly, the cultural and philanthropic organizations also do not need the major services of the banks.
Marketing Mix of Banking Services
1. Product: The bank may offer different types of bank accounts, lockers, different loans, money transfer facilities—government schemes, etc., to the customers.
Different customers have different service requirements from the same hank. Therefore, designing a suitable product mix is dependent on the market segmentation of banking services.
2. Pricing: The price mix for the banking services are determined by the Reserve Bank of India and the Indian Banking Association. All the banks have to follow the price regulations of the RBI.
The interest rates for different banking services like loans, account maintenance, charges for not maintaining minimum account balance, fund transfer, etc., are determined by the RBI.
3. Place: Deciding the location of the branch is very important for banking organizations. These branches are located as per the population and the demand for the service of the banks.
It is a challenging task to determine the location of the bank branches in a country like India. Different rural locations are there, which have a huge demand for banking services.
The branch locations are decided after considering the following points:
- Transport facility,
- Electricity, communication and another facility,
- Cleanliness of the surrounding,
- Safety and security,
- The facility of electronic as well as physical distribution, and
- Location of the head office.
1. Promotion: Banks use promotion strategies to influence the perception of the customers of the banking facilities. Two major categories of promotion strategies used by banks include personal and impersonal promotion.
i. Personal Promotion: Direct, as well as personal selling, is used by the banks to improve the knowledge of the customers about the different services of the bank.
The persuasion becomes more effective in the case of direct marketing. It results in impulse buying of the banking services.
ii. Impersonal Promotion: Advertising, sales promotion, publicity, etc., come under the category of impersonal communication.
Different methods like brochures, calendars, pens, etc., are used for sales promotion, and media like newspapers, hoardings, magazines, radio, etc., are used in advertising.
Publicity is also a good method for promoting banking services. It is preferred by customers over the advertisement. Celebrity endorsement is also used by several banks like ICICI and Axis bank.
Another important method to influence the customers is word-of-mouth promotion.
5. People: ‘People’ element of the service marketing mix for the banking services denotes the people involved in the service delivery process.
This may be customers and service employees. The banks need to recruit and train skilled and talented employees who can accurately evaluate the needs and requirements of the customers and deliver the desired services in an appropriate manner.
The organizational policies, as well as the technical skills, should be incorporated very carefully.
6. Process: ‘Process’ element in the service marketing mix of the banking services means the procedures or activities required to avail the services of the bank.
The banking organizations need to design the bank processes very carefully as it is a tool to make relations with the customers.
The nature of the process should be user-friendly and easy to understand for customers from different backgrounds. The service process should be customer-oriented.
It should be designed in such a way that it reduces the unnecessary hurdles in the banking process and performs smooth functioning of the services like cheque clearing, transactions, etc.
Nowadays, service organizations like banks need to design their process so effectively that customers repeat their purchases and become loyal to them.
7. Physical Evidence: In the case of banking services, the physical evidence concept denotes the physical atmosphere used to deliver the services to the ultimate customer.
It may include designing the interior of the bank, the uniforms of the executives of the bank, the color of the rooms of the bank, the physical setting of the bank, the chequebooks, the brochures, the deposit or withdrawal forms, etc.
These elements add to the service value. The customer is assisted through physical means to provide him/her with the best banking services.
Different banks use technologies to implement the physical evidence in the services like a digital status board for displaying the status of the work being done by a particular department.
Service Marketing Strategies for Insurance Services
With Indian consumers becoming more aware of their financial affairs and investments, it becomes essential for insurance managers to design attractive insurance services for them.
Nowadays, customers are looking for financial services that offer not only returns but also security. Therefore, it becomes very difficult for insurance managers to design services as per the tastes of the customers.
They need to be creative and flexible. Insurance managers first determine the different market segments available to them. After that, the marketing- mix is developed.
Market Segmentation of Insurance Services
The different bases which can be used for dividing the total market as follows:
1. Region: The insurance services can be designed for rural or urban consumers. It can also be for domestic or foreign customers.
2. Nature of Service: The insurance services can be designed for the fire, life, health, theft, motor, marine, etc.
3. Nature of Demand: Insurance services are broadly developed as per the demand in the market. The nature of the demand for a particular product determines the development of that product.
Marketing Mix of Insurance Services
The marketing mix of insurance services is as follows:
1. Product: The first element of the marketing mix of the insurance industry is the ‘product’ I Insurance companies offer different types of products to the customers.
The products sold here are general policies that are intangible in nature. Hence, we can say that the products offered by the insurance companies are in the form of insurance services like life insurance policy, health care policy, motor vehicle insurance, insurance of goods transported, etc.
