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TYBFM Marketing of Financial Services Time: 120 min N.B. (1) (2) All questions are compulsory.

. Figures to the right indicate full marks. Marks: 60

(1) a] what is marketing? Importance of marketing. Marketing is the process by which companies create customer interest in products/services. It generates the strategy that underlines sales techniques, business communication and business development. It is an integrated process through which companies build strong customer relationships and create value for their customers and for themselves. Marketing is used to identify, keep and satisfy the customer. The marketing concept holds that achieving organizational goals depends on the needs and wants of target markets and delivering the desired satisfactions. It proposes that in order to satisfy its organizational objectives, an organization should anticipate the needs and wants of consumers and satisfy these more effectively than competitors. Importance of marketing: The importance of marketing management as follows:
1. supplying required commodity 7. educational value 2. generating profits

6. increases national income

importance of marketing

3. creates employment opportunities

5. improves standard of living

4. widens the market

(1) Supplying required commodity: Marketing identifies the needs of the existing and potential customers and maintains the flow of commodities. In this way, the consumer oriented activities of the marketing management satisfy the needs of the people and thus provide a sense of satisfaction. (2) Generates profits: Marketing satisfies the needs, wants and desires of the customers and also generates profits for the company and money for the economy. (3) Creates employment opportunities: The growth of population and civilization goes on multiplying the needs of the people. In order to meet these needs, very large numbers of ventures are promoted. These enterprises require very large number of skilled and unskilled workers. Marketing in this way generates employment opportunities and thus helps us in the eradication of unemployment. In India, about 40 million people are engaged in wholesale and retail business, including those engaged in transportation and communication, warehousing, insurance and finance. In USA, nearly 1/3rd of its population is engaged in marketing. (4) Widens the market: Marketing of a new product/any new use of an existing product creates awareness and generates demand for all the companies manufacturing that product. The marketing efforts may be done by only 1 company but benefits the entire industry segment. (5) Improves standard of living: Standard of living is measured by quality and quantity of commodities we use. Marketing in addition to supplying the required goods invents and discovers its own novel goods and creates demand for it. We, in this way, are supplied with various and varied useful commodities, the use of which improves our standard of living. TYBFM MFS

(6) Increases national income: Marketing accelerates the pace of economic activities. More and more business activities and enterprises are promoted. The profit and profitability of ventures increase. Consequently income of individuals also increases. As such national income being the sum total of individuals income also increases, all these bring prosperity to the nation. (7) Educational value: Marketing is concerned while selling, advertising and sale promotion. Advertising and sales promotion measures educate the general consumers about the uses of the different commodities. The customers are acquainted with the advantages and disadvantages of various commodities. Even the illiterate people identify the commodities without reading the name of goods on the containers and packages. Marketing educates people and demand for it. (8) To Promote (9) Higher Sales (10) Company Reputation The success of a company often rests on a solid reputation. Marketing builds brand name recognition or product recall with a company. (11) Healthy Competition Marketing also fosters an environment in the marketplace for healthy completion. (12) Considerations Although marketing is hugely important for a business to succeed, it can also be very expensive. In its first year, a company might spend as much as half of its sales on marketing programs.

a. Distinguish between marketing and selling. (7) MARKETING Marketing means all customers wants and 1) satisfying efforts concerning with planning, pricing, promoting product and services. Emphasis on consumer needs and wants. 2) It is consumer oriented. 3) Company first determines customers needs 4) and wants and then decides out how to deliver a product to satisfy these wants. Marketing uses innovation in technology. 5) 6)

SELLING Selling is the transfer of the ownership and possession of the goods to the purchases. Emphasis is on the product. It is production oriented. Company manufactures the product first.

7) 8)

9) 10) 11) 12) 13) 14)

15) 16)

Selling uses existing technology and focuses on reducing costs. Planning is long-run-oriented in todays Planning is short-run-oriented in terms of todays products and terms of new products, product and markets. tomorrows markets and future growth. Marketing is a pull strategy. Heterogeneous Selling is a push strategy. Homogenous Scope is to identify customer need (research), Once a product has been created for a customer creating products to meet those needs, need, persuade the customer to purchase the promotions to advertise said products. product to fulfil his needs. Marketing views the customer as the very Selling views the customer as the last link in the purpose of the business. business process. The consumer demand determines the price, The cost of production and distribution price determines the cost. determines the price. Marketing is one to many processes. Selling is usually one on one process. The main goal is to find the right products for The main goal is to find the right customers for the customers. the products. Marketing shows how to reach to the Selling is the ultimate result of marketing. consumers. Marketing is a comprehensive term which Selling is the part of marketing and thus not a includes selling, advertising and also the comprehensive term. distribution of the goods. Profit is sought by ensuring customers Profit is sought by ensuring higher sales volume. satisfaction. Marketing has to take into consideration both Selling is concerned with the internal the internal and external factors and thus is a considerations regarding production and TYBFM MFS

wider concept.

distribution of good and thus Is a narrower concept.

(1) p. Explain the characteristics of financial services. (8) Financial services refer to services provided by the finance industry. The finance industry encompasses a board range of organization that deal with the management of money. Among these organizations are banks, credit card companies, insurance companies, customer finance companies, stock brokerages, investment funds and some government sponsored enterprises. Characteristics of financial services:Intangibility Nature of Demand Customer Orientation


Characteristi cs Of Financial Services


Quality Measurement Dynamism



INTANGIBILITY: The basic characteristics of financial services are that they are intangible in nature. For financial services to be successfully created and marketed, the institutions providing them must have a good image and the confidence of its clients. Quality and innovativeness of services are the focal points for building credibility and gaining the trust of the clients.


