Financial Institutions & Regulation
Author (Gordon Boreham estimates that; the (ally of financial institutions in the United Stales now Sop-, 47,000. However, recent statistics on American bank failures (a phenomenal 2,200% increase from 1981 numbers) Suggest dial less than half of these will survive to the next decade.’
Further, foreign competitors are now snapping at the heels of domestic companies on both sides of the border. In the United Slates, (he number of foreign banking institutions has grown by over 400% since 1973. and a similar competitive trend is shaping.”. up m Canada where foreign-based banks now outnumber home grown by more than seven to one. As Canada’s chief financial regulator Michael Mackenzie notes, there are simply too many financial institutions chasing too little business.
With so many firms vying for their affections, today’s consumers can afford to be choosy, and they are not going tolerate suboptimal products or services. It’s now a game of musical chairs, and when the music stops, there won’t be enough places to go around.
To survive, we have to focus on what the consumer wants. That is the essence of marketing and the key ingredient behind the success stories in this book.
Choosing the players
when I set out to write a book on marketing financial services, my first thought was what better place to turn for “wisdom” than to companies with outstanding marketing track records. I wanted to have representation from financial companies of varying size, including both national firms and those with a more regional or local flavor. I also looked on both sides of the Canada – U.S. border. In doing so, I hoped to isolate any marketing problems unique to firms of different size and geographic location.
Secondly, my aim was to include companies from each of the different groups within the financial services industry, including brokerage, banking and insurance. My reasoning here was simple: I wanted to determine if what works in bank marketing, for example, also works for a brokerage house or an insurance company, or, alternatively, if different marketing principles apply in each case.
As a third criterion for selection, I chose companies willing to share their marketing successes, and on occasion, failures. Although this precluded a few excellent institutions, quite obviously there was no other practical alternative.
Finally, I sought firms that were acknowledged by their peers to be successful financial marketers. In part, I relied on my own marketing experience, a 10-year stint that includes nearly four years as marketing manager for a national investment firm. However, 1 also solicited recommendations from respected financial marketers and analysts, including Dr. Leonard Berry, coauthor of Marketing Financial Services and past president of the American Marketing Association (AMA), and Mr. Tom Heftier, president of the Financial Institutions Marketing Association.
A few of the firms selected as participants for this book had also been chosen to speak at such forums as the AMA’s 1987 Financial Marketing Conference, a strong testament to their being financial companies with marketing success stories to tell.
In the end, I interviewed 23 of North America’s most successful financial companies. Each had stories to tell of marketing success — the challenges, the problems, the solutions. The book that resulted is stuffed with hands-on information about the world of financial marketing.
Through real-life case studies it illustrates the basics of good marketing but, perhaps more importantly, it also explores the subtleties of great marketing and offers unique insight into the outstanding benefits that great marketing can produce.
WEEDING OUT THE MARKETING MYTHS
Before tackling the task of building an effective marketing strategy, it is necessary to clearly understand just what financial marketing is and is not. Unfortunately, there is still some confusion as to the true nature of marketing, and a number of myths exist.
Myth #1 — Marketing is another name for selling.
Selling begins with the product and then searches for people to purchase it, whereas marketing begins with the customer and builds the product to suit customer needs. Many financial companies consider marketing to be a fancy name for selling, something they consider that they’ve handled very well for many years.
But, if the sales approach has been so successful, why then do nearly 70% of U.S. consumers spread their funds among multiple financial institutions, with over 40% opting for relationships with three or more companies?5 Obviously, many financial firms have not yet provided sufficient reason for customers to offer undivided loyalty.
Myth #2 — Marketing is little more than advertising.
Perhaps the most glaring of the myths about marketing is the notion that this discipline centres on such decisions as whether to splurge on a four-color job for your annual report or which snappy phrase looks the best for your company’s latest ad copy. Many still equate marketing with advertising. Advertising is paid communication of your message through such vehicles as newspapers or radio and, as such, only one of many tools available to implement an overall marketing strategy.
In the words of Linda Kanner, division executive for New England’s largest bank, Bank of Boston Corporation, “Marketers are much more than people who write the words for the next savings account statement stuffers or newspaper ad. They are analytic; they ask the right questions.”
Asking the right questions is key to good marketing; questions such as: Who do you want to do business with? What do these people want from a financial institution? And, how are you going to let them know that you can deliver on these needs? Answers to these questions form the basis of your marketing strategy; they give focus to your company’s approach to customers and competitors. The choice of tactics, such as choosing the right color scheme for a promotional piece, will follow from your strategy.
Myth #3 — Marketing is more art than science.
Another myth that crops up frequently in financial circles is that marketing is more art than science. Paul Bates, former vice president, Personal Advisory Services6 for the $86-billion Canadian trust company, Royal Trustee Limited, emphatically rejects this belief. “Marketing is not a hit and miss approach; it is a rigid discipline. You can do specific marketing forecasts including revenue, growth and profitability, plus you can have early warning signals and contingency plans in place should things not go as well as you expect.”
Myth #4 — Marketing is only useful as a reactive tool.
A final marketing fable should also be put to rest. Marketing is more than a system for putting out fires; it is a proactive discipline that always keeps the big picture firmly in view. A few years ago, when I first approached a former boss with a financial marketing plan, he was overwhelmed.
“You have a plan for the whole house,” he lamented, “and we’re only ready for the bathroom!” However, if all architects were to go about constructing bathrooms with no thought to providing the houses to match, we would soon find ourselves with bathrooms sprouting up in the oddest of places!
And so it is for building a financial marketing plan. Often the marketing concept of consumer focus is new to a financial company. In a zealous attempt to prove the merits of this approach, many marketers fall prey to the “bathroom-only dilemma” — their marketing efforts, such as promotional brochures or advertising copy, are produced in reaction to demands from within the firm instead of ensuring that these materials coincide with what the customer wants.
Bank of Boston’s Kanner sums up, “Everybody fin your company] thinks because they bank as individuals they know how to do retail banking. When you go to them with a product idea, half of them say I would never use that, and the other half counter with, Why not? What I say to all of them is this, Remember, you are not the target market!”