Topic 8 - Attracting, Retaining And Satisfying Customers Flashcards
MANAGING THE CUSTOMER RELATIONSHIP
What is the purpose of a financial services provider’s offer to prospective customers?
A:
To attract new customers by marketing its products effectively (e.g., a personal current account). The offer helps describe what the company provides, and customer loyalty depends on how well the company delivers on that offer
What keeps a customer loyal after they are attracted by an offer?
A:
Loyalty depends on the extent to which the provider delivers on the initial offer and meets or exceeds customer expectations
What is the most basic aim of a provider?
A:
To design and sell products that suit the needs of its customers. Providers must understand what customers need and what makes a product suitable for them.
- the marketing mix
Define the Marketing Mix.
is the combination of activities under a company’s control that can be manipulated to achieve marketing objectives. (Chartered Institute of Marketing)
What are the traditional 4Ps of the Marketing Mix?
A:
1. Product
2. Price
3. Promotion
4. Place
What are the additional 3Ps relevant to service sectors like financial services?
A:
5. People
6. Process
7. Physical Evidence
Why is it important to get the elements of the marketing mix right?
A:
Because they help attract and retain customers. All elements must be balanced and interdependent to provide the right product, at the right price, through the right channels, and with the right promotion
What happens if a company changes one element of the marketing mix?
A:
They may need to adjust other elements to keep the overall balance effective and aligned with customer expectations.
What factors must a provider balance in a product?
A:
• Quality of service expected
• Price the customer is willing to pay
• Method of delivery to the customer
• Message/media that best communicates with the customer
Give an example of balancing product and price.
A:
A provider may offer a very simple and basic product without extra features and charge less, appealing to customers looking for lower prices
Why must providers consider their competitors?
A:
To understand how their products compare, identify customer preferences, and potentially copy or improve upon competitor ideas.
- product/community
What is the role of a ‘product’ or ‘commodity’ in the marketing mix?
It is the most basic element that performs the service customers need or want. A customer-led approach involves designing products to meet specific needs, such as receiving/paying money for a current account.
List 5 practical requirements a current account must fulfill.
- Quick/accurate receipts and payments.
- Real-time balance/transaction updates.
- Security against fraud.
- Agreed overdraft facility.
- Value-added features (e.g., cashback).
Why do providers offer a range of current accounts?
To cater to different market segments (e.g., basic users, high-income clients) and ensure coverage of diverse needs. Example: HSBC’s “Bank Account” vs. “Premier.”
What is a USP, and how does Santander’s 123 Current Account exemplify it?
A USP is a feature that differentiates a brand (e.g., Santander’s cashback/interest on bills, unmatched by competitors).
Compare HSBC’s “Bank Account,” “Advance,” and “Premier” accounts.
- Bank Account: No-fee basic account.
- Advance: Preferential savings rates, overdraft options.
- Premier: Wealth management for high-income clients.
Why must providers continually review their product range?
To adapt to changing market conditions, remove low-value features, add innovations, and stay competitive.
Why is it useful to view accounts as a suite under “personal current accounts”?
The core service (money management) is similar, but each account targets distinct segments (e.g., students, wealthy clients).
How does competitor analysis influence product design?
Providers study competitors’ offerings to identify gaps, improve features, and highlight their USP (e.g., Santander’s cashback).
What is the goal of ongoing product monitoring?
To retire underperforming products, introduce new ones (e.g., digital banking features), and align with emerging customer needs.
- price/cost
How is the “price” of a financial services product typically expressed?
The price is expressed as:
- A rate of interest (e.g., for loans or mortgages).
- A fee (e.g., arrangement fees for loans).
- A premium (for insurance policies).
Key Detail: Price determines revenue, customer demand, and profit margins.
What are the four main factors that determine the price of a financial product?
- Cost of providing the product (e.g., borrowing costs + administrative expenses + profit margin).
- Demand for the product (higher demand may allow higher prices; price elasticity matters).
- Competitors’ prices (e.g., matching rivals’ fee reductions to retain customers).
- Brand image (premium brands charge higher prices for exclusivity).
Key Detail: Demand falls as price rises (price elasticity), but existing customers are less sensitive than new ones.
