Marketing Banking Lesson Notes

Marketing banking 1- From marketing to banking marketing: Defining the concept of Marketing would be very ambitious given the numerous attempts made by all Marketing enthusiasts. Thus, Yves Chirouze defines Marketing as "a state of mind and techniques allowing a company to conquer markets or even create, maintain and develop them" According to the definition, we note that marketing is presented as being: A state of mind. A set of means, actions and techniques A concept of management whose goal is to create, conquer, maintain and develop the company's market in order to satisfy the needs of their customers. On his side Philip Kotler, defines Marketing as: "the Analysis, organization, planning and control of the activities, strategies and resources of a company which have a direct influence on the consumer with a view to satisfying the desires and needs of cost-effectively selected customer groups. Thus, we define Bank Marketing as being "the application of approach and marketing techniques to banking activity." 2- Bank Marketing and its specificities: By the nature of its service activity, the bank has specificities; its methods must integrate a certain number of data which are as follows: Like Purchasing Marketing, it acts upstream to collect resources from capital suppliers. These resources will be transformed to be distributed downstream to banking customers (capital seekers). Like industrial marketing, banking marketing deals with companies, the target from which the bank collects and distributes capital. As in the case of marketing of consumer products, banks manage a range of products which are intended for individual customers and therefore for a very large population. Let us add to these specificities intrinsic characteristics which directly influence the market of the profession and therefore banking marketing marked by: Strong state and inter-professional regulation (the bank is not in control of its offer, nor its prices, among other things the influence of government policy). - The notion of risk is very strong (handling of money). -The bank's position remains strong to sell (credit), but weak to buy (resources). The lack of protection for innovation (no patent possible leading to a certain difficulty in differentiating these products in a sustainable way). The level of customer culture, when it comes to individuals, often remains low compared to the abstract aspect of certain banking services. The existence of a permanent relationship between the bank and its customers (contacts with branches). 3-The Bank's Marketing Tools Product/Service Pollicy: The banking activity is at the origin of a specific conception of product policy which remains very traditional and governed by the strong state and inter-professional regulation to which money is subject as well as the imminent risk and to which is added: The supremacy of the technical perspective over the commercial one in the design of new products and services. The importance of public authorities in the creation and disappearance of products and, through their influence, define, control and modify. Customer participation in the provision of servicing services However, the banking marketing man must act using a "marketing mix" approach intended to satisfy the needs of the chosen target dientele. (example: Today, a good investment to be appreciated by dlients must be adorned with three virtues: liquidity, security and yield). The role of product policy consists in achieving maximum adequacy of banking production to the needs expressed by target consumers, therefore product policy is a very important element of marketing policy: it concerns the creation of new products, maintenance of existing products. -The creation of new products: The creation of new banking products is necessary, new products are likely to attract new customers to the bank. The development of new banking products uses two paths which are not mutually exdusive. It is well conditioned by the state of technology -The notion of need: the analysis of customer needs in the monetary and financial field leads to distinguishing needs of a different nature and it is then a question of designing the products which will best satisfy these needs, among the needs we will note: The need for transactions or products such as checks, direct debit notices, etc. Precautionary needs, i.e. the need to build up savings such as passbook accounts, cash vouchers, etc. Need cash or products like personal loans, leasing and others. Need for short, medium and long term financing or the different types of credit. Need for securities management Need for advice and assistance. This approach also takes into account the psychological motivations of customers: search for security, anonymity, profitability. The need for cash savings for an individual can be analyzed either as a desire to take advantage of purchasing opportunities or as a fear of the future. -The notion of customers: Relatively homogeneous banking behaviors, depending on the target clientele, the bank offers products adapted to its specific needs: hence the product/client or product/market couple which is at the heart of any banking product policy. In the customer product or market product approach we also take into account the outcome of the different needs of the same customer segment, assemblies (packages) are then created concentrating several characteristics on a single product allowing the satisfaction of several needs. We come back to this in the "market" section. - Technology: It is clear that the state of technology conditions the banking product in the same way as the need or the customer. Technological innovation in fact gives birth to new products, particularly when it develops in the field of telecommunications. Let us cite some examples of banking products whose creation is linked to the state of technology: bank cards, tele- dearing, ATMs and others. The impact of technology occurs in several ways: Distribution of products directly through virtual means. Automation of administrative tasks so spending more time with customers Better knowledge of the customer thanks to the recording and analysis of data concerning them. This information will then make it possible to personalize the offer, for a guaranteed One to One. To conclude we can say that a new product corresponds to: - Has a need, - To a target clientele, - State of the art Maintenance of existing products: Maintenance and survival issues of banking products are a very important aspect of a bank's product policy. The products generally age very slowly, hence the need to carry out dressings or re-dressings. This maintenance phase ensures that the quality of the products remains maintained over time. 4-The banking mix Product policy Pricing policy Traditionally, the marketing mix of any company is presented in its four main components: product, price, distribution and communication. In the case of banking, these four variables have long played roles of unequal importance. A consumer does not only choose a product because of its design, its qualities, its commercial brand, the consumer also has an attitude towards the price of the product and the pricing policy. Pricing policy plays a limited role in banking marketing: A certain number of prices are set by the monetary authorities: Rate of interest on accounts (on savings accounts, savings accounts, etc.). Other prices are set at the level of the banking profession, after agreement between the main credit institutions (thus the borrowing interest rates) - Knowledge of the costs of the main