March 27, 2012

Marketing of Financial Services: Introduction to Marketing

Banking Diploma Courses in Bangladesh under The Institute of Bankers, Bangladesh (IBB)
Marketing of Financial Services-JAIBB
Introduction to Marketing 

The Scope of Marketing
            In twenty first century marketing is not related with the production and distribution of goods and services. The scope of marketing is so much expanded that it has play vital role to improve our standard 
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of life and at the same time help to create health and wealth society. Following areas or items where marketing principles, policies and strategies are applied and on the other hand these are widely used in marketing activities.
1. Goods :
            Physical goods constitute the bulk of most country’s production and marketing effort.
Physical goods can be food, car, television, clothing, housing and so on. Most of the marketing activities are closely related with goods. Without goods transportation, warehousing, grading and standardization activities can not be performed.

2. Services :
            Services play a vital role in the modern economy. As economies advance, developed nations are give more emphasis on production of services. Services include the work of airlines, hotels, care rental firms, barbers and beauticians, maintenance and repair people and service of accountants, lawyers, engineers, doctors, software programmers and management consultants. Many market offering are consist of a mix of goods and services. Such as fast food restaurant, where the customers are consume both good and service at a time. Pure service would be a psychiatrist listening to a patient or legal advice of lawyer.   

3. Experiences :
            Marketers can create, stage and marketed experience. As for example, Walt Disney World’s Magic Kingdom, where he create a visiting fairy kingdom, stages pirate ship, or haunted house and marketed different experiences for the customers. Another example, customers can gather experience by spending one week at a baseball camp playing with some retired baseball great players.

4. Events :
            Marketers can marketed events as goods and services. Marketers promote time - base events, such as the Olympics, company anniversaries, major trade shows, sports events. There is a whole profession of meetings planners who will work out the details of an event and stages it to come off perfectly.      

5. Persons :
            Celebrity marketing  has become a major business. A politician can marketed himself through campaigning political mandate, personal image or success. Today every major film star has an agent, a personal manager and ties to a public relations agency. Artists, musicians, doctors, high level lawyer and other professionals are drawing help from celebrity marketers. 

6. Places :
            Place marketing can be expressed in two different ways, one is places are used or play a vital role in marketing activities. Such as historical cities, regions or sea beach or natural beautiful areas to attract tourists. Other is places are used like as goods. Such as real estate or apartment marketing.

7. Properties :
            Properties are intangible rights of ownership of either real property or financial property. Such as real estate, apartment and stocks, bonds etc. Properties are bought and sold, so it requires marketing effort. Real estate agents work for property or apartment owners or seekers to sell or buy residential or commercial real estate or apartment. Investment companies and banks or their agents are involved in marketing of securities to both institutional and individual investors.   

8. Organizations :
            Organizations are actively works to build a strong, favorable image in the mind of their public or customers. Universities, colleges, museums, NGOs ( non government organization ) and clubs all lay plans to boost their public image to compete more successfully for audiences and funds.  

9. Information :
            Information can be produced and marketed as a product. Universities, colleges, schools and research organizations are collect data and facts and develop or produce information and thereafter distributed to parents, students, manufacturing organization and communities at a price. We buy CDs and visit the internet for information. At present in the knowledge society production, packaging and distribution of information is one of the major industries.    
10. Ideas :
            Every market offering includes a basic idea at its core. The buyer of a television set is really buy recreation and prestige. Products and services are the platforms for delivering some ideas or benefits. Marketers search hard for core need of their customers and they are trying to satisfying them. Many organization promote ideas to create better environment in the society. As for example, slogan of “ planted trees and save the environment ”.     

Demand States and Marketing Tasks

            Different type of demand are exist in the market for different type of products and services, which are discuss below. Marketer observed the demand in the market and take necessary action to change the nature of demand or adjust it with the help of different type of marketing tools and techniques. 

1.  Negative demand :
            A market is in state of negative demand if a major part of the market (customer) dislikes the product and may even may pay a price to avoid it. Such as vaccination, dental work, air travel etc.
            The marketing task is to analyze why the market dislikes the product and whether a marketing program consisting of product redesign, lower prices and more positive promotion can change beliefs and attitudes.   

2.  No demand :
            Target customers may be unaware of or not interested in the product. College students may not be interested in foreign language course. A new service holder may not be interest to take a life insurance policy.
            The marketing task is to find ways to connect the benefits of the product with the person’s natural needs and interests.