What is “price elasticity of demand,” and how does it apply to financial products?
- Definition: Measures how demand changes when price changes.
-
Application:
- If a bank raises mortgage interest rates, demand may drop (elastic).
- Existing customers are less price-sensitive (inelastic) than new ones.
Key Detail: Providers must balance price hikes to avoid losing prospective customers.
How do banks calculate the cost of providing a loan?
- Formula: Cost to borrow funds (e.g., interbank rates) + labor/administrative costs + profit margin = final price.
- Example: A mortgage’s price includes interest + arrangement fee.
Key Detail: Profit margin is added after covering all costs.
Why might a bank adjust its fees based on competitors’ actions?
- If a rival lowers loan setup fees and attracts more customers, others may follow (competitive pricing).
- New products must anticipate competitors’ future pricing.
Key Detail: “Follow-the-leader” pricing is common in saturated markets.
How does brand image influence financial product pricing?
- Premium brands (e.g., high-income segments) charge higher prices to signal exclusivity (e.g., Bank of Scotland’s Platinum Account at £21/month).
- Basic products align with “market price” (e.g., standard current accounts).
Key Detail: Price reflects perceived value, not just functionality.
How is the price (premium) of an insurance policy determined?
- Based on risk assessment:
- Historical data + probability calculations.
- Higher risk = higher premium (e.g., health insurance for smokers).
Key Detail: Unlike loans, insurance prices are tied to actuarial risk, not profit margins alone.
Why do banks typically not pay interest on current accounts?
- Banks source funds “for free” but provide implicit returns:
- Free services (e.g., payments, online management, overdrafts).
- Overdrafts incur interest, generating revenue.
Key Detail: Customers trade interest for convenience/services.
How is profit derived from a financial product’s price?
- Formula: Revenue (from price × sales volume) − Provision costs = Profit/Surplus.
- Margin: Must cover costs (e.g., loan administration) + desired profit.
Key Detail: Price must balance affordability for customers and profitability for providers.
- promotion/communication
What is the definition of ‘promotion’ in marketing?
is the process of making people aware of a product (or product range), maintaining/increasing awareness, and guiding customers from unawareness to repeated purchases. It highlights a product’s strengths/advantages over rivals.
Why is promotion considered an “ongoing activity”?
Because customers have short memories in marketing; constant reminders/reinforcements are needed to sustain awareness and preference amid competition.
What happens if customers are unaware of a product/provider?
They will not choose it, even if the product is high-quality or useful. Awareness is the first step to purchase decisions.
How can promotions persuade customers to choose one provider over another?
By clearly communicating why the provider’s products are the best (e.g., via branding, taglines, or highlighting competitive advantages).
What role does branding play in promotion
Strong branding (e.g., clear product names, taglines, logos) helps customers recognize and request specific products/providers.
What two key elements should a promotion include beyond product description?
1) Strengths over rival products.
2) Clear branding (name, tagline, logo) for recognition.
- place/channel
What does ‘place’ or ‘channel’ refer to in financial services?
The means by which financial products are delivered to customers, ensuring convenience and serving as a platform for promotion (e.g., posters in branches, banner ads online).
Why is channel choice critical for financial providers?
It affects customer accessibility, cost efficiency, and promotional opportunities, aligning with customer preferences (e.g., tech-savvy users vs. those preferring in-person service).
Delivery Channels - Face-to-Face**
What are the features of face-to-face channel delivery?
Customers visit provider premises (e.g., bank branches, IFAs) to buy/manage products. Example: Opening a current account at a branch and visiting for transactions.
What is a key advantage of face-to-face selling?
Higher success rate in converting customers due to personalized service and direct Q&A, outweighing higher costs for some products.
Delivery Channels - Online Banking**
What services does online banking offer?
Account management, transfers, payments, electronic statements, and P2P lending (e.g., Funding Circle). No personal service but cost-effective.
Who is online banking best suited for?
Computer-literate customers or those with schedules incompatible with branch visits.
Delivery Channels - Mobile Banking**
What are the requirements for using Barclays’ mobile banking app?
UK-registered mobile number, smartphone/tablet, age 16+, Barclays current account.
What tasks can be performed via mobile banking?
