Definition of service quality: ‘the service should respond to the customers expectations and satisfy their needs and requirements’ (Lovelock et al, 1999)
3.1 Situation Analysis
The increased popularity of the Internet has given online banking a fresh transfusion of growth over the past two years. Non-bank companies have taken advantage of the low barriers to entry made possible by the Internet to creep into the marketplace.
New legislation has opened the door to competition from brokers, insurance companies and financial service competitors, all of who are fighting banks for their customers.
Today more and more independent online banks have been created to compete within
the market. Their ease to compete has been due to having no need for branch offices
that ultimately reduces operating and fixed costs by replacing the great number of
employees and physical facilities that a traditional bank occupies.
They offer lower or no service fees to their customers due to such low costs and
higher interest rates than traditional high street banks. ‘45% of online customers cited rates and fees as initial reason they decided to bank online’ (Latimore et al 2000)
Many traditional banks are also moving to the Internet to remain competitive within the market.
Online Banking Statistics
‘UK web users use online banking sites more than any other of the eight European Countries surveyed’ (Money Extra).
‘Out of 47 million adults in the UK, 11.5 million are now regular Internet users, and of these around one-third (3.5 million) are using the web to research financial products. One and a half million users are using online banking and this number is expected to rise to more than 9 million users by 2004’ (Michael Pastor 2000)
’British women are spending longer than men on the web for the first time’ according to new data from Internet Research firm NetValue.
‘Around 5.2 million UK web surfers went to banking sites during July, and women made up more than half of new Internet banking users’ (MX Moneyextra, 2002).
Due to this SHE.com has decided to take advantage of the continuous growth of females banking online and offers purely to them an Internet bank.
SHE.com will be operating within a fiercely competitive market and therefore must be aware of the competition and offerings that other online banks bring to their customers. Just a few examples of these banks are as follows:
Nationwide Building Society
Launched in May 1997 this was the first financial institution in the UK to offer a web based banking service.
In 2001 it claimed it had reached more than one million registered users.
EGG
Launched in 1998 by insurers prudential operates strictly over the Internet.
It was named the leading UK online bank in December 2001 with 1.8 million registered users, which is now in excess of 2 million and has £9 billion assets.
Smile
A company, operating strictly over the Internet, is a strong competitor within the market alongside Egg. Launched a year after Egg, October 1999, it currently has in excess of 350,000 account holders.
First Direct
Launched in October 1989 and has now over 1 million customers.
Market Penetration Pricing (See Appendix 1)
How they compare on Interest (Appendix 2)
Bank Standard Interest on Standard Interest on overdraft
current account
Cahoot 4.0% 7.7%
I.F 3.2% 8.6%
Smile 3.0% 9.9%
Lloyds TSB 0.1% 17.3%
Barclays 0.1% 15.6%
Goals for SHE.com
To have 100,000 customers and 150,000 accounts by the end of April 2005.
To cover costs and move into profit in 2006.
To train 1500 staff committed to delivering a quality service to customers.
The long-term goal for SHE.com once established is to gain a high market share and to hold onto it by continuously trying to lower costs allowing further price reductions to fight off competition.
3.2 Strategic Options
Growth Strategy-Ansoff Matrix (1987)
Existing Products New Products
Existing
Markets
New
Markets
SHE.com is introducing a new product to an existing market therefore will adopt a product development strategy. A new product can be defined in different ways. ‘From a market perspective, the term refers to a new or revised set of customer perceptions about a particular cluster of benefits’ (Proctor, 2000)
Differentiation strategy- Porter (1985)
SHE.com is providing a service to women within a niche market with offerings that differ from competitors in a way that is valued by its customers.
She.com will adopt a differentiation focus through building a strong brand awareness and brand quality through focusing on the service it will provide to its target market.
3.3 Tactics
SHE.com understands that by offering products and a service matching competitors is not a basis in which to establish a customer base therefore offers its customers a number of differential benefits- ‘It is these that give the company its competitive advantage. It is these that must be identified, developed and exploited if the company is to win success’ (Malcolm McDonald, 2001).
Intangibility
As SHE.com is an intangible service, it has no physical dimension to it. ‘Purchase of a service only confers on the customers access to, and right to use a facility. This may well lessen the perceived customer value of a service and consequently make for unfavourable comparisons with tangible alternatives’ (CIM, 2002).
SHE.com’s main differentiation tactic is to increase its level of tangibility while incorporating contents within its service that interest women to make the customer more confident as to what the service is delivering. It will achieve this by:
‘Enhancing perceptions of customer service and customer value by offering excellence in the delivery of the service and promoting values of quality, service, reliability and value for money’ (CIM, 2002).
Tangibles:
*Free trial of Service- SHE.com offers new customers a 6-month free trail period.
*First 15,000 customers receive £25 beauty vouchers.
*Customers will be sent a loyalty card and earn points by depositing into savings accounts which can be turned into vouchers for money off products advertised at SHE.com.
