The Bank of Scotland groups marketing strategy is very important here, as is the role of people. The employees must have good product knowledge and customer service skills.
Technology is increasing within the industry. Consumers’ can now purchase services over the Internet and telephone and some believe that the reliability and consistancy of information provided is preferable. Bank of Scotland offers telephone, Internet, branch, and post banking. .
- Two-Way Information Flows. This emphasis the amount of contact between the customer and the provider. This point also acknowledges that with such contact there is opportunity for the bank to give and obtain information to the customer, helping them meet customers needs.
The bank of Scotland decided to restructure use of its data warehouse in order to focus its marketing strategies more successfully and better understand customer lifestyle patterns and behavior. So far, more accurate data analysis has led to increasingly successful marketing campaigns. Customer response and take-up of promotions tripled, saving them 10% cost savings on direct marketing and advertising resources.
The bank of Scotland also has one-to-one communications with customers allowing them to tailor a package to suit that customer’s need, almost to an extent that they are dealing with one segment.
Bank of Scotland wants to maintain its excellent customer relations and emphasese the importance of effective use of targeted direct mail as an aid to communication and the relationship building process. Bank of Scotland gives customers has other ways of contacting them - via the branch, telephone, HOBS (Home and Office Banking Service) and email.
- Intangibility. Financial products cannot be seen, touched or experienced until they re purchased, which makes it harder to market to consumers. Companies get round this by good, clever advertising, they have to produce adverts, and leaflets direct mail etc. that lets consumers see what products are available. As mentioned Bank of Scotland has proven success in this.
Employees also play an important role in overcoming this problem. Employees are the only physical contact that the consumer has with the provider. They have the ability to influence the consumers buying behavior. The bank must give good training to employees, so that they have excellent customer service and product knowledge. The employees must listen to the consumer wants and be able to recommend and explain the product/service. Customers tend to rely on the experience of others here i.e. word of mouth, what provider informs them. So, good publicity, reputation etc. is needed.
- Inseparability. Where the consumer and provider generally have to be present during service delivery. There is three main parts to this.
Firstly the environment. You will notice that banks décor has changed over the years. They are trying to create a friendlier, open environment that invites consumers to come in. Secondly the people, Consumers and employees. This again emphasises the role of the employee. Thirdly, the invisible orgainisation, the systems, processes and procedures. These need to be speedy and efficient. As mentioned Bank of Scotland has updated its data warehouse. The use of technology now allows consumers to purchase over the Internet and phone. There is no longer a need for employees to be the physical connection, SMILE Internet banking for example
- Heterogeneity. When marketing service there is a lack of ability to control the service quality before it reaches the consumer. The service will also vary between different orgainisations and even from different employees. Organisations overcome this by trying to standardize the service. Done through training. Technology such as the ATMs, telephone and the Internet reduces variability by almost cutting out the human element. This is also lower cost for the organization.
- Perishability. This is not so important in financial services. It means that if a product is not purchased at particular point in time, it is no longer available.
SECTION 2:
As mentioned before organisations have a market segmentation process. Where the market is split into groups of consumers with similar needs. Once the market is segmented the organisation needs a marketing strategy. There are three main approaches for this:
- Undifferentiated Marketing. Where the market is not really segmented. The provider tries to satisfy the whole market with one product. An example of this is Coca-Cola, they market the drink to the whole of the world. This is not common for the financial sector.
- Concentrated Marketing. Where the provider concentrates on one market segment and designs a marketing mix which matches the needs of the individuals in that segment. This allows providers to focus on an area they have some expertise. E.g. private banks concentrate there marketing on high net worth individuals.
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Differentiated marketing is where providers develop different marketing approaches/mixes and targets them at each specific segment. To do this the provider has to have enough products and expertise that will enable them to differentiate between groups of consumers on a profitable basis. E.g. different type of accounts differences in financial needs across personal, corporate, small business etc. banking customers. Also Internet, telephone banking all of which bank of Scotland has.
The bank can then take consumer characteristics into account. Demographic is a popular option. Where they assess consumer needs gauged on income, gender and family circumstances. As people will have different financial needs at different stages in there lives. Psychographic approach may be used to, this assess peoples lifestyles.
When bank of Scotland restructured their data warehouse it gave them a better understanding of customers lifestyle patterns and behavior, which allowed them to market more successfully. For example students may be a market segment. Bank of Scotland offer interest free overdraft limits and credit card account for students.
Parallel 56 provided strategic marketing consultancy services in the area of “Women into Business”. The consultancy included consideration of channels and propositions for attracting new women business customers. This is an example of a market segment.
By segmenting the market the bank can exploit their strengths. It allows them to have better more focused marketing campaigns at a cheaper cost, they can identify gaps in the market. This all helps keep the customers happy, which means profits.
Each segment must be worthwhile and profitable for the bank to consider a marketing strategy for it. Each segment must be accessible, stable, unique, large enough and profitable.
SECTION 3:
The external environment is made of many different parts and has a major impact on organizations. In terms of marketing, the external environment is split into the Macro and Micro marketing environments. The macro environment is a more external or the wider environmental factors that may have an impact on the organization. While the Microenvironment consists of more internal or the organizations more immediate environment that may affect its ability to serve its markets. I will be concentrating on the Microenvironment, which are mainly:
- Suppliers. The organizations or individuals so supply the resources needed for the bank to serve its customers. This might be the supply of equipment i.e. Computers. Sources of finance and employees also come into this category. The organization must keep a close eye on costs, levels of supplies etc. They should also keep an eye out for alternative sources. The suppliers co-operation is essential as if they are not efficient and cost effective then this will lead to the bank not supplying new products and meeting customers requirements. In a competitive environment this will lead to loss of customers thus profits.