The products offered by these companies are also known as a ‘bundle of utilities.’ Whenever a company or an individual buys a policy from any insurance firm, they buy not only the policy but also the prestige of the insurance organizations, agent’s assistance, rights to claims and compensations, etc.
2. Pricing: The next marketing mix of the insurance industry is the ‘price.’ The pricing policy of the insurance company is based on the premium charged by the customer against the policies.
The pricing also depends on the amount levied upon in case of any default in payment, rate of interest charged during such defaults, the credit facilities, underwriting and consultancy services offered to the customers, etc.
In the case of targeting the customer segment, pricing strategies play an important role. The policymakers and other decision-makers should ensure to keep such prices, which serves as a motivational tool in attracting the customers and developing the insurance business. This, sometimes, requires a new vision to set the structure for price, bonus, and interest charged.
3. Place/Distribution: The third element of the insurance industry’s marketing mix is ‘place.’ The branch manager needs to think well from all perspectives before setting its branch at a new place.
A thorough analysis should be done. Factors such as availability of infrastructural facilities, accessibility, and the efficient management of branch offices and premises should be given consideration.
Safety provision can also be given more priority in some cases, gating offices in remote areas should be avoided as it can be dangerous from the safety perspective of employees and cash kept at the branch.
The office location should be such from where all the public amenities like conveyance, shops, police station, etc., are close.
Even the point should also be kept in mind that the customers |e able to reach the branch easily. Civic amenities, parking facilities, interior decoration, and furnishing should also be kept in mind.
4. Promotion: Promotion mix occupies an important place in the formulation of the marketing mix of the insurance industry. Following are the main elements associated with the promotion mix of an insurance company.
i. Advertising: The advertisement of insurance policies is generally done through broadcasting, radio, or print media (newspaper).
The percentage of acceptability of the insurance messages can be increased by audio-visual exposure. Advertisement on television is most widely used among these.
With the help of broadcast, media insurance companies can communicate their message to millions of people at a time. Advertisements in newspapers can also prove to be effective in promoting the policies of insurance companies.
ii. Publicity: Along with advertisement, the marketers should also give consideration to publicity requirements as it also serves as an important element of promotion.
When used in the right manner, it can make promotional efforts proactive. When a comparison is made between advertisement and publicity, the advertisement can be considered insensitive.
However, insurance companies find publicity through vocal leaders or media more effective in communicating the information and messages. Maintaining effective public relations can prove helpful in enhancing the publicity impact.
iii. Sales Promotion: Sales promotion is temporary as it is applied for a particular period of time. The sales promotion tools in the insurance industry can be the incentives given to the employees, agents, policyholders, etc., for acquiring more customers and enhancing business.
An incremental role is played by the incentive given to the end customers for promoting the insurance business. Gifts, discounts, rebates, etc., for a short time period, also serve as promotional tools.
The Indian insurance organizations should keep bringing innovative ways to keep ahead of the foreign insurance firms.
iv. Personal Selling: As we all know, insurance businesses are generally acquired by personal selling, especially in rural areas. Hence, personal selling acts as an important element in the promotion mix.
The insurance companies employ agents who make personal contact with the customers and convince them to enroll in a new policy by informing them about the benefits.
Such promotional activity is totally based on an individual’s talent to persuade and disseminate information effectively.
The agents and employees involved in personnel selling should have attributes like communication skills, patience, dedication, and pleasing personality.
In order to motivate the employees and agents, their performance should be linked with incentives.
v. Word-of-Mouth Promotion: Another important element of promotion in the insurance sector is ‘word-of-mouth promotion.’ It is a more effective way of influencing customers.
Satisfied service users, popular personalities, opinion leaders, and social reformists can play the role of word-of-mouth communicators effectively.
In this case, weightage should be given more to the quality aspect of services provided to the customers so that they can further communicate their positive feedback to other prospective customers.
Cooperation should be made with opinion leaders as they help in promoting the business.
5. People: The management suggests efficient administration of personnel in the insurance sector as they form an important part of the marketing mix.
The quality of services is greatly judged by factors such as the use of laptops, computers, fax machines, printers, sophisticated telephonic services, e-mailing, internet, etc.
This adds to the satisfaction level of the personnel. The insurance companies should focus on the overall development of the personnel by providing them appropriate training in regards to information technologies and other operations.
Training should be provided to employees of all levels – from front desk to top managers. The insurance companies train their personnel in all aspects – from communication, familiarity with technology to behavioral guidance while dealing with customers.
6. Process: The next marketing mix of the insurance sector is ‘process.’ The process followed by the insurance company should be customer friendly.
The accuracy and speed of policy recovery and payment should be given due consideration. The convenience of customers should be kept in mind while undertaking the claiming procedures.
