CHAPTER 2: THE ROLE OF

MARKETING IN THE
FINANCIALSERVICES

INTRODUCTION
BASIC CONCEPT OF MARKETING
THE IMPORTANT OF MARKETING IN

BANKING
THE FOUR PILLARS OF MKTG CONCEPT
MARKETING MGT STRATEGY
THE ELEMENTS OF BANK MARKETING
TYPES OF MARKETING IN SERVICES
COMPANIES / FIRMS
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INTRODUCTION
THE GOAL OF FINANCIAL SERVICE
ORGANIZATIONS
The main goal for any financial service organization is
to create for itself a sustainable competitive
advantage in the market place.
In order to do this , it has to generate products ,
services or ideas that offer superior value for its
customers that is not easily imitated / copied by
competitors.
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A) WHY MARKETING???
-Becoming necessary in todays banks competitive
environment.
LIBERALIZATION ON BANKING INDUSTRY
BANK MERGER
IT CHANGES

-Banks have to think seriously about how they can compete

EFICIENT AND EFFECTIVELLY.
-This have led them to pay increasing attention to marketing
TECHNIQUES & STRATEGIES.

B) WHAT IS MARKETING?
-According to American Marketing Association
-marketing is the process of planning the
conception , pricing , promotion and distribution
of goods and services to create exchanges that
satisfy individual and organizational objectives
-Bank Marketing has been defined as a part of
management activity which seems to direct the flow of
banking services profitably to selected customers

Several terms in the

definition on marketing
First :Marketing is a process
It is a combination of several activities
performed in a systematic way and not
just a single transaction.

How the process

involve?
Eg:. Before a residential home loan scheme is sold, the bank has
:
1. To identify its target market
2. Structure the home loan scheme that meets the needs of the
target market
(through a series of steps must help them understand its benefits)
3. After the customer purchases the scheme, the bank must be in
constant touch with the customers and service them
All this part of mktg & could involve many procedures & many
people!
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Several terms in the definition

on marketing
Second:Marketing involves planning
conception, pricing, promotion and
distribution activities.

These activities are often called

the 4Ps (Mktg Mix)
Product (conception and creation of products)
Pricing, Promotion & Place (making the product
available at the right place for the customer,
which is the same as distributions)

Product

Price

People

Place

Promotion
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Product/Service
This concerned with the features of the bank products,
and
any option available to the customer.
(e.g. bank lending would include the term of loans fixed or
variable
rate and option to switch from variable to fixed rate or vice versa ).

Products could
include:
S/ac,
Credit card
Fixed deposit
Hire purchase
Housing loan
Share financing
etc

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Price
This refers to the interest rates offered to
depositors and
borrowers, bank charges, commissions for
services.

Price takes many

forms such as:
Interest rates
Commission
Fees
Other charge

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People
In view of the heavy competition, banks expect their staff to
take a pro-active selling or customer service role.
In fact, bankers are more sales persons these days than two
decade ago.
It requires training or re-training and in many cases a
profound cultural change in the bank as a whole, as people
adjust to new selling roles.
In the marketing of financial services, it is imperative that
the staff (people) takes the centre stage in order to achieve
success.

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Promotion refers to variety of activities which

include:
Personal selling
(e.g; informing customers about new products
by
customer service representatives or teller)
Sales promotion
(e.g; giving gifts for opening new a/cs)
Advertising
(e.g: n/paper or tv advertising of banks
services)
Publicity
(e.g: favourable media reports of banks
reputation & integrity)
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Place
Where the product or service is being
made available to the customer, or
how can the customer obtain the
service.
(e.g. branch network, ATMs, Internet
banking).

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Contd.
4Ps represent the marketers view of the
mktg tools available for influencing buyers.
From a buyers point of view, each mktg
tool is design to deliver a customer benefit

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Several terms in the

definition on marketing
Third:Marketing is directed at satisfying
individual and organization objectives.

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 Individual objectives refer to the satisfaction of

customer needs and wants.