- Customers. Without them the bank will not make profit, so they are very important. In order for the bank to attract and retain customer they must meet their needs and encourage them to purchase products. As mentioned before bank if Scotland are successful at this. They have been banking for over 300 years and have increased profits and customer base over last year. the bank must know; what consumers want, what they are buying from whom and why. They must be aware of changes in consumer wants and how consumers view the banks products and services against those of its competitors. Restructuring the use of its data warehouse help bank of Scotland understand customer lifestyle patterns and behavior. Which led to successful marketing campaigns.
- Competitors. They must be kept under constant review and they provide an alternative to your products and services. Within financial services products can be introduced very quickly and it is now easier for new competitors to enter the market, so keeping up-to-date is imperative. The bank must know what competitors’ are doing within the market and their strengths and weaknesses. Their weaknesses may be an opening for bank of Scotland to enter the market. One way Bank of Scotland has combated this is the joint venture project between J.S. Sainsbury and Bank of Scotland. This mutually beneficial move gives the Bank of Scotland a greater presence in England while Sainsbury's benefits from Bank of Scotland's banking expertise. Bank of Scotland is also a Group, which includes Halifax, Bank of Western Australia, Capital Bank, Bank of Wales and British Linen Bank and many more companies including insurance companies’ etc. From a consumer point of view this gives the impression of variety, but although different names all the banks come under the same group.
However, the bank must be wary, and this is where good knowledge comes in. If competitors are not providing a certain product it may be the case that they have done research and found that it is not profitable supplying it, or it may be that they do not have the capability to do it or they just haven’t noticed the opportunity. Again due to the fast paced and competitiveness of the market if one organizations supplies a successful product/service it will not be long until competitors release a similar one.
- Publics. It is essential for the bank to produce good public relations and image. As there are large groups, other than customers and competitors, who take an interest in the bank. The media, government, market analysts, the financial community etc. all can influence the banks ability to successfully market there products and services. Bank of Scotland undertakes public relations activities and tries to build goodwill with these publics. The Bank of Scotland support charities and encourage staff to participate in charity events. They also invest in the community and take part in the princess trust etc.
It is not just the outside publics that the bank of Scotland must care about. They have to look after there ‘internal public’. That is their workforce. They must have a good relationship with the workforce, keeping them happy will keep the customers happy. The workforce will also tell their friends what they think of the bank that will lead to word-of-mouth again. Which is why the bank offers good incentives such as bonuses, training, staff banking rates etc.
SECTION 4
As mentioned the market can be split into segments and the banks can then market products/services to suit each segment. The marketing mix is a standard toolkit that helps them do this. The four main components are; Product, Promotion, Price and Place. There are also 3 additional components, People, Process and Physical Evidence. I will be focusing on Product and
Customers don’t actually buy products. What they actually want is a bundle of benefits that will satisfy there needs. The bank must know consumers needs and buying behavior. Each consumer is different which is why we have market segmentation. As mentioned Bank of Scotland also updated their data, in order to understand their customer behavior and needs. Different segments will want different benefits from broadly similar financial products. Which is why banks tailor their products differently for different markets (product range portfolio). A good example is mortgages; there are many different types of mortgages to suit different groups of people. The banks also keep its products, and competitors, under constant review to make sure they are meeting customers’ needs.
The bank must also know what the customer wants the product/service for. Financial products or not usually purchased for the product itself, for another reason. This is known as derived demand. For example, a bank loan may be purchased to buy a car.
Banks can tailor products and must constantly introduce new products (product life cycle and development process.) to suit consumer needs, however so can the competition. Banks must achieve product differentiation, where they have a product or characteristic that can’t be easily copied. An example of how competitive the market is may be interest free credit cards. Once a provider brings out a 6month interest free period for example, competitors match this. Bank of Scotland now offer a 9-month interest free period.
Price is very important in the marketing mix, as this is what directly generates revenue for the bank. Price takes a variety of forms over the different sectors i.e. in banking, setting interest rate, fee structures, banks charges etc. insurance is mainly premium charges. Banks have a number of strategies to determine price. they must look at;
- Competitors prices,
- The products life cycle, i.e. begin or end of its life cycle.
- Banks marketing positioning policy. I.e. are they offering “no frill” cheaper service or aiming at top end clients.
- How the market is developing, saturated, declining.
Overall cost must cover banks costs, make a profit and cater for risks to ensure long-term survival. This will all depend on the banks capability and capacity. The bank has to also respond quickly to market conditions. Which involves a lot of environmental factors i.e. suppliers, competition etc.
Price is also important from a consumer point of view. The consumer has to be able to afford it, they may think price is an indication of quality. It is up to the bank to concinve the consumer that the price is worth paying, done through customer service and good marketing. Price is arguably one solution to the problem if product differentiation mentioned earlier. Allot of people will seek out the cheapest price, Especially in motor insurance, mortgages etc. However, other arguments suggest that ongoing high quality of products and service can persuade customers to stay with the bank and buy from it. So price is probably a temporary advantage over good, reliable products and service.
References
- T, HARRISON. FIANICAL SERVICES MARKETING (2000)
- S, FALCONER. MARKETING FINANCAIL SERVVICES,
