Marketing of Financial Services
Q. What do you mean by Strategic Business Unit (Nov’11)?
Strategic Business Unit (SBU): In business, a strategic business unit is a profit center
which focuses on product offering and market segment. Strategic business units typically
have a discrete marketing plan, analysis of competition, and marketing campaign, even
though they may be part of a larger business entity.
A strategic business unit may be a business unit within a larger corporation, or it may be
a business into itself or a branch. Corporations may be composed of multiple strategic
business units, each of which is responsible for it’s own profitability. General Electric is an
example of a company with this sort of business organization. Strategic business units are
able to affect most factors which influence their performance. Managed as separate
businesses, they are responsible to a parent corporation.
An example of a strategic business unit is General Electric. Product offering typically
encompasses a strategic business unit.
Q. Define service differentiation with features (Nov’11).
Service differentiation: The concept of being different is very much essential in today’s
world of cut-throat competition. The difference of one product from its competitor is the
revenue that it earns. Products have to be different in order to survive the competition.
It is not just the domestic competition but also the competition from and abroad, as one
country produces and sells in another country while some other countries produce and
sell in our country. The targeted customers have many options. Choosing among options
is always based on differences, implicit and explicit. So, one must differentiate in order to
attract the customer and make him/her buy the product.
Creating differentiation in one’s own product and services is a better way to avoid
competition. One can offer a number of possible options in products to the customers.
Every type of customer can choose a product which he/she likes. In this way, low-end,
mid-end or high-end customers, all of them will have a product to choose from. Common
differentiations include, speed, performance, quality, responsiveness, availability, ease or
integration.
All the above mentioned points are for a tangible product. But, how can we differentiate
services. It is easy when the differentiation of variables is tangible as in the case of
product but, difficult in case of services. If the product has not many tangible features,
then adding value-added services to the product is one of the methods. This process is
called service differentiation.
The main features of service differentiation:
Ease in ordering: Corporations like Dell, Baxter Healthcare and web-based services like
peapod and net grocer have eased the process of placing an order. One does not have to
step out of the house to buy the product.
Delivery: It is related to how well a product or a service is delivered to the customer with
speed and accuracy. The best examples are again Dell, which delivers its products right at
the doorstep of the customers.
Installation: It refers to the work undertaken to make the product operational at the
prescribed location. Buyers of heavy equipment expect good installation service.
Differentiation by installation is particularly important for companies that offer complex
products such as computers and machinery.
Customer training: It refers to how the seller provides training to the buyer about the
product and how to use it. General Electric supplies and installs expensive X-rays
equipment in hospitals but also gives extensive training to the staff of hospitals about
using the machines.
Customer consulting: It refers to the data, information systems and advising services that
the seller offers to buyers. For example, the Rite aid drugstore chain’s communication
program, called the Vitamin Institute provides customers with research so they can make
more educated judgments and feel comfortable asking for help. On the web, Rite Aid has
teamed up with drugstore.com to offer even more comprehensive health related
information.
Maintenance and repair: It refers to the post-sale services which generally include
maintenance and repair services. Automobile manufacturers are often seen providing
free services initially for the automobiles.
Q. What do you mean by product line (Nov’11)?
Product line: A group of related products manufactured by a single company is called
product line. In marketing jargon, product lining is offering several related products for
sale individually. Unlike product bundling, where several products are combined into one
group, which is then offered for sale as a unit, product lining involves offering the
products for sale separately. A line can comprise related products of various sizes, types,
colors, qualities, or prices. For example, a cosmetic company's makeup product line
might include foundation, concealer, powder, blush, eyeliner, eye shadow, mascara and
lipstick products that are all closely related. The same company might also offer more
than one product line.
Q. What do you mean by competitive strategies (Nov’11)?
Competitive strategies: Competitive strategies are the method by which one achieves a
competitive advantage in the market. There are typically three types of competitive
strategies that can be implemented. They are cost leadership, differentiation and a focus
strategy. A mixture of two or more of these strategies is also possible depending on one’s
business objectives and current market position.
Cost leadership: The aim of this strategy is to be a low-cost producer relative to ones
competitors and is particularly useful in markets where price is a deciding factor. Cost
leadership is often achieved by carefully selecting suppliers and production techniques to
minimize production, distribution and marketing costs. However one needs to be aware
of any serious loss in quality that may render low cost ineffective.