*Children can open a savings account for £1 once main customer has signed up with SHE.com.
*SHE.com will offer a competitive 3.7% gross AER if customer is a current account holder and 3% if not. This is SHE.com’s deliberate policy to reward customer loyalty.
*Credit card, mortgage, overdraft facility- SHE.com offers £500 overdraft free to attract potential customers.
*Free paper copies of cancelled payments.
*Free downloading of account statements.
* Free daily planner sheets e.g. Shopping list, calls to make that customers can print out.
*Guaranteed e-mail response to queries.
*Women’s car insurance, health insurance.
*Third-party products sold on website e.g. Subsidised WAP phones, beauty and fashion products.
*New tools- online calculator savings, budget planners based on actual income and expenses.
Reliability
*Staff- SHE.com will employ fully trained, experienced staff; 7 days a week within a central service centre in London to take customer calls if they have any queries or if by a slight chance the Internet site cannot be accessed.
*Security- SHE.com understands that ‘security was among the top reasons for customers deciding to continue banking offline’, according to a Gomez report on ‘customers who stopped using online banking services’ (Steven Bonisteel, 2001).
SHE.com has been accredited with a British Standard Kite mark for security management to give customers peace of mind.
*SHE.com has technicians daily to check glitches that may occur when surfing the website to avoid ‘ERROR’ message. Technicians will also constantly try to reduce number of clicks necessary for customers to perform a transaction or get to a particular web page.
Quality
*Web Design- Friendly and warm look and feel without overloading customers with too much information and financial jargon on its web page. Web design will also allow customers to log in, go straight to account details if they wish while those visiting the site for the first time are still made to feel at home by browsing through web site.
Service
*Before a customer signs up to SHE.com, a small questionnaire will be completed in order to provide a more personalised experience. This way SHE.com can provide information of interest and of a useful nature to its customers.
*A log in ‘welcome’ displaying last time an account was accessed.
*E Notes- Instant messages are sent to customers when bank balance drops below a certain point, when a cheque is cleared, or when products of a personal interest are on special offer e.g. ‘beauty bargains’.
*Cash Fairy- Small cartoon icon that pops up every 10-15 minutes – allows customers to ask a question about online banking by clicking on icon.
*Offer a personalised service to customers in order to build customer loyalty e.g. Customers can set up ‘reminders’ which pop up when a personal birthday is coming up, or when an appointment to see the doctor is due etc.
Promotional Objectives for SHE.com
1-To create an intangible, memorable image focused on Service Quality.
2-Build awareness and interest from potential customers to stimulate trial of service while encouraging employees to deliver a high-quality service.
2-Teach customers how to use services by providing online demonstrations and a workforce available to answer questions at call centre.
4-Communicate strengths and benefits to target market.
5-Maintain contact with existing customers by providing updated information on how to get the most out of SHE.com.
SHE.com will adapt the promotional mix to communicate their online service to women. Many of these communication elements will create a distinctive position in the market for SHE.com and will reach prospective customers.
Promoting SHE.com
SHE.com’s main way of communicating through its prospective audience is through the Internet. It will design an Internet communications strategy to:
Target women within the UK.
To create awareness and stimulate interest through its website- containing only necessary information, is appealing with graphics and is constantly up dated.
To actively promote website and company trademark through women’s magazines, business cards, yellow pages. Also sending out postcards direct to women through health clubs, hairdressers etc which advertises website address including an incentive to visit the website.
SHE.com will also set up advertisements through Internet search engines ‘yahoo’and ‘excite’ which will appear as ‘banner’ads’ in which potential customers can click on to and be taken to website for more information. Also will promote through women’s websites e.g. icircle.com and handbag.com. (See appendix 3)
Internet provides SHE.com with a useful form of self-service marketing as customer is in complete control of time and extent of contact with the websites they visit.
Billboards
SHE.com will advertise on billboards located around the country using its website address and slogan as its brand identity to get the message across to its target market.
Personal Selling
SHE.com will use experienced sales representatives to communicate face to face or by telephone with it target market and address their needs and concerns thus enabling SHE.com to find out more about their potential customers.
Public Relations
An organised press release is to take place nearer to launch date to introduce service to target market that will focus on communicating with women and providing them with a quality online banking experience. SHE.com is also involved in funding for ‘Breast Cancer Awareness’ (which will ultimately lead to further exposure).
Sales Promotion
SHE.com will offer potential customers incentives e.g.6-month free trail period thus motivating customers to act faster thus speeding up acceptance and introduction of SHE.com to the market. It will also provide a competitive edge over rival online banks.
Branding
The name SHE.com helps women to remind and familiarise them with the product and once established will ultimately lead to brand awareness and brand loyalty.
(See Appendix 4)
The promotional techniques above that SHE.com will adopt will:
-Enhance perceptions of customer service and customer value.
-Will portray excellence in delivery of service.
