examine the buying process as a whole. This largely reflects the difficulties associated with testing decision-process models in their entirety.
Empirical studies relating to the personal market highlight the importance of factors such as confidence, trust and customer loyalty. Some of the common choice criteria in bank selection include dependability and size of the institution, location, convenience and ease of transactions, professionalism of bank personnel, and availability of loans. It would appear, therefore, that the personal consumer is more interested in the functional quality dimension of financial services (i.e. how the service is delivered) than in the technical quality dimension (i.e. what is actually received as the outcome of the production process) (see Grönroos, 1984). This is hardly surprising, given the difficulties consumers have in evaluating services.
In contrast, work relating to corporate customers places much greater emphasis on the importance of interaction and understanding. This is consistent with the notion that issues such as passivity, complexity and problems of comparison are perhaps less important to corporate decision-makers, but that the intangibility and the lack of search qualities means that personal relationships, trust, confidence and reliability continue to be important influences within the purchase process.
‘Leeds Permanent’ and the ‘Northern Rock’ are both organizational names that try to link to an image of stability and security. Equally, a tangible image or association such as the Black Horse (Lloyds) or Direct Line’s red telephone on wheels can serve a similar purpose. Using physical evidence or imagery to tangibilize a financial service is a key element of most marketing strategies. Nevertheless, there are pitfalls associated with this approach, particularly with respect to the development of a tangible image. The image developed necessarily creates expectations in the consumers’ mind and if the organization cannot match those expectations then customer satisfaction may decrease.
Tangibilizing a service addresses the problem of lack of physical form, but is less effective in relation to product complexity and lack of consumer interest (a form of mental intangibility). Two key strategies are important in this respect. First, to address the complexity issue there is a need to focus on reducing perceived risk through building trust and confidence; if consumers cannot fully understand the nature of the service, then they must be able to trust a supplier and feel confident that their finances are being safely managed. Attempts to build such trust and confidence often rely on the longevity of the organizations. For example, The Royal Bank of Scotland claims in its literature that:
You can also be sure that your money is in safe hands. We have been around for more than 260 years, which gives us a wealth of banking experience.
Similarly, MAA claims in its advertising that it is:
a tried and trusted insurance company with over 30 years’ experience in protecting the savings of Malaysian families and investors.
Equally important is the use of third-party endorsements to indicate quality and reliability. Thus Arab Malaysian Unit Trusts Bhd emphasizes endorsements from Standard and Poor’s Micropal for several of its funds, while China Construction Bank draws attention to its status as ‘Bank of the Year’ in The Banker Awards.
The lack of consumer interest in many financial services and the fact that consumption is essentially contingent can often be addressed by focusing on the benefits gained from the purchase of the product. Thus, promotional material for personal loans tends to emphasize the purchases which can be made as a result of the loan (whether cars, hi-fi equipment, holidays or houses). Similarly, marketing for life insurance and other related protection products will emphasize the benefit of security for the policyholder’s dependents. Because financial services are generally products that consumers would prefer to avoid and because they have no obvious value in themselves, marketing must put extra effort into emphasizing the benefits that these services provide.
7.4.2 Inseparability/perishability
The fact that they are typically produced and consumed simultaneously means that financial services are perishable and, most significantly for this discussion, that customers have considerable difficulties with respect to pre-purchase evaluation.
Although an ex ante evaluation of a particular product may be difficult, consumers
can evaluate the organization and can draw on the experience of others.
Accordingly, a common theme in the marketing of financial services is to emphasize the performance and quality of the organization and its people in order that there will be a halo effect from organization to product. Such approaches are often reinforced by active attempts to secure word-of-mouth recommendations. American Express, for example, actively encourages existing customers to recommend new customers, and rewards those customers who do introduce new members.
Furthermore, given the importance of the interaction between customers and employees and the potential role of employees in inspiring trust and confidence, many organizations are increasingly looking at human resource policies, training and internal marketing as means of building more effective relationships with cus- tomers in order to encourage retention and re-purchase. These relationships are seen as being of considerable significance in reducing the levels of both perceived risk pre-purchase and dissonance post-purchase. First Direct, for example, when recruit- ing staff for the launch of its telephone banking service, placed much greater emphasis on the interpersonal skills of customer contact staff than it did on their detailed knowledge of banking practice.