3.  Latent demand :
            Many customers may have a strong need that cannot be satisfied by any existing product. There is a strong latent demand for harmless cigarettes and more fuel efficient cars.
            The marketing task is to measure the size of the potential market and take necessary research program and develop products and services to satisfy the demand if that are profitable. 

4.  Declining demand :
            Every organization, sooner or later face declining demand for one or more of its products. Such demand for gramophone, radio, black and white television etc.
            The marketer must analyze the cause of the decline and determine whether demand can be restimulated by new target markets, by changing product features, by price reduction or by more efficient and effective communication.   

5.  Irregular demand :
            Many organizations face demand that varies on a seasonal, daily, or even hourly basis, causing problems of idle or overworked capacity. Such as road transport city buses are idle during off - peak hours and insufficient during peak hours.
            The marketing task is to find ways to alter the pattern of demand through flexible pricing, promotion and other incentives. 

6.  Full demand :
            Organizations often face full demand when they are pleased with their volume of business.
Such as mobile phone companies faces full demand situation in Bangladesh.
            The marketing task is to maintain the current level of demand, so that they can face the changing customer preferences and increasing competition. The organization must maintain or improve its quality and continually measure customer satisfaction.

7.  Overfull demand :
            Some organization face a full demand level that is higher then they can expect or capable or want to handle. At present in Bangladesh L .P. gas companies enjoying overfull demand.
            The marketing task is to finding ways to reduce demand temporarily or permanently. In this situation marketers generally take the steps to raising price and reduce promotional activities and services.   

8.  Unwholesome demand :
            Unwholesome demand is the demand of that products and services which are harmful to the society. Organizations give their time, money, resource, effort and energy to discourage the consumption of these type of products and services. Such as unselling campaigns have been conducted against cigarettes, alcohol, hard drugs, X - rated movies, large families etc.
            The marketing task is to use negative messages and information ( harmful sides of the products and services ) in promotional activities, increase the price and reduce the availability of that products and services.     

Types of Markets
            A market is a set of all present and potential buyers. We can classify the market according to the nature, objectives, behaviour of the market, which are discussed below.

1.  Consumer markets :
            This market is constitute by the consumer who buys goods and services for their ultimate consumption. They do not process it to produce another goods and services or resell it to another customer. Their buying behaviour is mostly emotional and they are not well informed about goods and services. Producer or marketer requires to getting a clear sense about their target customers. Most of the product’s strength depends on developing a superior product and packaging and backing it with continuous advertising and reliable service. Consumer marketers decide on the features, quality level, distribution coverage and promotional activities that will help their product or service to achieve the best position in the market.  

2.  Business markets :
            This market is constitute by the business men or professionals who buys goods and services to produce another goods and services or resell it to another customer. They are well - trained and well - informed professional buyers who have the skill to evaluate the competitive offerings. Business buyer purchase products to make profit. Their buying behaviour is purely rational. Business marketers must demonstrate how their products will help business customer to achieve their profit goals. In this market advertise has very small role, but stronger role is played by sales force, price and company’s reputation for reliability and quality.     

3.  Global markets :
            Companies selling their goods and services in the global market place and face additional decision and challenges. Marketer must be decide which countries to enters, how to enter each country, how to adapt their product and service features to each countries, how to price their product in different countries. In the global market, marketer must have to take other decisions, such as how to adapt their communication to fit the cultural practices of each country. These decisions must be made on different legal system, different styles of negotiation, different type of requirements for buying, owning and disposing of property and so on.    

4.  Non - profit and governmental markets :
            Companies selling their goods to non - profit organizations such as churches, Universities, Education boards, charitable organizations or government agencies. In this market, company must be careful to set price for their goods, because these organizations have limited purchasing power. Lower prices can be affect the features and quality of the goods. In this market, different type of formalities are needed to make sales.    

Core Marketing Concepts
            Marketing have different type of core concepts, which are helpful to understood marketing as a modern social science. These core concepts are discussed below.

1.  Target markets and segmentation :
            A marketer can not satisfy all type of customers in a market at a time. Not everyone likes same soft drink, same dress, restaurant, automobile, movie etc. Customer likeness or dislikes of goods and services are depends upon the age, sex, income, culture, education, status and so on. Therefore, marketer segmented total market according to age, income, culture, education, status of the customers. Then firm decides which segment is more profitable and which segment   is easy to serve or to satisfy.   

