what is market segmentation? What are the conditions that must be met for effective segmentation ?Discuss

 Market Segemtation : The process of defining and subdividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.

Few companies are big enough to supply the needs of an entire market; most must breakdown the total demand into segments and choose those that the company is best equipped to handle.

Four basic factors that affect market segmentation are

1. clear identification of the segment,
2. measurability of its effective size,
3. its accessibility through promotional efforts, and
4. its appropriateness to the policies and resources of the company.

The four basic market segmentation-strategies are based on

1. behavioral,
2. demographic,
3. psychographic, and
4. geographical differences.

Effective market segmentation takes effort. It is not something that comes easily for any business. It requires a great deal of skilled research and effective implementation of segmentation strategies. Mindful monitoring of marketing strategy performance and adjustment to the segmentation system is also necessary to maintain the effectiveness of the strategies that have been employed.

The requirements for effective market segmentation are as follows:

a) Measurable: The size, needs, purchasing power, and characteristics of the customers in the segment should be measurable. Quantification should be possible.

b) Divisible: The segments should be differentiable. There must be clear-cut basis for dividing customers into meaningful homogeneous groups. They should respond differently to different marketing mixes. There should be differences in buyer's needs, characteristics and behaviour for dividing in groups.

c) Accessible: The segment should be reachable and serviceable. It should be accessible through existing marketing institutions, such as distribution channels, advertising media and sales force. There should be middlemen to distribute the products.

d) Substantial: The segment should be substantial. It should be large enough in terms of customers and profit potential. IT should justify the costs of developing a separate marketing mix.

e) Actionable: It should be actionable for marketing purposes. Organizations should be able to design and implement the marketing mix to serve the chosen segment.

what are the external factors which influence bank customer

  1. Political Factors:-

Banking and commercial institutions are impression via the political are very much touched via political factors especially federal legislation mounting pressures from customers . The climbing on stresses from customers and organisations for example investors, community and the government have advised the banks and economic organisations to address CSR and sustainability matters

Banks have progressively accepted the force from its stakeholders surrounding shareholders and investors to do investment in a to blame and ethical manner. Many banks kept particulars that environmentally-unfriendly endeavours can have an influence on piece charges and brand.

b) Economic and Competition Factors :

C) Social Factors:-

Social components are one of the most important components of external enterprise environment.These components encompass wellbeing attentive, community development rate, customers, vocation mind-set, age circulation etc.

D) Technological Factors:

ONLINE BANKING PROBLEMS:-

Fiveash, F (2009) Many Lloyds TSB enterprise customers who use Fire fox as their default browser are actually incapable to get access to their online banking accounts despite the conspicuous mechanical cock-up influencing an unidentified number of its customers, some have asserted that Lloyds TSB has so far failed to reply amply to the problem.(see appendix 2)

Limited number of users:-

Non question online banking is the much quicker and very easy way of considering with banks and organising our accounts. but need of information considering online banking is the major difficulty However, Internet get access to continues constrained amidst smaller earnings assemblies in the UK.(see appendix 1,2

Best mobile banking:-although some other banking services actually allows ascertaining balances and what's going on our bank anecdotes, but this will be the first time that customers will actually to proficient to do certain thing with our money precisely from wireless phones. Clients can use this facility to make direct payments PAYG wireless balances.(Atkinson, R.2008)

E) Legal and Credibility Factors

Briefly explain the major corporate banking services in Bangladesh

 Bank is providing a wide range of financial services, offering specialist advice and products to corporate clients to meet diverse demands of changing market scenario. Bank has expertise to customize products & services to meet specific requirements of their clients. Bank are committed to serve the customer with extensive branch net work all over the country to expedite thr client's business growth. Bank facilitate their business to face the challenges and realize opportunities, now and in the future. The main focus is relationship based banking and understanding corporate & institutional business environments.

Major Corporate Banking services are as follows:

 Working Capital Finance

Business Enterprises engaged in manufacturing/ trading/ service business are eligible to avail Working Capital Loan to meet day to day expenses for processing of manufacturing and selling product & services. Working capital products include both fund and non-fund based products. Fund-based working capital products include secured over draft, cash credit, packing credit, short-term loans payable on demand bank guarantees. Non-fund based products include bank guarantee, performance guarantees and bid bonds are also supporting the business of our customers.

