Review of Marketing Financial Services

Citation

Farquhar, J. (2008), "Review of Marketing Financial Services", European Journal of Marketing, Vol. 42 No. 11/12, pp. 1415-1417. https://doi.org/10.1108/03090560810903736

Recent articles in the UK media about financial service providers have recounted incidences of banks charging high fees, lending to customers who cannot afford the repayments and making large or even excessive profits. Pricing, targeting and public relations are all classical marketing activities, therefore, the study of how financial services are marketed remains high on the agenda of academics, students and practitioners. Gaining further understanding of the dynamic financial services marketplace and the demands of a rapidly changing industry is vital to stakeholders. Books on this subject can, therefore, be welcomed as a means of enlightening various groups about practices in the industry and how these practices might be improved with reference to more general marketing theory. This particular book adopts a conventional approach to the subject of financial services marketing over twelve chapters. It opens with an overview of the particular issues of marketing financial services, moves onto to cover traditional areas of marketing such as distribution and product development. Later chapters examine segmentation, customer satisfaction and strategic issues of marketing financial services. Each chapter finishes with five to six questions designed to encourage the reader to deepen his/her learning about the subject matter in each chapter but it might have been advisable to begin each chapter with learning outcomes as well. Six cases are provided at the end of the book for further study.

The author claims to provide a universal framework for educating consumers and marketers in this book (p XIII) but, are these groups the likely readers this book? At 342 pages, consumers of financial services will read a book of this thoroughness and depth and how much of it is actually relevant to their needs? The press provide dedicated information for consumers on a regular basis. Professional marketers, on the other hand, will find much of the material of interest and significance but these time‐pressed practitioners may well be deterred by the size of the book. The student body is also target market for the book and it certainly seems that this particular market would gain the most from studying it. The author is quite clear about the scope of the book in writing exclusively about the US market, so the universal framework that he purports to provide, in fact applies only to US geographic and regulatory limits. To be fair, the marketing of financial services is subject to legal and voluntary agreements made with a number of national bodies in any given country, and so national or geographic limitations seem acceptable with this particular subject matter.

The book adopts an exclusively consumer‐based perspective to marketing of financial services. Chapter 2 is concerned with consumer decision‐making and covers rational models and also considers heuristics such as theories of anchoring and adjustment, not usually discussed in financial services marketing texts. It is pleasing to see other models and theories of consumer behaviour discussed in addition to the usual rational models of consumer behaviour, so frequently pivotal in consumer behaviour chapters in marketing texts. It was also interesting to see that a chapter has been dedicated to customer satisfaction, which given the prominence of customer satisfaction in the marketing paradigm, seems sensible. There are however some slightly odd inclusions in this chapter such as relationship marketing (RM) which merits a dedicated chapter in any book on marketing of financial services. I can see how the author works back to RM from customer satisfaction as there is plenty of evidence of the linkages (e.g. Bolton et al., 2004; Oliver, 1999), but it nevertheless seems a little odd in terms of location and there is no mention of RM in the index either. The final chapter of the book is concerned with strategic marketing planning and opens with identifying strategic challenges in the marketplace for financial service providers. The author then argues that these challenges require robust strategy development and in so doing the author has chosen an interesting way of covering a topic that many students struggle to comprehend and hence to address.

There are also, unfortunately, some aspects of the book that are less commendable. The product chapter (3) provides a list of the usual financial offerings available in the marketplace but the questions at the end of the chapter are just a memory test of these products. The author has not provided a marketing framework for these products, for example how to manage a product portfolio of such diversity and complexity. In the second half of the book, there is a chapter on product introduction (7) and the rationale for separating out these two subjects seems a unclear. Furthermore, given the specialised nature of financial services, why does the author refer to motorbikes and minivans? There is a comprehensive discussion of pricing approaches such as parity pricing and promotional pricing but this chapter is very lightly referenced with many of the references not necessarily referring to the pricing issues in financial services or services. Pricing is a particularly interesting issue in financial service marketing as the customer often has very little idea of either the cost of the price of any particular service owing to cross‐subsidies. The way that the author had chosen to present pricing issues is something of a missed opportunity for exploring practices that frequently provoke customer mystification and dissatisfaction.

The chapter on advertising (5) considers just that, and there seems to be little justifiable reason to limit the discussion to just advertising, overlooking the vast area of integrated marketing communications that plays such an important role in the marketing of financial services. It is a little disappointing to see the author revisiting the consumer decision‐making process outlined in the consumer behaviour chapter when outlining classical and outdated advertising theory, although the author does state that he is outlining advertising basics (p. 133). Again, there are insufficient references to services or financial services marketing, which would have anchored the text more securely. How a chapter can be written about advertising without a mention of branding is something of a mystery and indeed branding is given scarcely a mention and does not even figure in the index? The author provides some interesting calculations (pp. 142‐143) about how the costs and revenue from advertising activities can be calculated. The emphasis of this chapter is on customer acquisition with no mention of targeting existing customers, failing to pick up on any of the relationship marketing issues or customer retention in the industry and literature (e.g. Rust et al., 2004). Considering the heavy use of technology by banks, insurance companies and other financial service providers, it is surprising to note that there is no mention of the internet and the omnipresence of financial service providers on web sites. The mention of the Internet leads into the chapter on Distribution (6) which has a very obvious typographical error (p. 151). In spite of the huge literature on the internet and banking, there are only two pages on technology which hardly represents the research or importance of this channel and the impact of the Internet on banking and marketing as a whole.

I was disappointed to see so little reference to the services marketing literature, which would have provided a framework against which the some of the practices of financial services marketers could have been evaluated and which the practitioners could have been usefully introduced as a means of furthering their craft. The chapter headings cover the areas that one might expect, but seem no to take the area forward in any way, for example no mention of corporate social responsibility. The book appears to be primarily concerned with business to consumer (B2C) marketing with scant mention of business‐to‐business marketing of financial services. The author does not make it clear that the main thrust of the text is B2C and readers would want to know that the text is exclusively concerned with this aspect of financial services marketing. The scope of financial services is broad and the range of offerings available is extensive and varied. Writing about such a varied industry is a challenge and there is some rationale for concentrating on a particular geographic marketplace. But, again, it is up to the author to make it clear to the reader, in time‐honoured fashion, that there are limitations to the study. In short, the book presents an individual perspective on the marketing of financial services but does make claims to developing universal frameworks, which are not entirely compatible outcomes. There are some real strengths – interesting perspectives on consumer behaviour, insight into pricing strategies for financial services, and a good piece on the strategic challenges facing financial service organisations. The book is somewhat limited in its appeal, being developed for the US market exclusively with cases that are of course based in the US market, its value therefore outside of the US could be one of a comparison text.