Differentiation: A differentiation strategy seeks to develop a competitive advantage
through supplying and marketing a product that is in some way different to what the
competition is doing. If developed successfully this strategy can potentially reduce price
sensitivity and improve brand loyalty from customers.
Focus strategy: This strategy recognizes that marketing to a homogenous customer group
may not be that effective a strategy for the product the business is selling. Instead the
business focuses its marketing efforts on a different selected market segments. That is,
identify the needs, wants and interests of the particular market segments and customize
marketing techniques to reflect those characteristics.
Q. What do you mean by Consumerism (Nov’11)?
Consumerism: Consumerism is a social and economic order that encourages the
purchase of goods and services in ever-greater amounts. Early criticisms of consumerism
are present in the works of Thorstein Veblen (1899). Veblen's subject of examination, the
newly emergent middle class arising at the turn of the twentieth century, comes to
fruition by the end of the twentieth century through the process of globalization. In this
sense, consumerism is usually considered a part of media culture.
The term "consumerism" has also been used to refer to something quite different called
the consumerists movement, consumer protection or consumer activism, which seeks to
protect and inform consumers by requiring such practices as honest packaging and
advertising, product guarantees, and improved safety standards. In this sense it is a
movement or a set of policies aimed at regulating the products, services, methods, and
standards of manufacturers, sellers, and advertisers in the interests of the buyer.
For example, an industrial society that is advanced; a large amount of goods is bought
and sold. Sometimes referred to as a policy that promotes greed, consumerism is also
coined as a movement towards consumer protection that promotes improvement in
safety standards and truthful packaging and advertisement. Consumerism seeks to
enforce laws against unfair practices implement product guarantees.
Q. What is the Marketing Communications Mix (Nov’11)?
The Marketing Communications Mix: The Marketing Communications Mix is the specific
mix of advertising, personal selling, sales promotion, public relations, and direct
marketing a company uses to pursue its advertising and marketing objectives.
Advertising: Any paid form of non-personal presentation and promotion of ideas, goods,
or services by an identified sponsor.
Personal selling: Personal presentation by the firm’s sales force for the purpose of
making sales and building customer relationships.
Sales promotion: Short-term incentives to encourage the purchase or sale of a product or
service.
Public relations: Building good relationships with the company’s various publics by
obtaining favorable publicity, building up a good "corporate image", and handling or
heading off unfavorable rumors, stories, and events.
Direct marketing: Direct communications with carefully targeted individual consumers to
obtain an immediate response and cultivate lasting customer relationships.
Q. What is window dressing (June’13)?
Window dressing: Window dressing is a term that describes the act of making a
company's performance, particularly its financial statements, look more attractive than
what it is in actual.
A strategy used by mutual fund and portfolio managers near the year or quarter end to
improve the appearance of the portfolio/fund performance before presenting it to
clients or shareholders. To window dress, the fund manager will sell stocks with large
losses and purchase high flying stocks near the end of the quarter. These securities are
then reported as part of the fund's holdings.
How It Works/Example: Let's assume Company XYZ wants to look attractive to potential
acquirers. It might do some window dressing by announcing much higher sales
projections, obtaining and holding a lot of cash, or making other announcements that are
likely to raise the stock price, even if only for a short time. The objective is to make a
favorable impression on potential acquirers.
Companies are not the only ones to engage in window dressing. Mutual funds do it as
well, often by cutting their losses and buying high-fliers (sometimes that are not even in
the fund's investment sector) near the end of a reporting period.
Q. What is Customer Loyalty (June’13)?
Customer Loyalty: Customer loyalty is all about attracting the right customer, getting
them to buy, buy often, buy in higher quantities and bring one even more customers.
However, that focus is not how one builds customer loyalty.
One builds loyalty by1. Keeping touch with customers using email marketing, thank you cards and more.
2. Treating your team well so they treat your customers well.
3. Showing that you care and remembering what they like and don’t like.
4. You build it by rewarding them for choosing you over your competitors.
5. You build it by truly giving a damn about them and figuring out how to make them
more success, happy and joyful.
In short, one builds customer loyalty by treating people how they want to be treated.
Q. What is musharaka product (June’13)?
Musharaka product: Musharaka is a contract of partnership between two or more parties
in which all the partners contribute capital, participate in the management, share the
profit in proportion to their capital or as per pre-agreed ration and bear the loss, if any,
in proportion to their capital/equity ratio.