Balance checks, transfers, bill payments, PIN viewing—free, secure, and easy to use.
Delivery Channels - Telephone Banking**
How does telephone banking function?
Services accessed via phone using security info or keypad commands. Retained for customers preferring human interaction.
How does telephone banking compare to newer channels?
Preceded online/mobile banking; some customers still prefer it despite migration to digital options.
How does cost influence channel selection?
Branches are expensive (e.g., closures to cut costs); remote channels (online/mobile) reduce overheads but incur IT/call center expenses.
Why is target market segment important?
Providers must align channels with customer preferences (e.g., older demographics may resist branch closures). Example: NatWest’s 2013 branch closures sparked backlash.
How does effectiveness determine channel choice?
Geographic reach (e.g., online/mobile suits wide areas; face-to-face works for localized, high-touch services).
What role do competitors play in channel strategy?
Providers mimic successful rival channels (e.g., banks adopting mobile apps), then compete on service quality.
How do intermediaries (e.g., IFAs, brokers) distribute products?
They sell products like unit trusts or mortgages without direct provider involvement, balancing reach against loss of control.
Give an example of hybrid channel use by a provider.
TSB offers branch-managed savings accounts (face-to-face) and online-only accounts (higher interest rates), targeting different segments.
- people, process, and physical evidence
People
Employees are central to the service experience, influencing customer impressions, brand reputation, and long-term sales. They must have people skills, proper training, motivation, and a good attitude to retain loyal customers.
How do employees contribute to the marketing mix in a bank?
They directly interact with customers, build relationships, and represent the brand. Their performance affects customer satisfaction, product sales, and loyalty.
Process
What does “process” refer to in the financial services marketing mix?
It encompasses the systems and procedures for delivering services, including IT systems (e.g., account processing), customer wait times, and issue resolution efficiency.
What is a common customer complaint regarding banking processes?
Difficulty reaching a human representative when calling, due to automated systems and long queues.
Provide an example of a process failure and its consequences.
In 2013, RBS’s mobile app malfunctioned twice, preventing 2 million customers from accessing accounts. This damaged the bank’s reputation and raised concerns about IT reliability (Which? criticized the lack of robustness).
Physical evidence
Why is physical evidence critical for financial services?
Services are intangible; customers cannot evaluate them beforehand. Tangible evidence (e.g., well-decorated branches, positive reviews) reassures them about service quality.
Give examples of physical evidence in banking.
- A professional, welcoming branch environment.
- Customer testimonials or third-party endorsements (e.g., good reports from other clients).
Key Concept: Reputation & Reliability
How do process failures impact a bank’s reputation?
Technical issues (e.g., app outages) erode trust. Customers expect uninterrupted access to their money; failures lead to public criticism and reputational damage (e.g., RBS case).
- combining elements of the marketing mix
Why can’t the elements of the marketing mix be viewed in isolation?
Because they function as a combined whole. Decisions in one element (e.g., price) are influenced by others (e.g., product features, distribution channels, or promotion).
How does the price of a current account reflect the marketing mix’s interconnectedness?
The price depends on:
- Additional product features.
- Delivery channel (e.g., online accounts may offer higher interest rates).
- Promotional materials used.
Why should the marketing mix change over time?
To adapt to changes in the external environment, including:
- Political factors.
- Economic conditions.
- Social trends.
- Technological advancements.
What is critical for financial services providers regarding the marketing mix?
They must treat the mix as an integrated system, ensuring decisions in one area align with others to meet customer needs and environmental shifts.
-advertising
What is the definition of advertising in financial services?
The promotion of products to people on a non-personal basis to raise awareness, capture attention, and encourage purchases.
Why might people assume financial services require little advertising?
Because everyone needs a bank account, and those with money to save/borrow are already motivated to seek providers.
Why do financial providers advertise despite this assumption?
To create awareness of generic products (informative advertising) and influence brand choice (persuasive advertising).
What is informative advertising?
Focuses on informing people about available products (e.g., the need to save, insure, or borrow).
What is persuasive advertising?
Aims to convince people to choose a specific brand, often competing on product differentiation rather than price.
Why is persuasive advertising linked to oligopolistic markets?
Providers compete on brand and product features rather than price due to limited competition.