Project Finance

Bank provides project loan to set up /BMRE of long-term infrastructure and industrial projects/ service unit on the basis of debt and equity rather than the balance sheets of project sponsors. Project financing have been recognized as an important and crucial mode of finance for a financial institution for substantial growth of its industrial credit vis-à-vis managing long term finance. Growth of project finance/Industrial credit of a developing country like Bangladesh is considered as a key parameter for transforming her dream into a mid income country group.

Term Finance

Banks are offering short term & mid term finance to you to meet emergency financial needs of our project/business.

Trade Finance

Import

a)Letter of Credit

Business Enterprises can avail Non-funded facility for import / procurement of raw materials, machinery, equipment, merchandise item.

b)Loan against Imported Merchandize (LIM)

Business Enterprises engaged in import merchandise can avail working capital for retirement of import documents.

C)Loan against Trust Receipt

Business Enterprises engaged in import of merchandise can avail working capital for retirement of import documents.

Export

Pre-shipment finance

Back to Back L/C, EDF, ECC, SOD (Working Capital Finance), Packing Credit.

Post-shipment finance

Foreign Documentary Bills Purchase, Inward Documentary Bill Purchase.

Lease Financing

Lease financing became a thrust sector for individual and small enterprise besides medium and large enterprises. Bank has been providing lease finance facility to its customer for acquisition of manufacturing and service equipments for all major industrial sectors. The facility helps the customer to have better financial flexibility under budgetary constraints and to enjoy tax benefit. Bank offers financing vehicles/ CNG conversion/ refueling plant/ sea or river transport, capital machinery/ plat/ equipment/ lift / generator/ boiler, construction equipment/ computer for IT education center, medical equipment etc

Syndication Finance

Commercial banks has been financing large scale projects under syndication arrangement to raise and meet huge credit need of a company. This arrangement allows the Banks to share expertise among them and diversify its credit risks. To cater the need of leading corporate house  Bank has been raising fund from the banking sector on behalf of the customer through syndication arrangement.

Different Products and Services of Banks

 Mainly there are two types of product in Bank. These are

 · Deposits – Banks accept the deposits of the public. In order to attract the savings of the people, the bank provides every sort of facility and inspiration to them and collects the scattered savings of the society. The bank opens an account of those people who deposit their savings with the bank. These deposit accounts can mainly be of three types and people can open any of these three types of accounts according to their wish. These accounts are current account, saving bank account, fixed deposit account.

 · Loans – The bank just don’t keep with themselves the deposited amount of the people, rather they advance them in the form of loans to the businessman and entrepreneurs, just to earn profits for their partners. The loanee keeps some gold, silver, fixed and variable assets in the form of security with the bank. The bank can advance loan to their customers in three ways: overdrafts, money at call, discounting bills of exchange.

 

Importance of Bank Marketing

 Awareness among Customers

Modern technology has made customers aware of the developments in the economic environment, which includes the financial system. Financial needs of the customers have grown multifold into various forms like quick cash accessibility, money transfer, asset security, increased return on surplus funds, financial advice, deferred payments etc. With a wide network of branches, even in a dissimilar banking scenario, customers expect the banks to offer a more and better service to match their demands and this has compelled banks to take up marketing in right earnest.

 Quality as a Key Factor

With the opening up of the economy, fast change has been experienced in every activity, and banking has been no exemption. Quality is the watch word in the competitive world, which is market driven and banks have had to face up to this emerging scenario. In fact, it may not be out of place to reiterate that quality will in future be the sole determinant of successful banking ventures and marketing has to focus on this most crucial need of the hour.

 Growing Competition

Increased completion is being faced by the banking industry from within the system with other agencies both, local and foreign, offering value added services. Competition is no more confined to resource mobilization but also to lending and other areas of banking activity. The foreign commercial bank with their superior technology, speed in operations and imaginative positioning of their services has also provided the necessary impetus to the Indian banks to innovate and complete in the market place.

