STRATEGIC MARKETING MANAGEMENT STRATEGIC MARKETING MANAGEMENT Learning Objectives

STRATEGIC MARKETING MANAGEMENT

STRATEGIC MARKETING MANAGEMENT Learning Objectives This course is designed to enable target learners to achieve the following objectives: v v To learn and understand concepts, processes, methods, models, approaches and activities involved in strategic marketing management. To understand how strategic marketing management principles, concepts, theories and techniques are applied to create customer value in the banking and financial services organizations. To develop a strategic thinking and ability to identify and develop strategies for coping with the changing external and internal environments of the banking and financial services organizations. To appreciate the strategic role of marketing in determining the organization’s competitiveness in the marketplace as well as the joint satisfaction of customer needs and corporate objectives.

1. Introduction to Marketing Theory Definition and Concept of Marketing as Demand Management. Marketing Orientations towards the Marketplace. Characteristics and Marketing Challenges of Financial Services. Types of Financial Services Provided by Banking Organizations. Impact of Computer and Information Technology on the Marketing of Financial Services. The Meaning and Scope of Strategic Marketing Management. 2 Marketing Environment of Financial Services Organisations The nature and importance of marketing environment to financial services; The microenvironment and macro environment components of the marketing environment. Analysis of the firm’s microenvironment, i. e. Internal and Task environmental forces and macro environment, i. e. Political-Legal, economic, social, technological and competitive environments. Current environmental trends and their impact on the market place and marketing practice.

3 Strategic Planning Process Meaning of Strategic planning; Corporate, division and strategic planning. Strategic Planning versus Operational Planning. The Importance and Benefits of Planning to Banking Organisations. The Corporate Strategic Planning Process (Defining the Corporate Mission, Establishing Strategic Business Units (SBU), Planning New Businesses, and Downsizing Older Businesses). The Business Strategic Planning Process (Defining the Business Mission and Objectives; Situation Analysis; SWOT Analysis; Strategy and Programme Formulation, Implementation, Control and Evaluation of Strategic Plan); Strategic Planning Tools: Strategic Business Units, Gap Analysis, Boston Consulting Group (BCG) Matrix, Ansoff’s Product/Market Matrix. Determinants of Success and Failure of Strategic Planning in Banking.

4. Strategic Marketing Planning and Management The meaning and Scope of Marketing Planning and its Relationship with Strategic/Corporate Planning. The Marketing Planning Process: Marketing Audit, Setting Marketing Objectives; Target Market Selection and Positioning; Developing the Marketing Mix; Formulation of Marketing Programme; Implementation and Control of a Marketing Plan. Marketing Audit: meaning, characteristics and components of the marketing audit. Tools for strategic analysis and Developing Marketing Strategies: Porter’s Generic Strategy Model; Ansoff’s Product/Market Expansion Model. Components and Purposes of the Marketing Plan. Organisation of Marketing Departments. 5 Market Segmentation, Targeting and Positioning Meaning and Benefits of Market Segmentation approaches /methods. Target Market Selection and Positioning Approaches and Strategies. 6 Marketing Information and Research Systems Meaning, Roles, Importance and Components of a Marketing Information System. Definition, Uses, Role, Types and Areas of Marketing Research. The Marketing Research Process.

7. Consumer and Organizational Buying Behaviour § Consumer Buying Behaviour Meaning and Importance of Understanding Consumer Buying Behaviour. Influences on consumer buying behaviour. Types of Consumer Decision Making Behaviour. The Consumer Buying Process. Consumer Behaviour and Diffusion of Innovation. - Organizational Buying Behaviour Differences between Organizational and Individual Buying Behaviour. Major Influences on Organizational Buying Behaviour. Buying Roles in the Organizational Buying. Stages in the Organizational Buying Process.

8. The Marketing Mix Concept and its Use, Role and Importance in the organisation. The Traditional Marketing Mix (the 4 Ps) and Expanded Marketing Mix (the 7 Ps). Analysis of the Elements of the Financial Services Marketing Mix and how they are interrelated. Prerequisites of a Successful Marketing Mix – the Strategic, Planning and Tactical Elements. Extent of Branch Influence over the Firm’s Marketing Mix.