Why must advertisements be tailored to the target audience?
To ensure the message resonates with the needs and preferences of the intended consumers.
Give an example of how medium choice varies by product.
A short TV commercial for a new pension product vs. a text message ad for student loans.
What role does market segmentation play in advertising?
Helps providers decide how and where to advertise based on audience demographics/behavior.
List the 7 stages of successful advertising.
- Customer is unaware.
- Customer becomes aware.
- Customer understands.
- Customer appreciates benefits.
- Customer is convinced to buy.
- Customer buys.
- Customer continues to buy.
What is the key takeaway from the stages model?
Advertising must guide customers from ignorance to loyalty through gradual engagement.
What are key principles for creating effective ads?
- Convey a simple message.
- Avoid information overload.
- Create a mood (humor, feel-good, celebrity appeal).
How did banks advertise post-2008 financial crisis?
Emphasized safety, prudence, and customer service (e.g., Virgin Money’s “soulful” approach, Lloyds’ “250 years” campaign).
Why is repetition critical in advertising?
People may ignore ads initially but remember the brand after multiple exposures, even if annoyed.
How do large providers structure their advertising campaigns?
Use multi-media approaches (TV, online ads, posters, mailshots) with a consistent message across all platforms.
Why is consistency important in multi-media campaigns?
Ensures the same core message is reinforced, improving brand recall.
- branding
What is branding in the context of financial services?
Branding refers to the name, design, logo, or symbol that distinguishes a product/provider from competitors. It’s an intangible asset that communicates company values, builds trust, and creates competitive advantage.
Why are strong brands valuable for financial services providers?
They foster customer loyalty, reduce price sensitivity, enable brand extensions, and allow targeted marketing. Trust in a brand discourages customers from switching to competitors.
How did non-traditional firms like Virgin impact financial services branding?
They brought established brands and marketing expertise into the sector, forcing traditional providers to improve their branding, especially post-2007–08 financial crisis.
How does a strong brand enable product differentiation?
Customers associate unique attributes with the brand, making the product distinct from competitors’.
Why is effective advertising easier for strong brands?
Well-known logos instantly convey provider values, reducing the need to reiterate them in ads.
What is brand loyalty, and why is it important?
Customers stick with a brand despite competitors’ offerings, aiding customer retention.
How does a strong brand reduce price sensitivity?
Fewer customers switch when prices rise
What is brand extension?
New products benefit from existing brand goodwill (e.g., Virgin Money leveraging Virgin’s reputation).
How does branding support targeted marketing?
Providers use brands to appeal to specific segments (e.g., youth-focused sub-brands).
Can an expensive ad campaign alone create a strong brand?
No. Brands require time, money, and consistent efforts like PR, customer care, and product design.
Why must branded products perform well?
Performance builds positive associations (e.g., reliability) tied to the brand name.
Why do large financial firms use multiple brands?
To target different markets or retain goodwill from acquired brands (e.g., post-takeover).
What are “brand identity guidelines”?
Rules for literature layout, fonts, colors, etc., ensuring consistency and recognition.
How do providers choose a house style?
Through research on how styles influence customer perception (e.g., colors conveying trust).
What role does image play in branding?
Visual symbols (e.g., Lloyds’ black horse) instantly identify the brand.
How does color contribute to branding?
It reinforces identity (e.g., Barclays’ blue eagle).
Give an example of a distinctive word in branding.
Halifax’s use of “extra” in product names.
What is a conceptual phrase in branding?
Slogans like Nationwide’s “building society, nationwide” convey brand ethos.
How do brands simplify communication?
They convey information quickly (e.g., via logos) without words.
Why is consistency critical in branding?
It reinforces recognition and aligns with researched customer perceptions.
The advantages of a string brand include the following:
- product differentiation
- effective advertising
- brand loyalty
- relative price insensitivity
- brand extension
- better targeted marketing
product differentiation
How does a strong brand contribute to product differentiation?
Customers perceive the product as distinct from competitors due to the associations they have with the brand (e.g., quality, trust, or lifestyle).
Why is advertising more effective for well-known brands?
A recognizable logo and established brand values allow advertisements to quickly resonate with audiences without restating the provider’s core messages.
