Strategies To Overcome Challenges In Financial Services Marketing And Market Segmentation Approaches Used By A Financial Organization

Features that pose challenges in financial services marketing

As the function of the financial service sectors is growing all over the world such as the banking sector, insurance, franchising, hire purchase, customer credit and others, constructing some solid and effective management strategies is becoming a great necessity for the financial sectors (Berg, El-Komi & Kim, 2016). The term ‘financial services’ connotes the activities, satisfaction and benefits that a financial sector offers to its customers providing financial value with the sale of money. There are many competitors which have increased the focus on how to compete in the best possible way and multiply their profit rates (Lovelock & Patterson, 2015).

In general, eight specific features raise some challenges for the financial institutions. These are Intangibility- The issue of intangibility is perhaps the biggest problem in the financial service sectors. The trust entirely depends on the ‘word of mouth ‘and becomes challenging for the provider to convince the customer to invest because he/she cannot see the benefit the investment is going to yield after a particular time (Paul, Mittal & Srivastav, 2016). Inseparability-The customer has to be present physically while the process of purchasing service continues in these sectors. It becomes challenging when one bad result is visible to other customers present there, disturbs their mindset and consequently they deny to invest. Heterogeneity- The quality and standard differ from firm to firm and provider to provider within the same firm. Inconsistency trembles the trust of the customers which is threatening for the providers.  Perishability- In financial industries few services are limited for a particular time. On the other hand, the supply of services often does not meet the demand of the customers. The financial service institutions face problems while managing the demand and the flow of supply. Fiduciary responsibility- The customers expect a set of promises, care and responsibility from the providers based on which they can invest faithfully (Al-Hawari, 2015). It creates complicacies if any advice given to the customer by the service provider does not yield the expected outcome. It affects the reputation of the firm. Two-way information flow- The customers and the service provider stay in regular contact with each other and any case of confusion, one reaches the other via telephone or emails and other tools of communication (Armstrong et al., 2015). Unlike other features, this feature is entirely positive in nature and can bring opportunities for the customers and the providers too. Contingent Consumption- Sometimes it is suggested that the amount of money invested in the financial products, does not return in a straight consumption profit (Maimbo & Melecky, 2014). It creates a negative impact on the minds of the customers, and they prefer saving their money rather than investing it somewhere. Period of consumption-  There is a suggestion that a lot of financial products are long – term. The maturity period of the investment is long and tiresome (DeAngelo & Stulz, 2015).

HSBC’s marketing strategy to overcome these challenges

The best strategies of fighting with the difficulties that come along with the features of the financial services can be seen in HSBC (The Hong Kong and Shanghai Banking Corporation), a multinational financial organisation having around 3,900 offices running successfully in 67 countries all over the globe (hsbc.com, 2018). The foundation of their marketing strategy is building better relationships with the customers providing enriching service to them that help to grow their wealth potentially. They have a special kind of tool called ‘Goal Planner’ that helps the customers gain more insight into the investment they are about to make, and they can assess the subsequent risks (if any). The tool suggests appropriate solutions according to the needs of the customer helping him/her in choosing the right plan (hsbc.com, 2018). The customer receives proper e- information regarding the market positions all around the country and a long list of policies with their pros and cons. After planning his/her investment, a handout of everything is provided by the tool itself. The issue of ‘word of mouth’ is solved the moment the customer chooses logically with proper information.  HSBC is supported by global research competencies and try to provide the superior and productive plans for the customers with more capitalising power (hsbc.com, 2018).  They provide a list of factors that benefit the buyers such as, and they have the medical protection, educational planning, retirement planning and many others. A dutiful team is assigned to each client to evade further complications. It has won the award for best bank in Asia for ‘cash management’ and ‘risk management'(hsbc.com, 2018). They have settled e-business bonds with other top market players to provide modified service to the clients. They have become a part of Bond Asia, a joint venture corporation, an expert in delivering fixed earning transactions wide across Asia. They deal with short-term investment plans attracting the customers to invest. They keep regular contact with the customer thereby, strengthening their trust and relationships.      

Market strategies become productive and successful only if the market segmentation is done correctly. The marketing mix gets tailored to individual buyer requirements supported by carefully selected segments (Xv & Meng, 2015). Market segmentation is the division of the market into specific subgroups which can be chosen as a target to be reached. It is based on the customers who react differently to the marketing mix variables (Kraenzlin & Nellen, 2015). The customers, as well as the businesses, are equally benefitted by the marketing approach which is segment- oriented. Market segmentation helps an organisation to choose its target market and profit areas. Without a target market, it becomes a waste of money and time on the disinterested public. It improves the customer retention and customer satisfaction (Silvestro & Lustrato, 2014). The banks have been focusing on the student market for a long time, and the segmentation strategies that they use are exclusively wide-ranging and more sophisticated. 