 Technological Advances

Technological innovation has resulted in financial product development especially in the international and investment banking areas. The western experience has demonstrated that technology has not only made execution of work faster but has also resulted in greater availability of manpower for customer Contact.

Development in Marketing Scope at the Aspect of Service Marketing

 Marketing scope develops day to day. These developments carry special significance for service sector in which customer and service producer interact closely.

 INTERNAL MARKETING

Especially in service sector like external relations, internal relations also have significance. It requires finding and keeping successful personnel.

For personnel of the organization to be considered their own goals and service situation, values of the organization are sold to them. The communication techniques carried out for customers are also performed for the personnel in internal marketing and this two techniques go together. For example, the ads that aim creating firm’s image should be prepared with regarding to audience which is composed of firm’s personnel.

 NETWORK MARKETING

This approach takes the organization as a sequence which involves producer and customer that market services to each other in the organization. In this structure, the activities of departments that compose organization would be more focused on market. This will also affect the structure of organization.

 RELATIONSHIP MARKETING

It was mentioned that close relationship was established between producer and customer in service sector. In addition to this, life cycle of a customer relationship was also mentioned under the product outline.

 According to the researchers, maintaining the relationship for extant customer increases the profit of firms. It should be emphasized that this fact has an importance for service sector.

 Life cycle of a customer relationship is composed of three stages. At the first stage, firms try to be well known and to acquire new customers. At the second stage, the connection between customer and firm has been achieved. During the stage, firms intensified their activities on acquired customers and both of them promises mutually. At the third stage, these promises are accomplished and the service is consumed. During the stage, firms face “Reality Instants” which could possibly achieve satisfaction of customer and continuous relationship.

This could be also true for second stage. So, these instants should be managed successfully.

Explain the New Product Pricing Strategies

 Pricing strategies usually change as the product passes through its life cycle. The introductory stage is especially challenging. Companies bringing out a new product face the challenge of setting prices for the first time. They can choose between two broad strategies:

     1.    Market-skimming pricing and

     2.   Market-penetration pricing.

 Market-Skimming Pricing

Many companies that invent new products set high initial prices to “skim” revenues layer by layer from the market. Apple frequently uses this strategy, called market-skimmingpricing (or price skimming).

 Example of market-skimmingpricing

When Apple first introduced the iPhone, its initial price was as much as $599 per phone. The phones were purchased only by customers who really wanted the sleek new gadget and could afford to pay a high price for it. Six months later,

Apple dropped the price to $399 for an 8GB model and $499 for the 16GB model to attract new buyers. Within a year, it dropped prices again to $199 and $299, respectively, and you can now buy an 8GB model for $99. In this way, Apple skimmed the maximum amount of revenue from the various segments of the market.

 Conditions for Market skimming Pricing:

Market skimming makes sense only under certain conditions.

 First, the product’s quality and image must support its higher price, and enough buyers must want the product at that price.

 Second, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more.

 Finally, competitors should not be able to enter the market easily and undercut the high price.

 Market-Penetration Pricing

Some companies use market-penetration pricing. Companies set a low initial price to penetrate the market quickly and deeply—to attract a large number of buyers quickly and win a large market share. The high sales volume results in falling costs, allowing companies to cut their prices even further

 Example of Market-Penetration Pricing

The giant Swedish retailer IKEA used penetration pricing to boost its success in the Chinese market. When IKEA first opened stores in China in 2002, people crowded in but not to buy home furnishings. Instead, they came to take advantage of the freebies— air conditioning, clean toilets, and even decorating ideas. Chinese consumers are famously frugal.

 When it came time to actually buy, they shopped instead at local stores just down the street that offered knockoffs of IKEA’s designs at a fraction of the price.

 So to lure the finicky Chinese customers, IKEA slashed its prices in China to the lowest in the world, the opposite approach of many Western retailers there. By increasingly stocking its Chinese stores with China-made products, the retailer pushed prices on some items as low as 70 percent below prices in IKEA’s outlets outside China. The penetration pricing strategy worked. IKEA now captures a 43 percent market share of China’s fast-growing home wares market alone, and the sales of its seven mammoth Chinese stores surged 25 percent last year. The cavernous Beijing store draws nearly six million visitors annually. Weekend crowds are so big that employees need to use megaphones to keep them in control.