INSEPARABILITY: The functions of producing and supplying financial services have to be carried out simultaneously. These cases for a perfect understanding between the financial services firms and their clients.


PERISHABILITY: Financial services have to be created and delivered to the target clients. They cannot be stored. They have to be supplied according to the requirements of customers. Hence, it is imperative that the providers of financial services ensure a match between demand and supply.


Heterogeneity (DYNAMISM): The financial services must be dynamic. They have to be constantly redefined and refined. On the basis of socio-economic changes occurring in the economy, such as disposable income, standard of living, level of education, etc. Financial services institutions must be

proactive in nature and evolve new services by visualizing the expectations of the market. TYBFM MFS


Fiduciary Responsibility -Peculiar to finance Industry -Implicit responsibility a financial service has over Customers Funds. -Confidence & Trust are key role for Customers


Two Way Information Flow Customer Interaction & Relationship Marketing for the financial organisation.

vii. viii. ix. x.

Transparency Of performance Uncertanity of Outcome Comparabililty CUSTOMER ORIENTATION: The institutions providing financial services study the needs of the customers in detail. Based On the results of the study, they come out with innovative financial strategies that give due regard to costs, liquidity, and maturity considerations for various financial products. This


xii. xiii.

way, financial services are customer - oriented. OWNERSHIP: Ownership in services is not transferred to the customer. It means that you do not own or take away the service, you merely experience it. For example, you may stay at resort for holiday but you do not own its physical facilities like rooms, etc. NATURE OF DEMAND: Demand for services can be seasonal and peak or diminish at certain times. For e.g. demand for holiday packages is highest during summer vacations. QUALITY MEASUREMENT: services are disseminated by the contact personnel of the service provider and any human error on their part due to miscommunication, lack of information or efficiency and behavioural attitudes makes it very difficult to standardize and rate the quality of services. Two implications

1. 2.

Customers are buying a set of Promises when acquiring Financial services The fact that Financial services are low in search qualities, evaluation of them is even more complicated.

Q1.A.What are financial Products? Explain the major types of financial products available in India. Financial products refer to those instruments that help you save, invest, get insurance or get a mortgage. Various banks issue these, financial institutions, stock brokerages, insurance providers, credit card agencies and government sponsored entities. Financial products are categorized in terms of their type or underlying asset class, volatility, risk and return. The major types of financial products are: 1.Shares: These represent ownership of a company. While corporations to finance their business needs initially issue shares, they are subsequently bought and sold by individuals in the share market. They are associated with high risk and high returns. Returns on shares can be in the form of dividend payouts by the company or profits on the sale of shares in the stock market. Shares, stocks, equities and securities are words that are generally used interchangeably. 2.Bonds: These are issued by companies to finance their business operations and by governments to fund expenses like infrastructure and social programs. Bonds have a fixed interest rate, making the risk associated with them lower than that with shares. The principal or face value of bonds is recovered at the time of maturity. 3. Treasury Bills: These are instruments issued by the government for financing its short-term needs. They are issued at a discount to the face value. The profit earned by the investor is the difference between the face or maturity value and the price at which the Treasury bill was issued.


4. Options: Options are rights to buy and sell shares. An option holder does not actually purchase shares. Instead, he purchases the rights on the shares. 5. Mutual Funds: These are professionally managed financial instruments that involve the diversification of investment into a number of financial products, such as shares, bonds and government securities. This helps to reduce an investor's risk exposure, while increasing the profit potential. 6. Certificate of Deposit: Certificates of deposit (or CDs) are issued by banks, thrift institutions and credit unions. They usually have a fixed term and fixed interest rate. 7. Annuities: These are contracts between investors and insurance companies, wherein the latter makes periodic payments in exchange for financial protection in the event of an unfortunate incident. 8. Insurance: A contract in which one party agrees to pay another partys financial loss resulting from a sp ecified event of unfortunate incident. 9. Banking: Banks are financial intermediary institutions for receiving, lending, and safeguarding money as well as conduction other financial transactions. There are several types of banks; nationalized banks, foreign banks, private banks, co-operative banks, agricultural bank, and investment bank. 10. Cash equivalents: There are relatively safe and highly liquid investment options. T-Bills and money market funds are cash equivalents.

q. What are financial Products? Explain the major types of financial products available in India. (7) corporate banking retail banking

