Challenges in Marketing

Financial Services
Marketing Financial services

Table of Contents
Introduction
MARKETING CHALLENGES FOR FINANCIAL SERVICES
Ways to Overcome Today's Challenges in the Financial
Industry
Conclusion

Introduction
The marketing of financial services is a unique and highly specialized branch
of marketing. The practice of advertising, promoting, and selling financial
products and services is in many ways far more complex than the selling of
consumer packaged goods, automobiles, electronics, or other forms of goods
or services. The environment in which financial services are marketed is
becoming more competitive, making the task of marketing financial services
increasingly challenging and specialized. Financial services marketers are
challenged every day by the unique characteristics of the products they
market.

For

example,

often

financial

services

cannot

be

visually

communicated in advertisements as easily as consumer goods can.

Furthermore, the relatively unexciting nature of financial services makes the
task of attracting consumer attention and inspiring consumer desire a
difficult one.
The study of financial services marketing is in many ways far more
fascinating than other areas of marketing. There are many predictable
behaviors that consumers often exhibit in their dealings with financial
services providers.
The predictability of these behaviors and the abundance of data enable
financial services organizations to use market segmentation technologies for
matching the most relevant products to individual consumers.
There is mounting evidence that suggests the environment in which financial
services are marketed is becoming more complex and challenging. As part of
this study we will be discussing some of the challenges in marketing
Financial Services and ways to overcome these challenges.

MARKETING CHALLENGES FOR

FINANCIAL SERVICES
Financial products and services are a particular type of good that pose special
challenges to marketing. These challenges include the following:

Vague Product/Service Attributes

A core challenge is a general lack of consumer awareness of the
various dimensions that constitute a financial service. Research has
shown that consumers education on financial services is generally
very poor. Studies also show that consumers can only process about
seven pieces of information at any one point in time, so their ability to
fully process the information presented to them in financial services
advertising is comparatively limited.
The difficulty in understanding financial services is further
compounded by the fact that financial services are generally
uninteresting and unexciting, making the task of appreciating the
differences among financial services more challenging for the average
person.

Well conceived and executed advertising is one of the few

ways to overcome this challenge because it may facilitate
consumer education, and can help consumers understand the
unique benefits of a financial service.

Intangibility
Financial services meet a general monetary rather than a specific
tangible need. Accordingly, financial service providers must get their
message across effectively and ensure an attractive image. A financial
service cannot appeal to a depositor's senses, but rather provides
them with an intangible benefit.

Quality is Intangible
The quality of financial services is rarely quantifiable. For example,
the claims payout behavior of an insurance company is generally
unknown to the majority of the companys customers. This is because
the sharing of risks across a large number of customers means that
most policyholders may seldom experience losses firsthand.

Similarly, the long-term future returns of a mutual fund would be

unknown for many years after the purchase of shares of the fund. It is
the task of the financial services advertiser to create an understanding
and appreciation for the underlying qualities of an advertised financial
offer.
Compelling statements about the efficiency of the claims processing
procedures of the company or overall customer satisfaction may help
to accomplish this. In the case of a mutual fund, revealing the
qualifications of the fund manager or the past performance of the fund
may help convey the sense of quality that consumers may expect.
Obviously, without advertising, these aspects of quality would remain
largely unknown.
While companies may attempt to make information about the quality
of financial services available, few seem to understand how to make a
case that is truly compelling.

Inseparability
Financial services are produced and distributed at the same time. The
main concern of the marketer is therefore to provide the right service
at the right place and time. This requires close proximity to customers.
In addition, the packaging of the savings product is very important.

Limited Differentiation - Getting to Square One

Financial services are very much alike. Reasons for chore provider over
another are often related to convenience. This is especially true for
small depositors whose demand for a savings product in often not
excessively dependant on interest rates. Companies that have
managed to differentiate themselves in this highly crowded market,
have done so by establishing strong, consistent and responsive brand
identities. This is something financial services companies struggle with.
There are various strategic frameworks that can be used to execute
measurably successful advertising in financial services. These include
elements like understanding the consumers decision making process,
strategizing the communications process by which you connect,
grasping consumers motivations and needs, and execution style.
The applicability of a given framework depends on market
characteristics, the overall strategy of the company, and the specific
service being marketed, so there is no general consensus on which
framework is the most valid in guiding a successful financial services
advertising strategy.
My recommended approach is a marketing audit from the outside-in,
beginning with research to identify your unique marketing challenges.
This involves benchmarking the competition for best and worst

practices, identifying your own internal strengths and weaknesses, and

developing a set of recommendations and guidelines for brand and
product positioning to propel rigorous execution of strategies and
tactics that strongly differentiate your services and generate consumer
resonance.