9. Product Strategy Meaning and Importance of Product in the Marketing Mix. Nature and Types of Banking Products. Product Levels and Product Hierarchy, Product Mix Strategies and Influences on Product Strategy. Product Brands and the Importance of Branding in the Financial Services. New Product Development – Meaning of New Products, Reasons for New Product Development, New Product Development Process and Strategies, New Product Management, Reasons for New Product Failures The Product Life Cycle, Including Definition, Stages, Use, and Strategies. Product Portfolio Analysis and Planning; Use of PLC and the Boston Consulting Group (BCG) Matrix in Portfolio Analysis and Planning. 10 Pricing Strategy Meaning, Role and Importance of Pricing in the Marketing Mix. The Commercial and Strategic Importance of Pricing. Situations in which Pricing Decisions are Desirable to the Organisation. Influences on Pricing, Including Internal and External Factors. Pricing Strategies for New and Existing Products. Price changes (i. e. price cuts and increases) and Reactions to Price Changes.

11. Distribution Strategy Meaning, Role and Importance of Distribution/Delivery System. Channels of Distribution and their Functions. Influences on Distribution Channel Planning and Design. Distribution Channels in Banking: the Branch Office, Service Delivery Facilities, etc. Impact of IT on Distribution in Banking, Including Emerging Technology-Driven Service Delivery Systems such as Internet (Web) and Telephone Banking; ATMs, Plastic Cards, etc. 12 Promotion Strategy Meaning, Role and Objectives of Promotion and the Communication Process. Steps in Planning Effective Marketing Communications. The Promotion Mix Concept, Promotion Methods: Advertising, Sales Promotion, Publicity and Public Relations, Personal Selling, and Direct Marketing. Internal Communications and their Importance to the Organization.

13. People in Financial Services Marketing Mix Selling and Sales force Strategy: Importance and Role of People in the Financial Services Marketing Mix and Selling of Financial Services. Understanding Selling (Selling Vs Marketing, Misconceptions about Selling, Types of Selling Jobs, Relationship Selling). Impact of Selling on Profitability through Customer Acquisition, Customer Retention and Maximizing Return on Advertising Expenditures. Characteristics of Successful Salespeople. The Selling Process – An Overview of the AIDAS and Behavioural Approaches/Models to Selling. The Use, Merits and Demerits of the Direct Sales force in Selling of Financial Services. Role of Sales Training and Product Knowledge in Selling Financial Services. Managing the Selling Strategy of Financial Services Organizations.

14 Service Quality and Customer Care Strategy Role of People in Customer Care and Customer Satisfaction. Service Quality as the Foundation of Customer Care Concepts, Including the Customer/Supplier Concept and Service/Profit Chain. Dimensions and Determinants of Service Quality/Customer Care. Achieving Improvement in Service Quality/Customer Care in the Financial Services Organizations. Role of Training and IT on Customer Care. Quality Assurance and Total Quality Management (TQM).

15 International Marketing Meaning of International Marketing. Reasons and Benefits that prompt Banking and Financial Services Organisations to Engage in International Marketing or to go Global. The International Marketing Environment – Nature and Impact of the Legal, Economic, Political, Ethical, Social, Technological, and Competitive Factors of the Global Market on a Firm’s International Marketing Involvement. The International Marketing Planning Process; Elements of International Marketing Plan, including International Marketing Mix Elements; standardization versus adaptation of marketing mix. International Marketing Strategy Decisions, Including why go Global, Where to go, and how to go; Modes of Entry to Overseas Markets Available to Banking and Financial Services Organisations.

16. Ethical Issues in Marketing The Meaning of Ethics; Influences on Ethics; the Role of Ethics in Marketing. Differences between Ethics and Social Responsibility, and Ethics and the law. Elements/Scope of Ethical Codes, Including Marketer’s Responsibilities; Honesty and Fairness in Practicing the Marketing Profession; Rights and Duties of Parties in the Marketing Exchange Process; Marketer’s Responsibilities in the Areas of Product Development and Management, Promotions, Distribution, Pricing, and Organizational Relationships. Social Responsibility Concepts, including Profit Responsibility, Stakeholder Responsibility and Societal Responsibility. Some Ethical Dilemmas in Marketing, Including Product, Price, Promotion, Place (Distribution Channels), People, and Process. Strategies for Ethics and Social Responsibility (Proactive, Reactive, Defense, and Accommodation Strategies).

