that concentrates on supplying a particular product type to a range of customer groups is pursuing a product specialization strategy. This approach to market targeting may be particularly appropriate to organizations with particular strengths or knowledge in relation to a given technology or product. Thus, Al Baraka Islamic Bank in Bahrain, Bank Islam in Malaysia and the Islamic Bank of Britain can be seen to be pursuing a product specialization strategy by offering Islamic financial services (a particular product type) to a range of different cus- tomer groups (segments) which range from retail customers needing very simple banking products through to businesses requiring very complex financing arrangements.
4. Market specialization. This approach is the opposite to product specialization.
Rather than concentrating on a particular product, the organization chooses to specialize in meeting the needs of a particular customer group. This strategy may be most suitable where knowledge of the customer group’s particular needs is a particularly important basis for establishing a competitive advantage. Private banks pursue this type of approach in relation to high net-worth individuals – they seek to provide a range of different financial products to meet the needs of the high net-worth customers.
8.6.4 Customized targeting
This approach represents the ultimate manifestation of the segmentation concept, based as it is upon a separate, tailored marking mix for each customer. Some mar- kets lend themselves more naturally to a customized approach, especially those that are in service sectors involving a high degree of human interface. In the financial services sector, customized targeting is most in evidence as part of a hybrid strategy in which a distinct set of services (such as investment banking) is offered to a particular segment (such as large corporations) and then the service is customized to individuals within that segment.
the brand or organization. When successful, positioning results in a brand or com- pany being seen as distinctive from its competitors.
To be commercially advantageous, positioning should be based upon product and service characteristics that:
● are relevant to the target segment
● achieve differentiation from the competition
● can be communicated clearly to the market
● can be sustained.
Positioning is a truly strategic concept that requires a considerable investment over a prolonged period of time. It is the primary manifestation of competitive advantage, and represents a considerable source of brand and corporate value. To be successful, it requires alignment between how an organization (or brand) wants itself to be perceived and how it is actually perceived by consumers.
The brand characteristics upon which positioning may be built can relate to demonstrable product and service attributes or image-related factors. McDonald’s has historically based its positioning on features concerning fun, food and family, which is perceived appropriately through the entirety of the consumer’s engage- ment with the brand. The company employs the tag-line ‘mmmm, I’m loving it’, which conveys the sense of enjoyment. Burger King, on the other hand, has a posi- tioning that is based on more explicit reference to product quality communicated in a more serious manner than McDonald’s. L’Oréal is an example of a brand whose position is based more on image than specific product features. Its hair- and skin- care products use the tag-line ‘Because I’m worth it’ to convey the notion of products that are about self-indulgence, and they are priced accordingly. Designer-label luxury goods are positioned very much on the basis of an image of exclusivity rather than the tangible features of the products themselves.
Positioning is less well-developed as a concept in the field of financial services than in the field of consumer goods. Given the earlier assertion that it takes time to establish a successful position in the mind of the consumer, it is perhaps rather early days to give a definitive view on financial services positioning. What we can say is that financial services positioning operates to an overwhelming extent at the corpo- rate level as opposed to that of the individual product or brand. In this context, organizations have relied on positioning with respect to product/service attributes or image-related factors in much the same ways as is observed in the tangible goods domain. Morgan Stanley’s position is based on product/service attributes and emphasizes ‘excellence in financial advice and market execution’. Similarly, the Standard Bank of South Africa aims to be ‘Simpler. Faster. Better’. Examples of approaches that are more image-based include HSBC, which positions itself as ‘the world’s local bank’
to create the image of a bank that delivers value on the basis of both local knowl- edge and global strength. Similarly, in Japan, where banks have traditionally placed most emphasis on serving corporate clients, Shinsei Bank emphasizes its orientation towards satisfying retail customers and building strong relationships.
