The Financial Services
Consumer
Introduction
- Understanding consumers and consumer needs and
requirements is the guiding philosophy of marketing.
- This demands an insight into the wider aspects of
consumer psychology and behavior, including what
motives consumers, what their attitudes and perceptions
of the company and its product are, as well as an
understanding of their decision processes.
- Understanding the financial consumer is no longer just
a marketing requirement, it has become a legal
requirement.
Social and economic factors affecting
the demand for financial services
A more mature customer.
Increased Importance of female customers.
Alternative Sources of income.
A more mobile customer.
A more socially conscious customer.
Financial Services characteristics and
their implications for buyer behavior
Services are different from goods, and that affect
and change consumer’s behavior towards
services and bring about differences in
evaluation and decision making processes.
In financial Services, it’s possible to find a great
wide variety in the level of complexity of the
products, varying levels of consumer
participation, varying degrees of product
uniformity from highly standards to completely
customized, as well as high and low levels of
involvement.
Financial Services Characteristics
1- Intangibility
Good: is an object, a device, a thing.
Service: is a deed, performance, an effort.
Intangibility as a characteristic creates two
major problems for financial service
provider:
1- Making the product difficult to grasp mentally.
2- Service cannot be displayed or physically
demonstrated to customer, posting problems in
the advertising and trial of products.
Financial Services Characteristics
2- Inseparability
Results from services being processes or
experiences, where consumers become
co-operators with the provider.
(Customers act as a partial employees).
Inseparability may only apply to a few
financial products.
Financial Services Characteristics
3- Heterogeneity
Inseparability leads services being more
prone to variation in quality.
Two consequences raise:
How the provider will deal with nonstandardization.
It increases the uncertainty of the purchase
decision.
Financial Services Characteristics
4- Perishability
Results because of simultaneous production
and consumption, and leads to a problem
of an inability to build and maintain stocks.
Since there will be no inventory available for
back-up, when demand exceeds capacity
customers are likely to be sent away
disappointed.
Financial Services Characteristics
5- Fiduciary responsibility
The implicit responsibility of financial service organizations
for the management of their customer’s funds and the
nature of financial advice supplied to their customer’s.
Financial services consumers are essentially buying
promises.
In addition to confidence and trust, consumers rely on their
cues ( Such as the size of the financial institution, its
image and the longevity of business to provide an
indication prior to purchase of the extent to which
promises are likely to be honored.
Financial Services Characteristics
6- Two-way information flows
Financial services are not simply concerned
with one-off purchases but involve a series
of regular two-way transactions over an
extended time period.
Like: issuing statements, account handling,
branch visits, use of ATM. This provides
the potential for a wealth of information to
be gathered on consumers.
Implications for consumer
evaluation processes
As a result of financial services characteristics,
three distinct qualities have been appeared and
impacted consumer evaluation processes in the
selection and purchase of services and its
providers.
1) Search qualities: describe the attributes of a
service which can be determined prior to
purchase of the product. For financial services,
such qualities relate to the tangibles that
customer can draw information from, such as
branch network, or technology.
Implications for consumer
evaluation processes
2- Experience qualities: relate to the
attributes which are only discernible either
during consumption or after purchase,
thus not prior to the purchase.
3- Credence qualities: are characteristics
which the consumer may find impossible
to evaluate even after purchase and
consumption. Ex. pensions and
investment.
Financial needs and motives for
buyer behavior
Motivation: forces which initiate and drive behavior
towards attainment of specific goals or objectives.
Goal: result of needs which cause a state of tension in an
individuals.
Goal object: techniques or devices used to achieve or
attain goals.
Need: a discrepancy between an actual and a desired
state.
Two conditions must present in motivation situation:
1- there must be a goal or an objective that acts as an
incentive.
2- there must be a state or condition within the person that
stimulates action
Financial needs and motives for
buyer behavior
Many products are but a means to an end,
whereas financial services largely provide
a means to means to an end.
Needs derive motives in a specific
direction, individuals are generally
motivated to experience pleasure and
avoid pain: Approach objects_ positives
goals provide attainment of pleasure.
Avoidance objects_ negative goals provide
the avoidance of pain.
Basic financial needs that financial
consumers have
1- Cash accessibility: frequent access.
2- Asset security: protect against theft and
depreciation.
3- Money transfer: move money around.
4- Deferred payment
5- Financial advice: work as instrument to
find a solution.
Figure 2-4 Hierarchy of financial needs
Financial services decision making
Decision Making process:
1- Problem recognition
2- information search
3- evaluation of alternatives
4- purchase decision
5- post-purchase evaluation
This model is built around the information processing model or the
AIDA (Awareness, Interest, Desire and Action) which assumes
buyers pass through a cognitive, affective, and behavioral stages
when a product has a high degree of involvement.
For simplicity, in financial services another model is used which breaks
the process down into three stages: 1- pre-purchase information
search, 2- evaluation of alternatives, 3- post-purchase evaluation