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The Financial Services Marketing Handbook: Tactics and Techniques That Produce Results / Edition 2

The Financial Services Marketing Handbook: Tactics and Techniques That Produce Results / Edition 2

by Evelyn Ehrlich, Duke Fanelli
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Product Details

ISBN-13: 9781118065716
Publisher: Wiley
Publication date: 04/03/2012
Series: Bloomberg Financial Series , #150
Pages: 208
Product dimensions: 7.10(w) x 10.10(h) x 0.90(d)

About the Author

Evelyn Ehrlich, PhD, is President of EC Communications, a marketing consulting firm that has specialized in financial services since 1982. Her clients have included AXA Advisors, BNY Mellon, JPMorgan Chase, Merrill Lynch, and other leading financial institutions. Ehrlich currently teaches financial services marketing at New York University and has previously taught at Baruch College and the University of Vermont. She has been a speaker for private companies and trade groups, including the Financial Planning Association, the Financial Communications Forum, the Financial Services Marketing Conference, and others.

Louis "Duke" Fanelli has more than thirty years of experience in marketing and financial services. He is currently Senior Vice President, Marketing and Communication for the ANA (Association of National Advertisers), the leading association for client-side marketers. Prior to joining ANA, he served as CMO for Edelman Financial Services, Fairfax, Virginia, a leading independent advisory firm. Earlier, he was a VP of Marketing for AXA Equitable Life Insurance Co., New York. Prior to joining AXA, he spent nearly fifteen years in various communication, marketing, and business leadership positions at Chase. He began his career as a journalist.

Read an Excerpt

The Financial Services Marketing Handbook

tactics and techniques that produce results
By Evelyn Ehrlich Duke Fanelli

Bloomberg Press

Copyright © 2004 Evelyn Ehrlich and Louis A. (Duke) Fanelli
All right reserved.

ISBN: 1-57660-156-0


The Unique Challenges of Marketing Financial Services

Marketing financial services used to be easier. Banks gave a toaster to a new depositor and had a customer for life. Stockbrokers rarely left their parent company to go to a competitor. Institutional financial services was a clubby business in which multimillion-dollar deals were negotiated on the golf course. No more. Today, competition in financial services is fierce; sales and market-share growth can hinge on a few basis points, a friendlier voice on the phone, or an easier-to-navigate website. Not only has competition become more intense, financial services have also changed structurally. Old customs and laws that isolated banks by geography and separated investment banks from commercial banks, and insurance companies from mutual fund companies, have disappeared.

Now, everyone is competing for hot business segments. Retirement services, for example, are offered by banks, brokerages, mutual funds, insurance companies, and independent advisers. And it's not just customers they're competing for. With mergers and acquisitions occurring all the time, financial companies are nolonger lifelong employers to whom employees naturally feel loyalty. Today's financial marketplace is a free-for-all, where top sales producers act like pro basketball players, demanding signing bonuses and salaries that can far exceed the CEO's.

But even as the financial industry has undergone momentous structural change, financial services marketing has remained pretty much what it's always been: passive, conservative, and relatively undisciplined. The words are different now; marketing managers talk about "brand management" and "customer value" and "share of wallet." But with few exceptions, financial services marketers are using old and not always effective methods of acquiring and retaining customers and sales professionals. This is true both in consumer and institutional markets, in traditional brick-and-mortar businesses like banks, and in cutting-edge businesses like online brokerages.

Some financial companies have attempted to update their methods by applying lessons learned in more marketing-oriented disciplines, such as consumer products. And there are certainly lessons to be learned that way. One of the objectives of this book is to introduce and apply modern marketing principles to the practice of financial marketing.

But financial products are not consumer products. In fact, they're not products at all in the way product marketing is usually described. Nor are they altogether like services. The financial industry operates in a unique way, and its marketing tasks are correspondingly complex. Consider an example: Product marketers can target consumers and can position and brand their products with the confidence that all samples of their products are manufactured to be the same-every bottle of Stolichnaya vodka tastes the same, looks the same. But a marketing manager at a private bank can't make the same assumption. The experience that clients have of the bank's service will differ, depending on the particular private banker who serves them and on support staff throughout the organization.