Brand loyalty
What is brand loyalty, and how does it benefit companies?
Brand loyalty means customers stay with a provider even when competitors offer better products. It enhances customer retention and reduces churn.
Relative Price Insensitivity
How does a strong brand reduce price sensitivity?
Customers are less likely to switch to competitors when prices increase because the brand’s perceived value outweighs cost concerns.
Brand Extension
What is brand extension, and why is it advantageous?
Launching new products under an existing brand leverages existing goodwill, reducing marketing costs and increasing acceptance.
Better Targeted Marketing
How can brands use segmentation effectively?
Large providers tailor specific brands to segments (e.g., youth markets) using branding combined with market research for precise appeal.
Can an expensive ad campaign alone create a strong brand?
No. Brands require time, investment, and consistent performance across advertising, PR, customer care, and product design to establish trust.
Why do financial organizations use multiple brands?
To appeal to different target markets or retain acquired brands’ goodwill after takeovers, preserving their existing customer bases.
What is a “house style,” and why is it important?
A set of rules (e.g., fonts, colors, layouts) ensures consistency, brand recognition, and conveys a researched, cohesive brand image.
- public relations (PR)
What is the definition of Public Relations (PR)
PR is a long-term process through which a provider promotes and maintains a positive public image and reputation. It aims to enhance or improve the firm’s reputation
What are four key outcomes of good PR
- Generates interest in a provider’s business
- Prompts potential customers to find out more
- Triggers previous customers to buy again
- Reinforces the firm’s image and reassures existing customers
How is PR different from advertising
Unlike advertising (which is paid for), PR focuses on influencing perceptions through media by working with journalists to present the provider in a positive light without direct payment
Who is the target audience of PR
Not only customers and potential customers but also stakeholder groups and the general public
What is the main aim of PR
To influence public perception about the organisation, significantly impacting the overall brand image
What factors influence a provider’s reputation
Due to a bad reputation from the crisis, it’s been difficult for financial services PR departments to limit damage and spin headlines positively
Name some common PR activities
• Issuing press releases
• Commenting on external changes
• Participating in trade exhibitions
• Sponsoring events and TV shows
• Supporting charities
• Publishing newsletters
Give an example of PR activity shown in the image.
A: Barclays sponsoring the Mayor of London’s cycle hire scheme to gain publicity.
What do larger providers have for managing PR?
A: Dedicated PR departments or PR agencies, often with a press team to manage reputation-related headlines
Why is managing PR not easy for large banks?
A: They’ve been frequently featured in critical media stories, making positive PR challenging
What is a ‘damage limitation exercise’?
A: A PR strategy to explain and manage negative incidents to reassure the public and protect the firm’s image
Give an example of damage limitation in action.
A: Halifax and Lloyds TSB (Oct 2012) experienced systems failure—PR issued statements to explain and reassure customers
Is PR only for damage control?
A: No. PR also highlights good news—e.g., awards and achievements—to gain positive media attention
- sales literature
What is sales literature and who creates it
Sales literature is a generic term applied to the text created by a provider’s marketing department
How may sales literature be distributed to prospective customers
It may be sent by post, uploaded onto websites, displayed at bank branches, or sent to firms (e.g., IFAs) that promote the provider
Why is sales literature important in financial services where there is rarely a physical product
Because it’s often the main point of contact between the customer and the organisation—especially when buying online
What types of documents fall under sales literature?
A: Brochures, agreements, statements, contract notes, and other documents
Why do businesses spend time on the appearance of sales literature?
A: To convey their brand image effectively
What is a mailshot and what is its purpose?
A: A mailshot is directed at people likely to be interested in a product. It aims to promote a specific offering to a targeted audience
How do providers choose who to send mailshots to?
A: They use databases to create customer profiles and target people based on previous purchases or interests
Give an example of how a mailshot might be targeted.
A: A savings account for high-income earners might be promoted to people who have bought expensive products like home extensions or long-haul holidays
What does a typical mailshot include?
A: A letter with an attractive headline, some product details (not all small print), and a call to action
Why is the use of mailshots less common today?
A: Because they are less relevant in the digital age and face environmental scrutiny.
Why is sales literature made available to IFAs?
