marketing mix
Learning objectives
9.1 Introduction
Discussions of marketing have traditionally focused attention on how to attract new customers – a process typically described as customer acquisition. Increasingly it is recognized that the retention of existing customers may be every bit as important as the acquisition of new ones. The elements of marketing used for acquisition and retention are in many respects very similar, but the ways in which they are used can be quite different. In Part II of this text we focus upon aspects of marketing manage- ment which are particularly concerned with the acquisition of new customers.
Specifically, we focus on the well-established concept of the marketing mix which is introduced in this chapter and subsequently explored in more detail.
9
By the end of this chapter you will be able to:
● understand the relationship between marketing strategy and the marketing mix
● appreciate the differences and relationship between annual marketing planning and the strategic marketing plan
● explain the nature of the marketing mix as it applies to financial services
● understand the challenges associated with developing a financial services marketing mix.
The marketing mix is a term used to describe the marketing tools that a manager controls. Managers must make decisions about these different tools in order to create a clear competitive position in the market for the organization’s products and services that is consistent with the nature of the overall marketing strategy. The tools that make up the marketing mix are often referred to as the ‘4-Ps’ – product, price, promotion and place – although in services marketing this is often extended to 7-Ps by adding people, process and physical evidence. It is through the marketing mix that strategy takes practical effect. In other words, the marketing mix is the practi- cal expression of the marketing strategy. Consumers have little or no knowledge of, or interest in, strategy. What concerns them is the utility they experience from the contact they have with the marketing mix.
It is important to recognize that decisions about the marketing mix have both strategic and tactical dimensions. The strategic dimension of the marketing mix is primarily concerned with decisions about the relative importance of the different elements of the marketing mix. For example, promotion, and particularly television advertising, may play an important role in the marketing mix for many retail finan- cial services, but be almost irrelevant for specialized corporate financial services.
Equally, a mass-market financial service such as a standard bank account or mortgage will need a distribution system that makes it easily available to a large proportion of the population, whereas a highly specialized product can rely on a far more selective system of distribution. In contrast, the tactical dimension of the marketing mix is con- cerned with specific decisions about the individual marketing tools. Thus, for exam- ple, once a decision has been taken about the general approach to pricing (e.g.
premium pricing), a specific decision is required regarding the actual price to be set.
The purpose of this chapter is to provide an overview of the marketing mix for financial services, paying particular attention to the way in which the marketing mix may be used for customer acquisition. The traditional 4-Ps are discussed more fully in the following chapters. The chapter begins with a brief discussion of short-term, annual marketing planning, to set a context for discussion of the mix elements. This is followed by a discussion of the strategic issues relating to the marketing mix, and the subsequent section provides an overview of the individual mix elements and their rel- evance in a financial services context. The chapter moves on to explore the challenges associated with using the marketing mix for customer acquisition in financial services.
9.2 Short-term marketing planning
In Chapter 5 we considered strategic marketing planning and recognized that its primary role is to set direction over the medium to long term – typically 3–5 years.
It is upon the platform of the strategic marketing plan that major policy decisions are made, such as selecting which segments are to be served and establishing how the organization will differentiate itself in delivering value to customers and thus achieve competitive advantage. To complement the strategic marketing plan, best practice dictates that an organization should have an ‘annual marketing plan’. If the strategic marketing plan is about the setting of long-term direction and the determi- nation of competitive advantage, the annual marketing plan is about achieving a joined-up and co-ordinated approach to achieving short-term marketing objectives.
In the way that there is no universally agreed process and template for strategic marketing planning, there is no such model for the annual marketing plan.
However, it is important that there is consistency between a given organization’s strategic and annual marketing plans. Moreover, it is important that organizations that comprise a number of individual strategic business units (SBUs) or business lines adopt a common approach to marketing planning. For example, a broad-based financial services provider such as HSBC might choose, say, to produce an annual marketing plan for its range of mortgage and property finance products. This may be quite separate from, for example, its pension product range. Whilst both of these product groups will be guided by the overall corporate positioning statement of being ‘The World’s Local Bank’, they each nonetheless operate in quite distinct marketplaces. Therefore, each will have quite different requirements in respect of the market-specific objectives that they specify, the elements that need to be consid- ered when analysing the marketing environment, and the characteristics of the segments that they identify and target. For example, the competitor set that applies to pensions products will vary greatly to that of the mortgage area. This is an important point, as there are real dangers of conducting a marketing plan at too aggre- gate a level. There are no straightforward solutions to this difficulty other than to say that all organizations must approach the issue in a way that best suits their particular circumstances, such as product range, scope and organizational structure.
The conduct of the annual marketing plan comprises two components, namely:
the process and the written plan itself. It must be borne in mind that there should not be a strict one-size-fits-all approach to the annual marketing plan; rather, it should be tailored to suit the particular characteristics of any given organization.
However, the model shown in Figure 9.1 represents a sound core structure for the ultimate output of the planning process.
The plan should make it clear where responsibility and accountability lies for marketing objectives and the successful completion of marketing-mix activities.
A brief restatement from the strategic marketing plan to ensure consistency
Mission
Executive summary (for this plan) Situation review (updated) SWOT analysis (updated) Objectives (for the budget year)
Product management and development
Pricing Distribution Promotion
Internal communication Summary activity schedule Budget
Accountability and evaluation Material specific to
the annual plan
Marketing mix
Implementation
Figure 9.1 The annual marketing plan.