If financial products don't act like products, neither do they act entirely like services. Consider that, in many cases, a "product" will be sold not by someone who works for the parent company but by someone who is independent-an insurance broker, pension fund adviser, or personal financial planner. Or they may work for the parent company but still act independently, as do many stockbrokers who can easily walk away to a new firm. Your job as a marketer is not only to make sure that sales professionals are sustaining your brand strategy but also to keep them selling your product. You've got a two-tiered marketing task: selling the customer and selling the salesperson.

And this only begins to describe the challenges for the financial services marketer. Even defining financial services is hard in an industry that encompasses everything from mass-marketing of consumer banking, insurance, and investments to one-on-one selling of institutional products and services that may cost millions of dollars.

This book is designed for anyone whose job it is to market or sell any financial product or service-consumer or institutional-through a multitude of sales channels. The following chapters provide the basic tools and techniques that every financial marketer needs to be familiar with, along with case studies of how these methods have been applied (some successfully, some less so). To begin, let's look more closely at how financial marketing is different.

Products or Services?

In order to apply general marketing principles to financial services, we first need to ask: are the goods being sold as products or as services? What difference does it make? For your bottom line, plenty. Let's say, for example, that you're in charge of a new credit card, called Topnotch, for the high-net-worth market. It offers lots of extras and has a hefty annual fee. One of your jobs, as a product marketer, would be to use focus groups, surveys, and other market research methods in order to help the product people determine which bells and whistles would be most valued by prospective customers and how much they would be willing to pay for them. You would then need to pinpoint your product's advantages over your competition and find a way to communicate these benefits to your target market segment. This is all classic product marketing.

You've done all this brilliantly, and your Topnotch card has taken off beyond your projections. But then you start noticing some disturbing numbers-customers are canceling their cards far beyond the levels you anticipated. And after a lot of interviews with current and former customers, you find out that the service provided on your card is uneven. Sometimes the customer service representatives are extremely helpful, but other times they leave the customer unsatisfied. And the reason is that even though they are trained to offer Topnotch service, the reps' compensation is tied to the number of customers they service rather than the satisfaction of each customer they service. As a result, the customers' experience with the card does not match the brand image of luxury and customization. Your mistake was to market a product (all Topnotch cards are the same), rather than a service (each experience of using the Topnotch card is different).

Financial Services as Products

As the example shows, financial services are neither products nor services, but have elements of each. Here are some ways in which financial services are like products:

Separability. Unlike many services, the production of many financial products can be separated from their consumption. A consumer does not have to be physically present in the bank to use a checking account. Like an athletic shoe, the checking account is "manufactured" in advance of its sale and subsequent use.

Lack of perishability. Unlike a dinner reservation, a credit card will be there when the customer wants one. It is not perishable. This makes it easier for the financial provider to manage supply and demand. Unlike the finite seating in a restaurant where every customer wants a table on Saturday at 8 p.m., the supply of credit cards can be adjusted to meet demand.

Mass production. Services are typically created and delivered one at a time, while products are usually mass-produced. Whereas many financial services are individualized, such as financial advice, others can be mass-produced and mass-marketed, like insurance policies, college savings accounts, or data analysis systems for bond traders. Mass production enables mass distribution and cost savings.

Financial Services as Services

A checking account may be "manufactured," but it is not tangible. Unlike a car, you can't touch it or examine its features with your eyes and hands. It has no physical presence. Despite the vocabulary often employed in the financial world, financial services "products" are not entirely products, because they are intangible. Intangibles have certain common qualities.

Low cost of entry. There is little or no cost to manufacture, inventory, or distribute a financial "product." Start-up costs are very low, which means that there are few barriers to creating-or copying-a financial product. Although there may be legal restrictions and expenses associated with marketing, the capital costs of creating a new product are negligible. Also, there are no warehousing or physical distribution costs.

Speed to market. A manufacturer of a new toy or airplane must develop blueprints, build models, test the integrity of the design, and often reengineer several prototypes before a product can even be test-marketed. But in financial services, the idea is the product. If an investment bank comes up with a new way to securitize cash flow (say, by selling shares of the future royalties of a pop singer), the bank can start selling the securities almost as soon as the ink is dry on the offering plan.