A: To keep them up to date with new products or changes so they can advise clients accurately
How does sales literature for IFAs differ from that for customers?
A: It contains more detailed information to ensure advisers are well informed
- direct selling
What is direct selling in financial services?
A: Direct selling refers to sales between the customer and provider without a financial adviser. It can be remote (telephone, internet) or personal (branch, home visits).
How does remote selling differ from personal selling?
- Remote: Seller and customer are not physically together (e.g., phone, internet).
- Personal: Seller is physically present (e.g., office, home visit).
Why is direct selling increasing in popularity?
Due to technological advancements and changing customer attitudes, especially via online, mobile, and telephone channels.
What are the advantages of face-to-face selling?
- Builds a personal relationship.
- Enhances brand perception through positive interactions.
- Allows customers to ask questions, ideal for those with limited financial knowledge.
How does a telephone call compare to face-to-face selling?
It can be personal but lacks non-verbal communication, weakening relationship-building.
What are the drawbacks of emails and mailshots in direct selling?
- Do not establish customer relationships.
- May annoy customers (seen as unsolicited/nuisance).
- More effective for retaining existing customers than acquiring new ones.
When are remote methods like emails most effective?
For selling additional products to existing customers who are already familiar with the provider.
How do call centres influence customer perceptions?
By building rapport and handling enquiries efficiently, they shape positive views of the provider.
ATTRACTING AND RETAINING CUSTOMERS
Why is retaining customers as important as gaining new ones?
Retaining customers is cost-effective (cheaper than acquiring new ones) and existing customers are targets for cross-selling (e.g., buying additional products like mortgages after a personal loan).
How does the method of acquiring customers affect loyalty?
Customers acquired through face-to-face selling are more loyal than those gained via impersonal channels (e.g., internet) because personal interactions build stronger relationships.
What strengthens a customer’s loyalty to a provider?
The perceived relationship with the provider (e.g., through a sales adviser). Stronger relationships increase loyalty and retention.
Why do financial services customers rarely leave the market entirely?
They typically switch providers rather than exit the market, making retention a key focus for providers.
What is the primary goal of customer retention in financial services?
Encouraging customers to prefer a specific brand, not just persuading them to use products (especially for “sticky” products like current accounts or mortgages).
Why is brand preference critical for products like current accounts or mortgages?
These have no substitutes, so customers switching will likely choose a large provider. Losing a customer here means losing long-term revenue.
What happens when a customer switches a current account or mortgage to another bank?
They usually choose a large provider, and the losing bank may aim to gain customers from rivals in return.
What is the broader strategy for providers in attracting/retaining customers?
Focus on relationship-building, brand preference, and cross-selling opportunities to maximize lifetime customer value.
- the marketing mix
What is the purpose of the marketing mix in attracting and retaining customers?**
The marketing mix ensures the product is sold at a fair price, designed for customer circumstances, delivered via a convenient channel, and satisfies customer needs. This builds reputation and loyalty.
What are the key components of the marketing mix in practice?
- Product: Suits customer’s circumstances and satisfies needs.
- Price: Clean and fair.
- Channel: Convenient and suitable delivery method.
- Information: Customers are fully informed before purchase.
- customer service
Why is customer service critical for financial products?
Financial products are services, and customers expect high standards. Poor service leads to complaints and reputational damage.
How can the quality of customer service be measured?
By tracking the number of complaints received.
What are the main complaints from personal current account customers?**
- Online banking servers being “down,” preventing access or fund transfers.
- Inability to reach customer service for resolution.
Why do savings account customers complain?
- Low interest rates (even if market-wide).
- Bonus interest rates withdrawn without notification.
What frustrates customers about these products?*
- Complexity and lack of understanding about value fluctuations.
- Perceived high fees.
What are the key complaints from loan customers?**
- Difficulty obtaining loans despite creditworthiness (especially small businesses).
- High arrangement fees.
What is the most common insurance-related complaint?
Insurers avoid paying claims by imposing strict interpretations of policy wording.
How can providers avoid these complaints?*
By ensuring transparent communication, fair pricing, reliable service, and designing products that align with customer needs (effective marketing mix).
- reputation and brand image
What is the role of reputation and brand image in attracting customers?