7.4.3 Heterogeneity
A logical consequence of inseparability and the important role played by people is that the quality of service delivery has the potential to be highly variable. Clearly, the potential for such variability will hinder the process of evaluation by consumers.
Mechanization of service delivery through ATMs, automated phone-based systems and Internet-based systems, for example, or even through the use of expert systems, has the potential to reduce quality variability, although this option may not be available for all services. Where delivery cannot be mechanized, then financial institutions must emphasize internal marketing and training to ensure higher levels of consistency in service delivery.
7.4.4 Fiduciary responsibility
The concept of fiduciary responsibility concerns itself with the implicit and explicit responsibilities of financial institutions with respect to the products they sell. The impact of fiduciary responsibility is arguably at its greatest at the purchase stage, when a consumer may find that, despite an active marketing campaign which has stimulated a decision to purchase, the institution indicates that it is unable to pro- vide the product. For example, a common complaint from both personal customers and smaller businesses is that banks will actively promote the fact that they offer a variety of loans, but will then turn down applications from some customers. Similar issues arise in relation to insurance, where many companies are increasingly look- ing to sell only to good risks. In part this may simply reflect the overall importance of profit and an unwillingness to supply loans or insurance when the risk is too high (Knights et al., 1994). However, we should perhaps note that such decisions may also reflect an element of fiduciary responsibility in the sense that financial services sup- pliers are obliged to recognize that many of their ‘raw materials’ are actually funds
provided by other customers. An extension of the idea of responsibility in relation to the management of funds is evidenced in the case of the Co-operative Bank. The bank’s positioning and promotional campaign revolves around its ethical stance and its commitment to the responsible sourcing and distribution of funds.
The selling process itself is also an area of concern because of the substantial information asymmetries which exist between supplier and customer. To address these problems is difficult. The simplest route is perhaps to emphasize honesty and prudence as themes in promotional campaigns. Consider, for example, the HSBC campaign which claims:
We believe that the way forward is to offer a range of financial services honestly, simply and with integrity. That is how we have accumulated 23 million customers in 81 countries and territories.
Furthermore, there are difficulties for financial service organizations in that fiduci- ary responsibility means that they may be promoting products to those individuals who are unlikely to be able to purchase because they are considered to be poor risk.
While clearly this is something that many suppliers seek to avoid, in practice the identification of exactly who is an appropriate customer is difficult and, even with sophisticated marketing information systems, this process will be less than perfect.
Finally, with respect to fiduciary responsibility, there is the issue of the purchase (sales) process itself. Given the information asymmetries that exist between supplier and customer, many customers are vulnerable to high-pressure selling and bad advice. Indeed, this is probably the issue that has done most to undermine the image of the financial services sector in recent years. Nevertheless, there are ways in which these issues can be tackled both internally and externally. One approach which a number of organizations have adopted is to reconsider their reward systems with a view to eliminating or at least reducing the reliance on commission-based selling. In a number of cases the nature of the reward structure (e.g. ‘our salesmen aren’t paid just on commission’) is used as a component of advertising in order to reassure consumers of the high standards of the supplying organization.
7.4.5 The long-term nature and uncertainty of products
Many financial services are either consumed continuously (current accounts, credit cards) and therefore require a long-term relationship, or only yield benefits in the longer term, and the precise nature of these benefits may be uncertain. As indicated earlier, these features of financial services will tend to increase the perceived risk associated with the purchase and decrease consumers’ ability to evaluate the serv- ice both ex ante and ex post. To address this problem, there is again a tendency to rely heavily on marketing activities that emphasize the longevity of the supplier, trust, confidence and reliability. A good illustration of this approach is the TV advertising used by Clerical Medical, which emphasizes the origins of the company during the early part of the nineteenth century and its success at serving particular customer groups since that time. More recently, Royal Insurance has used a campaign that focuses on the relationship between a particular financial adviser and a client; the advert depicts the two individuals growing older together and seeks to highlight the
company’s ability to provide a continuous relationship that meets the individual’s changing financial needs.