Lack of exclusivity. A successful new manufactured product can usually enjoy a period of exclusivity, during which there is no competition. The product may be patented (like a drug) or trademarked (like software) to prevent competitors from using exactly the same formulation. Or the costs of building a competitive manufacturing facility (as for a new airplane model) are just too high to be feasible.

But in financial services, there are few protections, and the cost of entry is low. Merrill Lynch "invented" the first CMA (cash management account) in the late 1970s. It was the first time that a brokerage firm had offered an account that combined investments with checking. It was very successful and brought Merrill a lot of new business. But within a few years, every brokerage firm had one. Although Merrill trademarked the name, it could not protect the idea. Its first-mover advantage quickly dissipated.

Service Is What It's About

Because it's easy to copy a new financial idea, product differentiation is difficult. Whatever bells and whistles you come up with for your product, for example, affiliation credit cards or online bill paying, can be easily replicated by your competitors. Over time, additional value has to come from somewhere other than the product itself.

Where does added value come from? Service is almost always the most important differentiator. With products, you can control quality at the source-in the manufacturing process. With a service, quality is added (or not) by the people who sell to or manage the clients. This means that the quality of your product can vary because of the individual who is selling or providing it. All Hewlett-Packard color copiers Model 2210 are the same, but all financial advisers are not. Thus, one of the biggest challenges within organizations that are marketing financial services is controlling service quality. This is particularly difficult in those areas where third parties who are not employed by the service creator are responsible for servicing your product-such as investment advisers, independent insurance agents, or third-party administrators of pension plans.

Marketing Money Is Different

Key marketing issues differ from service to service-marketing a vacation resort, for example, will involve a different set of variables than marketing a law firm. So it is with financial services, which have their own unique service attributes.

Psychology of Money

Financial services are about money, and money carries a lot of psychological baggage. People's attitudes toward money are highly emotional. This may matter less at the institutional level, but for the consumer marketer, hitting the right emotional notes can be critical. One financial institution, for example, developed a typology that classified attitudes and behaviors toward financial matters into five categories, based on the following variables: degree of control over spending and saving, interest in and knowledge about money matters, desire to accumulate versus spend, and trust in or need for advice.

Other typologies have addressed investor psychology-for example, market-follower versus contrarian, degree of risk tolerated, or spending and saving behaviors. Spending and saving typologies go back to Freud, who described compulsive spenders and non-spenders, as well as subtypes, such as the pretended wealthy and the pretended poor. Modern psychologists have built on Freudian taxonomies, describing categories such as "fanatical shoppers," "passive buyers," and "esteem buyers." Marketers of debt products are particularly interested in the psychology of spending because they seek to identify targets who are likely to build up balances while continuing to pay them off steadily. There is a fine line between overspenders who default and those who do not.

Third-Party Relationships

Because money is so personal, relationships become very important in some areas of financial services-particularly investments, retirement planning, and insurance. In these areas, consumers don't necessarily buy a brand (Salomon Smith Barney) so much as they do an individual (my stockbroker). In fact, in some cases, the person who sells the product is also the creator of the product, for example, independent financial advisers.

For the marketer, the fact that the customer has a relationship with a financial intermediary is a double-edged sword. On the one hand, customer loyalty tends to be very high. On the other hand, today's Salomon Smith Barney sales executive may be tomorrow's Merrill Lynch sales executive-and his or her clients will follow along. Thus, the marketer's task is as much to sell to the intermediary as it is to sell to the end user.

Multiple Sales Channels

One of the reasons for the complexity of marketing financial services is that there are numerous ways to reach the end customer. In conventional product marketing, you generally have a sales chain: manufacturer to wholesaler or distributor, to retail store, to customer. The sales reps for a pharmaceutical company are talking to doctors; for a consumer products company, to retailers. The end user is seldom the manufacturer's customer.

In financial services, end users are reached directly and indirectly, sometimes in both ways at the same time. Each sales channel requires a different marketing strategy. Here are some of the possible avenues:

Direct-to-end user. Methods include direct mail (often used by credit card companies), telemarketing, and online sales (as for online brokerage services and some loans and insurance products).