Different approaches to market segmentation

There are three basic approaches to market segmentation. Those are – undifferentiated, differentiated and concentrated marketing. Differentiated marketing is another name for mass marketing where the company targets to fulfil the demand of all segments with one product. Differentiated marketing takes place when the company targets different market segments by developing different approaches and puts those on them (Ghosh & Ghosh, 2014). Concentrated marketing occurs when the company targets a particular market segment and prepare a marketing mix that matches the requirements of customers in that specific segment.

HSBC uses the information technology as a significant tool to maintain the functionality scale of the bank worldwide. It focuses on the e-business to attain the marketing objectives, develops the marketing strategy which is the centre of the marketing mix which also includes the market segmentation. The bank gives importance to the needs of the customers and has segmented them in respect to their geographical locations and culture (hsbc.com, 2018). It has been found by the organisation that most of the customers want to stay in a long-term relationship with the organisation which is highly productive, ambitious and market-oriented. The bank utilises its presence in more than 67 countries, knows the public requirements of that region and designs plans accordingly. The trained staffs of HSBC have reduced the cost price of the products they serve and thereby, fascinating more customers to ally with the company (hsbc.com, 2018).

The bank has invested a significant amount to the proprietary bonding with customers and their management to manage the customers more powerfully. The e-banking service of HSBC is spread worldwide and so active that it is connected to the heart of the customers and knows their specifications and needs. The bank’s one of the highest strength is commercial banking which includes the traders, business partnership and trading entities. The responsibility to build relationships and the contacts fall on the shoulders of the network managers who are located in the local branches of the company or the commercial branches. They serve for 25,000 offices and 1,200 consumers for more than 67 countries. They have their own hi-tech soft wares and tools to serve the customers preferences. HSBC had explored 27,000 consumers all over the world and received the customer’s experiences (hsbc.com, 2018). The different policies and services of the company are sincerely aligned with the market segmentation. The bank designs different kinds of credit cards keeping the customer reactions and behaviours in view which gives a tough time to the market rivals. The distinct brand image and the superiority of service have raised the credit-card approach to higher levels. HSBC has designed six types of credit cards to meet the needs of different segments of the customers. The consumers display different buying conducts caused by the presence of a range of similar products (hsbc.com, 2018). The effective marketing mix policy applied by the bank incurs a positive reaction from the customers regarding the credit cards. The product satisfies the needs and choice of the customers making them more inclined towards the product and the company itself (hsbc.com, 2018).

Therefore, the different approaches adopted by HSBC for proper market segmentation and fix its target market are of great importance and use. Their worldwide presence in different regions has enabled them to know the people better and work according to their conveniences. The e-business has also contributed to the development of their target market.  The variety of credit cards has added a new value to the popularity of the bank.

References:

Al-Hawari, M. A. (2015). How the personality of retail bank customers interferes with the relationship between service quality and loyalty. International Journal of Bank Marketing, 33(1), 41-57.

Armstrong, C., Guay, W. R., Mehran, H., & Weber, J. (2015). The role of information and financial reporting in corporate governance: A review of the evidence and the implications for banking firms and the financial services industry.

Berg, N., El-Komi, M., & Kim, J. Y. (2016). Market segmentation and non-uniform Shariah standards in Islamic finance. Journal of Economic Behavior & Organization, 132, 39-49.

DeAngelo, H., & Stulz, R. M. (2015). Liquid-claim production, risk management, and bank capital structure: Why high leverage is optimal for banks. Journal of Financial Economics, 116(2), 219-236.

Ghosh, M., & Ghosh, A. (2014). Financial Inclusion Strategies of Banks: Study of Indian States. International Journal of Applied Financial Management Perspectives, 3(2), 990-995.

hsbc.com. (2018). Retrieved from https://hsbc.com

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Lovelock, C., & Patterson, P. (2015). Services marketing. Pearson Australia.

Maimbo, S. M., & Melecky, M. (2014). Financial sector policy in practice: benchmarking financial sector strategies around the world. The World Bank.

Paul, J., Mittal, A., & Srivastav, G. (2016). Impact of service quality on customer satisfaction in private and public sector banks. International Journal of Bank Marketing, 34(5), 606-622.

Silvestro, R., & Lustrato, P. (2014). Integrating financial and physical supply chains: the role of banks in enabling supply chain integration. International journal of operations & production management, 34(3), 298-324.

Xv, L., & Meng, Q. (2015). Interference in and Ecological Strategies to Mobile Financial Services Developed by Commercial Banks. Open Journal of Social Sciences, 3(07), 194.