Chapter IV: Distribution & Communication

Dr. Karim Kobeissi

Section 1: The Distributional Policy

Distribution

in

financial

services

marketing is concerned with how the

service is delivered to the consumer,
making sure that it is available in a
place, at a time and in a format that is
appropriate and convenient for the
customer.

Introduction
The distribution policy was based on the accumulation of
branches (classical distribution channel that involve a direct
interaction between the customer and the banker) : More
branches More customers. However, this policy was
challenged by saturated markets and productivity problems.
The new technologies are offering interesting opportunities
(cost of a virtual agency on computer is 5 times lower than
that of a traditional agency).

Introduction (con)
Consequently, for reason of performance and to
better meet the expectations of their customers,
banks

adopt

more

and

more

multi-channel

distribution policy which is translated by the

implementation of different modern and remote
distribution channels (e.g. online banking, ATM,
mobile banking...).
Modern channels of distribution which made banking
services available at any time and place have
entailed multiple changes both at banks level and
customers level.

Functions of Distribution Channels

Distribution channels perform a set of key functions:
1)Offering and selling financial products and advices
to customers.
2)Collecting the needed information (Market Data) for
actions planning and development.
3)Collecting of feedback from the local environment
to improve promotional campaigns.

Choice of Distribution Channels

The choice of distribution channels can provide a
sustainable competitive advantage because it is
the only real sign of differentiation in an industry
characterized by commoditization of products and
emerging price competition.
The determinants of

the distribution policy are

function of the targeted markets which can be

classified into two broad categories:the mass
marketandthe individual market.

Choice of Distribution Channels (con)

a) Mass Market
The mass market ask for simple products but has special
requirements in terms of cost and performance.It also
requires

geographic

standardized

services,

decentralization
attractive

of

the

investment,

offer,
and

significant advertising.

b) Individual Market
The individual market is made up of few demands but having
enough profitability to justify a personalized treatment and a
range of tailor-made" services.

The Choice of the Distributions Configurations

In the bank-customer relationship, the key issue
related to distribution is the identification of the
right equilibrium, adapted to every

customers

segment, between a physical relation and an

automated

relation.

It

is

then

question

of

arbitrating between the transactional bank and the

relational bank configurations.

Transactional Configuration

Relationship Configuration

A bank that adopts a transactional configuration The relationship configuration is developed by two
types of banks:
is a bank that provides to every customer in the
conditions which suit him the best (even outside of 1)Specialized Banks:
Their customers are basically formed of SME 1
the opening times of agencies), all the services and rich individuals. To this type of customers,
linked to the different products that he owns. The banks offer high added value products that are
coupled with sophisticated financial advices which
most common operations are accomplished by the makes the contact an obligation.
customers with robots located outside agencies or 2) General Public Banks:
with hindsight. They develop the relational dimension in a
traditional network of branches while simplifying

the procedures and reducing the length of

common operations (specific quick counters for
common operations). For uncommon operations,
these banks favor appointments where the
customers can reveal their exceptional needs and
plans.

Section 2: The Promotional Policy

Kotler defines promotion as a set of incentive techniques,
mainly short-term, created to stimulate the purchase of a
particular product, more quickly and in larger volumes, by the
consumer or the distributor.
The promotion is used to inform the customer, to persuade him,
and

to

remind

him

of

specific

products

and/or

the

organization which sells them, to influence his feelings, his

convictions or his purchasing behavior.

The Contents of the Promotion

Kristina

(2006)

recommends

that

promotional

policies should be designed as per the nature of

services to be promoted. The advertisers should
seek a narrative approach to communicate the
service

experience

rather

argumentative approach.

than

logical,

Location convenience,

speed of service, competence and friendliness of

bank personnel are also the most important points
with maximum value in banking services (Laroche,
1986).

The Promotional Mix

Promotion policies are usually performed through the five
elements of the promotional mix:
1) Advertising
Advertising is any paid form of non-personal communication
about an organization, good, service or idea by an identified
sponsor

(Berkowitz,

2000).

Advertising

is

persuasive

medium that permits the bank to repeat a message many

times. It provides opportunities for dramatizing the bank and
its products through artful use of print, sound and color.
Advertising, unlike personal selling is impersonal. It carries a
monologue message to the audience from an identified
source (Owaga, 2002).

The Promotional Mix (con)

2) Personal Selling
Personal selling is a face to face presentation and promotion of
products and services. There is a direct interaction between
the firms sales employees and customers. Personal selling
has traditionally been the principal communicable channel in
banking, although until recently the concept of selling
financial services was very poorly developed. Nevertheless
the branch delivery system and the branch

manager in

particular were seen as the key to client interface.

The Promotional Mix (con)

3) Sales Promotion
Sales promotion consists of short-term incentives to
encourage purchase or sales of

a product or service

(Kotler,2005). Promotions attract deal-oriented consumers

who are likely to switch banks rather than new long term
accounts (Channon, 1985).

The Promotional Mix (con)

4) Public Relations
Public relations is building good relations with the companys
various publics by obtaining favorable publicity, building up
good

corporate

image,

and

handling

or

heading

off

unfavorable rumors, stories and events (Kotler, 2005). Public

relations are more of a background activity and are designed
to enhance the banks position with specifically targeted
audiences (Channon, 1985).