 Conditions for Market-Penetration Pricing:

Several conditions must be met for this low-price strategy to work.

 First, the market must be highly price sensitive so that a low price produces more market growth.

 Second, production and distribution costs must decrease as sales volume increases.

 Finally, the low price must help keep out the competition, and the penetration price must maintain its low price position. Otherwise, the price advantage may be only temporary.

Briefly discuss the marketing mix in banking sector in Bangladesh

 Recently, banks are in a period that they earn money in servicing beyond selling money. The prestige is get as they offer their services to the masses. Like other services, banking services are also intangible. Banking services are about the money in different types and attributes like lending, depositing and transferring procedures. These intangible services are shaped in contracts. The structure of banking services affects the success of institution in long term. Besides the basic attributes like speed, security and ease in banking services, the rights like consultancy for services to be compounded are also preferred.

 Price:

The price which is an important component of marketing mix is named differently in the base of transaction exchange that it takes place. Banks have to estimate the prices of their services offered. By performing this, they keep their relations with extant customers and take new ones. The prices in banking have names like interest, commission and expenses. Price is the sole element of marketing variables that create earnings, while others cause expenditure.

While marketing mix elements other than price affect sales volume, price affect both profit and sales volume directly.

Banks should be very careful in determining their prices and price policies. Because mistakes in pricing cause customers’ shift toward the rivals offering likewise services.

Traditionally, banks use three methods called “cost-plus”, “transaction volume base” and “challenging leader” in pricing of their services.

 Distribution:

The complexity of banking services is resulted from different kinds of them. The most important feature of banking is the persuasion of customers benefiting from services.

Most banks’ services are complex in attribute and when this feature joins the intangibility characteristics, offerings take also mental intangibility in addition to physical intangibility. On the other hand, value of service and benefits taken from it mostly depend on knowledge, capability and participation of customers besides features of offerings. This is resulted from the fact that production and consumption have non separable characteristics in those services.

Most authors argue that those features of banking services make personal interaction between customer and bank obligatory and the direct distribution is the sole alternative. Due to this reason, like preceding applications in recent years, branch offices use traditional method in distribution of banking services.

 Promotion:

One of the most important elements of marketing mix of services is promotion which is consist of personal selling, advertising, public relations, and selling promotional tools.

 Personal Selling:

Due to the characteristics of banking services, personal selling is the way that most banks prefer in expanding selling and use of them.

Personal selling occurs in two ways. First occurs in a way that customer and banker perform interaction face to face at branch office. In this case, whole personnel, bank employees, chief and office manager, takes part in selling. Second occurs in a way that customer representatives go to customers’ place. Customer representatives are specialist in banks’ services to be offered and they shape the relationship between bank and customer.

 Advertising:

Banks have too many goals which they want to achieve. Those goals are for accomplishing the objectives as follows in a way that banks develop advertising campaigns and use media.

 1. Conceive customers to examine all kinds of services that banks offer

2. Increase use of services

3. Create well fit image about banks and services

4. Change customers’ attitudes

5. Introduce services of banks

6. Support personal selling

7. Emphasize well service

 Advertising media and channels that banks prefer are newspaper, magazine, radio, direct posting and outdoor ads and TV commercials. In the selection of media, target market should be determined and the media that reach this target easily and cheaply must be preferred.

 Banks should care about following criteria for selection of media.

 1. Which media the target market prefer

2. Characteristics of service

3. Content of message

4. Cost

5. Situation of rivals

 Ads should be mostly educative, image making and provide the information as follows:

 1. Activities of banks, results, programs, new services

2. Situation of market, government decisions, future developments

3. The opportunities offered for industry branches whose development meets national benefits.

 Public Relations:

Public relations in banking should provide;

 1. Establishing most effective communication system

2. Creating sympathy about relationship between bank and customer

3. Giving broadest information about activities of bank.

It is observed that the banks in Turkey perform their own publications, magazine and sponsoring activities.

