Unit 4 Topic 9 Flashcards
What is market segmentation?
A marketing technique that divides a market into smaller groups based on shared characteristics to better meet customer needs.
What are the three main types of market segmentation?
Geographic (location-based), demographic (age, gender, income), and behavioral (spending habits, loyalty).
Why do financial providers use market segmentation?
To design products that meet specific customer needs and effectively target marketing efforts.
How does segmentation help financial providers?
It allows them to develop tailored products, set appropriate pricing, and choose the right marketing channels.
What is product differentiation?
The process of making a product stand out from competitors by adding unique features or benefits.
How can financial providers differentiate their products?
By offering exclusive benefits such as cashback, rewards, lower fees, or additional insurance coverage.
What are packaged current accounts?
Bank accounts that include additional benefits like insurance, cashback, or travel perks in exchange for a monthly fee.
What are the main benefits of packaged accounts?
Features such as travel insurance, mobile phone insurance, cashback, and preferential interest rates.
What are some criticisms of packaged current accounts?
Some customers pay for benefits they don’t need, policies may have exclusions, and mis-selling can occur.
How can banks improve transparency with packaged accounts?
By clearly explaining benefits, checking eligibility, and sending annual statements detailing the perks.
What is an interest-free balance transfer?
A promotion where customers can transfer credit card debt and pay no interest for a set period.
What hidden costs should customers be aware of?
Balance transfer fees (usually around 3%), penalties for missed payments, and interest on new purchases.
How do cashback credit cards work?
They give customers a percentage of their spending back as a reward, usually in the form of vouchers or cash.
What is a rewards program in financial services?
A scheme where customers earn points on purchases, which can be redeemed for discounts, travel perks, or other benefits.
Why do financial institutions conduct market research?
To understand customer needs, assess demand, and improve products.
What are the two types of market research?
Primary research (new data collection) and secondary research (using existing data).
What are some common primary research methods in financial services?
Interviews, questionnaires, focus groups, observation, and mystery shopping.
What is mystery shopping?
A research technique where individuals pose as customers to evaluate service quality and product suitability.
What is secondary research?
Research that uses existing data, such as reports from government agencies, competitors, and market studies.
What are some sources of secondary research data?
Government reports, financial regulators, market research firms, and competitor analysis.
What is financial product development?
The process of creating new or improved financial products to meet changing customer needs.
What are the main reasons financial providers develop new products?
To respond to legal, economic, social, and technological changes.
How do legal changes influence financial product development?
Regulations can restrict certain practices, requiring new products to comply with updated laws.
Give an example of how regulation affected financial products.
The ban on gender-based pricing in insurance led to unisex pricing policies.
