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DISTRIBUTIVE NETWORK RELATIONS Learning Objectives: To understand the availability of various delivery channels and marketing strategies deployed by each one of them. Chapter 12 Markeiting of Financial Services 1 DISTRIBUTIVE NETWORK RELATIONS • • • 12.1 Introduction The distribution network is the face of the financial intermediary and probably the most visible aspect of the marketing efforts. Often they are the buyer’s only point of contact to avail financial services. Distribution channels help in the place aspect of the marketing mix. The Investopedia defines a distribution channel as “The chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer”. A distribution channel can include wholesalers, retailers, distributors and even the internet. Channels are broken into direct and indirect forms, with a "direct" channel allowing the consumer to buy the good from the manufacturer and an "indirect" channel allowing the consumer to buy the good from a wholesaler. Direct channels are considered "shorter" than indirect" ones. Chapter 12 Markeiting of Financial Services 2 DISTRIBUTIVE NETWORK RELATIONS • 12.2 What is the need for a distribution channel? • The primary goal of the marketing plan is to get people to buy your products or services. The Sales and Distribution part of the marketing plan details how this is going to happen. • Stern and Ansary define a distribution channel as a “ Set of interdependent organizations involved in the process of making a product or service available for use or consumption”. Chapter 12 Markeiting of Financial Services 3 DISTRIBUTIVE NETWORK RELATIONS • 12.3 The role of a sales person in a distributive network • The basic objective of an organization selling its own product or a third party product is to sell it at a profit. Profit can be sustained with customer satisfaction and loyalty. Hence a sales person has to build the distribution network loyalty, be it a part of a stimulated distributive network to put in efforts for generating customer delight or to establish an efficient after sales service. A sales person should be clear about what is expected of the channel and from himself in terms of the service that it provides to the customers. Companies can achieve greater differentiation if their sales persons can adhere to the high levels of channel objectives. Chapter 12 Markeiting of Financial Services 4 DISTRIBUTIVE NETWORK RELATIONS • 12.4 Distribution channel objectives: • Every organization has to finalize a set of channel objectives and the activities that need to be performed with a certain level of efficiency and effectiveness before organizing the channel activities. Infrastructure and market related constraints should be carefully studied before finalizing the set of channel objectives. • The basic objectives of a distribution channel can be stated as follows: • To reach out to maximum consumers • To multiply this reach and to provide efficiency to the marketing process • To facilitate smooth flow and create time, place and possession utilities. • To provide scales of economies and operations • To provide specialization Chapter 12 Markeiting of Financial Services 5 DISTRIBUTIVE NETWORK RELATIONS • 12.5 How to stimulate delivery channels in financial services? • A customer is offered a wide array of channels and given a choice to select the optimum channel mix for maximum satisfaction. Some financial intermediaries invest crores of rupees on the branch layout, egalleries, remote electronic channels and even extension counters at corporate office complexes. These channels are supposed to be used for massive cross selling and upselling of both banking and Para banking products and services. • Many sales persons are motivated enough to provide an extra push for cross selling and upselling the various products and services. These feelings race to inadequacies in sales persons presentations and hence the basic objective of using the ready infrastructure for cross selling and upselling is defeated. • Let us understand how to market the usefulness and availability of various delivery channels available in the current era of financial services. Chapter 12 Markeiting of Financial Services 6 DISTRIBUTIVE NETWORK RELATIONS • Branch: • Branch is the direct channel that conceptualizes the contractual relationship with the customer. With the Know Your Customer (KYC) norms implemented by almost all organized financial markets, the customer has to visit the branch for establishing his proof of identity and address. Inspite of tremendous developments in technology, research has proved that a customer still prefers to enhance his banking experience by visiting a branch. • Hence the marketing design should put its heart and soul in designing the branch layout and ambience to make the experience of various types of customers right from the young till the old, a pleasant one. Chapter 12 Markeiting of Financial Services 7 DISTRIBUTIVE NETWORK RELATIONS • ATMs • Banks are obliged to provide free service to their customers for withdrawing cash , balance enquiries over the counter or through their own ATMs. However the cost of providing such services over the counters is 3-5 times more expensive than that through ATM. Thus diversion of branch traffic to ATMs effectively results into saving transaction costs which otherwise could have been incurred across the counters. An ATM is a full version of a mini bank allowing all transaction for depositing and withdrawing funds. Chapter 12 Markeiting of Financial Services 8 DISTRIBUTIVE NETWORK RELATIONS • A Point of Sale (POS) terminal : is a portable electronic device that enables the processing of debit and credit card payments for products and services purchased at retail outlets. POS terminals help the customer to perform cash less transaction. The POS terminals also help the card holder to withdraw cash at designated merchant outlets. In this case the bank pays charges which are split amongst the card-issuing bank, the bank that owns the POS terminal and the Shared Payment Network Company. New private sector banks account for over 70% of the POS network in our country. Inspite of the tremendous ease in performing cash less transactions, customers are still not ready to make use of POS terminals for doing routine financial transactions. Chapter 12 Markeiting of Financial Services 9 DISTRIBUTIVE NETWORK RELATIONS • Mobile banking is the latest and the most convenient delivery channel which can be used even in the unbanked, under banked and rural location. Statistics on mobile banking say that India has a larger number of mobile phones than the savings accounts which means lots of potential for converting mobile phone users into bank customers. Mobile banking offers various facilities to the customers like option to pay utility bills, option to transfer funds to any customer or between different accounts, facility for setting alerts for different transactions, facility for shopping and paying though the mobile, user friendly easy operations enabled by installing a small app provided by the bank and facility for using banking facility from anywhere including the rural places. The mobile banking channel is highly cost effective delivery channel model for the banks as compared to ATMs. Chapter 12 Markeiting of Financial Services 10 DISTRIBUTIVE NETWORK RELATIONS • Banking through digital channels became more popular first with the introduction of internet banking. With the increasing use of online banking channels banks have changed their sales and marketing efforts from the broad based brand and the branch focused campaigns to more effective digital marketing. In spite of the paradigm shift in banking only a small portion of banks (2025%) are at high levels of maturity to deploy digital marketing for generating profits. One of the weakest areas of the banks is the real time integration of all its channels for first getting a single customer view and then shooting the right information for decision making of the customer. Some of the banks do use high end analytics but still the customer relationship managed has not yet blossomed into comparison to the real depth and usefulness of the analytics. Chapter 12 Markeiting of Financial Services 11 DISTRIBUTIVE NETWORK RELATIONS • Sales through tie ups are also an emerging sales channel. This channel is focused more on bulk sales by entering into contractual relations with builders of real estate property, educational institutions, car manufacturers, corporates for providing personal loans to employees etc. Special concessions like the waiver of the processing fees, documentation charges, and competitive interest rates are offered to woo customers for taking spot decisions. The entire process of purchase, bank documentation, insurance, delivery happens under one roof. The financer gets a bulk portfolio and the customers benefits for spot decisions. A lot of efforts are put in advertising such events before conducting such tie up programs. Chapter 12 Markeiting of Financial Services 12 DISTRIBUTIVE NETWORK RELATIONS • With this we complete our session on chapter 12 ‘DISTRIBUTIVE NETWORK RELATIONS’. Next we move to chapter 12 ‘Evaluating Marketing Cost’ Chapter 12 Markeiting of Financial Services 13