The Co-operative Bank is an example of an organization that positions itself on the basis of an image-related attribute. When it conducted a review of its competi- tive position in the early 1990s, it anticipated that its future position would be based upon product or service attributes. Such attributes could have included factors like
the number of branch outlets, range of services, quality of service delivery, charges, interest rates, investment returns and so on. This is a fairly predictable approach to branch-based financial services, and it would have been difficult for the Co-operative Bank to differentiate itself from its larger rivals on such a basis. A spark of intuition and judgement resulted in its choice of ‘the ethical bank’ as the basis for its position.
Case study 8.1 shows how Co-operative Bank’s allied financial services business CIS has reflected an ethical stance in its approach to investment fund management.
Headquartered in Manchester, England, CIS is the only Co-operative insurer in the UK and is one of the largest providers of personal financial services in the country. A particular point of interest is that the Co-op has developed a strong affinity with that section of the population that displays a strong ethical orien- tation towards a range of issues. Indeed, the Co-operative Bank has clearly posi- tioned itself as the ethical bank. What is interesting is the way in which the Co-op Bank and CIS have adapted their marketing mixes in ways that are consistent with their approach to segmentation and positioning. Here, we consider how the needs of the ethically-orientated segment have been reflected in CIS’s approach to investment management.
As a member of the Co-operative movement, CIS shares this ethical under- pinning which, when applied to investment, has always been construed as requiring the optimization of financial returns for customers. Recognizing the increasing sophistication of the market, in 1989 CIS introduced a range of unit trusts (mutual funds) to which was added, in 1990, a fund that screens compa- nies on environmental, health and safety criteria. These positive criteria are supplemented by negative criteria relating to animal testing, armaments, oppressive regimes, tobacco and nuclear power. Like other CIS products, units in this fund, now known as the CIS Sustainable Leaders Trust, are sold through the Society’s direct sales-force in people’s homes. The availability of this prod- uct has extended the interest in social investment within the Society’s customer base, and the Trust has always been amongst the largest funds of its kind, although it represents less than 1 per cent of CIS’s overall assets. The managers of the fund have been able to demonstrate that the adoption of an ethical approach to a fund’s structure is financially as well as ethically sound. Indeed, the following data, supplied by S&P Micropal, show how well the Trust has performed compared with industry acknowledged benchmarks
£1000 invested on 31 December 2002 was, on 31 December 2005, worth:
● £1664 if ‘invested’ in the FTSE All-Share Index
● £1672 on the basis of the Average UK All Companies Fund
● £1733 if used to purchase units in the Trust (assuming the income was reinvested).
Continued
Case study 8.1 Ethical investment policies and the
ethically-orientated investor segment – the Co-operative Insurance Society Limited (CIS)
A variant on product/service positioning is positioning that is based upon serv- ing the needs of the distinct target segment – i.e. a focused positioning strategy. By means of such a strategy, the organization is trying to create the perception that it has a unique understanding of the needs of the individuals that compromise its target segment. The implication is that the overall value reposition will be seen to be superior to that of competitors in the eyes of customers. Police Mutual Assurance There is a continuing market for screened investments, although the potentially greater financial risk must be made clear to customers. Nevertheless, the trend has been towards using enhanced analysis required to integrate social, ethical and environmental (SEE) considerations with the investment mainstream. In 1999 CIS launched a programme known as ‘Responsible Shareholding’, applying to all equity funds and based on engaging with com- panies on matters of concern. These matters were identified through a customer consultation exercise, from which an ethical engagement policy was developed which provides the basis for approaching companies. In part, this represents a reaffirmation of the Co-operative movement’s democratic roots, but it also acknowledges the fact that SEE issues are increasingly important in establishing a company’s social responsibility and future sustainability. This does not relate only to a company’s community activities, but also to the way in which it devel- ops its workforce, for instance, and above all how it governs itself in the relationships between management, board, shareholders and other stakehold- ers. Analysis of corporate governance is an important part of Responsible Shareholding, and CIS undertakes to vote on every motion put to investee com- pany AGMs (whenever possible), supplemented if necessary by attendance to raise questions from the floor. Reporting is seen as an essential component of corporate responsibility, and detailed analysis takes place of disclosure on mat- ters such as executive remuneration and SEE issues, in order to determine how the Society’s votes will be exercised. Along with some other UK investors, CIS has been recognized in the press as one of the foremost UK institutions practis- ing Socially Responsible Investment (SRI). It is becoming increasingly accepted that such activities contribute to investment sustainability – UNEP’s Asset Management Working Group concluded in 2004 that environmental, social and corporate governance issues affect long-term shareholder value, sometimes profoundly. If this is proved, it will demonstrate that an active response by com- panies to SEE and governance concerns voiced by customers does enhance the financial returns that they receive.