 Selling Promotional Tools:

Another element of the promotion mixes of banks is improvement of selling. Mostly used selling improvement tools are layout at selling point, rewarding personnel, seminaries, special gifts, premiums, contests.

Discuss the regulations that directly influenced on advertising specific financial services

 Some of the regulations that have a direct influence on advertising specific financial services are discussed below-.

 Advertising Commercial Banking Services:

Advertising of commercial banking services is monitored through the various regulations enforced by the Federal Reserve as well as the Office of the Comptroller of the Currency. For example, the Truth in Savings Act specifies items of information that depository institutions should disclose about deposit accounts featured in their advertisements. Terms such as the rate of interest, applicable fees, and terms of the deposit such as the minimum length of time that is required prior to withdrawal of the funds need to be clearly communicated to consumers. For credit products, the Truth in Lending Act (regulation Z of the Federal Reserve) dictates that the true cost of credit must be communicated in written form to consumers. Regulation Z also establishes the method to be used to determine the cost of credit and requires that lenders communicate this information in the form of the annual percentage rate (APR).

 Regulators may also monitor advertisements to ensure that banks do not exaggerate the extent to which they claim to make credit available to customers as a means for generating leads. In addition, commercial banks, which are ensured by the Federal Deposit Insurance Corporation (FDIC), need to mention their coverage status with the FDIC in their ads and other consumer communications.

 Advertising of Insurance Company:

Each state’s department of insurance regulates insurance advertising. The objectives of insurance advertising regulations are twofold. The first objective is to prevent the creation of biases in consumer assessment of the probability of catastrophic events. This objective relates to the established fact that consumers typically are unaware of the risks and probabilities for events for which they purchase insurance products, as discussed in Chapter 2. For example, insurance advertising that bolsters the fear of catastrophic events through dramatic imagery is not allowed. Negative outcomes of disasters should also not be overstated in insurance advertisements. The second objective of insurance advertising regulations is to prevent the creation of inferences that suggest that an insurance company is unusually generous in its payout behavior. As a result, insurance advertisers have to take great care not to exaggerate either the severity of harmful events or their own willingness to payout customer claims. In addition, images of currency and checks should not be included in advertisements for insurance products as they may make consumers infer unconsciously that the insurance company has a high propensity to payout claims and is usually generous.

 An additional objective in insurance advertising is to prevent misleading information from being communicated to consumers. Formally, an ad can be considered misleading when it causes individuals with average levels of intelligence to arrive at inferences that conflict with reality. In order to establish if such inferences are a result of the advertisement, formal market research utilizing third-party companies and random samples of consumers would be used. Insurance advertising is further restricted by the terminology that may be used. Terms such as “liberal” and “generous,” for example, cannot be used as they boost impressions of the payout behavior of the insurance company. Similarly, references to words such as “financial disaster” and “catastrophic” are not allowed because they may exaggerate the extent of the harm consumers might face if they do not have insurance coverage. The fact that insurance prices vary from one consumer to the next due to varying risk levels also limits the pricing terminology that can be used in insurance advertising.

Therefore, terms such as “low,” “budget,” and “low-cost” cannot be used.

 Advertising, Investment and Brokerage Services:

The advertising of investment and brokerage services is regulated by the SEC as well as the NASD. These regulators require that advertisers ensure that consumers understand that past returns of an investment may or may not be realized in the future. As a result, statements to this effect need to be mentioned in consumer communications, including advertisements in mass media and direct mail. Advertisements for mutual funds must also encourage potential investors to seek the detailed technical information on the fund by requesting the fund’s prospectus. The ads should facilitate such action by providing consumers the necessary contact information.

Additional Securities and Exchange Commission rules should be consulted for the details of information that must be included in mutual fund advertisements. Readers are encouraged to further examine sources specializing in financial services advertising regulations for additional details.

Explain the different steps in advertising for bank or financial services institutions

 Several steps are essential for successful execution of advertising campaigns in financial services. These steps are-

 Determining the Objectives of Advertising:

The first step is to determine the objectives of the advertising campaign, reflecting the overall marketing strategy of the company.