small savings and retirement planning

mutual funds

financial products

credit cards

fee based funds non life insurance

life insurance


The various financial products in the financial service spectrum of India are as follows: 1. Corporate Banking: The marketing of bank products to corporate customers is corporate banking. Banking products are classified into fund based products and fee based services. Fund based products are further classified into assets and liability. Liability products include salary accounts, current accounts, fixed deposits and payment cards. Assets include kinds of credit products like trade finance, corporate finance, project finance and term loans. Financial products can be easily copied. Hence innovative security measures need to be introduced. The pricing of banking products have a direct impact on the customer retention and customer acquisition. 2. Retail Banking: Liberalization, economic growth, challenging demographics and technological advancements have fuelled the growth of retail banking in India. The product range in retail banking is classified into 4 categories: liability products, asset products, credit/debit cards and investment products. Liability products include savings accounts, no frill accounts, current accounts, recurring accounts and term deposits. Assets include all kinds of retail loans (housing/personal/gold/education/property/mortgage/vehicle/agricultural loans). The investment products include investments in pension funds, mutual funds and insurance policies. 3. Credit cards: Credit/cash/debit cards facilitate cashless transactions. The credit card business is a LOW margin, HIGH volume business. The various trends and issues in the credit card industry in India include ways to increase credit card usage by retail and corporate consumers, importance of CRM, technology in marketing, issues related to credit card frauds, aggressive selling and privacy related issues. 4. Non-life insurance: The products targeted at individual/retail consumers are motor vehicle insurance, health insurance, personal accident insurance and householders insurance. Other retail products are baggage insurance, transit insurance and pet insurance. The common non life insurance products targeted at corporate/organizational customers are group health insurance, cargo insurance and hull insurance, industrial insurance and fire insurance. 5. Life insurance: This caters to the needs if an individual and group of individuals. Generally they are categorized under term life, whole life, and endowment money back, annuities and pensions and ULIP. 6. Small savings and retirement planning: The objective of savings is to cater to future needs. The small savings schemes introduced by the Government of India help people develop the habit of savings to finance their future needs. Types of small savings schemes and they differ from one another on parameters like investment limits, maturity period, liquidity and returns interest rates offered to the depositors and tax concessions if any. 7. Mutual funds: Mutual funds in India cater to the needs of different types of investors. SEBI which also controls the stock market is the regulatory body for mutual funds as well along with RBI and both these authorities are answerable to the MoF (Ministry of Finance). Mutual funds can be classified as open ended funds, close ended funds, and interval funds based on the fund structure. Based on investment objectives, they are divided into growth funds, income funds, balanced funds and money market funds. Based on specific purpose of use, they are classified as savings schemes, index funds and theme based funds (including sectored /industry specific funds). 8. Fee based funds: Can be broadly classified into corporate and retail fee based services. Organizations avail of such services for meeting both their short term and long term financial requirements. The common fee based funds are offered to corporate clients: cash management services, letter of credit, bank guarantees, bill discounting, factoring/forfeiting, forex services, merchant banking, etc.

Q. Explain the various elements of marketing mix with regard to services. (8) TYBFM MFS

A service is an act or performance offered by one party to another. Services are special kind of products. Service marketing is dominated by the 7 Ps of marketing namely:-

1. Product: - It is "the thing" that will fulfil the needs of your customer. This is the most important thing in the mix, the physical product or the service that the entity is offering for sale to the public. 2. Price: - Price is often considered a proxy for quality. This is the price or amount that the customer needs to giveaway in exchange of the product or service one is offering. Marketing strategy will need to ensure that people will get the perceived value as greater than the price they will need to giveaway. 3. Place: - It often offers a different side of value to the customer. Services are often chosen for their place utility. Closer to the customer means higher probability of purchase. It may be either online or offline, customers should be informed where the products will be available. 4. Promotion:-It plays a role in the perception the possible target audience may have about the service. There has to be a fit between the promotion and the positioning. Online marketing makes it cheaper to conduct promotions and reach as many people as possible. 5. People: - They are crucial in service industry. It includes employees, management, customer service provided etc. 6. Process:-They are important to deliver a quality service. Services being intangible, processes become all the more crucial to ensure that the standards are met. 7. Physical Evidence:-It affects the customer satisfaction. Often services being intangible, customers depend on other cues to judge the offering. This is where physical evidence plays a part. Product Physical features Quality Level Accessories Packaging Warranty Product Lines Branding 2. 3. 4. 5. 6. Price Level Terms Differentiation Discounts Allowances 4. Sales promotion 5. Publicity Place Channel type Exposure Intermediaries Outlet locations Transportation Storage Managing Channels

1. 2. 3. 4. 5. 6. 7.

Price 1. Flexibility

Promotion 1. Promotion blend 2. Personnel selling 3. Advertising TYBFM MFS

1. 2. 3. 4. 5. 6. 7.

Education Training Physical Evidence Facility design Equipment Signage Employee dress Other tangibles Reports Business cards Statements Guarantee

People 1. Employees Recruitment Training Motivation Rewards Team work 2. Customers

1. 2. 3. 4.

Process Flow of Activities A. Standardization B. Customized Number of steps A. Simple B. Complex Customer Involvement

a. Describe the stages in product development.


The Stages are 1. Idea Generation is often called the "fuzzy front end" of the NPD process

Ideas for new products can be obtained from basic research using a SWOT analysis (Strengths, Weaknesses, and Opportunities & Threats). Market and consumer trends, company's R&D department, competitors, focus groups, employees, salespeople, corporate spies, trade shows, or ethnographic discovery methods (searching for user patterns and habits) may also be used to get an insight into new product lines or product features.

Lots of ideas are generated about the new product. Out of these ideas many are implemented. The ideas are generated in many forms. Many reasons are responsible for generation of an idea. Idea Generation or Brainstorming of new product, service, or store concepts - idea generation techniques can begin when you have done your OPPORTUNITY ANALYSIS to support your ideas

in the Idea Screening Phase (shown in the next development step). 2. Idea Screening

The object is to eliminate unsound concepts prior to devoting resources to them. The screeners should ask several questions:

Will the customer in the target market benefit from the product? What is the size and growth forecasts of the market segment / target market? What is the current or expected competitive pressure for the product idea? What are the industry sales and market trends the product idea is based on? Is it technically feasible to manufacture the product? Will the product be profitable when manufactured and delivered to the customer at the target

price? 3. Concept Development and Testing

Develop the marketing and engineering details

Investigate intellectual property issues and search patent databases Who is the target market and who is the decision maker in the purchasing process?

What product features must the product incorporate? TYBFM MFS

What benefits will the product provide? How will consumers react to the product? Prove feasibility through virtual computer aided rendering and rapid prototyping What will it cost to produce it?