EXAMINATION STRUCTURE Time Allowed: Three hours. Examination Format: The paper consists of six questions and candidates should attempt any four. Each question carries 25 marks. RECOMMENDED READINGS 1. BPP: Marketing of Financial Services, CIB Associateship Study Text. London, (1993). 2. BPP; Strategic Marketing Management, CIB Bankers Workbook Series. London (1996). 3. Cowdell, J. and Farrance, C. C. , Marketing of Financial Services, CIB Bankers Workbook Series. London, (1993). 4. Pezullo, A. M. , Marketing for Bankers. American Bankers Association (1993). 5. Willson, M. S. , Gilligan, C. and Pearson, D. J. , Implementation and Control. Butterworth/Heinemann. Oxford (1992). § Gamba, S. K. , Strategic Marketing Management, TIOB (2003 § Strategic Marketing Management, UIB Publication(2005)

STRATEGIC MARKETING MANAGEMENT Definition of Marketing: There are several definitions of marketing, but the most suitable ones are the following: The chartered Institute of Marketing defines marketing as “A management process responsible for identifying, anticipating and satisfying customer requirements profitably” (2001). Phillip Kotler in 1980 defined marketing as “a human activity directed at satisfying needs and wants through the exchange process” It should be noted from the definitions that marketing involves the following: -

Marketing is guided by needs of customers. Needs of customers should be central to the business approach adopted by the organization. Do not produce based on cost and efficiency alone, but on needs and wants of customers as well. Marketers in organisations should be concerned with identifying who their customers or potential customers are plus what they expect and want and then design and produce products based on this. Organisations should anticipate changes in customers’ requirements as the market changes. This brings in the need for research and development plus on going creativity and innovation.

Matching the goods produced with the needs of potential and existing customers in terms of product features, availability, price etc. is necessary. These, however, should be balanced with organizational capacity, so as to ensure that there is a balance between consumer requirements and organizational capabilities. An important element of the marketing orientation here is that it must filter through the entire organization including , but not limited to marketing, sales, front office, back office etc. whoever gets in touch with customers should be able to satisfy them. Marketing is a human activity involving people ie. Customers, suppliers, sales people, distributors, etc. it, therefore, requires organization and leadership Marketing is a management process. Top management should own up the marketing effort and move it because they understand the mission and vision of the organization, the SWOT/ environment of the business and allocate resources.

Marketing improves business performance and profitability. The aim of marketing is profitable sales. It may increase costs, but with a view to profitability. Marketing involves an exchange process and exchange must involve value. Adaptation over the long run. Banks seek to profit from a long-term relationship(lifetime value) with their customers. Relationship marketing acknowledges the fact that profits do not come from individual transactions , but from the propensity of the customer to deal with your bank rather than your competition.

MARKETING MYOPIA Banks or companies sell products/goods or services, but customers buy satisfaction. We should, therefore, be seen to satisfy customer needs at all times.

MARKETING MANAGEMENT Marketing management involves putting the marketing orientation into practice and can be viewed as a philosophy of how to run the business. It is the implementation of marketing concepts to deal with practical problems. Kotler defines marketing management as: “analyzing, planning, implementation and control of programs designed to create, build and maintain beneficial exchanges with target buyers for the purpose of achieving organizational objectives”. This definition emphasizes the following: -

This definition emphasizes the following: Building and maintaining beneficial exchanges with customers Need to achieve organizational objectives Need to manage the process Importance of relationships with buyers in achieving organizational objectives and ability to compete with organisations in the market place. NB. Marketing is about serving customers better than competitors.

It is important for organisations to distinguish between their customers and consumers. Marketing should both identify and distinguish between customers and consumers of the organization in order to produce products or services that will sell successfully. The customer is the person or organization that buys the product or service, while the consumer is the person or organization who uses the product or service. Eg. The customer for the child’s account may be the parent, but the consumer is the child. Same applies to toys. NB. Many products satisfy the same customer need; like fish and chips, matooke and beef or chips sausages etc. all remove hunger. The customer will buy the combination that satisfies his/her need most.

Every product has a cost and the customer makes a trade-off between expenditure and satisfaction. According to Kotler, buying a product must for the customer be a better deal than: Self-production Theft or coercion Begging. The marketing management process involves the following activities: Analysis – it begins and ends with the customer. It involves identifying who your existing and potential customers are, what they buy and level of satisfaction. It includes R&D including both qualitative and quantitative analysis.