Reputation and brand image are vital in attracting customers by creating an association between the provider’s name and values like trust, reliability, or service, which customers prioritize when choosing a financial services provider.
Can a strong brand alone ensure customer retention? Why or why not?
No, a strong brand alone cannot ensure retention. If the brand is the only strong point, customers may switch to competitors with equally strong brands. Retention depends on good products, fair prices, and high-quality customer service.
How do smaller local providers (e.g., building societies, credit unions) attract customers if they lack a strong brand?
They may rely on a good marketing mix (product, price, place, promotion) and local recognition rather than a fully developed brand.
- loss leaders
What is a loss leader?
A product or service offered below cost to attract customers, who then purchase other profitable products.
How do loss leaders help in customer retention?
They attract new customers with the hope that they will become long-term repeat customers by purchasing additional profitable products.
Give an example of a loss leader in financial services.
Free financial advice sessions—banks offer them at no charge, hoping customers will later open accounts or buy other products.
Why do banks offer children’s savings accounts with low/no fees despite high administrative costs
It’s a loss leader strategy—children are future customers who may stay with the bank for life, generating long-term revenue through loans, investments, and other services.
What is the long-term benefit of loss leader strategies like children’s accounts?
A customer acquired early may remain loyal for decades, fulfilling all financial needs with the same provider, leading to significant lifetime revenue.
- deals and product offers
Why do providers offer attractive deals to new customers?
To encourage switching from other accounts/providers, often with temporary bonuses that later revert to lower standard rates.
What is a common tactic used by providers in low-interest-rate climates?
Paying a small bonus to new savers to make interest rates appear more competitive.
How can savers maximize returns under bonus-rate schemes?
By transferring money to another bonus-paying account once the initial bonus period ends.
Give an example of a bonus rate structure.
An account may offer 1.16% AER for 12 months, then drop to 0.35%.
Why have some banks faced criticism from consumer groups?
For failing to remind customers when bonus periods are about to expire.
How has Nationwide addressed this criticism?
Through its “SavingsWatch” scheme, notifying customers via email/SMS about rate changes (e.g., bonus expiry, Bank of England rate changes, or new accounts).
What triggers a SavingsWatch notification?
- Interest rate changes (provider-initiated or due to Bank rate changes).
- Introductory bonus expiry.
- Launch of new savings accounts.
How might new-customer deals negatively impact existing customers?
They may feel disadvantaged, as new customers receive privileges for “disloyalty” to previous providers.
How do providers retain existing customers?
By offering loyalty products with exclusive terms (e.g., higher interest rates) to discourage switching.
Provide an example of a loyalty product.
HSBC’s “Loyalty Cash ISA,” which offers extra interest to customers with an HSBC current account.
What is the purpose of loyalty products?
To persuade customers that staying with the provider yields better benefits than switching.
- social and ethical considerations
What do people expect from financial services providers regarding ethics and responsibility?
People expect financial services providers to behave ethically and act responsibly toward their stakeholders (e.g., customers, employees, communities).
What is Corporate Social Responsibility (CSR), and why is it important for financial providers?
CSR refers to a company’s commitment to operate ethically and contribute to societal well-being. For financial providers, it helps build a positive reputation, fostering customer loyalty and potential sales growth.
How can banks, building societies, credit unions, and insurance companies support communities?
They can:
- Help local communities (e.g., funding education, supporting small businesses).
- Initiate global projects (e.g., clean water initiatives in developing countries).
Example: A high street bank partnered with international charities to provide clean water in Bangladesh, addressing pollution and street children’s needs.
Key Point: Community support enhances brand image and demonstrates ethical commitment.
How does a strong ethical reputation benefit financial service providers?
A good reputation from ethical practices (e.g., CSR, community projects) can attract customers, leading to increased sales and long-term loyalty.
Key Point: Ethical behavior is not just moral but also commercially advantageous.
ACHIEVING CUSTOMER SATISFACTION
Why is customer satisfaction vital after attracting and retaining customers?
Unsatisfied customers will leave, as there’s no reason to stay with a provider if unhappy with the product/service. The marketing mix must ensure satisfaction to prevent losing them.
What are the two general approaches to selling a product?
Transactional selling and relationship marketing.