Testing the Concept by asking a number of prospective customers what they think of the idea -

usually via Choice Modelling. 4. Business Analysis

Estimate likely selling price based upon competition and customer feedback Estimate sales volume based upon size of market and such tools as the Fourt-Woodlock equation

Estimate profitability and break-even point 5. Beta Testing and Market Testing

Produce a physical prototype or mock-up Test the product (and its packaging) in typical usage situations Conduct focus group customer interviews or introduce at trade show Make adjustments where necessary Produce an initial run of the product and sell it in a test market area to determine customer

acceptance 6. Technical Implementation

New program initiation Finalize Quality management system Resource estimation Requirement publication Publish technical communications such as data sheets Engineering operations planning Department scheduling Supplier collaboration Logistics plan Resource plan publication Program review and monitoring

Contingencies - what-if planning 7. Commercialization (often considered post-NPD)

Launch the product Produce and place advertisements and other promotions Fill the distribution pipeline with product

Critical path analysis is most useful at this stage 8. New Product Pricing

Impact of new product on the entire product portfolio Value Analysis (internal & external) Competition and alternative competitive technologies Differing value segments (price, value and need) TYBFM MFS

Product Costs (fixed & variable) Forecast of unit volumes, revenue, and profit. Discuss. (8)

(2) p. What are the factors affecting consumer buying behaviour -

Buying Behaviour is the decision processes and acts of people involved in buying and using products. A large number of factors influence the consumer buying behaviour. Kotler and Armstrong classify these as:

Cultural Factors: Consumer behavior is deeply influenced by cultural factors such as: buyer culture, subculture, and social class. 1. Culture Basically, culture is the part of every society and is the important cause of person wants and behavior. The influence of culture on buying behavior varies from country to country therefore marketers have to be very careful in analyzing the culture of different groups, regions or even countries. 2. Subculture Each culture contains different subcultures such as religions, nationalities, geographic regions, racial groups etc. Marketers can use these groups by segmenting the market into various small portions. For example marketers can design products according to the needs of a particular geographic group. 3. Social Class Every society possesses some form of social class which is important to the marketers because the buying behaviour of people in a given social class is similar. In this way marketing activities could be tailored according to different social classes. Here we should note that social class is not only determined by income but there are various other factors as well such as: wealth, education, occupation etc. Social Factors: Social factors also impact the buying behavior of consumers. The important social factors are: reference groups, family, role and status. 1. Reference Groups Reference groups have potential in forming a person attitude or behavior. The impact of reference groups varies across products and brands. For example if the product is visible such as dress, shoes, car etc then the influence of reference groups will be high. Reference groups also include opinion leader (a person who influences other because of his special skill, knowledge or other characteristics). 2. Family Buyer behavior is strongly influenced by the member of a family. Therefore marketers are trying to find the roles and influence of the husband, wife and children. If the buying decision of a particular product is influenced by wife then the marketers will try to target the women in their advertisement. Here we should note that buying roles change with change in consumer lifestyles 3. Roles and Status Each person possesses different roles and status in the society depending upon the groups, clubs, family, organization etc. to which he belongs. For example a woman is working in an organization as finance manager. TYBFM MFS

Now she is playing two roles, one of finance manager and other of mother. Therefore her buying decisions will be influenced by her role and status. Personal Factors: Personal factors can also affect the consumer behaviour. Some of the important personal factors that influence the buying behaviour are: lifestyle, economic situation, occupation, age, personality and self concept. 1. Age and life-cycle stage Age and life-cycle have potential impact on the consumer buying behavior. It is obvious that the consumers change the purchase of goods and services with the passage of time. Family life-cycle consists of different stages such young singles, married couples, unmarried couples etc which help marketers to develop appropriate products for each stage. 2. Occupation The occupation of a person has significant impact on his buying behavior. For example a marketing manager of an organization will try to purchase business suits, whereas a low level worker in the same organization will purchase rugged work clothes. 3. Economic Situation Consumer economic situation has great influence on his buying behavior. If the income and savings of a customer is high then he will purchase more expensive products. On the other hand, a person with low income and savings will purchase inexpensive products. 4. Lifestyle Lifestyle of customers is another import factor affecting the consumer buying behavior. Lifestyle refers to the way a person lives in a society and is expressed by the things in his/her surroundings. It is determined by customer interests, opinions, activities, etc and shapes his whole pattern of acting and interacting in the world. 5. Personality Personality changes from person to person, time to time and place to place. Therefore it can greatly influence the buying behavior of customers. Actually, Personality is not what one wears; rather it is the totality of behavior of a man in different circumstances. It has different characteristics such as: dominance, aggressiveness, selfconfidence etc which can be useful to determine the consumer behavior for particular product or service.

Psychological Factors: There are four important psychological factors affecting the consumer buying behavior. These are: perception, motivation, learning, beliefs and attitudes. 1. Motivation The level of motivation also affects the buying behaviour of customers. Every person has different needs such as physiological needs, biological needs, social needs etc. The nature of the needs is that, some of them are most pressing while others are least pressing. Therefore a need becomes a motive when it is more pressing to direct the person to seek satisfaction. 2. Perception Selecting, organizing and interpreting information in a way to produce a meaningful experience of the world is called perception. There are three different perceptual processes which are selective attention, selective distortion and selective retention. In case of selective attention, marketers try to attract the customer attention. Whereas, in case of selective distortion, customers try to interpret the information in a way that will support what the customers already believe. Similarly, in case of selective retention, marketers try to retain information that supports their beliefs. 3. Beliefs and Attitudes Customer possesses specific belief and attitude towards various products. Since such beliefs and attitudes make up brand image and affect consumer buying behaviour therefore marketers are interested in them. Marketers can change the beliefs and attitudes of customers by launching special campaigns in this regard.


Explain the concept of product life cycle with the help of a diagram.


Product life cycle is the stages through which a product or its category bypasses. From its introduction to the marketing, growth, maturity to its decline or reduce in demand in the market. Not all products reach this final stage, some continue to grow and some rise and fall.