In sophisticated companies, market information is integrated into a marketing information support system which can be used by managers to make decisions. Decision support systems use such information to develop effective marketing decisions. Marketing objectives should be linked with company mission, vision, objectives etc. There are two types of market opportunities; environmental opportunities which exist anywhere in the environment(SWOT) such as fields of energy, foodstuffs, transport, professional services etc. It should be noted that not all environmental opportunities are appropriate for all institutions. We also have company marketing opportunities which are distinctive competences in one or more areas of activity that make a firm more likely than others to take advantage of certain environmental opportunities.

Planning – marketing management also uses information from marketing analysis to develop the organisation’s marketing response called strategic marketing planning. The strategic marketing plan involves the following: Identification of selected target markets Setting the levels of each element of the marketing mix for each target market Setting marketing objectives to match corporate objectives in areas like market share and sales volumes Implementation – Implementation of marketing plans involves identifying and developing a suitable marketing mix. Kotler defines a marketing mix as “a set of controllable variables and their levels that a marketer uses to influence the target market”. The marketing mix includes the following: Product – defined as a package of benefits. It also has features. Place – mainly distribution channels for the product. Avail product to customers. Price – price affects consumer buying behavior. Products should be availed at the right price and with suitable credit facilities. Promotion – refers to advertising and sales promotion for customer awareness NB. Service marketing involves three other Ps which we shall look at later.

Control – finally, marketing management involves control of the ways of implementing the marketing plan. Control involves setting quantifiable targets and checking performance against these targets, while taking remedial action where required.

MARKETING ORIENTATION TOWARDS THE MARKET As an orientation or philosophy, marketing defines the organization’s stance towards its customers. Marketing orientation is a marketing logic or philosophy which an organization chooses to relate to its target market. The key issue is to choose the best orientation to guide organization marketing efforts. There about 5 orientations that organization can select from Production concept/ orientation Product concept / orientation Selling / sales concept / orientation Marketing concept / orientation Holistic marketing concept

PRODUCTION CONCEPT Management aims at producing goods of optimum quality and cost. Management key task is to improve efficiency in production and distribution. Aim is achieving high production efficiency, low costs and mass distribution. Assumption is that customers are interested in product availability and low prices. They ignore R & D. It is applicable where demand exceeds supply. Consumers are more interested in price than features. PRODUCT CONCEPT Focus in on making superior products and improving them over time. Reasoning is that: Customers buy products or services that are well made rather than solutions. Seller knows best what the needs of customers are. Quality and performance are the major determinants of consumer buying decision. Consumers take time to appraise products and decide what is best for them NB: Buyers buy solutions to their specific challenges and buying decision may be based on esteem, price or emotional factors.

SALES/ SELLING CONCEPT: Output and new competitors increase and demand supply are more or less equal. Views success as coming from increased sales (converting of product to cash) and Focuses on aggressive selling / promotion. People must be coaxed into buying. Uses personal selling, advertising, sales promotion etc. MARKETING ORIENTATION Output continues to grow and supply exceeds demand (buyers’ market) and to survive, organizations must ensure that they satisfy customers’ needs. Emphasis goes on market research to identify, anticipate and satisfy customers’ needs and customer is now king. A marketing orientation is a marketing management process which identifies or anticipates the needs of customers or groups of customers so that products or services are designed to satisfy these needs. NB: According to this orientation, the marketer’s job is not to find the right customers for the product but the right products for the customers.

THE HOLISTIC MARKETING CONCEPT: Everything matters with marketing to achieve organizational goals. This orientation recognizes the fact that the organization operates in and environment with (LEPEST) factors that have to be borne in mind as you operate. It is sometimes referred to as the societal marketing concept. Holistic marketing concept comprises 4 areas or aspects: (1) Relationship marketing (2) Integrated marketing (3) Internal Marketing (4) Social Responsibility marketing

RELATIONSHIP MARKETING: Is about the fact that the goal of marketing is to develop, lifetime relationships with clients; (lifetime value). Marketing here aims to develop “deep enduring”. Relationships with all people or organizations that could directly or indirectly affect the success of the firm’s marketing activities. Aim is to ensure that there is mutual satisfaction for all involved (customers, employees and other strategic partners e. g. distributors, dealers, investors etc. ). Has led to the emergence of relationship departments and managers in banking for purposes of building sustaining and growing sound long term relationships with their key customers (ARM, CRMS, RMS) following the pareto 80 – 20 rule. Aim is to build a marketing network (Kotler & Keller 2007). Long-term survival depends on customer retention. It is 5 – 7 times more expensive to get a new customer than retain an existing one.

