hdfc

112/04/08

Customer acquisition strategies and the marketing

mixFinancial Services Marketing by

Ennew ． Waite

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Learning objectives understand the relationship between marketing strategy

and the marketing mix appreciate the differences and relationship between

annual marketing planning and the strategic marketing plan

explain the nature of the marketing mix as it applies to financial services

understand the challenges associated with developing a financial services marketing mix

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9.1 Introduction The marketing mix is a term used to describe the

marketing tools that a manager controls. It is important to recognize that decisions about the

marketing mix have both strategic and tactical dimensions.

The purpose of this chapter is to provide an overview of the marketing mix for financial services, paying particular attention to the way in which the marketing mix may be used for customer acquisition.

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9.2 Short-term marketing planning

If the strategic marketing plan is about the setting of long-term direction and the determination of competitive advantage, the annual marketing plan is about achieving a joined-up and co-ordinated approach to achieving short-term marketing objectives.

The conduct of the annual marketing plan comprises two components: the process the written plan itself

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Figure 9.1 represents a sound core structure for the ultimate output of the planning process.

A brief restatement fromthe strategic marketingplan to ensureconsistency

Material specific tothe annual plan

MissionExecutive summary (for this plan)Situation review (updated)SWOT analysis (updated)Objectives (for the budget year)

Marketing mix

Implementation

Product management anddevelopmentPricingDistributionPromotionInternal communicationSummary activity scheduleBudgetAccountability and evaluationFigure 9.1 The annual marketing plan.

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The plan should make it clear where responsibility and accountability lies for marketing objectives and the successful completion of marketing-mix activities.

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9.3 The role of the financial servicesmarketing mix

Chosen competitive position

Product

Target customers’ needs

Price Promotion Place

Figure 9.2 Customer needs and the marketing mix.

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9.3 The role of the financial servicesmarketing mix

used to create the organization’s desired competitive position there are two key requirements. 1. Consistency with position. 2. Synergy from mix elements.

Thus, an effective marketing mix must aim for consistency and synergy – consistency with strategic position, and synergy from the individual elements.

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9.4 The financial services marketing mix: key issues

The main differences between financial services and physical goods were listed as: Intangibility Inseparability Heterogeneity Perishability

Marketing activities might consider: Intangibility: providing consumers with physical evidence,

building trust and confidence

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Inseparability: ensuring that staff are friendly and responsive, processes for service delivery should be customer orientated

Heterogeneity: standardizing service delivery processes, encourage a high and consistent level of quality

Perishability: automating services features, managing demand through careful use of staff rosters or by using special price mechanisms

Thus, the provision of physical evidence, staff management (people) and the systems for delivering service (process) are all likely to be important elements of marketing decision-making for financial services.


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9.4.1 People The ‘people’ factor in the marketing mix emphasizes the

important role played by individuals in the provision of financial services.

The people component of services marketing is associated with personal selling which relates to product promotion and distribution (place) elements of the marketing mix.


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9.4.2 Process Process is concerned with the way in which the service is

delivered, including business policies for service provision, procedures, the degree of mechanization etc.

Reasons why process is important: 1. the heterogeneity of services raises the issues of quality

management and control


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2. service may be highly visible to the consumer and will need to be flexible enough to accommodate potential demand variations.

3. the intangibility of services means that the process by which the service is provided will often be an important influence on the consumers’ assessment of service quality

The main concern with process is typically in the context of distribution, but it also has relevance to pricing decisions.


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9.4.3 Physical evidence Physical evidence refers to anything tangible which is

associated with a given service. It is generally recognized that physical evidence can be

subdivided into two components: Peripheral evidence (e.g. a document wallet) Essential evidence (e.g. a bank branch)

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9.5 Customer acquisition and the financial services marketing mix

This section focuses on the challenges which might confront organizations when trying to manage these elements with a view to the acquisition of new customers.

Case study 9.1 Customer acquisition at HDFC BankBackground Liberalization during the 1990s paved the way for the influx of new Liberalization during the 1990s paved the way for the influx of new

private-sector banks, the first of which was HDFC, launched in 1995. private-sector banks, the first of which was HDFC, launched in 1995.

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The bank’s research had identified a significant middle-class The bank’s research had identified a significant middle-class market, which expected a high quality of service and was willing to market, which expected a high quality of service and was willing to pay for it.pay for it.

Goal & Means persuade customers to switch to HDFCpersuade customers to switch to HDFC international levels of service at a reasonable priceinternational levels of service at a reasonable priceSpecific marketing mix decisions Product

Offered a comprehensive range of banking services were Offered a comprehensive range of banking services were recognized as being of considerable importance.recognized as being of considerable importance.


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Price Offered its initial bank account with the requirement for a Offered its initial bank account with the requirement for a

minimum balance below the typical international bank, but still minimum balance below the typical international bank, but still higher than the public-sector. higher than the public-sector.

This ensured that HDFC had the margin to support the delivery of This ensured that HDFC had the margin to support the delivery of superior service.superior service.

Promotions Supports the line marketing promotion to reducing marketing Supports the line marketing promotion to reducing marketing

spend and the costs of acquisition.spend and the costs of acquisition.


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Place HDFC focused attention on the 10 largest cities in India, which HDFC focused attention on the 10 largest cities in India, which

account for close to 40 per cent of the population, and account for close to 40 per cent of the population, and concentrated on gaining maximum market share in those areas concentrated on gaining maximum market share in those areas before expanding to other cities. before expanding to other cities.

Use its branch network and adopt self-service technology to Use its branch network and adopt self-service technology to ensure that it met the diverse set of needs of its mid-market ensure that it met the diverse set of needs of its mid-market customers.customers.


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However, not all financial services providers have been so successful in managing the mix for consumer acquisition.

Historically, the financial services sector has received considerable criticism for tending to focus on new customer acquisition to the detriment of existing customers.

Care must be taken with the use of new-customer price promotions to ensure the appropriate management of expectations.

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9.5 Customer acquisition and the financial services marketing mix In addition to concerns about the way in which marketing

mix variables are used the specific features of the financial services sector may create additional challenges.

A further aspect of the mix that may be challenging in a financial services context is place. (the channel of distribution)

Owing to the economics of new customer acquisition. The profit is in the lifetime value of a new customer, and not necessarily in the profitability of the first product purchased.

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