Stages of product life cycle Introduction This is the stage of low growth rate of sales as the product is newly launched in the market. Monopoly can be created, depending upon the efficiency and need of the product to the customers. A firm usually incurs losses rather than profit. If the product is in the new product class, the users may not be aware of its true potential. In order to achieve that place in the market, extra information about the product should be transferred to consumers through various media. The stage has the following characteristics: 1. Low competition 2. Firm mostly incurs losses and not profit. Growth Growth comes with the acceptance of the innovation in the market and profit starts to flow. As the monopoly still exists, companies can experiment with the new ideas and innovation in order to maintain the sales growth. This stage is the best time to introduce new effective products in the market thus creating an image in the product class in the presence of its competitors who try to copy or improve the product and present it as a substitute. Maturity In this, the end stage of the growth rate, sales slowdown as the product has already achieved acceptance in the market. New firms start experimenting in order to compete by innovating new models of the product. With many companies in the market, competition for customers becomes fierce, despite the increase in growth rate of sales at the initial part of this stage. Aggressive competition in the market results in profits decreasing at the end of the growth stage thus beginning the maturity stage. In addition to this, the maturity stage of the development process is the most vital. Decline This is the stage where most of the product class usually dies due to low growth rate in sales. A number of companies share the same market, making it difficult for all entrants to maintain sustainable sales levels. Not only is the efficiency of the company an important factor in the decline, but also the product category itself becomes a factor, as the market may perceive the product as "old" and may not be in demand. It is not always necessary that a product should go through these stages. It depends on the type of product, its competitors, scope of the product etc.


Products tend to go through a life cycle. Initially, a product is introduced. Since the product is not well known and is usually expensive (e.g., as microwave ovens were in the late 1970s), sales are usually limited. Eventually, however, many products reach a growth phasesales increase dramatically. More firms enter with their models of the product. Frequently, unfortunately, the product will reach a maturity stage where little growth will be seen. For example, in the United States, almost every household has at least one colour TV set. Some products may also reach a decline stage, usually because the product category is being replaced by something better. For example, typewriters experienced declining sales as more consumers switched to computers or other word processing equipment. The product life cycle is tied to the phenomenon of diffusion of innovation. When a new product comes out, it is likely to first be adopted by consumers who are more innovative than others they are willing to pay a premium price for the new product and take a risk on unproven technology. It is important to be on the good side of innovators since many other later adopters will tend to rely for advice on the innovators who are thought to be more knowledgeable about new products for advice.

At later phases of the PLC, the firm may need to modify its market strategy. For example, facing a saturated market for baking soda in its traditional use, Arm Hammer launched a major campaign to get consumers to use the product to deodorize refrigerators. Deodorizing powders to be used before vacuuming were also created. It is sometimes useful to think of products as being either new or existing. Many firms today rely increasingly on new products for a large part of their sales. New products can be new in several ways. They can be new to the marketno one else ever made a product like this before. For example, Chrysler invented the minivan. Products can also be new to the firmanother firm invented the product, but the firm is now making its own version. For example, IBM did not invent the personal computer, but entered after other firms showed the market to have a high potential. Products can be new to the segment TYBFM MFS

e.g., cellular phones and pagers were first aimed at physicians and other price-insensitive segments. Later, firms decided to target the more price-sensitive mass market.


a. Describe the stages of Consumer buying decision process.

called as consumer.


An individual who purchases products and services from the market for his/her own personal consumption is To understand the complete process of consumer decision making, let us first go through the following example: Tim went to a nearby retail store to buy a laptop for himself. The store manager showed him all the latest models and after few rounds of negotiations, Tim immediately selected one for himself. In the above example Tim is the consumer and the laptop is the product which Tim wanted to purchase for his end-use. Why do you think Tim went to the nearby store to purchase a new laptop? The answer is very simple. Tim needed a laptop. In other words it was actually Tims need to buy a laptop which took him to the store. The Need to buy a laptop can be due to any of the following reasons: His old laptop was giving him problems. He wanted a new laptop to check his personal mails at home. He wanted to gift a new laptop to his wife. He needed a new laptop to start his own business. The store manager showed Tim all the samples available with him and explained him the features and specifications of each model. This is called information. Tim before buying the laptop checked few other options as well. The information can come from various other sources such as newspaper, websites, magazines, advertisements, billboards etc. This explains the consumer buying decision process. A consumer goes through several stages before purchasing a product or service. NEED INFORMATION GATHERING/SEARCH EVALUATION OF ALTERNATIVES PURCHASE OF PRODUCT/SERVICE POST PURCHASE EVALUATION Step 1 - Need is the most important factor which leads to buying of products and services. Need infact is the catalyst which triggers the buying decision of individuals. An individual who buys cold drink or a bottle of mineral water identifies his/her need as thirst. However in such cases steps such as information search and evaluation of alternatives are generally missing. These two


steps are important when an individual purchases expensive products/services such as laptop, cars, and mobile phones and so on. Step 2 - When an individual recognizes his need for a particular product/service he tries to gather as much information as he can. An individual can acquire information through any of the following sources: Personal Sources - He might discuss his need with his friends, family members, co workers and other acquaintances. Commercial sources - Advertisements, sales people (in Tims case it was the store manager), Packaging of a particular product in many cases prompt individuals to buy the same, Displays (Props, Mannequins etc) Public sources - Newspaper, Radio, Magazine Experiential sources - Individuals own experience, prior handling of a particular product (Tim would definitely purchase a Dell laptop again if he had already used one) Step 3 - The next step is to evaluate the various alternatives available in the market. An individual after gathering relevant information tries to choose the best option available as per his need, taste and pocket. Step 4 - After going through all the above stages, customer finally purchases the product. Step 5 - The purchase of the product is followed by post purchase evaluation. Post purchase evaluation refers to a customers analysis whether the product was useful to him or not, whether the product fulfilled his need or not?