INTERGRATED MARKETING Views marketing as a task that devises marketing activities and comes up with fully designed (integrated) marketing programs to create, communicate and deliver value for customers. It takes into consideration the fact that marketing programs consist of numerous activities and decisions. We normally use the marketing 4 Ps to correspond to the customer’s 4 Cs i. e. (i) Product – Customer solution (ii) (iv) Price Place Promotion - Customer Cost Convenience Communication Ability of organization to succeed will depend on how best they meet customer needs (4 Cs) by providing good solutions to customers. Therefore under integrated marketing, the following are important; (a) Many different activities are normally employed to communicate and deliver customer value. (b) All marketing activities are coordinated to maximize joint effort (design marketing with other activities such as demand management, resources management and network management)

INTERNAL MARKETING Is a part of holistic marketing concept which emphasizes that every one in the organization (bank) from senior management to lower levels embraces the marketing aspirations/principles of the organization. This should start from hiring to training and deployment. “You cannot promise good service if you do not know what you are giving and cannot serve yourselves internally”. Departments are customers of each other, which leads to signing of service level agreements amongst departments in the organization. With every department thinking about the customer or putting customer at the forefront.

SOCIAL RESPONSIBILITY MARKETING OR SOCIETAL MARKETING CONCEPT (HUMANISTIC OR ECOLOGICAL MARKETING) Is also part of holistic marketing. This moves deeper from just satisfying customer needs to incorporating legal, environmental, quality and ethical concerns into the organizations activities. (LEPEST). Managers then have needs of the society and customers to satisfy. It emphasizes that marketing activities affect the entire society.

FINANCIAL SERVICES MARKETING Most people think that only tangible products can be marketed but in banking, we find ourselves marketing services which are intangible and may not be inspected before being bought or may not be taken away. WHAT IS A SERVICE? “Any act or performance that one party can offer to another that is essentially intangible and doesn’t result into ownership of anything. Its production may or may not be tied to a physical product. Maintenance services of buildings, cars, plant etc are attached to products but financial services are not linked to any particular products. It is definitely easier to sell tangible products than intangible ones (services) mainly because selling involves stimulation of human senses (touch, sight, smell, feel etc) The main characteristics that distinguish services from tangible products are;

(a) INTANGIBILITY Services cannot be seen, touched or felt/displayed as a result; The customer who purchases the service has nothing to display as a result of that purchase. Examples include; money transfer, insurance etc What financial institutions do is to try and tangiblize the intangible by say a cheque book for current account, insurance policy, money transfer form etc. Services are difficult to understand. Tangibility may inhibit the propensity to consume a service as customers do not understand them well. This is why we stress benefits while marketing services. NB: Intangible is normally a matter of degree e. g. there are intangibles that add value to tangible products such as decorating or hair dressing, plant or vehicle maintenance. OR Complete intangibility in terms or entertainment or leisure services

(b) INSEPARABILITY FROM SERVICE PROVIDER Services are usually simultaneously produced, sold and consumed (at the same time) NB: Services have to be at the same time Made available Sold Produced Consumed This makes the character, customer service/care of the person providing the service very important if you are gloomy, customers will perceive the service as bad and vice versa.

(c) HETEROGENITY OF VARIABILITY Services vary from time to time or are heterogeneous. Standardizing services is one of the most difficult things to do. Customer satisfaction for services depends on the behaviors, mood, motivation well being of the service providers and these keep changing. It is thus true that service quality depends on who provides the service, where it is provided and when it is provided. Quality of loan depends on the loan assessor and the bank is judged accordingly. This makes standardization very important. Standardization is usually in ATMS and other areas like account opening. This also requires training of staff and proper hiring plus proper customer service monitoring

(d) PERISHABILITY Services cannot be stored and are therefore perishable. E. g. seats on bus if it is moving or in a theatre for performance expire with the journey or show and cannot be stored to be sold later. The major marketing challenges here are: - Staff members need to be available in adequate quantities to attend to customers but you should bear mind the need for the bank to minimize expenditure. - “Anticipating levels of demand here becomes very important i. e. will the level of demand be high or low” - Could also be that level of demand will be high leading to poor service and lost customers

(e) LACK OF OWNERSHIP Compared to goods services have one major difference in that they do not result into transfer of the property. The service purchase only confers to the purchases a right to use or access the facility and not ownership. This usually lessens the perceived customer value for services compared to physical goods that are purchased and owned.

