9.1 Meeting the needs, wants and aspirations of a market segment Flashcards
Examples of features that can be included in a packaged current account:
- Travel insurance
- Breakdown cover
- Mobile phone insurance
- Exclusive interest rates
- Cash back
Main ways in which banks differentiate their current accounts to suit needs of different market segments include a focus on shared characteristics such as:
- Income
- Stage in life cycle
- Loyalty
- Money management needs
What does HSBC’s Premier Bank Account include?
- Relationship manager
- Worldwide travel insurance
- Worldwide cash withdrawals with no non-sterling cash fees
- Preferential savings, loans and mortgage rates
What does RBS’s ‘Silver Account’ include?
- Travel and mobile phone insurance
- Preferential rates on travel money
- Cashback on tickets for events
- Discounts on restaurant meals
Drawbacks of packaged current accounts:
- Monthly fee can be as much as £24 a month meaning additional benefits may not be good value for money
- People can be overinsured without realising
- Policy add-ons can offer very limited cover
- Add-ons may mean that banks are losing their focus on the main product
What does it mean if someone is overinsured?
They are paying twice for the same product, but in the event of a claim will be compensated once
What must providers do to counter criticisms of packaged current accounts?
- Check each customer will be eligible to make a claim under each policy
- Send each customer an annual statement explaining how to claim each benefit
- Ensure that advisers who recommend packaged accounts check that each policy is appropriate
What are balance transfers?
Balances transferred from a competitors credit card to the providers credit card
What does it mean if someone has an interest-free period of balance transfers?
Interest will not accrue on the amount transferred for the agreed period and customer need make only a minimum payment each month
What is a drawback if a customer transferred a balance to another provider for an interest-free period?
They have to pay a fee when the initial transfer is made - normally around 3%
Common pitfalls of interest-free periods on balance transfers:
- To remain eligible customer must stay within their credit limit and make payments on time
- Customer must pay off the amount of balance that they transferred within the agreed period
- If conditions are not met 0% rate can be terminated immediately
How long can an interest-free period on balance transfers last?
From a few months to 30 months - average is 15 months
What is cashback?
When the card company gives a cash amount back to the customer equal to an agreed percentage of the amount spent using the card
Example of a reward programme:
Barclays’ ‘Freedom Rewards Card’ is a credit card that offers ‘Freedom’ points when customers shop, with double and triple points at certain selected retail, entertainment and eating outlets.
What do customers think of reward programmes?
It is easy to build up points, but the range of places in which they can spend them is limited