The Promotional Mix (con)

5) Sponsoring
In sponsoring, the bank brings its support for an event
or for a program of general interest, for example, a
sports event, a concert or a scholarships program.
It is important that the bank selects the events or
programs susceptible to have an influence on its
target markets or to pass the image which he
wishes to transmit.

Success Factors in Advertising Financial Services

Several factors influence successful advertising in financial services:

1) A Unique Selling Proposition

A fundamental requirement for advertising financial services is to
possess a unique selling proposition. A unique selling proposition
reflects the one attribute that a financial services provider must
possess that makes it uniquely superior to its competitors. Not
possessing a unique selling proposition implies that there is no
basis for differentiation between ones offering and other choices
that the consumer might have.

Success Factors in Advertising Financial Services

2) Target Marketing
Successful financial services advertising requires that the
financial

services

being

promoted

are

relevant

to

the

targeted groups of consumers. A mismatch between the

financial service being advertised and the target audience
could result in a complete loss of advertising effectiveness.

Success Factors in Advertising Financial Services

3) Creating Memorable Ads
Successful advertising often requires the completion of all
phases of the communications process exposure, attention,
processing.

However,

the

creation

of

memorable

advertising message is critical to generating long-term

impact. Memorable ads might be recalled years after the
consumer has been exposed to them, with subsequent
effects on sales.

Success Factors in Financial Services Advertising (con)

4) Facilitating Consumer Action
The fact that financial services are often individually customized to
specific consumer needs, and typically require one-on-one contact
in order to be sold means that advertisers should facilitate the
process for consumers to contact the financial services provider.
This may require the inclusion of toll free telephone numbers, web
site addresses, instructions on how to obtain additional information,
and the address of the nearest agent or retail location where the
product or service could be obtained.

Success Factors in Financial Services Advertising (con)

5) Coordinated Use of Media

A successful advertising strategy used in a variety of
markets

is

campaigns

referred
(IMC

to
-

as

coordinated

Integrated

media

Marketing

Communications). This involves the simultaneous

use of various media to display ads with similar
messages.

Success Factors in Financial Services Advertising (con)

6) The Tonality of the Communication
Communication experts confirm that thetonalityused in a
messageimpactsthewayin

whichitis

perceived.

Advertisers use humor as a way of breaking through the

noise and confusion in an attempt to grab the attention of the
viewer. Feelings evoked through the use of humor can also
lead brand positive associations, as well as increasing the
comprehension levels of the viewer.

Steps in Advertising of Financial Products

Several steps are essential for successful execution
advertising campaigns in financial products :

of

1)
Identification of Advertising Objectives
The first step is to determine the objectives of the advertising
campaign, reflecting the overall marketing strategy of the
company.
2) Budget Determination
The next step in the advertising process is to determine the budget
required to carry out the ad campaign. Often, the required budget
is significantly different from what is available, and may be
dictated by organizational budgetary constraints.
3) Computing the Return on Investment (ROI)
The next step in the advertising process is to determine the return on
investments associated with the advertising campaign.
Life time value of customer X conversion rate X reach
ROI = ------------------------------------------------------------------------------------------ - 1
Total advertising campaign expenditure

Steps in Advertising of Financial Products (con)

4) Developing the Contents of the Ad
Once the return on investment computation has shown favorable results, the
next step in the advertising process is to develop the contents of the ad, as
reflected in its execution style and informational content.
5) Media Selection
The next step in the advertising process is to determine the media that will be
used. In general, financial services that are more complex and require the
communication of detailed information tend to rely on print forms of
advertising.
6) Scheduling and Campaign Execution
Once the media to be used for an ad campaign has been determined by the ad
agency, a media schedule needs to be developed in order to achieve the
original objectives of the ad campaign which had been identified in step 1.
This task is often carried out by the advertising agency that has been hired
to carry out the campaign. There are specific media scheduling and
campaign execution strategies that are most effective in certain forms of
financial services.

Steps in Advertising of Financial Products (con)

7) Measurement
The final step in the advertising
process is to assess the
impact of the ad campaign
through
formal
market
research or examination of
company records. It is critical
to measure and record sales
levels and other advertising
responses following an ad
campaign in order to determine
the financial effects of the
invested advertising dollars.
Such measures may help finetune the advertising strategy
of the company and provide
estimates for optimizing future
advertising campaigns.

Banking Mix Summary

Mixed banking is characterized by an accumulation of not
differentiation:
1) No Differentiation by the Products or Services
There is no clear distinction between the banks products aimed at the
same targeted segments. Because of the absence of patent
protection,

any

innovation

is

quickly

copied.

2) No Differentiation by the Distribution Networks

All rival products are offered through similar channels of distribution.

Banking Mix Summary

(con)
3) No Differentiation by the Contact Staff
All banks recruit their employees according to similar requirements
and standards.
4) No Significant Differentiation by the Communication Tone
Humour is adopted by almost all banks in their promotional campaigns.

The only privileged source of distinction can be found in the financial

conditions where the competition frequently takes the shape of a
price war.