LEVELS OF DEMAND (1) Negative demand: consumers dislike the product to the extent that they are willing to pay a price to avoid it. E. g. dental care or air travel. Marketing here should identify the cause of the negative demand try to counter it. (2) No demand. Products which have no perceived value in certain markets and there is no demand for them e. g. pension in youth markets, purpose of marketing here is to stimulate demand. (3) Latent demand A large group of customers in the market share the need for a product which does not yet exist in the market. (Interest paying current account). Marketing here should use R & D to decide whether product is viable and can be produced and marketed profitably.

LEVELS OF DEMAND (4) Faltering or declining demand Less and less of a product is being consumed in the market. Marketing task here is to identify the cause of faltering demand re-assess the nature of product plus a marketing campaign to rejuvenate the product if possible. (5) IRREGULAR DEMAND Perhaps one of the biggest challenges in service marketing including financial services. The pattern of demand is based on seasonal factors or other volatility sources such as economic fluctuations. Marketing here should synchronise demand supply by discouraging use when demand is strong and encouraging use during low periods. (6) FULL DEMAND Demand is at desired corporate/marketing levels and in line with marketing objectives. Key challenge here is to maintain this level of demand by continuously monitoring and adjusting marketing campaigns e. g. basic current account.

LEVELS OF DEMAND (7) OVER FULL DEMAND Demand exceeds the level of supply on a somehow permanent basis i. e. demand is above supply and there is no desire nor ability to raise supply. May happen in areas like specialist cars, restaurants or non-renewable resources like oil. Marketing task here should be to reduce demand eg. by increasing price or making it less available. (8) UNWHOLESOME DEMAND Any demand (positive) is regarded as excessive because of the undesirable qualities of the product e. g. drugs and smoking. We could use counter marketing to reduce or remove demand e. g. (cigarette smoking may be dangerous to your health)

THE SERVICE ENCOUNTER This is where a service provider and customers come face to face in the delivery of the service. This must be enjoyable by the customer eg. DISNEY. There are two aspects of a service encounter: (a) The technical quality e. g. cashier banking your cheque. (b) The functional quality – whether service is delivered in a courteous way.

THE SERVICE MARKETING MIX In addition to the four Ps of price, product, place and promotion, the service marketing mix has other 3 Ps. (i) People Courtesy / Competence (ii) Process how service is delivered, is it enjoyable, timely etc (iii) Physical evidence Environment of the service encounter eg. logos, ambience, etc.

CHARACTERISTICS OF FINANCIAL SERVICES In the past financial institutions (Banks and others) were not marketing oriented. With de-regulation in the UK, banks started realizing that they had to focus on the customer to survive. Because of the increased competition today financial institutions are moving towards aggressive marketing strategies. This is also influenced by the characteristics of financial services which include the following. (a) FIDUCIARY RESPONSIBILITY This responsibility relates to the management of funds and the financial advice given to customers. This responsibility demands that customers be treated with integrity, honesty and diligence in all transactions plus giving them proper advice on top of the usually expected quality, reliability and safety of financial products. This is very important because the raw materials of most financial products are other financial products e. g. loans from deposit products.

CHARACTERISTICS OF FINANCIAL SERVICES (b) CONTROL BY GOVERNMENT Compared to other service organizations, banks, or regulated financial institutions are indirectly involved in national economic policy. The Central Bank uses banks to implement economic policy and areas like interest usually constrain pricing policies of financial institutions due to requirements of the economy.

CHARACTERISTICS OF FINANCIAL SERVICES (c) RISKNESS Service purchasing is usually more risky than products mainly because service purchase is infrequent, difficult to conceptualize but also very important to the customer. For example: Taking a mortgage loan as an example people get few mortgages in their lives but may not even understand the different types of mortgages e. g. endowment and repayment mortgages Whereas buying a mortgage is a very important aspect of life, it becomes very stressful when you continue paying the rest of your life. Pensions; You pay for over 30 – 40 years for a benefit in future

FUNDAMENTAL CONCEPTS IN MARKETING MANAGEMENT Needs wants and demands. These three are basic drivers of marketing activity. Need is a basic human requirement that represents the difference between a person’s actual state and his or her ideal state e. g. people need food, water, air, clothing, shelter, recreation, education etc to survive. NB: Needs create the basic motivation for purchase decisions. Kotler & Keller (2007) – marketing management) came up with 5 types of needs -Stated needs customer wants a baking service -Real needs - Customer wants prestige or status baking i. e. what customer actually wants -Unstated needs Customer expects good service from the bank. -Delight needs Customer needs the bank to give him/her recognition/special attention -Secret needs – customer wants to be seen by friends & colleagues as wealthy and upper class.