Growth of Relationship Marketing as a discipline and practice got an impetus post industrial era. Until this period the products and services were always produced in smaller quality where things were in short supply and were marketed in the local area. Industrialization led to mass production as well as standardization of the products and services. The businesses started expanding their geographic boundaries and exploring new markets where in it became necessary for them to evolve new methods of marketing. They understood the importance of having to reach out and build a relationship with a customer and make efforts to retain the customer rather than keep spending on marketing to new customers every time. As competition is increasing, product innovation is definitely one of the key important elements that the Organizations need to depend upon to steer themselves ahead in the market. Along with the technical leadership the companies necessarily need to know how to reach out to the Customer. Engaging the Customer, Understanding the Customer and building relationship has become the need of the day. No wonder that every individual today is bombarded with calls, emails, personal visits, mailers and all sorts of marketing communications from different companies trying to vie for your attention. From the Credit card Company, bankers to the shopping mall as well as the local restaurant you frequent try to engage you into a relationship that goes beyond a single transaction. One of the outcomes of the evolution of Relationship Marketing has been the birth of CRM solutions Relationship Marketing is a marketing strategy whose objective is to establish and maintain a profitable, longterm relationship with a customer, which goes beyond the initial contact. Relationship marketing is a form of marketing that evolved from direct response marketing; it places emphasis on building longer-term relationships with customers rather than on individual transactions. Relationship marketing involves an understanding of customers' needs and wants through their lifecycle and providing a range of products or services accordingly Traditional marketing is said to use the functional department approach, which is now deemed too limited to provide a usable framework for assessing and developing customer relationships. In today's sophisticated consumer environment, an alternative model where the focus is on customers and relationships rather than markets and products is now required. Relationship marketing is cross-functional and is organised around processes that involve all aspects of an organisation. Many commentators prefer to call it "Relationship Management" in recognition of the fact that it involves much more than that which is normally included in marketing and the practice of relationship marketing has been greatly facilitated by several generations of Customer Relationship Management (CRM) software. Relationship Marketing therefore has evolved not only as a marketing strategy but has been the foundation on which the Companies build their core values and ethics . Relationship Marketing defines the framework for the Company to reach out as well as and orient themselves to the outside markets, to the end customer as well as to the business partners, the suppliers and vendors too. Relationship marketing is not limited to Customers and Suppliers alone but has been extended in scope to cover he internal employees as well as an effective way of reaching out to attracting best talent too TYBFM MFS

In the high tech age where the marketing concepts and tools have undergone major changes with the introduction of e commerce, online selling, network marketing, direct marketing, B2B and B2C business models, relationship marketing has become the base on which the Business strategies as well as Marketing strategies are built. Business Organizations today have begun to recognize and consider the human quotient as well as the emotional quotient of business relationships. Relationship Marketing has evolved as a discipline that helps the Businesses to look beyond transactions to long term business associations. Successful Relationship Marketing strategy helps the Organization deepen and strengthen its revenue streams on long term basis. Relationship Marketing is a considered to be a core Corporate Philosophy on which the Business strategy is built upon. It is reflected in all of the Marketing disciplines including branding, advertisements, promotions, public relations as well as through all sales channels and networks through which the Company reaches out to the Markets and Customers. Marketing Approaches There are two mechanisms through which businesses can drive financial correlation. Customer Satisfaction - Customer expectations are continuously increasing. Brand loyalty is a thing of the past. Customers seek out products and producers that are best able to satisfy their requirements. Customer Retention - The other way round, retention of old customers costs much less than acquisition of new ones. It is 5 times more expensive to acquire a new customer than to retain an old one. The profit generated from the retained customer must therefore handsomely exceed the harvest reaped from the new clientele. The retained customer base is thus a huge intangible asset.

BENEFITS OF RELATIONSHIP MARKETING In general, if your business can have a bulk volume of loyal customers, it can ensure the following benefits: Focus on providing value to customers. Emphasis on customer retention. Customers stay with the company longer. Customers deepen their relationship with company The method is an integrated approach to marketing, service and quality. Therefore it provides a better basis for achieving Competitive Advantage Customers demonstrate less price sensitivity Studies in several industries show that the costs to keep an existing customer are just a fraction of the costs to acquire a new customer. So often it makes economic sense to pay more attention to existing customers. Long-term customers may recommend company's products or services to others, by initiating free word of mouth promotions and referrals. Long-term customers are less likely to switch to competitors. This makes it more difficult for competitors to enter the market. Happier customers may lead to happier employees. (3)

p. Explain identification and analysis of competitors using Porters Five Force Model. (8)
The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into. With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations. TYBFM MFS

Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. These are: 1. Supplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are.

2. Buyer Power: Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else, and so on. If you deal with few, powerful buyers, then they are often able to dictate terms to you. 3. Competitive Rivalry: What is important here is the number and capability of your competitors. If you have many competitors, and they offer equally attractive products and services, then you'll most likely have little power in the situation, because suppliers and buyers will go elsewhere if they don't get a good deal from you. On the other hand, if no-one else can do what you do, then you can often have tremendous strength. 4. Threat of Substitution: This is affected by the ability of your customers to find a different way of doing what you do for example, if you supply a unique software product that automates an important process, people may substitute by doing the process manually or by outsourcing it. If substitution is easy and substitution is viable, then this weakens your power. 5. Threat of New Entry: Power is also affected by the ability of people to enter your market. If it costs little in time or money to enter your market and compete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.


