1. Product Strategy and Distribution
Strategy of Financial Services
Group 8

2. Financial Services
• The various services that are created and delivered by the
financial system are known as Financial services.
• Financial services constitute an important component of the
financial system.
• Financial services, through the network of elements such as
financial institutions, financial markets and financial
instruments, serve the needs of individuals, institutions and
corporate.

3. Insurance
For the customers’, the most important function
of an insurance company is;
• Product design.
• Distribution services.
• Delivery performance.
• Investment performance.

4. Marketing Strategy of insurance company
influenced by:
• The convergence of financial services.
• Rise of E-commerce.
• Emergence of new distribution channel.
• Value proposition of time.
• Cost reduction.
• Effective CRM.
• Profitability.

5. Issues In Insurance Marketing
• Insurance is unpatented, subjective, requires prior
experience.
• Physical evidence is difficult to establish.
• Mass production is impossible.
• There is an involvement of customers in production
of services.

6. Success Factors Of Insurance Players
• Change n the Attitude of the Population.
• Open and Transparent Environment Created Under the
IRDA.
• Well Established Distribution Network.
• Trained Professionals to Build and Sell the Product.
• Rationale Approach to the Investment Criteria.
• Stringent Accounting Practice to Prevent Failures
Amongst the Insurers.
• Level Playing Field at all Stages Of Development in the
Sector For all the Players.

7. MARKETING STRATEGIES OF INSURANCE
PLAYERS IN INDIA
• Develop customer relationship that retains the loyalty of existing
customers and enable new customer segment and market areas to
be served effectively and efficiently.
• Introduce new innovative products and services desired by targeted
customer segment.
• Produce customized high quality products and service at low cost
and with short lead times.
• Mobilize employee skills and motivation for continuous
improvements in process capabilities, quality and response times.
• Deploy information technology, databases and systems in an
optimum manner.

8. Punch line of Some Players
Insurance Company Punch line
Life Insurance Corporation of India "Life is Beautiful“
“Jindgi ke sath bhi jindgi ke baad bhi"
Birla Sun Life Insurance "Your Dreams. Our Commitment"
ICICI Prudential Life Insurance "We cover you at every step in life"
HDFC Standard Life Insurance Making life Easier for you
OM Kotak Mahindra Life Insurance "Jeene ki Azaadi"
ING Vysya Life Insurance "Adding life to insurance"
TATA AIG Life Insurance "With you always”
Max New York Life Insurance Company "Your partner for life"
Bajaj Allianz "We cover almost everything"
AMP Sanmar "Creating better futures"

9. Market Strategies of Some Insurance
Policies
• Tied up with Corporation Bank and
Vijay Bank for distribution.
• Launch customized and focused insurance
products for various sections of
the society.
• Customer retention, it has launched a highly optimistic campaign of
revival of lapsed policies.
• One of biggest advertiser of its products utility a wide large of
products viz. print and electronic media, sponsoring events, road
shows etc..
• Following both mass marketing and segmentation strategy.
• Promotion activities is on tax benefit and returns from insurance

10. • Achieve scale in premium income
and distribution force in shortest time.
• Using tools like workstation marketing,
corporate marketing, road shows,
stall in trade fair, loading etc..
• Mostly pro-active in nature.
• The focus is more on direct selling apart from communication and
building personal relations.

11. • Direct market tactics
• Marketing at worksites
and corporate customers
• Customized product offerings.
• To sell the products as long term investment plans.

12. • Many flexible products with options and
riders that can be customized to over
250 combinations.
• Using direct marketing like
advertisement and event sponsorship.

13. • Tied up with Geojet Info fin Technologies.
• Strategy of phase-wise introduction
of products.
• Following the bundle method of product
offerings to enable meticulous investment planning by analyzing
the needs, requirements risk profile of the customers.

14. • Mass marketing
• To build its brand by stressing on
the 'creditworthiness of the company
and its partners.