2.  Marketers and prospects :
A marketer is someone who seeking a response ( attention, a purchase, a vote, a donation ) from another party. Where another party is called the prospects. If two parties are seeking to sell something to each other, then we called them both marketers.

3.  Needs , wants and demands :
            The marketer must try to understand the needs, wants and demand of the target market. Needs describe the basic human requirements. People need food, air, water, clothing and shelter to survive. People also have some strong needs for recreation, education, health care, justices and entertainment. A marketer can not create needs for his market.
            These needs become wants when they are directed to specific objects that might satisfy the need. A persons needs can be food but his wants can be rice, brad or fruits.
            Demands are wants for specific products backed by ability to pay. Three factors are important to create demand for a product. First, desire to buy a specific product, second, ability to buy ( purchasing power ) and third, willingness to pay. Demand can be created by the marketers.  

4.  Product or offering :
            People satisfy their needs and wants through products. A product is any offering that can satisfy a need or want of the customers. Product is the most important factor in marketing for any type of manufacturing and business organizations. Marketers chose their marketing policies and strategies on the basis of the product nature, position and stage of product life cycle. Major types of basic offerings of business or social organizations are goods, services, experiences, events, persons, places, properties, organizations, information and ideas.

5.  Value and satisfaction :
            The product or offering will be successful if it is able to delivers value and satisfaction to the target buyer. The value is a ratio between what the customer gets ( benefits ) and what they gives ( cost ). The buyer chooses different offerings on the basis of which is perceived to deliver the most value. The benefits include functional benefits and emotional benefits. The costs include monetary cost, time cost, energy cost and psychic costs. The marketer can increase the value of the customer offering in several ways. Raise benefits, reduce costs, raise benefits and reduce costs, raise benefits by more than the raise in costs, Lower benefits by less than the reduction in costs.      

6.  Exchange and transactions :
            Exchange is the core concept of marketing, involves obtaining a desired product from someone by offering something in return. Exchange is only one of four ways in which a person can obtain a product. The person can self - produce the product and service, as when a person hunts, fishes, produce cloths or gathers fruits. The person can use force to get a product, as in a holdup or burglary. The person can beg, as happens when a homeless person asks for foods. Five conditions are more essential to create exchange. these are.
            (a) There is at least two parties.
            (b) Each party has something that may be valuable to the other party.
            (c) Each party is capable to communicate and delivery.
            (d) Each party is free to accept it or reject the exchange offer.
            (e) Each party believes that it is appropriate or desirable to deal with the other party.
Exchange is a process rather than an event. Two parties are engaged in exchange if they are negotiating, trying to arrive at mutually agreeable terms.
A transaction is a trade of values between two or more parties. A transaction involves several dimensions, at least two things of value, conditions of agreement, a time of agreement, and a place of agreement.         

7.  Relationship and networks :
            Relationship marketing has the aim of building long term mutually satisfying relations with key parties – customers, suppliers, distributors – in order to earn and retain their long term performance and business. Marketers accomplish this by promising and delivering high quality products and services at fair price to the other parties over time. Relationship marketing builds strong economic, technical and social ties among the parties. It helps to cut down transaction costs and time.
The ultimate outcome of relationship marketing is the building of a unique company asset called marketing network. A marketing network consists of the company and its supporting stakeholders, such as customers, employees, suppliers, distributors, retailers, adverting agencies, university scientists and others with whom it has built mutually profitable business relationships.  

8.  Marketing channels :
            To reach a target market, the marketer uses three kinds of marketing channels. The marketer uses communication channel to deliver and receive message from target buyers. This includes newspapers, magazines, radio, television, mail, telephone, billboards, posters, CDs, audiotapes and internet.
            The marketer uses distribution channels to display or deliver the physical product or services to the buyer or user. This includes warehouse, transportation vehicles, distributors, wholesalers and retailers.
            The marketer also uses selling channels to effect transactions with potential buyers. Selling channels include not only the distributors and retailers but also the banks and insurance companies that facilitate transactions.     

9.  Supply chain :
            Marketing channels connect the marketer to the target buyers, the supply chain describe a longer channel stretching from raw materials to components to final products that are carried to final buyers. The supply chain represents a value delivery system. Each company captures only a certain percentage of the total value generated by the supply chain.    

10. Competition :
            Competition includes all actual and potential rival offerings and substitutes that a buyer might consider. Competition can be classify into four categories.
            (a) Brand competition : A company sees its competitors as other companies offering a similar product and services to the same customers at similar price.
            (b) Industry competition : A company sees its competitors as all companies making the same product or class of products.
            (c) From competition : A company sees its competitors as all companies manufacturing products that supply the same service.
            (d) Generic competition : A company sees its competitors as all companies that compete for the same customers.    