Unexciting Products
Consumer involvement with the benefits of an insurance policy, the
rates of return on an investment product, or the checking account
services provided at a commercial bank rarely cause a great deal of
excitement and enthusiasm. As a result, financial services are usually
not associated with high levels of consumer involvement, excitement,
symbolism, or emotions.
In addition, the high level of complexity makes evoking positive
emotional responses more challenging than it would be for consumer
goods such as electronics. The quantitative and contractual nature of
financial services requires considerable cognitive effort and
mathematical processing before consumers can fully appreciate the
merits of an advertised offer.
Furthermore, there the considerable amount of internal consumer
resistance to discussing personal financial matters makes for an
audience that is at best generally uninvolved, and, at worst, resistant
and defensive. The standard answer stock photos of faces and
families simply doesnt go the distance in humanizing the process.

Consumer Trust
Financial service provision involves an intimate relationship between
the producer and the consumer. Thus, financial relationships are often
built over a long period of time and are very sensitive to changes in
mutual trust.
Securing a sense of mutual trust between the consumer and the
financial institution has at times been a challenge in financial services
markets. Distrust affects both the consumer and the company, as both
may feel uncertain about the underlying intentions of the other party.
For example, a recent consumer survey shows that one in every four
consumers will not hesitate to cheat their insurance company, if they
have a chance to do so.
These consumers may, for example, choose to misinform their
insurance company about their individual risk characteristics when
signing up for an insurance policy, misrepresent the sequence of
events that lead them to file a claim, or even neglect to disclose
relevant information that may invalidate the insurance policy.

 Geographic Dispersion
Because proximity is a key factor in financial service provision, large
financial institutions must offer a wide branch network, numerous
sales points, or doorstep services to ensure the satisfaction of regional
and local needs.
Except in the case of recent high-tech developments such as internet
banking, financial institutions cannot hope to serve a large customer
base if they only distribute their products and services centrally.

Limited Ability to Visually Communicate

Financial products may not always be communicated to consumers in
ways similar to how consumer goods are advertised.
An automobile manufacturer may feature its product using images and
photographs, increasing the sensory input of the consumer and
creating a sensation similar to consumption of the product. This
increases the cognitive and emotional impact that advertising
generates in the consumer.
When you attempt to advertise an insurance policy or investment
product, the challenge is how to present an abstract, intangible
product visually.
The challenges in visual communication of financial services require
experienced, attentive, and creative development of ad content in
order to excite the viewer about the useful aspects of the financial
service.

Growth Balanced with Risk

Selling financial products, particularly loan products, involves risk.
Accordingly, organizational growth must be well balanced with the
capacity of a financial institution to manage risk.

Regulations
The practice of financial services advertising is further complicated by
the massive number of regulations that restrict the contents of
financial services advertisements, and the number of regulatory
agencies that closely monitor and influence ad content. Elaborate and
complex sets of criteria need to be met in order to attain regulatory
compliance. This restricts the advertisers creative process, and makes
the task of financial services advertising a highly unique specialization.

Marketers who are used to working in a highly regulated environment

may not be as well versed in consumer marketing principles.

Fiduciary Responsibility
The primary responsibility of a depository is to guard the interests of
the depositors. Systems and procedures, as well as financial services,
must be structured accordingly.

Labor Intensity
Financial service provision is highly labor intensive. While automation,
especially computerization, can effectively make transaction
management more efficient, financial services, particularly savings
services, remain dependent on the personal relationship between
customers and the front-line staff of the institution.

Ways to Overcome Today's Challenges in

the Financial Industry
These are some strategies that help financial services managers meet the
challenges of doing business in today's market.

Attract and retain clients

Banks and financial services firms have to stand out in the crowd by
offering customers something extra.
"The bottom line is there is nothing that can differentiate one bank
from another, other than making a connection with customers," says
Joe Sullivan, CEO of Market Insights.
Make an emotional connection with the consumer and let them know
you understand their financial needs. Then come at them with
solution-based thinking, not product pushing.
The financial services providers that help customers take ownership of
their finances and teach them to become better money managers will
have larger client bases.

Know your customer

In a rapidly changing world, financial services providers must be

aware that their customers are changing, too. Consumers are savvier
and more aware of their finances than they were five years ago.
The best providers engage customers and learn how their needs are
evolving. If a bank or a business has not looked at its market or its
customers to learn "what is going on with them in the last year, you
don't know your customers."

Promote confidence in the economy

The economic crisis that began in 2008 is still very fresh in customers'
minds. Though it did not have much impact in India but in US large
financial institutions collapsed and the government bailed out troubled
banks. The stock market lost value and in much of the country the
housing market eroded.
Now financial advisers are called on to provide factual evidence to
customers that the economy is getting stronger.

Use technology that customers expect

"Technology has changed the expectations consumers and small
businesses have of their bank". Clients use information on the Internet
to compare financial service firms.
Many customers are comfortable with managing their money online
and they expect user-friendly tools to do so. E-mail messaging and
chat interaction may now be primary ways financial advisers
communicate with clients.
Companies must react to changes in technology to keep reaching
customers in the most effective ways.

Watch your reputation

The financial services world is like high school in some ways:
Reputations can be difficult to control or change. At the moment,
consumers are not forgiving many of the companies that were front
and center during the economic crisis.