NB: It is important to note that responding only to stated needs may not satisfy the customer. Many customers may not know what they want in a product or may know but not state it well. It is the duty of the marketer to identify the specific customer needs

WANTS: Unlike needs which are human desires for general satisfiers, wants are human desires for specific satisfiers i. e. needs transform into wants -you may need food but actual want is chicken and chips etc You may need an account by wanting a savings account NB: The satisfaction of a need is very general but that of a want is specific. DEMANDS Demands are wants for specific products in services backed by willingness and ability to pay. Marketers must therefore measure and understand the effective demand of their product(s)

(2) EXCHANGE AND TRANSACTION Marketing is based on the principle of exchange. The basic concept with exchange is that I have something you want and you have what I want so let us deal. According to Philip Kotler and Armstrong (Marketing Management 2007). Exchange potential only exists under the following five conditions. * There at least 2 parties * Each party has something that might be of value to the other. * Each party is capable of communication and delivery * Each party believes it is appropriate or desirable to deal with the other.

MARKETER, PROSPECT, MARKET A marketer is one who seeks a response (attention, a purchase, a vote, a donation etc) from another party called prospect or potential buyer. A prospect is a potential buyer from whom a response is sought. Market is interpreted differently by different people. Many people think is it a physical place where buyers and sellers meet, but to marketers it refers to a group of people who demand the product. Here we have aspects like consumer market, corporate market, SME market etc. which gives rise to market segmentation.

(4) TARGET MARKETS, SEGMENTATION, MARKE OFFERINGS AND POSTIONING. Research to decide target markets then segment them according to their needs, then come up with market offerings or need satisfiers for each segment (market) and then position yourself in each market. It is the market that positions you, all you do is try to make your positioning the best.

(5) OFFERINGS AND BRANDS An offering is a value proposition which is a set of benefits that are offered to the customer by the product/ service to satisfy their needs. “A BRAND is a name, term, sign, symbol or design or combination of them intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors – (Kolter). Branding removes anonymity and gives identification to the company and its goods and services.

(6) VALUE AND SATISFACTION Delivery of value and customer satisfaction are key in the whole process. Always exceed customer expectations Kotler identified three aspects on customer value a. Total Customer Value The perceived monetary value of the bundle of economic, functional and psychological benefits customers expect from a given market offering.

b. Total Customer Cost The bundle of costs customers expect to incur in evaluating, obtaining using and disposing of the given market offering including monetary, time, energy and psychic(mental) costs. c. Customer Perceived Value The difference between the prospective customer evaluation of all benefits and all the costs of an offering and the perceived alternatives.

(7) MARKETING CHANNELS Avenues for reaching the market with both information and products/ services Communication Channels Means used by marketer to deliver and receive messages in the market and include news papers, magazines, radios, television, mail, telephone, bill boards, fliers, posters, brochures, CDs, audio tapes and internet. Distribution Channels How product is delivered to the market e. g. wholesalers, retailers, agents (manufacturing) but for banks it could be branches, agents, kiosks etc Service Channels Means used by the marketer to facilitate business transactions in banking includes ATMs, 24 hour call centres, debit/credit cards, telephone, internet banking facilities etc.

(8) COMPETITION Understand who the competitors are, both actual and potential rival offerings, competition in financial services sector is very intense now (Banks, credit institutions, MDIs, MFIs, Money lenders etc) (9) MARKETING ENVIRONMENT Continuously do a SWOT of your organization and R & D (10) MARKET PLANNING & STRATEGY Continuously required

TASKS OF MARKETING MANAGEMENT (1) Developing marketing strategies and plans (2) Capturing market insights. What is happening inside and outside the organization by use of a marketing information system which is continually updated. (3) Delivering value (4) Communicating value (5) Connecting with customers (R&D) (6) Shaping market offering and building strong brands. Product quality, promotion, marketing (7) Creating long term growth through product management range and composition, Positioning, NPD

