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Difficulties of Marketing Services.
Introduction:
Drawing marketing strategies for services is always more difficult than drawing marketing strategies for products.
Marketing strategy is part of the corporate strategy; marketing strategy aims to help the corporation to achieve its targets and missions.
Marketing services is very different because services are invisible.
In this assignment we will consider the case of Abbey National that has undergone a fundamental change of marketing strategy and marketing techniques.
Main Text:
Abbey:
The UK government has reformed the banking sector through deregulation and joining banks and building societies in UK retail banking sector.
This has led to increasing competition in the financial sector.
Abbey was searching for a new marketing strategy in order to after it had made a billion pounds of losses in the year 2002.
The starting point for Abbey was to realise that it has to develop a marketing strategy based on customer-led approach in order to return to profitability and rebuild its client base.
For a long-time, Abbey was a product-led bank and not a customer-led bank.
Abbey started drawing its marketing strategy by surveying its customers; the research found that customers considered dealing with Abbey National as boring and baffling (reference: abbey.com).
Difference in market research:
It is very difficult to be customer-led bank in the high street banking sector because the bank has to satisfy all sorts of people from all backgrounds, market research has to be general in order to satisfy as much customers as possible, while in product marketing, market research has to be very specific in order to meet the needs of a segment of the market, Harris,G(2002).
The research indicated that most people referred to Abbey national by Abbey.
The chairman of Abbey National decided to launch a new brand name, which is Abbey.
Abbey has developed a statement in order to convince people that the bank is devoted to them and to sorting out their finances; the statement is that “Abbey is about you and your money”
The re-branding of Abbey will have a very positive impact on the customers and it will make Abbey different in the minds of many customers.
Making Abbey different in the minds of the customers is the only way to attract customers from all backgrounds; people tend to think that different is better and more reliable, Beckwith,H(2001).
Difference in the possibility of segmentation and concentration:
The chairman realised that market segmentation and concentration could only be achieved in the product market but not in the retail banking sector, this is because retail banks provide full package of financial services to people, Abbey could not only concentrate on providing savings or personal accounts or loans, it has to provide the full package of financial services.
The chairman decided to make Abbey look different from other high street banks by making its products simpler in order to make the people feel more comfortable and confident in solving their financial issues.
Making Abbey different from the rest of the high street banks did not only include developing simple financial products but also developing communications strategy in order to communicate this simplicity to its customers.
Difference in the communication strategy:
The clarity in the communications is very important in order to make people from all backgrounds understand that Abbey is the bank for all the people, while the communication strategy in the physical product markets does not have to be necessarily simple and clear, many physical products are communicated in a professional and specialised language in order to target a certain segment of the market.
Differences in the differentiation potential:
Differentiating high street banking financial services is different from differentiating physical products.
Differentiating retail banking services does not lead to premium pricing of high street financial products while differentiating physical products leads to premium pricing.
Differentiating Abbey by making Abbey’s financial products simpler could only pay off by increasing the number of customers but not by increasing the prices of the financial products because of the competition.
In that sense, differentiation in the banking industry is not sustainable because many other banks will attack Abbey by launching counter campaigns in order to gain their lost customers.
Differences in the potential of low cost, low price strategy:
Low price strategy: this strategy is difficult to apply to many categories of the financial products, the reason for that is because of the fact that interest rates are determined by the central bank and interest rates are the basis of pricing many important financial products such as Mortgages and Loans, this leaves banks with limited ability to lower the interest on their loans in the long-term, while in the physical product market, companies can offer very cheap products and very expensive products.
Differences in the quality of the service vs. product:
The only way to keep the customers in the banking industry is by concentrating on customer service.
Customer service is the most important factor in marketing services.
The standard of customer service in marketing services stands for the quality of the product in marketing products.
Measuring the quality of physical products is possible while measuring the quality of the service is very difficult.
Good customer service to some people might be bad customer service to other people, people do not agree what a good customer service is.
There is no way in which we can standardise providing services, service companies provide their services through a series of acts that can be rarely routinised, while providing physical products can be standardised.
The only way to improve customer service is by giving authority to the front-line managers in order to customise customer service and provide what every customer wants.
In the service sector, Service production and consumption happen at the same time while in the physical product sector there is a time gap between production and consumption of the product, Hooley,G, Saunders,J & Piercy, N(2004).
Abbey is working with its employees in order to show its customers that Abbey is a friendly bank that is ready to listen to the needs of the clients and ready to serve their needs.
Abbey trained its employees to use easy language with its customers in order to remove the barrier between the customer and its money, this is not the case in the physical product market this is not a necessity, car driver talk in a specialised language when talking about their cars.
Ethical issues:
The ethical issue in marketing financial products is apparent, many people consider encouraging people to buy financial products such as credit cards and loans unethical, while buying physical products (except Alcohol and Tobacco) by a large number of customers in considered a necessity, Shanmugathan, P, Dhaliwal, S Stone, M & Foss,B(2003).
Conclusion:
Marketing services is more complicated than marketing products, because services are intangible and inconsistent and they are more related to customer needs than products.
Reference:
- Beckwith,H(2001): Selling the Invisible: A field guide to modern marketing, publisher: Thomson Texere.
- Harris,G(2002): Brand Strategy in the Retail Banking Sector: Adapting to the financial services revolution, Journal of brand management, July 2002, vol. 9, no. 6, pp. 430-436(7)
- Hooley,G, Saunders,J & Piercy, N(2004):marketing strategy and competitive positioning, 3d edition, publisher: Prentice Hall.
- Shanmugathan, P, Dhaliwal, S Stone, M & Foss,B(2003): does ethic focus change how banks should implement customer relationship management? Journal of financial services marketing Vol 8.
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