11. Marketing environment :
            The marketing environment consists of task environment and broad environment. The task environment includes the immediate actors involved in producing, distributing and promoting the offering. The main actors are the company, suppliers, distributors, dealers, agents, brokers, manufacturer representatives, marketing research agencies, advertising agencies, banks, insurance companies, transportation and telecommunication companies and the target consumers.
            The broad environment consists of demographic environment, economic environment, natural environment, technological environment, political environment, legal environment, social environment and cultural environment. These environments contain forces that can have a major impact on the actors in the task environment.     

Marketing Philosophy
            Marketing management is the conscious effort to achieve desired exchange outcomes with target market. But what philosophy should guide a company’s marketing efforts ? What relative weights should be given to the interests of the organization, the customers and society ? So, marketing activities should be carried out under a well thought philosophy of efficiency, low cost and mass distribution. There are five competing concepts under which organizations conduct marketing activities. These are discussed below.    

1.  Production concept :
            The production concept is one of the oldest concept in business. The production concept holds that consumers will prefer products that are widely available and inexpensive. Managers of production oriented businesses concentrate on achieving high production efficiency, low costs and mass distribution. They assume that consumers are primarily interested in product availability and low prices. This concept hugely used in the developing countries. It is also used when a company wants to expand the market.  

2.  Product concept :
            The product concept holds that consumers will favour those products that offer the most quality, preference or innovative features. In this concept price of the product is not an important factor. Managers in these organization focus on making superior products and improving them over time. They assume that buyers admire well made products and can appraise quality and preference. Company first try to produce a better quality product with the help of their engineers but they do not consider the needs and wants of the consumer. Here company think that if they are able to product a better quality product then they can sell it easily in the market.    

3.  Selling concept :
            The selling concept holds that normally consumers are not interest to buy enough of the company’s product, until they are forced. The company must therefore, undertake an aggressive selling and promotional effort. This concept assume that typically consumers are not buy much more and must be stimulated to buy more. It is also assume that company has an efficient and effective selling and promotional tools to stimulate more buying.
             The selling concept is practiced most aggressively with unsought goods, that buyers normally do not think to buy it. Such as insurance, encyclopedias. These industries have preferred various sales techniques to locate prospects and disclose the product benefits to the prospects. The selling concept is also practiced in the non - profit organizations to collect funds and political parties. Most firm practice the selling concept when they have over capacity. Their aim is to sell what they make rather than what market wants.       

4.  Marketing concept or consumer oriented concept :
            The marketing concept or consumer oriented concept holds that the key to achieving its organizational goals consist of the company being more effective than competitors in creating, delivering and communicating customer value to its chosen target market. Marketing concept rests on four pillars. These are discussed below.
            (a) Target market : First company segmented total market according to some effective basis. Then they choose a target market, which market is more profitable and at the same time it is easy to serve. Company do best when they choose their target market carefully and prepare effective marketing programs. 
            (b) Customer needs : A company can define its target market but fall to correctly understand the customers needs. Understanding customer needs and wants is not always simple. Some customers have needs which they are not fully conscious, or they can not articulate these needs, or they use some words that requires some interpretations. So, it is essential to find out the actual needs and wants of the customers.
            (c) Integrated marketing : When all the company’s departments works together to serve the customer’s interest, the result is integrated marketing. Integrated marketing takes place on two levels. First, the various marketing functions - sales force, advertising, customer service, product management, marketing research - must together. Second, marketing must be embraced by the other departments, they must also have to think about customer.    
            (d) Profitability : The ultimate purpose of the marketing concept is to help organizations to achieve their objectives. In the case of private firms, the major objective is to earn profit. In the case of non - profit or public organizations, it is surviving and attracting enough funds to perform useful work.

5.  Societal marketing concept :
            The societal marketing concept holds that the organization’s task is to determine the needs, wants and interests of the target markets and deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well being. The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. Here company must try to make a balance among company profit, customer want satisfaction and public interest. At the same time company try to build up a health and wealth society so that company can able to survive in long run.      

Difference between selling concept and marketing concept

Starting point
Selling and promoting
Profit through sales volume
Selling concept
Target market
Customer needs
Integrated marketing
Profit through customer satisfaction
Marketing concept

Introduction to Marketing

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