A need is a state of felt deprivation. Eg: hunger,
thirsty, lack of shelter & financial insecurity are
all physical or emotional states of deprivation.
Wants are how these needs manifest(nyata)
themselves & shaped by culture and personality.
Eg: when American is hungry, he may want a
hamburger to satisfy the hunger need while
malaysian looks for nasi lemak.
Similarly a financially insecure individual may wish
to invest in time deposit (if he/she risk-averse)
But if he/she a risk prone individual may invest in
speculative stocks.
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Keperluan (Needs)
Keperluan merujuk kpd sesuatu kenyataan tentang
apa yg amat diperlukan oleh seseorg individu. Ia
terhasil secara semulajadi di dlm setiap diri manusia.
Seboleh mungkin pengguna akan cuba memenuhi
keperluan asas terlebih dahulu sebelum memikirkan
mengenai keperluan yg lain.
Contohnya setiap org memerlukan makanan, pakaian
& tempat tinggal sebgi keperluan asas. Keperluan ini
juga dikenali sebagai keperluan fisiologi. Tanpa
pakain, tempat tinggal & makanan, individu tsb
mungkin menjalani kehidupan yg tdk normal.
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Kehendak ( Wants)
Konsep asas yg kedua ialah Kehendak. Iaitu satu bentuk
keperluan manusia yg terbentuk oleh persekitaran budaya &
personaliti seseorg melalui proses pembelajaran.
Misalnya, setiap org memerlukan air ketika dahaga tetapi
setengah org berkehendakkan air mineral dalam botol &
sesetengahnya pula lebih suka minum coca-cola.
Biasanya kehendak kpd makanan atau pun lain2 barang
keperluan tidak terbatas sekiranya kita ada kemampuan
kewangan. Oleh itu apabila seseorg mempunyai kehendak
serta kemampuan utk membeli, kehendak tsb akan bertukar
menjadi permintaan.

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Hierarki Keperluan
Maslow
5. Keperluan Pncapaian Diri
(Kejayaan)
4. Keperluan Penghargaan Diri
(dihormati & mpyi status)
3. Keperluan Kasih sayang
(disayangi & dicintai)
4. Keperluan Keselamatan
(selamat dari bahaya atau peperangan)
5. Keperluan Fisiologi
(makanan, minuman, pakaian & tempat tinggal)
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 The same basic needs could lead to different

wants among individuals. Its is marketings

responsibility to identify consumer needs & wants
& develop products that satisfy them.
This should be done however in such a way as to
accomplish organizational:
OBJECTIVES,
SUCH AS REVENUE,
MARKET SHARE AND
PRODUCT TARGETS.

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FOURTH:Marketing operates through mutually beneficial

exchanges between buyers and sellers.
There are many ways of acquiring a product, Eg:

begging, stealing & self production. None of these

methods can be called marketing.
Mktg involve the offering of money, goods or
service in return for acquiring the product.
Effective marketers emphasis mutually beneficial
exchanged in which both buyers & sellers are
better off as a result of the exchange becoz this
will lead a long term r/ship with customers.
Finally mktg is equally relevant for physical
products (e.g. toothpaste or airplanes), services
(e.g.banking services, or ideas (e.g.anti-smoking
campaign).

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What is Marketing Strategy?

Marketing mgt refers to the mgt of mktg
activities to attain specific organizational
objectives, such as market share, revenues or
profits.
Marketing mgt strategy includes the follows:
a)
b)
c)
d)

Segmentation of markets
Identification of target markets
Develop positioning & differentiation strategies
Develop & implement a marketing mix for each
target market
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A market consists of all the potential customers

sharing a particular need or want who might be
willing & able to engage in exchange to satisfy that
need or want.
A target market is a collection of current & potential
customers that the firm chooses to serve. Most
markets today are heterogeneous (customers differ
from each other in their wants, purchasing power &
response to marketing stimuli).
One strategy will not be effective for all customers in
the market. To be successful, organization should
first divide these markets into homogeneous subsets
of customers.(refer next slide..)

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These subsets are called market segments.

E.g. Banks divide their markets into commercial
& household/retail customers.
Insurance companies form segments based on
age, income & family life cycle stage.

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STEPS IN MARKETING MMGT

STRATEGY
MARKET SEGMENTATION
TARGET MARKET SELECTION
POSITIONING/DIFFERENTIATION
STRATEGY
MARKETING MIX
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Few financial institutions have the resources to

serve every market segment. Most firms select
one or a few segments as their target markets.
Selection is made on the basis of an evaluation
process which includes factors such as:
size & growth of the segment,
the level of competition in the segment,
the organizations capabilities to serve the
customers in that segment &
the firms objectives.
For each target market, the organization needs to
have a positioning & differentiation strategy.