Source: Robert Taylor, CIS Investment Management (personal communication).
Case study 8.1 Ethical investment policies and the
ethically-orientated investor segment – the Co-operative Insurance Society Limited (CIS)—cont’d
and Teachers Assurance position themselves as specializing in the needs of employ- ees of the police service and education sector respectively.
Although positioning in the field of financial services is overwhelmingly at the corporate rather than product-brand level, there is a growing incidence of portfolios of organizational brands that reside within an overall corporate structure.
Smile.co.uk is positioned as a youthful, approachable high-tech brand within the Co-operative Financial Services umbrella organization that includes the ethical Co-operative Bank. HBOS retains the clearly distinctive positioning of organizational brands such as the Bank of Scotland and Halifax. Similarly, Lloyds TSB continues to support the distinctive positioning of the Scottish Widows and Cheltenham and Gloucester brands within its overall brand architecture.
8.7.1 Perceptual mapping
It is important to have some understanding of the type of processes that are used to determine a company’s or product’s position. One commonly used approach is perceptual mapping, which relies primarily on information about consumer percep- tions of both the organization and its competitors. This information may be based upon either quantitative research-based data or more subjective judgements. It is important to remember that it is not simply a product that is being positioned but, rather, the complete product or corporate offer, including product and service fea- tures, image, quality and pricing. Perceptual mapping requires that an organization first identifies the main feature of a product category available to consumers. The next step is to establish the relative importance of those features to consumers, and the relative performance of competing offers. Market research is used to arrive at the relative importance of features and competitive ratings. Qualitative research meth- ods, such as the use of focus groups and individual depth interviewing, are useful means of seeking original and insightful new positions.
Through the research and evaluation process, the organization typically tries to identify two major dimensions of itself or its product that could form the basis of competitive advantage. This is partly a matter of judgement, but may also be supported by more detailed statistical analysis of consumer perception. Figure 8.2 presents a hypothetical perceptual map that might apply to the investment fund management sector. It assumes that the chosen discriminators upon which Company A wishes to base its position are reputation for investment performance and concern for the investors’ interests.
Company A has a competitive advantage arising from its position as a company that is seen to deliver competitively superior investment performance and cares about its customers. Its nearest rival is Company F, and it needs to maintain a close watch on F to ensure that Company A continues to maintain a relatively superior position. Company D is clearly competitively disadvantaged on the basis of its investment performance and perceived concern for investors’ interests. Company E displays relatively high levels of concern for its investors’ interests, but fails to deliver with regard to investment performance. Company B delivers very good investment performance, but comes across as having an uncaring approach to investor interests. Finally, Company C is pretty much stuck in the middle, being just average or both constructs of performance.
Whatever position is decided upon, it must satisfy some basic tests of its likely effectiveness. Jobber (2004) identifies a set of four such tests, namely:
1. Clarity – is the basis of the position clear and straightforward to grasp?
2. Credibility – can the position be justified and validated by the evidence available?
3. Consistency – is the essence of the position communicated consistent over time in all elements of the marketing mix?
4. Competitiveness – does the position result in benefits to the customer that are demonstrably superior to those provided by its competitors?
The crucial test is whether the company (or brand) is perceived to be distinctive.
Positioning presents particular challenges to the financial services industry, owing to the intangibility of its products, the absence of patent protection and the ease with which products and services can be copied by competitors. Arguably, positioning is still in its infancy in many areas of financial services around the world. There often seems to be little that discriminates between the mainstream banks and insurance companies, certainly as far as the perceptions of consumers are concerned. In time we can expect to see more distinctiveness, but it will require a degree of sustained consistency that has so often been absent in the past.