Example - model analysis on Nokia Nokia was founded over 140 years ago in Finland, and since then has become a global organization that operates in over 120 countries worldwide. Nokia has also become a market leader in the mobile telecommunications industry and is most known for their mobile phones and Smartphones. Although recent competition has affected the market share that Nokia has in the telecommunication industry they still hold a strong 29% (2011) of the market share in a forever changing industry The micro environment is the internal factors that are affected by the customers, staff, shareholders and competitors. The best model for evaluating the micro environment of Nokia is Porters 5 forces as this takes into consideration the competitors, customers, suppliers and new entrants. Nokia are in the position where they can bargain and negotiate with any mobile phone hardware maker because there is a high number of equipment suppliers that are readily available to them should their current suppliers attempt to bargain for more money with them. Nokias main argument would be the fact that they are a global organization that has the highest market share in the industry, so the suppliers would not want to lose such an illustrious organization. On the other hand, Nokia have recently created an alliance with Microsoft for their software which would be considered a major coup for Nokia more than Microsoft. As a result, Microsoft will have a lot of power when negotiating a price and share because the deal is more beneficial to Nokia than Microsoft. In conclusion, there is a moderate threat from the powers of suppliers because although the hardware suppliers have a very low power, Microsofts power over the software is very high because theyre very few other organizations who have the expertise and skills to rival Microsoft.

q. Short notes on Services Marketing Triangle? (7) There are three kinds of service marketing triangle that includes: 1. EXTERNAL MARKETING 2. INTERNAL MARKETING 3. INTERACTIVE MARKETING 1. External Marketing In an external marketing, marketers interact directly to the end users. They try to understand the need of customers and satisfy them after fulfilling their demands. In an external marketing, marketers set the pricing policies and create awareness about the products and design promotional strategies and techniques that help to attract the customers towards their products and services. They communicate with their customers directly and convince them to buy their products. They involve in constructive group of activities that helps to design excellent products that meet the customers demands efficiently. TYBFM MFS

Their goal is to create awareness about their products or services among users by communicating with them directly. They also grab the attention of the market and produce interest in their services. External marketing is one of the important parts of service marketing triangle.

2. Internal Marketing In an internal marketing, marketers try to interact with their employees in order to know about the strengths and weaknesses of their organization. The owner of the company tries to involve all of his employees in general discussion, believe on teamwork. Internal marketing involves general discussions, teamwork, training, motivation and rewards on best performance. Employees communicate with themselves on specific project. Teamwork helps to involve employees in their assigned tasks and generate output quickly. Organizational rewards motivate employees to make their performance effective. All employees understand the goals and objectives of the company clearly and try to meet organizational goals. They also know how to grab the attention of their customers. Customers are highly satisfied with their products or services. They always try to satisfy their clients at any cost. If employees of the company are satisfied with their job and performance rewards, they can become an effective asset of any organization. Executives of the organizations fully understand the service marketing triangle if they want to gain a competitive advantage in the market. 3. Interactive Marketing Interactive marketing involves in the delivery of products or service to the customers and front office employees of the company. It is the most important part of the service marketing triangle because it establishes a long term or short term relations with customers. Customers who are highly satisfied with their products or services can become regular customers of their brand. Marketers who cannot compromise on quality and deliver high quality products to their customers have a great community of loyal customers. Their loyal customers always prefer them to buy products. Service marketing triangle has great importance and its components are essential in the success of any business. A well established business always follows the strategies of service marketing triangle. Today, marketers who know how to remove the companys weaknesses and increase the strengths and assets are market leaders. They are aware of external threats and opportunities that boost up their business. They also know how to communicate with their customers, clients and employees in order to achieve organizational goals.


(4) Write short notes on: (any three) (15) (a) Marketing Financial Products in China Chinas financial system is highly regulated and relatively underdeveloped, but has recently begun to expand rapidly as monetary policies become integral part of its overall economic policy. As a result banks are becoming more important to Chinas economy by providing increasingly more finance to enterprises for investment. A financial service in China refers to the services provided by the finance industry: banks, investment banks, insurance companies etc. Financial reform in chinas banking sector includes the introduction of leasing and insurance and operational boundaries are being slowly eroded to promote competition. (b) Levels of Product Kotler distinguished three components: Need: a lack of a basic requirement; Want: a specific requirement for products or services to match a need; Demand: a set of wants plus the desire and ability to pay for the exchange. Customers will choose a product based on their perceived value of it. Satisfaction is the degree to which the actual use of a product matches the perceived value at the time of the purchase. A customer is satisfied only if the actual value is the same or exceeds the perceived value. Kotler defined five levels to a product: 1. Core Benefit The fundamental need or want that consumers satisfy by consuming the product or service. 2. Generic Product A version of the product containing only those attributes or characteristics absolutely necessary for it to function. 3. Expected Product The set of attributes or characteristics that buyers normally expect and agree to when they purchase a product. 4. Augmented Product Inclusion of additional features, benefits, attributes or related services that serve to differentiate the product from its competitors. 5. Potential Product All the augmentations and transformations a product might undergo in the future. Kotler noted that much competition takes place at the Augmented Product level rather than at the Core Benefit level or, as Levitt put it: 'New competition is not between what companies produce in their factories, but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value.' Kotler's model provides a tool to assess how the organisation and their customers view their relationship and which aspects create value. (c) Importance of CRM 1. A CRM system consists of a historical view and analysis of all the acquired or to be acquired customers. This helps in reduced searching and correlating customers and to foresee customer needs effectively and increase business. 2. CRM contains each and every bit of details of a customer, hence it is very easy for track a customer accordingly and can be used to determine which customer can be profitable and which not. 3. In CRM system, customers are grouped according to different aspects according to the type of business they do or according to physical location and are allocated to different customer managers often called as account managers. This helps in focusing and concentrating on each and every customer separately. 4. A CRM system is not only used to deal with the existing customers but is also useful in acquiring new customers. The process first starts with identifying a customer and maintaining all the corresponding TYBFM MFS


6. 7.