Commissioned salespeople.]


Excerpted from The Financial Services Marketing Handbook by Evelyn Ehrlich Duke Fanelli Copyright © 2004 by Evelyn Ehrlich and Louis A. (Duke) Fanelli. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Table of Contents

Preface ix

Acknowledgments xi


The Unique Challenges of Marketing Financial Services1

Products or Services? 2

Psychology of Money 6

Third-Party Relationships 7

How End Users Select a Financial Services Provider 8

Legal and Regulatory Constraints 13


CHAPTER 1 Segmentation 19

The End of Undifferentiated Markets 20

Methods of Segmentation 23

Finding Your Target Segments 29

CHAPTER 2 Positioning and Branding 33

Positioning Strategy and Differentiation 33

Creating a Distinctive Brand Identity 37

CHAPTER 3 The Market Plan 45

Researching Your Plan 46

The Elements of the Plan 48


CHAPTER 4 Advertising 61

Media Selection 62

The Role of Your Ad Agency 63

Creating Effective Creative 65

Measuring Advertising Effectiveness 71

CHAPTER 5 Public Relations 75

Third-Party Endorsement 76

The Tools of Public Relations 77

Media Relations 79

Public Relations for Every Budget 82

Measurement 85

CHAPTER 6 Sponsorship and Event Marketing 87

What Is the Value of Sponsorships? 87

Cause Marketing 89

Activating a Sponsorship Program 91

Measuring the Effectiveness of Sponsorship 94

CHAPTER 7 Interactive Marketing 97

Techniques and Goals of Direct Methods 97

E-mail Marketing Considerations 98

Improving Response Rates 100

Mobile Marketing 104

CHAPTER 8 Social Media Marketing 107

Social Media Concerns 108

Effective Social Media Engagement 110

Social Networks as Marketing Channels 118

CHAPTER 9 Personal Selling 123

Traditional Relationships between Sales and Marketing 124

Bottom-Up Marketing 126

Changes in the Sales Distribution Model 130

Marketing Support Across the Sales Cycle 132

CHAPTER 10 Trade Shows and Seminars 135

Trade Shows 135

Seminars 139

CHAPTER 11 Relationship Marketing 145

Why Customer Retention Matters 146

Methods of Relationship Building 147

Loyalty Programs 152

Conclusion 157

Appendix: Applying Marketing Principles to Sales Practice160

Building Your Plan 162

Practice Examples 164

About the Authors 191

Index 192

What People are Saying About This

From the Publisher

"Marketers who understand the complex and rapidly changing financial services industry are rare and increasingly in demand. The Financial Services Marketing Handbook is a unique and invaluable training tool for beginners that also offers new insights to veteran financial marketers."
Andrea Trachtenberg
Senior Vice President, Head of Global Marketing
Lehman Brothers Wealth & Asset Management

"Until now, financial marketing has lacked a standard reference work that encompasses what every practitioner should know. Ehrlich and Fanelli are recognized industry veterans who have combined their own wide-ranging experience with fundamental principles of marketing. This is a must-have book for every financial advertising and marketing professional."
Bill Wreaks
Publisher, Journal of Financial Advertising & Marketing
President, Financial Communications Society (2002-4)

"Today's financial sales professionals face a range of new challenges that require strategic understanding and tactical planning ability. The Financial Services Marketing Handbook gives sales professionals a road map to success, through real-world examples, practical how-tos, and a structured approach to market planning."
Mary Rudie Barneby
First vice president and divisional sales manager at a major U.S. brokerage firm
Past president, Financial Women’s Association

"Combining a solid academic orientation with the insights of knowledgeable practitioners, The Financial Services Marketing Handbook should prove an invaluable text in both undergraduate and graduate-level business programs."
Professor Irv Schenkler
Stern School of Business, New York University
Coauthor, Guide to Media Relations

"This is truly time well-spent—a practical, powerful, and engaging guide to all aspects of financial services marketing. Timeless in scope, this is a guide you'll want to keep within easy reach for years to come."
Cliff Oberlin and Jill Powers
CEO and President of Oberlin Financial Corporation
Authors of Building a High-End Financial Services Practice

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