banking products is relatively recent. To explain this minor role, it is first necessary to emphasize the dose links that exist between monetary policy and the prices charged for banking products, and to be aware of the dependence of a large part of the prices of banking products on decisions and rules in force allocated by the country's monetary policy. The rates or pricing of banking products is applied in the form of commissions constituting the bank's profit margin. Bank loans are priced using the interest rate. While accounts are subject to the rule of days of values. (THEday of values is the date used for calculating interest (debtors or creditors). It does not necessarily coincide with the date of operation. It is important to know this when you have a tight budget to avoid incidents and overdrafts). The distribution policy In the banking sector, the distribution variable has long been marked by the traditional exclusivity of the circuit constituted by the branch network of each establishment. This exclusivity is, however, called into question by new forms of distribution and, above all, by the incursion of new non-bank competitors. The choice of distribution channels can provide a lasting competitive advantage because it constitutes the only real element of differentiation for brands in a sector characterized by the commoditization of products and by only emerging price competition. Distribution, commercial organization and sales methods have also been profoundly modified. From relationships close to forced sales and generating thousands of inactive accounts, current techniques have become more marked by advice: with making appointments by telephone, computerized management of advice and information. Distribution choices are also closely linked to the diversification sought by the main brands: -the development of self-service beyond just the ATM - the creation of specialized consulting agencies - the reduction of the counter linear which favors the "seated relationship" the creation of networks of prescribers -the multiplication of forms of direct banking Distribution channels should be designed as ways to increase availability and adapt services to satisfy current customers and expand their use by new customers. In addition, the development of personnel closer to customers constitutes not only an important element of the distribution policy but also a good support for the communication policy. The communications policy Communication policy is defined by: "All actions of a firm: to make itself known and appreciated as a company and to make its products known and appreciated." The content of a communication policy is therefore to make the company and its know-how known in a global manner in order to give it an image that reflects its identity. To do this, the company acts simultaneously on two dimensions. Namely, a dimension bringing together communication external to the company's various audiences and internal communication oriented towards the staff. However, external communication can be declined according to severall themes and objectives: informative, it has brand image or notoriety objectives, All these variables are called upon to support the commercial growth of banks which obviously suffer from the still significant persistence of the money taboo. Internal communication: Internal communication aims primarily to ensure good circulation of information within the bank. Internal communication must let all members of the bank know the objectives set by general management, the means implemented to achieve these objectives, the strong points and the weak points of the company. All bank staff, whatever their hierarchical level, must be informed dearly and concisely about the development strategy. However, it is not enough to inform, rather it is necessary to make staff adhere to the objectives set and develop the feeling of belonging to the group and sharing the same values with the other members of this group. This corporate culture can strengthen the economic efficiency and social cohesion of the bank. External communication:it deals with the bank's relations with its environment which is made up of a whole set of groups each with very different behaviors, needs and expectations: - Clients, - Suppliers, -Shareholders, - Other capital providers, - Authorities, - Associations. According to Brochant Lendrevie, we distinguish two levels of communication in this case: Corporate communication, which means that the company communicates its values, its people, its know-how about itself. The second level is commercial communication, which the company communicates about its activities (products and services). The notion of image Image is a component of the company's development strategy. Thanks to its communication policy, the bank tries to build an image that reflects its own identity in relation to what it produces. This action is called communication or institutional marketing. The main difficulty in conveying a global picture lies in its complexity. It is the combination of: - internal image (values and corporate culture) the image of the brand which includes notoriety, positive/negative perception by the environment, position in relation to the competition. - the social image, that is to say the role of the bank in society. If the bank manages to create a strong image, this will permeate all its products; will impose itself on public opinion, and will serve as a shield in the event of a crisis. The means of a communication policy Patronage and sponsorship: these techniques help shape the overall image of the company, increase its notoriety and improve its brand image. These two actions are today an important aspect of a bank's communication policy. The advertisement: Advertising has long been reserved for consumer goods; banking circles have been reluctant to consider this technique. Now the use of advertising action is essential, therefore six different types of advertising action are possible in a bank: The different advertising actions: Advertising of notoriety, brand image or products. Notoriety advertising: it aims to make the name of the bank known to the public through an acronym (logotype) marking the fact of belonging to the banking sector. - Brand image advertising: it complements awareness advertising. Not only does the public know the bank but they also perceive in a certain way the relationship they have or could have with the bank, through its products, its distribution channel, its customers, etc. The clientele is often determined based on the brand image, the bank will strive to have a "good image". Product advertising: aims to raise awareness of the bank's products by emphasizing the qualities of these products. This action is undertaken when launching a new product or maintaining existing products, depending on the objectives of the marketing plan. - Collective or individual advertising Advertising is collective when it is aimed at all of the bank's current or potential customers. It then uses the major media: radio, television, billboards, etc. The press objective is to reach all segments of the market. Advertising is individual when it is aimed at a particular customer, it is established either by a direct seller or by direct mail. This method is particularly appropriate in banking, particularly when advertising support (personalized letter, leaflet, etc.) is added to the account statement, Individual advertising is used to promote new or existing products, particularly if the products are intended for a defined customer segment. The cost of this operation is very low.