8. 9. 10. 11.


details into the CRM system which is also called an Opportunity of Business. The Sales and Field representatives then try getting business out of these customers by sophistically following up with them and converting them into a winning deal. All this is very easily and efficiently done by an integrated CRM system. The strongest aspect of Customer Relationship Management is that it is very cost-effective. The advantage of decently implemented CRM system is that there is very less need of paper and manual work which requires lesser staff to manage and lesser resources to deal with. The technologies used in implementing a CRM system are also very cheap and smooth as compared to the traditional way of business. All the details in CRM system is kept centralized which is available anytime on fingertips. This reduces the process time and increases productivity. Efficiently dealing with all the customers and providing them what they actually need increases the customer satisfaction. This increases the chance of getting more business which ultimately enhances turnover and profit. If the customer is satisfied they will always be loyal to you and will remain in business forever resulting in increasing customer base and ultimately enhancing net growth of business. CRM Customer Relationship Management is one of the newest innovations in customer service today. CRM stands for customer relationship management and helps the management and customer service staffs cope with customer concerns and issues. CRM involves gathering a lot of data about the customer. The data is then used to facilitate customer service transactions by making the information needed to resolve the issue or concern readily available to those dealing with the customers. This results in more satisfied customers, a more profitable business and more resources available to the support staff. Furthermore, CRM Customer Relationship Management systems are a great help to the management in deciding on the future course of the company.

(d) 1. 2. 3. 4. 5. 6. 7. 8. 9.

Marketing Financial Products in USA Middle market companies need extra support when they create new banking relationships The bank should have a single contact point to resolve problems. The customer service associate mat either solves problems on his own or refers The customer to someone else in a clear hierarchy of problem solvers The customer must always have the sense of dealing with a single institution To provide creative tools that makes it easier for new customers to change banks or to add new services Banks must recognize, above, all the middle market treasury officers have less time and fewer resources for cash management than their peers in larger organizations. This brings in the need for a well designed, intuitive, and well integrated online portal, similar to the offering of a good personal bank but with more features and flexibility. Banks that provide loan at the right time will tend to win more clients 10. Relationship managers for cross selling cash management products 11. While the size of an individual middle market account may not justify continuing high level product support, banks should leverage their experts more effectively. 12. Growth only by acquiring new customers is not always feasible. 13. When banks do come up with new products, the products often fail because they don't focus enough on the customer. 14. Internal structure changes can improve the of success

The following are the steps taken by banks for marketing:


15. Banks should look for new insights from existing customer data 16. Successful bank innovation begins first by learning to look at things from the customers point Of view and then trying to solve a problem.


EXTERNAL ENVIRONMENT of Business. It refers to the environment that has an indirect influence on the business. The factors are uncontrollable by the business. There are two types of external environment.

Micro Environment The micro environment consists of the actors in the companys im mediate environment that affects the performance of the company. These include the suppliers, marketing intermediaries, competitors, customers and the public. The micro environmental factors are more intimately linked with the company than the macro factors. The micro forces need not necessarily affect all the firms in a particular industry in the same way. Some of the micro factors may be particular to a firm. When the competing firms in an industry have the same micro elements, the relative success of the firms depends on their relative effectiveness in dealing with these elements. 1. Suppliers An important force in the micro environment of a company is the suppliers, i.e., those who supply the inputs like raw materials and components to the company. The importance of reliable source/sources of supply to the smooth functioning of the business is obvious. 2. Customer The major task of a business is to create and sustain customers. A business exists only because of its customers. The choice of customer segments should be made by considering a number of factors including the relative profitability, dependability, and stability of demand, growth prospects and the extent of competition. Competition not only include the other firms that produce same product but also those firms which compete for the income of the consumers the competition here among these products may be said as desire competition as the primary task here is to fulfil the desire of the customers. The competition that satisfies a particular category desire then it is called generic competition. 3. Marketing Intermediaries The marketing intermediaries include middlemen such as agents and merchants that help the company find customers or close sales with them. The marketing intermediaries are vital links between the company and the final consumers. 4. Financiers The financiers are also important factors of internal environment. Along with financing capabilities of the company their policies and strategies, attitudes towards risk, ability to provide non-financial assistance etc. are very important. 5. Public Public can be said as any group that has an actual or potential interest in or on an organizations ability to achieve its interest. Public include media and citizens. Growth of consumer public is an important development affecting business.


Macro Environment

If your business involves delivery of goods in a global supply chain, you would have more global issues such as legal and political concerns.
Macro environment is also known as General environment and remote environment. Macro factors are generally more uncontrollable than micro environment factors. When the macro factors become uncontrollable, the success of company depends upon its adaptability to the environment. Some of the macro environment factors are discussed below:

Political factors: Taxation policy Government stability Foreign trade regulations Trade and tariff controls Business regulations Economic factors: Interest rates Inflation Economic growth (GNP trends) Disposable income Money supply Socio-cultural factors: Income distribution Attitudes to work and leisure Levels of education Lifestyle changes Population demographics Technological factors: Rate of obsolescence Rate of new discoveries and development Government spending on research Government and industry focus of technical efforts Speed of technology transfer Environmental factors: Global warming Environmental protection laws Availability of natural resources Waste disposal Energy consumption Legal factors: Employment law Health and safety Product safety Monopolies legislation Consumer law