In the Islamic Banking context, the Islamic Bank may be a partner with its client for
running a business where both of them contribute capital, either both of them or the
client alone take part in the management of business as per terms of the contract and
share the profit as per agreed ration or bear the loss, if incurred, as per their
capital/equity ratio.
Q. What is Millionaire Deposit Scheme (June’13)?
Millionaire Deposit Scheme: Millionaire Deposit Scheme (MDS) Account is a time
specified monthly deposit scheme for clients where the deposited money will become
one million on maturity.
Features and Benefits:
1. Tenor: 4, 5, 6, 7, 8, 9 and 10 year’s term;
2. Deposit on monthly installment basis;
3. Attractive rate of interest;
4. Account can be opened at any working day of the month;
5. Monthly installment can be deposited through a standing debit instruction from the
designated CD/SB Account;
6. Monthly installment can be deposited in advance;
7. An account can be transferred from one branch to another branch of the bank;
8. Credit facility for maximum of 2 years can be availed at any time during the period of
the scheme;
9. Allowed to open more than one MDS Account for different amount at any branch of
the Bank;
But these features and benefits can be varied bank to bank.
Q. What is Mobile Banking and Internet Banking (June’13)?
Mobile Banking: Mobile banking is a system that allows customers of a financial
institution to conduct a number of financial transactions through a mobile device such as
a mobile phone or personal digital assistant.
Mobile banking differs to mobile payment's which involves the use of a mobile device to
pay for goods or services either at the point of sale or remotely, analogously to the use of
a debit or credit card to effect an EFTPOS payment.
The earliest mobile banking services were offered over SMS, a service known as SMS
banking. With the introduction of smart phones with WAP support enabling the use of
the mobile web in 1999, the first European banks started to offer mobile banking on this
platform to their customers. Mobile banking has until recently (2010) most often been
performed via SMS or the mobile web.
Internet banking: Online banking (or Internet banking or E-banking) allows customers of
a financial institution to conduct financial transactions on a secured website operated by
the institution, which can be a retail bank, virtual bank, credit union or building society.
To access a financial institution's online banking facility, a customer having personal
Internet access must register with the institution for the service, and set up some
password (under various names) for customer verification. The password for online
banking is normally not the same as for telephone banking. Financial institutions now
routinely allocate customers numbers (also under various names), whether or not
customers intend to access their online banking facility. Customer’s numbers are
normally not the same as account numbers, because number of accounts can be linked
to the one customer number. The customer will link to the customer number any of
those accounts which the customer controls, which may be cheque, savings, loan, credit
card and other accounts. Customer numbers will also not be the same as any debit or
credit card issued by the financial institution to the customer.
To access online banking, the customer would go to the financial institution's website,
and enter the online banking facility using the customer number and password. Some
financial institutions have set up additional security steps for access, but there is no
consistency to the approach adopted.
The common features fall broadly into several categories. A bank customer can perform
non-transactional tasks through online banking, including 
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Viewing account balances.
Viewing recent transactions.
Downloading bank statements, for example in PDF format.
Viewing images of paid cheques.
Ordering cheque books.
Download periodic account statements.
Downloading applications for M-banking, E-banking etc.
Bank customers can transact banking tasks through online banking.
Funds transfers between the customer's linked accounts
Paying third parties, including bill payments (e.g., BPAY) and telegraphic/wire
transfers
 Investment purchase or sale
 Loan applications and transactions, such as repayments of enrollments.
 Register utility billers and make bill payments.
Q. Do you believe in advertising? Put your arguments.
Advertising: Advertising is any paid form of non-personal presentation and promotion of
goods, services or ideas by an identified sponsor.
Advantages of advertising:
1. The attraction of a large and geographically-dispersed market.
2. A pass along rate for print media that supplements circulation.
3. Low costs per viewer or listener.
4. The large number of media available.
5. Sponsor control over message content, graphics, timing, and the audience targeted.
6. A uniform message delivered to all members of the audience.
7. Editorial content that often surrounds an advertisement.
8. The easing of the way for personal selling and self-service retailing.
Disadvantages of advertising:
1. Advertising messages are inflexible and not responsive to consumer questions.
2. It is difficult to satisfy diverse audience needs.
3. A large portion of viewers or readers may be wasted.
4. Some types of advertising require high total expenditures.
5. Messages are usually brief, with limited information.
6. Feedback is hard to obtain.
7. Low attention is given to advertising by some people, who may even “zap”
commercials on television.