Installment schemes should also be given to the customers to fulfill the increasing customers’ demand as well as to maintain competitiveness in the market.
7. Physical Evidence: The last element of the insurance marketing mix is ‘Physical evidence.’ In insurance companies, physical evidence is via the internet when the customer encounters the service (for example, the claims made for compensation in case of accidents of vehicles).
The behavior of employees with the customers on the phone or given on mail is also a form of physical evidence.
Service Marketing Strategies for Mutual Fund Services
Designing the service marketing strategies for Mutual Fund Services is a challenging task as different similar services are available in the market, giving tough competition to it.
As India is in the growing phase of the mutual fund market, it is very important for the managers to educate the common people about the significant benefits of investing in mutual funds.
Therefore, a promising marketing strategy is required to educate potential customers about mutual fund services and their returns.
In order to design a suitable marketing strategy for mutual fund services, marketers need to segment the market and develop an effective marketing mix.
Market Segmentation of Mutual Fund Services
There is only a single basis for the segmentation of mutual fund services, i.e., the purpose of the investors behind the investment. Different customers have different return expectations from mutual fund investments.
For example, some customers want their investment to offer regular fixed returns, while others want a huge return in the long-term.
Therefore, the following mutual fund investments can be developed based on the needs of the customers:
1. Income Funds: These are the mutual funds that offer regular fixed returns to the customers for their investment. The money of the customers is invested in a secure fund like Government securities, corporate debentures, bonds, etc.
Therefore, it is the best mutual fund investment for customers desiring regular fixed income with low risk involved.
2. Growth Funds: These are the mutual funds that offer a significant amount of money in return for medium to long-term investment.
The investments which offer a high return over a period of time, like equities, are used in such mutual funds.
Therefore, it is the best mutual fund investment option for customers desiring a huge return in the long run.
3. Balanced Funds: The combination of growth and income funds are called balanced funds. Here, the money is invested in both the growth funds (i.e., equities) and the income funds (i.e., corporate debentures, bonds, etc.).
The proportion of investing the money in both the funds is predetermined. Therefore, it is the best investment option for the customers desiring regular fixed income as well as capital appreciation.
Marketing Mix of Mutual Fund Services
1. Product: Designing the mutual fund product is a very challenging task as it is very difficult to meet the changing customer needs and the economic changes occurring in the geographical region.
Offering mutual funds investment services to the customers is a job of caution and responsibility as it involves the savings of the people.
Therefore, studying the customers and their changing income level is essential for designing a mutual fund product. The profile of the customer is also important in deciding the mutual fund product.
Mutual funds products associated with the name of a renowned manufacturer or brand are preferred by the customers.
For example, ICICI Premier, GIC Growth Plus, BOB Growth, Birla Mutual Income Plus, Can Bonus, Kothari Pioneer, Reliance Growth, Alliance Equity Fund, Tata EGF, etc.
2. Price: Pricing the mutual funds is not the priority for the marketers. They focus on delivering quality services to the customers as it is associated with the returns on investments of the customers.
Here, it becomes complicated to fix the price of mutual fund services. However, any distribution fee which is required for the mutual fund investment should be clearly communicated to the customers.
3. Place/Distribution: The role of place or distribution is very significant in designing mutual funds products.
In order to be competitive and ahead of the competitors, mutual fund organizations aggressively search for new ways to offer services to the customers.
Earlier product-based models were prevalent, but nowadays, solution-based models for mutual funds products are used.
In order to be in completion, designing an effective delivery strategy is very crucial for mutual fund marketers. It helps in offering need-based solutions, advisory services, etc.
4. Promotion: Designing a promotion mix for the mutual fund services is very crucial for the organizations as different potential players are available in the market with a different set of mutual fund services.
It is very important to make a brand of the service organization. Therefore, effective advertisement, personal selling, and sales promotion strategies need to be designed for mutual fund services to attract potential customers.
Among all the above-described promotion strategies, advertisement is the best option for mutual fund services.
5. People: People are the delicate portion of the marketing mix for any services. Service marketers should take special care in designing the people part of the marketing mix.
They need to be skilled and trained in dealing with different types of customers. The organizational objectives should be well taught to them.
Customer satisfaction should be the prime priority for service people. These service people should be willing to develop their interpersonal skills.
6. Process: The process includes the tasks or procedures required to avail the mutual fund services from a service organization.
This processing element should be designed in such a way that it attracts customers due to its simplicity. Most of the service organizations have complex and lengthy procedures to get mutual fund services.
It acts as a barrier for the customers interested in such services. Therefore, the process should be simple and time-saving.
7. Physical Evidence: All the elements of the service atmosphere should be simple and friendly in nature. It may include the physical setting of the institution, the uniforms of the executives, the application forms, the furniture, etc.