Marketing for Bankers - Introduction

From the library of The Leadership Corporation Australia:

1. How marketing enables banks to offer superior value to their customers?

It is marketing’s responsibility to identify the bank's target customers and understand their expectations of benefits and costs. It is also marketing’s challenge to estimate benefits and costs associated with competitors’ offerings. It is marketing’s role to co-ordinate the bank’s efforts in providing the highest possible benefits-to-costs ratio among the competing firms. Finally, through activities such as branding, positioning, product differentiation, advertising, promotion, the marketing department would attempt to create additional benefits and reduce costs.

What is Marketing?

Marketing is sometimes viewed as being synonymous with advertising and promotion. This is, however, a narrow view. In some of the leading companies around the world, the marketing function is seen in much broader terms. According to the 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 organisational objectives.

Several terms in the definition need explanation. First of all marketing is a process. It is a combination of several activities performed in a systematic way, and not just a single haphazard transaction. Before a residential home loan scheme is sold, the bank has to identify its target market, devise a home loan scheme that meets the needs of the target customers, and through a series of steps must help them understand its benefits. After the customer purchases the scheme, the bank must be in constant touch with the customers and service them. All this is part of marketing and could involve many procedures and many people.

Second, marketing involves conception, pricing, promotion and distribution activities. These activities are often called the Four Ps — Product (conception and creation of products), Pricing, Promotion and Place (making the product available at the right place for the customer, which is the same as distribution). A bank’s products could include checking accounts, savings accounts, credit cards, fixed deposits, investment accounts and so on. Price takes many forms, such as interest rates, commission and fees. Promotion refers to a variety of activities which include personal selling (e.g. informing customers about new products by customer service representatives or tellers), sales promotion (e.g. giving gifts for opening new accounts), advertising (e.g. newspaper or television advertising of bank’s services), and publicity (e.g. favourable media reports of bank’s reputation and integrity). Place or distribution is responsible for making the product available to customers in the right quantity, at the right place and at the right time. This includes channel decisions (wholesaling and retailing), and physical distribution (storage, transportation, logistics), etc. In banks, distribution decisions deal with the number and location of branches, and ATM machines; electronic banking, etc.

Third, marketing is directed at satisfying individual and organisational objectives. Individual objectives refer to the satisfaction of customer needs and wants. A need is a state of felt deprivation. For example, hunger, thirst, lack of shelter and financial insecurity are all physical or emotional states of deprivation. Wants are how these needs manifest themselves and are shaped by culture and personality. For example, when an American is hungry, he may want a hamburger to satisfy the hunger need. A hungry Malaysian on the other hand looks for nasi lemak. Similarly a financially insecure individual may wish to invest in time deposit, if he is risk-averse, but given a risk-prone individual he may invest in speculative stocks. So the same basic needs could lead to different wants among individuals. It is marketing’s responsibility to identify unmet needs and wants and 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 profit targets.

Fourth, marketing operates through mutually beneficial exchanges between buyers and sellers. There are many ways of acquiring a product. For example, begging, stealing and self-production are some ways. None of these methods can be called marketing. Marketing involves the offering of money, another good or service in return for acquiring the product. Effective marketers emphasise mutually beneficial exchanges in which both buyers and sellers are better off as a result of the exchange because this will lay the foundation for a long-term relationship with customers.

Finally, marketing is equally relevant for physical products (e.g. toothpaste or airplanes), services (e.g. banking services), or ideas (e.g. anti-smoking campaign).