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Positioning refers to the strategy of identifying

the preferences of the target market customers
& developing an offering as close to the customers
preferences as possible.
E.G. if the customers in a target market are very
price-sensitive & dont care for service, the
company must position itself in line with customer
needs (low price provider to appeal to them.!).
Differentiation refers to attempts on the part
of the organization to persuade its customers that
its offering is superior to its competitors
offering.
E.G. a bank can claim that customers wait for less
time in their bank than in competing banks, or they
offer higher rates on fixed deposits. Whereas the
reference point for positioning is the customer,
that for differentiation is the competitor.
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The positioning or differentiating strategy

leads to the next step in marketing
strategy.
For each target market, the company has
to develop a MARKETING MIX which
consists of the 4Ps as illustrated above
(PRODUCT, PRICE, PLACE @
DISTRIBUTION & PROMOTION).

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Roberts Lauterborns suggested

that the 4Ps correspond to the
customers 4Cs:
4Ps
Product
Price
Place
Promotion
Marketers View

4Cs
Customers needs &
wants
Cost to the
customer
Convenience
Communication
Customers View
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The Four Pillars of The Mktg Concept

1)
2)
3)
4)

The Four Pillars that support the marketing

concept are:
Customer orientation
Profit
Total Company effort
Social responsibility.

These pillars help ensure the success of a business.

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The Four Pillars of The Mktg Concept

SUCCESSFUL BUSINESS

CUSTOMER
SATISFACTION

TOTAL
PROFIT

COMPANY.
EFFORT

SOCIAL
RESPONS
IBILITY

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1) CUSTOMER SATISFACTION
The marketing concept recognizes that customer
satisfactions is the business that all businesses are
in. A truly mktg oriented company believes that its
financial objectives will be best served by identifying
its target market & recognizing & responding to that
markets needs & wants,
Highly satisfied customers tend to be repeat
purchasers, &
it is much more expensive to generate a new customer
than to provide additional service to an existing one.
Satisfied customers are also more loyal!, thus less
likely to stray (follow) to competitors, & less price
sensitive than customers who are not highly satisfied.

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2) PROFIT
The mktg concept does not imply that customer
satisfaction is the only objectives of an
organization. It recognizes that to reach profit
objectives there must be a balance between
customer satisfaction & profitability.
E.g. A bank might improve its cust satisfaction with
its services by offering curent a/c with no fees,
service charges, or minimum balance requirements.
The highly successful mktg organization finds ways
to use its resources in the most efficient way
possible consistent with cust needs & wants.
The market concept believes that profit objectives
can best be met by providing customer satisfaction.
Greater cust. satisfaction should improve
earnings by increasing fee income & deposit
balances.
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3) TOTAL COMPANY EFFORT

The mktg concept must become the philosophy of
the entire organization, not just the mktg
department.A firm is mktg itself every time a
cust. Interacts with an emplyoee.
E.G. a teller is engaged in mktg when greeting a
cut. If the teller rude, then as far as the cust. is
concerned, the bank is rude.
The commitment to cust. satisfaction must be
made & supported by top mgt & implemented in
the form of a corporate culture that places the
cust at the center of all the banks activities.
Each department must be cooperate and work
together to meet organization goals.!!!
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4) SOCIAL RESPONSIBILITY
Social responsibility is an important part of the
mktg concept, especially for banks.
Banks like other firms are expected to play an
active roles in the community. Bank often support
on education (scholarship), sports, develop
infrastructure (bus stop), sumbangan kpd org2
miskin, anak2 yatim, bantuan perubatan & etc.
Sponsorship (eg: Kolej Maybank, Kolej Bank &
Muamalat).

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Marketing Mgt
Philosophies
1. Production concept
The assumption is that if an organization makes the

product available & affordable to the consumers,

they will buy it.

2. Product concept
The emphasis in this philosophy is on developing

innovative & technically sophisticated product.

(emphasis on R &D)

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Contd.
3.Selling Concept
Companies are guided by the assumption that

products need to be aggressively pushed &

promoted.
Even, bad & unneeded products can be sold through
aggressive salesmanship.

4. Mktg Concept
The mktg concept believes that organisational

objectives could be best achieved through customer

satisfaction.
The role of mktg is to identify customer needs &
wants, help in developing products that satisfy those
needs.
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Contd.
5.Societal Marketing Concept
To generate superior value to their customers by

improving the consumers & societys well being.

E.g: BSN contribution to the community through the
opening of the branches in rural areas to bring bank
services to the outlying areas, building bus shelters,
donations & extending scholarships to assist in the
education needs of the community.