-Will portray value for money
All ultimately enhancing market position of SHE.com.
3.4 Conclusions
In conclusion, from my findings it is clear that the online banking market is one that is volatile and very competitive. Although there are no barriers to entry as such, the fierce competition within the market can act as a barrier and prevent new banks from entering the market if they do not provide products or services that meet the expectations of customers, or offer alternatives to the ones already available in the market.
I also discovered that differentiation of Internet banks is extremely important and simply producing ‘me too’ products/services is not sufficient enough to survive within this competitive market. Existing online banking customers are unlikely to move to a new bank if its existing bank already gives the same offerings. Also, customers considering to bank online are more likely to sign up to an established online bank e.g. Egg than one that has just launched into the market and has no record of success.
Therefore it is important to offer a distinctive product to customers to lure them away from competitors.
Banks must also address issues concerning customers e.g. Security, speed, reliability as these are the reasons why customers are continuing to bank offline.
Promoting an online banking service is different to promoting a product. Not only should an online bank promote to its customers but also aim at motivating employees to carry out exceptional service, as this is what potential customers will expect from their bank.
3.5 Recommendations
My recommendations for my new online bank SHE.com are as follows:
-Once established, to explore customer satisfaction through research and customers experiences to assess whether it is meeting their target market needs.
-To keep making the service as tangible as possible with new product offerings to make customers feel more confident as to what the service is delivering.
-To consider defining target market into smaller segments and providing separate offerings for each e.g. Female Students, Businesswomen.
-To assess which promotional methods are bringing in most sales thus concentrating on these methods only.
-To increase market share and appear as a threat to competing online banks within the market.
3.6 Appendices
1-‘A pricing strategy denotes how a company will price its products in particular periods or particular market conditions’ (Lancaster and Reynolds, 2002)
The online banking market is operating a marketing penetration strategy based on lowering costs to offer an extremely competitive price to attract the greatest number of buyers to the market as early as possible.
This pricing strategy, which SHE.com will adopt, will lead to customers of established online banks as well as traditional high street banks demanding similar benefits putting a great amount of pressure on existing banks to reduce prices and provide more innovative products and a greater choice to its customers.
2- The interest rates of the various online banks mentioned were taken from their individual websites.
3- Net value reports that icircle.com and handbag.com are the most popular websites with a reach of 1.4% and 198.000 unique visitors in May 2002.
4- The promotional methods used by SHE.com will communicate the benefits of purchasing the service so that ‘the customer visualises its appropriateness to the usage requirements within which the principal benefit is sought’ (CIM, 2002)
3.7 References
Ansof, H.I (1987). Corporate Strategy (Revised edition), Harmondsworth: Penguin.
Bonisteel, S (2001) ‘Those who do it more like it best’
CIM Study Text (2002). International Marketing Strategy, pp347-348, BPP Publishing.
Latimore, D, Watson, I, Maver, C (2000) ‘The customer speaks: Internet users tell us what they want from retail financial services’
Lovelock, C, Vandermerwe, S, Lewis, B (1999) Services Marketing: A European Perspective’ Prentice Hall.
Mc Donald, M (2001). Marketing Plans: How to prepare them, how to use them,
4th Ed, pp140, Butterworth Heinemann.
MX Money Extra (2002). ‘Online Banking: What services are on offer?’
NetValue (2002). ‘Women overtake men online’
Pastor, M (2000). ‘UK users lead Europe’s online banking charge’
Porter, M.E (1985). Competitive advantage, New York, The Free Press.
Proctor, M. (2000). Strategic Marketing: An introduction, pp175-180. Routledge.
3.8 Bibliography
Ansof, H.I (1987). Corporate Strategy (Revised edition), Harmondsworth: Penguin.
Bonisteel, S (2001) ‘Those who do it more like it best’
CIM Study Text (2002). International Marketing Strategy, pp347-348, BPP Publishing.
Gold, S (2001). ‘110 million Europeans Banking online by 2005-Report (Forrester Research prediction)’
Lancaster,G, Reynolds, P (2002). Marketing: The One Semester Introduction, Butterworth Heinemann.
Latimore, D, Watson, I, Maver, C (2000) ‘The customer speaks: Internet users tell us what they want from retail financial services’
Mc Donald, M (2001). Marketing Plans: How to prepare them, how to use them,
4th Ed, pp140, Butterworth Heinemann.
‘More women banking online’ (2001)
MX Money Extra (2002). ‘Online Banking: What services are on offer?’
NetValue (2002). ‘Women overtake men online’
O’Sullivan, O (1999). ‘Discouraging words on online banking’
Pastor, M (2000). ‘UK users lead Europe’s online banking charge’
Porter, M.E (1985). Competitive advantage, New York, The Free Press.
Proctor, M. (2000). Strategic Marketing: An introduction, pp175-180. Routledge.
Tomlinson, R (1999). Is there money in the E-Bank? Fortune, vol 24.
