PhD, associate professor, Garmider L.D.,

Larina A.G.

Alfred Nobel University, Dnipropetrovs'k

MARKETING OF FINANCIAL SERVICES: CHALLENGES AND SPECIALIZATION

The marketing of financial services is a unique and highly specialized branch of marketing. The practice of advertising, promoting, and selling financial products and services is in many ways far more complex than the selling of consumer packaged goods, automobiles, electronics, or other forms of goods or services [1]. Financial services marketers are challenged every day by the unique characteristics of the products they market. For example, often financial services cannot be visually communicated in advertisements as easily as consumer goods can. Furthermore, the relatively unexciting nature of financial services makes the task of attracting consumer attention and inspiring consumer desire a difficult one. However, the study of financial services marketing is in many ways far more fascinating than other areas of marketing. There are many predictable behaviors that consumers often exhibit in their dealings with financial services providers. The predictability of these behaviors and the abundance of data on existing and potential customers enable a uniquely scientific approach to developing and executing successful strategies for the marketing of financial services, much more so than in other markets.

There are several facts that are unique to the consumer decision process in financial services. The first is the very nature of financial services, which is typically unimaginative and unexciting. A simple examination of advertisements for financial services would reveal that financial services advertising is often lame and less inspirational than the types of advertising and communications one may attribute to other kinds of services or goods [2]. For example, financial products and services often cannot be visualized, making it more difficult for the marketer to communicate their benefits using imagery. The benefits gained from an investment option, the stability of an insurance company, or the accuracy of financial transaction records at a commercial bank can rarely be visually communicated in the context of an advertisement, especially in an exciting and attention-grabbing manner. Furthermore, the complexity of financial services makes the task of evaluating a financial service difficult for the average person. For example, a typical home mortgage might have well over a dozen attributes, and even a standardized service such as a checking account may have a sufficiently large number of attributes, such that the average consumer might be unable to fully appreciate the differences between offers by competing banks. The complexity of financial services often leads to an array of largely predictable consumer decision patterns that are a result of consumers’ use of simplifying rules, called “heuristics.” Heuristics enable consumers to cope with the challenging task of evaluating complex decisions by for example, focusing only on a subset of the available information. While such an approach may not result in the best decision, it results in patterns of consumer behavior observed across a wide array of decision contexts.

The traditional boundaries of financial services marketing are being challenged by the emergence of new competitors from both within and outside of the financial services sector. The primary objective of regulating financial services advertisements is to protect consumers against misleading advertisements. In addition, regulations are in place to ensure that consumers have the necessary information available to them prior to making decisions on financial services. The types of regulations that are in place vary depending on the financial service category. It is also important to recognize that the shape of the advertising response function might significantly vary from one competitor to another. Furthermore, advertisers need to be able to contrast various ad execution strategies and to identify ads that are most effective in the marketplace. 

Advertising has a special role in the marketing of financial services since financial services are generally intangible. The intangible nature of financial services stems from the fact that they cannot be touched, tasted, felt, or visualized. As a result, consumers’ perceptions of quality are often based on the image associated with the company. This places the burden of informing consumers about the beneficial aspects of a financial service on the shoulders of the advertiser. While the quality of manufactured goods might be easily visible to the consumer through the observation of the product’s physical features, the quality of financial services is a largely unobservable construct. The training and knowledge of a financial advisor, the transaction accuracy of a credit card company, or the financial strength of an insurance company are largely unknown measures to the masses.

Financial services advertisers have to educate consumers on the unique and beneficial features of their services. This is an especially important task when consumers may not possess the required background knowledge and product information to appreciate the merits and weaknesses of competing financial services. Advertising is one of the few ways to achieve differentiation in financial services. The environment in which financial services are marketed is becoming more competitive, making the task of marketing financial services increasingly challenging and specialized.

Reference:

1. Solos, George. 2008. The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What it Means. Jackson: Public Affairs.

2. Kaufman, Henry. 2009. The Road to Financial Reformation. New Jersey: John Wiley and Sons.

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