For example, the objective of an advertising campaign might be to generate new policies for an insurance product or to increase the level of consumer awareness of the brand or the company. Recognizing and identifying the exact objective of an ad campaign is critical to accurate assessment of its merits and potential. Examples of popular advertising objectives in financial services are target levels for customer inquiries, new policies signed, and advertising recall.

 (2) Determining the available Budget

The next step in the advertising process is to determine the budget required to carry out the ad campaign. Often, the required budget is significantly different from what is available, and may be dictated by organizational budgetary constraints. For example, the budget available for advertising a particular financial service might be determined based on a percentage of the total premium revenues generated in the prior year. Clearly, an increase in the intensity of an advertising campaign would require higher budget allocations and may call for the abandoning of traditional budget-setting approaches for advertising. The total budget that is required to execute an advertising campaign is a function of the reach and frequency (and hence the gross rating points) necessary to create consumer response and the cost of media used to secure this level of exposure. The associated dollar figure, therefore, needs to have been estimated prior to negotiations with higher levels of management, in order to ensure the availability of sufficient funds for executing an effective advertising campaign.

 (3) Estimating the Return on Investment (ROI):

The next step in the advertising process is to determine the return on investments associated with the advertising campaign. Four items of information are needed in order to conduct this estimation, one of which is an estimate of the lifetime value of an acquired customer. The lifetime value of the customer is the total profit that an acquired customer represents to the company. It is quantified as the sum of the profits associated with the stream of transactions that the customer will undertake with the company over the years. In addition, an estimate of the total number of consumers who will be exposed to the advertising campaign is required. An estimate of the percentage of reached consumers who will eventually purchase the advertised financial product or service is also required.  Clearly, negative return on investment estimates would make the advertising campaign and unlikely prospect for further action.

 (4) Developing the Contents of the Ad:

Once the return on investment computation has shown favorable results, the next step in the advertising process is to develop the contents of the ad, as reflected in its execution style and informational content. In this step, the services of advertising agencies that specialize in producing financial services ads are required. These specialized agencies often also engage the support of legal experts who can determine the compliance of advertising content with existing regulations. Often, testing of ad content using small-scale samples, focus groups, or test markets may be needed.

 (5) Media Selection:

The next step in the advertising process is to determine the media that will be used. In general, financial services that are more complex and require the communication of detailed information tend to rely on print forms of advertising.

Television advertising, which capitalizes on multiple sensory inputs, tends to be the most effective although often the most expensive. Once the media to be used for an ad campaign has been determined by the ad agency, a media schedule needs to be developed in order to achieve the original objectives of the ad campaign which had been identified. There are specific media scheduling and campaign execution strategies that are most effective in certain forms of financial services. For example, an effective ad-scheduling tactic is to advertise in pulses with heavy advertising in one month, reduced advertising the following month, and a return to high advertising levels in the third month.

 (6) Scheduling and Campaign Execution:

There are specific media scheduling and campaign execution strategies that are most effective in certain forms of financial services. For example, an effective ad-scheduling tactic is to advertise in pulses with heavy advertising in one month, reduced advertising the following month, and a return to high advertising levels in the third month.

This tactic tends to result in more sales and higher levels of consumer response than a constant and steady level of ad spending.

 (7) Measurement:

The final step in the advertising process is to assess the impact of the ad campaign through formal market research or examination of company records. It is critical to measure and record sales levels and other advertising responses following an ad campaign in order to determine the financial effects of the invested advertising dollars.

 Such measures may help fine-tune the advertising strategy of the company and provide estimates for optimizing future advertising campaigns. For direct advertising campaigns, such measures are obtained through the tracking of consumer inquiries following the ad campaign and the use of tracking numbers, which can pinpoint the exact promotional material to which the consumers are reacting. For ads delivered through mass media such as television, radio, and newspapers, the tracking of consumer responses may be considerably more difficult and might require examining aggregate changes in sales for the months following the ad campaign, or the purchase of market research data from specialized research firms.