Ownership should be made clear and unambiguous, and sole ownership for delivery should always be sought. It is common to encounter a plethora of shared account- abilities, which results in an unclear sense of ownership. Indeed, well-defined accountability is a necessary prerequisite for an appropriate appraisal system and performance review. This section of the plan can also be used to summarize the array of key performance indicators (KPIs) that arise from the marketing-mix activities.
In the discussion of strategic marketing planning in Chapter 5, explicit reference was made to internal communication. The lack of sufficient emphasis upon this issue is a major contributory factor to the failure of marketing plans to achieve their objec- tives. It is very rare for a marketing objective in the field of financial services to be accomplished without the involvement of people in other functions. In the case of an insurance company there may be a sales-force to consider; a building society must take care to inform branch staff. In all types of financial services companies it is vital that administration staff are made fully aware of marketing activities that will impact upon their work. Similarly, IT and business systems colleagues need to know how plans for new products or new product features should be factored into their own functional plans.
A central component of any annual marketing plan will be decisions about the marketing mix and details about how key marketing variables will be managed and controlled. The remainder of this chapter will explore in more detail the concept of the mix as it applies in financial services.
9.3 The role of the financial services marketing mix
It is vital to grasp the point that the marketing mix is what determines the customer experience. Thus, it is the role of the mix to deliver customer satisfaction and result in a stream of margin that delivers shareholder value. Purchase decisions are made by consumers on the basis of the overall service offer and how well this meets their needs. A service offer can simply be decomposed into the elements of product, price, promotion and place (and even people, process and physical evidence), and these form the basis of the traditional marketing mix. Marketing managers make deci- sions about these variables in order to implement a marketing strategy – in particu- lar, they use these variables to create a clear market position and demonstrate how their product meets consumer needs in the target market. This process is shown in Figure 9.2.
The remaining chapters in Part II address in detail those aspects of the mix that have historically been prominent in acquiring new customers. It must be borne in mind that the same elements of the mix also have a part to play in the retention of customers, and the range of the mix in this context will form the focus for Part III of this book.
Each chosen target customer segment should be the subject of a tailored marketing mix. Unless the organization has chosen to follow an undifferentiated strategy, the mix must be adjusted to suit the particular characteristics of each individual segment.
In addition to segmentation, the strategy will identify the basis of the company’s competitive advantage. The chosen form of competitive advantage provides a refer- ence point for the marketing mixes designed for each target segment. Thus, there must be consistency in the design of segment-specific mixes to ensure that the core competitive advantage is in evidence across the range of mixes employed. All ele- ments of the marketing mix must be designed, presented and delivered in ways that are mutually reinforcing and faithfully reflect the company’s chosen basis for differ- entiation.
In practice, there is a range of different marketing tools that marketing managers can use. Thus, when we use the term ‘the 4Ps’ it is important to remember that each
‘P’ encompasses a range of different marketing tools. Some examples of these are as follows:
● Product – includes range of products offered, features, brand, quality, packaging, warranties, terms and conditions
● Price – includes listed price, discounts, payment periods, credit terms
● Promotion – includes advertising, personal selling, sales promotion, publicity, public relations
● Place – includes channels of distribution, location, access (opening hours), staffing.
In managing the marketing mix, it is important to remember that each decision about a particular tool will send a message to consumers. A high price, for example, may be interpreted as indicating high quality. A limited number of outlets for a product or service may imply that it is exclusive, as might advertising in expensive magazines with limited circulation. Thus, if the marketing mix is to be used to create the organization’s desired competitive position there are two key requirements;
1. Consistency with position. The decisions about each mix element must be consistent with the position that has been chosen. Thus, for example, when Maybank
Product Price
Chosen competitive position
Target customers’ needs
Promotion Place
Figure 9.2 Customer needs and the marketing mix.
decided to promote a youthful lifestyle image in Malaysia, it supported that deci- sion with a major promotional event that included a live band, promotional offers for mobile phones and a competition with a VW Beetle as the major prize. These were all activities that were seen as being consistent with a youthful image. If the same event had included a performance by a string quartet, and a Volvo as the competition prize, many consumers would have found this inconsistent with the image being portrayed and the promotional event would have been much less successful.
2. Synergy from mix elements. As well as ensuring that an element of the mix is consistent with the chosen position, it is also important to ensure that all the mix elements are consistent with each other. This is important because each element of the mix presents customers with a very clear message about the organ- ization and its products and services. There are very real synergies generated when each element of the mix conveys the same message to consumers.
Equally, if elements of the mix send different messages, then consumers may be confused. For example, the American Express Platinum charge card is associated with high-income consumers and symbolizes prestige and success. It is the fact that it is exclusive that makes it attractive. A press campaign in mass-market media will be inconsistent with the product and the image it projects. There will be no opportunity for synergy, and the image of the card may be damaged because the real target market will not recognize the appropriateness of the card for them.
Thus, an effective marketing mix must aim for consistency and synergy – consistency with strategic position, and synergy from the individual elements.
Individual elements of the mix should not be viewed in isolation; constant cross- referencing is essential to ensure consistency with other elements in the mix.