FINANCIAL SERVICES PROVIDED BY BANKS Banks offer a number of services to both personal and business customers. It is common for banks to segment the market in areas like personal, SME and Corporate customers. We shall however, make a distinction between services offered to personal

PERSONAL CUSTOMER SERVICES ACCOUNTS: (a) Savings accounts (b) Deposit account (fixed deposit account) (c) Investment account (Linked to interest rates in money market – high return) (d) Current accounts on demand funds (e) TESSAs (Tax exempt special savings account mainly in UK) Offer high return but cannot access funds for years. NB: Some banks have come up with special names for some of these accounts e. g. Totos account, etc Some of these provide instant access to money (current account) while others cannot be touched for several years (TESSA). Different rates of interest will apply on some of these accounts.

MONEY TRANSMISSION SERVICES (a) Cheque books with cheque guarantee cards (b) Standing Orders (c) ATMs (d) Bankers Cheque (Bankers’ drafts) (e) EFT (f) RTGs (For large payments) Lending products: (a) Personal overdrafts (b) Personal loans (c) Credit Cards (d) Mortgages Interest rates charged is based on banks base rate Mortgage rates are cheaper than rates on other products

Other services include: (a) Foreign currency transaction (purchase/sale) (b) Travellers cheques (c) Foreign currency drafts (d) Travel insurance Non funds based products: (a) Insurance of all types (b) Pensions (c) PEPs (Personal Equity plans) (d) Other stocks and shares service (e) Other stocks & shares services (f) Trustees reserves

SERVICES TO BUSINESS CUSTOMERS Business customers are usually organizations including sole business partnership, private & public limited companies, cooperatives, associations, charters, NGOs, government departments etc Business customers use many of the products/services used by personal customers but they have other special services tailored towards their needs. (a) Savings products They can operate high interest savings accounts with rates linked to the money market. They can also invest in certificates of deposits (CD’s) which they can turn into cash if needed through the secondary market. (b) Trade Finance Services Documentary collections Documentary credit Money transmission Introduction abroad Forex services like forward exchange rates, pure currency options etc Discounting bills

SERVICES TO BUSINESS CUSTOMERS (c) Lending products like: Loans, Overdrafts, Mortgages, Leasing, Hire Purchase (d) Foreign currency services: Swift for payments Forex Bills of exchange collected, discounted or negotiation

IMPACT OF TECHNOLOGY ON FINANCIAL SERVICES MARKETING (a) IT leads to efficiency in the production process leading to a reduction in both transaction and other related costs i. e. reduce costs and increases efficiency. (b) May lead to a paper less office/reduces paper work (c) Plays a key role in new product development (NPD) be it for product modification or completely new products, (d) It facilitates communication between financial services organization and their new customers e. g. SMS banking, Online banking , internet banking etc. (e) Facilitates links between financial services organizations e. g. it is used in inter bank settlement systems (RTGS) or EFT and clearing house use. (f) If has enabled branchless banking. (g) Leads to economies of scale in production as costs reduce. Joint ventures here may be important as banks share platforms like shared ATM networks to gain benefits of economies of scale other than using one network for self.

NB: IT developments have impacted on financial services organization in that they have not only affected the organizations themselves but their customers, staff, organizational structure, branch layout, international operations plus information processing and layout as follows: * For customers, IT has improved the quality of services e. g. through ATMs, Online banking, SMS banking etc , loss of personal touch is a negative aspect * For staff, IT has led to freeing of bank staff from more tiring jobs to better jobs e. g. from manual operations, making staff more efficient and competitive in the market.

NB: On a negative side, it has led to training requirements and driven some people out of their jobs as the required numbers reduce. Less contact with customers On organizational structure, IT has led to changes in organization structures of banks with introduction of new methods of control and some offices are phased out e. g. structure of head office, regional offices and branches. On international operations, it has turned the world into a global village e. g. ( funding on line) or money markets of the world are linked 24 hours without any physical market. On branch layout, IT has enabled creation of more space for customers and less space for staff, thereby delighting customers. It has improved the process of information management and reporting. Information can now more efficiently be entered, processed, stored and retrieved. Reliable reports can be stored and retrieved any time.

QUESTIONS: Define marketing - What is the difference between marketing and selling? - List the eight demand states facing firms in marketing. - List the five marketing orientations towards the market place - Name the four components of holistic marketing concept. - Define services - List the characteristics of financial services

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