- transactional selling
Define transactional selling.
An approach focusing on the product (not the customer), aiming to close individual sales quickly without building relationships or assessing customer needs.
What is the salesperson’s primary goal in transactional selling?
To make as many sales as possible, closing deals swiftly.
How does a transactional approach view its products?
Assumes products are strong enough to “sell themselves.”
What are two perceived benefits of transactional selling?
- Faster brand awareness.
- Lower costs (uses fewer human resources).
What does transactional selling fail to do?
Build customer relationships, inquire about needs, or check product suitability.
- Transactional Selling vs. Relationship Marketing
What is the primary focus of transactional selling vs. relationship marketing?
- Transactional selling: Sales targets.
- Relationship marketing: Customer retention.
How do transactional selling and relationship marketing differ in orientation?
- Transactional selling: Service features.
- Relationship marketing: Customer benefits.
Compare the timescales of transactional selling and relationship marketing.
- Transactional selling: Short-term.
- Relationship marketing: Long-term.
How is customer service viewed in each approach?
- Transactional selling: Low emphasis.
- Relationship marketing: High emphasis.
What level of commitment is expected from customers in each approach?
- Transactional selling: Limited.
- Relationship marketing: High.
How does customer contact differ between the two approaches?
- Transactional selling: Limited contact.
- Relationship marketing: High contact.
How is quality perceived in transactional selling vs. relationship marketing?
- Transactional selling: Concern of operations.
- Relationship marketing: Concern of all parties.
Compare the cost and revenue implications of transactional selling and relationship marketing.
- Transactional selling: Lower upfront costs but fewer repeat sales.
- Relationship marketing: Higher initial costs but balanced/more than balanced by long-term revenue from loyal customers.
Describe the sales culture in the financial sector before the 2007-08 crisis.
- Transactional in nature.
- Focused on short-term profits, bonuses, and meeting sales targets.
- Led to irresponsible lending (e.g., unaffordable loans, mis-sold PPI).
What were the consequences of the transactional sales culture?
- Housing bubble and mortgage defaults.
- PPI mis-selling scandal (policies sold to ineligible customers).
- Banks faced massive compensation costs.
How has the financial sector’s approach changed since the crisis?
Shift toward relationship-based marketing.
- Emphasis on ethical banking, customer suitability, and long-term trust.
What competitive advantages does relationship marketing offer?
- Higher long-term revenue: Loyal customers buy repeatedly.
- Cost savings: Cheaper to retain customers than acquire new ones.
- Reputation: Enhances trust and ethical standing.
How does relationship marketing prevent issues like the PPI scandal?
- Sales staff take time to understand customer needs.
- Avoids mis-selling by ensuring product suitability.
The final stage of successful advertising is:
The customer continues to buy
The customer is convinced to buy
The customer buys
The customer is encouraged to buy
The customer continues to buy
The approach to finding and keeping customers that centres on the product rather than the customer is known as:
Relationship selling
Personal selling
Transactional selling
Product selling
Transactional selling
The ‘marketing mix’ is a tool used by professionals to describe what firm is offering
True
False
True
The pricing of an insurance policy is based primarily on:
Demand
Risk
Cost
Gender
Risk
Regardless of how good a product is, people will not buy it unless:
They know about it
They know it’s cheap
They understand it’s useful
They know their peers have it
They know about it
The 4 C’s of marketing are:
- Commodity,cost, communication, channel
- commodity,cost,confidence, channel
-commerce,cost,
communication,channel
-commerce,cost,confidence, channel
Commodity,cost, communication, channel
The factors that make a brand different from and better than competing brands are known as its:
Ultimate selling promotion
Unique service position
Unique selling point
Ultimate service position
Unique selling point
A perceived disadvantage of online banking is:
It’s running costs
It’s time taken to load
It’s cost to the customer
It’s lack of personal service
It’s lack of personal service
An example of a loss leader is:
A children’s savings account
A credit card
A cash isa
A mortgage
A children’s savings account
The 80:20 rule is also known as the Pareto principle
True
False
True
One of the 3ps of services is:
Product
Provider
Personal
People
Product
To achieve long term sales, it is better to use a transactional selling approach than a rs selling approach
True
False
False