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Mktg Concept vs
Societal Mktg Concept!
Mktg concept focuses on customer
satisfaction & company profitability
while
Societal mktg concept concerns about the
long-run well-being of the environment &
society. (the long-term welfare of the society
as a whole)
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THE ELEMENTS OF MARKETING

The marketing approach refers basically to 4 steps.
i)

Research to determine customers financial

requirement

ii) Design new services or innovate old ones according

to the findings.
iii) Market services to the customer for whom they
were researched and designed (this includes
pricing, promotion and distribution) at a profit.
iv) and, satisfy the customers financial needs.

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MAJOR CHARACTERISTICS OF
BANK SERVICES TODAY!
1) Tangibility-ATM, Self automated machine,
2) Intangible-services/products
3)Highly individualized marketing system
4) Lack of special identity-image
5)Wide range of products /services
6)Geographical dispersion-berselerak
7)Growth must be balanced with risk
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5. The Bank Marketing function

-Focuses its attention on the following activities:

a) Customers behaviour, attitudes and segmentation

b) Branch management, locations and distribution of
banking services;
c) Advertising, communication, promotions and
publicity
d) Product / service development
e) Pricing of banks services
f) Defining marketing strategies , administration &
controlling the marketing program
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g) Marketing research that attempts to collect,

investigate ,analyze and interpret market
developments.

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The objective of the marketing process is

profitable sales of services that satisfy customers
financial requirements and needs.

It puts the emphasis on customers needs

satisfaction, at a profit to the bank. Competing
successfully means doing it on a profitable basis.

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The marketing approach to banking

service
1. Identify the customers financial
needs and wants

6. Forecasting and research

future financial market needs

5.Distribution : set up suitable

distribution channels and bank
branches

2.Develop appropriate banking products and

services to meet customers needs

3.Pricing : determine the prices for

products / services development

4. Advertise and promote the

products to existent and potential
customers of financial services

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Stage 1- it starts and concludes with identifying and

satisfying customers needs.
Stages 2 through 4, this process-is also called marketing
mix and has a special importance in any marketing
programme.
-A marketing mix is a term used to describe a blending of
decisions about product services , place, promotion and
price

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-These decisions act on each other, while they are being

mixed together,

e.g: : A decision on price also will affects decision on

promotion!!.
These decisions must be evaluated continually, if the total
marketing programme is to succeed.
-Banks must manage a collection of marketing mix because
they sell a collection of customer satisfying services to
diverse target markets.

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-It must create marketing programs designed to attract

funds,
it must then convert these funds into other customersatisfying services from uses of credit and buying power
and then
create marketing programs to attract customers for this
funds

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BANK

Marketing mixes
to attract users of
funds and services

Marketing
mixes to
attract funds

TARGET
CUSTOMERS

Marketing Tasks of Banks

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Three Types of
Marketing in Service
Firms

Figure 1

INTERNAL
MARKETING

COMPANY

EXTERNAL MKTG

EMPLOYEE

CUSTOMER
INTERACTIVE MKTG

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1. Company to
Customers: External
Mktg
Traditional mktg, consisting of the 4Ps.
Banks develop new services to meet consumer
needs, price them, promote them & make them
available through convenient locations.
E.g: banks may use ATM to market their products &
services by imprinting the availability of such
products on the invoices @ promoting through the
interactive screen display.

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2. Company to
Employees: Internal
Mktg
The set of activities that are directed at motivating,
training of bank staff.
Most banks perform internal banking through properly
recruiting, training, motivating & reward program.
E.g: Hongkong Bank conducts basic banking courses
for new staff to familiarize them in respect to the
banks operation.
Employees are also provided with reference
guidebooks for commonly encountered problems @
frequently asked questions to assist them in their
communication with customers.
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3.Employees to
Customers: Interactive
Marketing
The perceived quality of the service depends upon
the interactions between employees & customers.
To ensure that these interactions are satisfactory,
banks monitor them & coach their employees to
handle the situations effectively.
e.g: Hong Kong Bank staffs are trained in sales
techniques & negotiation skills,
a/c relation mgt programmes are conducted for a/c
mgrs in priority banking department so that they can
manage their a/cs more affectively.
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SUMMARY
Marketing is a process-It is a combination of several
activities performed in a systematic way!!!
Marketing mix include product, price, place &
promotion.
Marketing is undertaken to satisfy customer needs and
wants and to fulfill organizational objectives.
Marketing operates through mutually beneficial
exchanges.
Marketing is equally relevant for goods , services or
ideas.
Marketing plays an indirect as well as direct role in
creating superior value for its customer.
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