15. • Cashless insurance products
• Advertising in local newspapers,
television and hoarding for generating awareness.
• Highly cautious in underwriting risks.

16. • Simple Products.
• Branch-wise segmentation
and product offerings.
• Smaller Average size of policies.

17. New Trends in the Insurance Industry
As per the 7th April 2010 Outlook Money
ICICI Prudential ACE
 Type 1 Ulip
 No Premium allocation charge
• Only 2 charges;
o Policy Administration – Rs.60/-
o Fund Management – 1.35%

18. `
AEGON Religare Start Child
 Child Plan with lowest cost
 Auto-rebalancing and invest protection features

19. IDBI Fortis Retiresurance
 Pension Plan with lowest cost
 No premium allocation charge in any year

20. Reliance Life Basic Plan
 Type II Ulip
 Low Premium allocation of 6% first year and nil
thereafter.

21. Types of Insurance
• Universal Life Products
– Offer flexibility by allowing a policy holder to make changes in
premium.
– Can change the policy amount if the holder is not able to make the
payments.
• Demographic Plans
• In-built Riders
• Inflation Based Products
• More Thematic Funds

22. Distribution Channel
• Traditional
– Agents
• Most companies in India use
• Called as “insurance advisors/planners”

23. E.g.: LIC
It has more than 6,51,000 agents around the country

24. –Brokers
• Professionals who assess risk on behalf of a
client, advise on the mitigation of that
risk, identify the optimal insurance policy
structure, bring together the insured and
insurers, carry out work preparatory to
insurance contracts and where necessary, assist
in the administration and performance of such
contracts, in particular when claims arise.

25. Benefits of Brokers
• Improvement in Customer Service.
• Transfer of Technology and Managerial Know-how.
• Benefits to Insurance Companies.
• Foreign Exchange Considerations.

26. New Distribution Channels
• Direct Marketing
• Brokers/Corporate Agents
• Independent Financial Advisors
• Telemarketing
• Work site Marketing
• Retail Chains
• Internet Marketing
• Bancassurance (Distribution of insurance products by banks)

27. Mutual Funds
1. Aggressive Funds Funds invested in stocks of fledgling
companies/industries; goal is maximum Price rise;
current income is very low; safety is very low.
2. Growth Funds Funds invested in stocks of settled
companies/industries; goal is high capital
appreciation; current income and safety is low.
3. Growth and Income Funds Funds invested in companies with solid track record;
goal is price rise and moderate current income; safety
is low to moderate.
4. General Money Market
Funds
Funds invested in short-term debt instruments; goal
is moderate to high current income; safety is very
high.
5. Balanced Funds Funds invested in mixture of bonds, preference and
common stocks; goal is current income and long-
term growth; safety is high.
6. Tax Saving Funds Funds invested in permissible stocks/ debentures;
goal is tax benefits and growth; current income is
moderate and safety is high.
Types of Mutual funds

28. Marketing of Mutual Funds
1. Product Planning Product line to be offered—quality, design, range of
services, etc.
2. Branding Selection of product name, brand policy like
individual family or corporate brand.
3. Pricing Policy Price of units, rates of incentives, rates of
commission to agents/brokers.
4. Distribution Policy Channel to use for selling the products—direct to the
customers or through intermediaries like agents,
brokers, etc.
5. Promotion Promoting sales through advertisement, road shows,
etc.

29. News on Mutual Fund
• Mutual Fund investment to become more costlier.
– SEBI has recently changed the rules to encourage mutual fund
industries to increase its reach beyond the large cities.
– SEBI banned entry load of 2.5%, which was used for payment of
commission to distributors.
• A 20 bps rise in expense ratio, which will compensate
mutual funds for ploughing back the money raised from the
exit load into the scheme instead of using it to meet the
expenses.

30. Existing Order
Expenses Percentage
Investment Management & advisory fee 1.25
Custodian fee 0.05
R&TA fee 0.2
Marketing & Selling Expenses 0.1
Brokerage & Transaction cost 0.51
Audit fees/fees & Expense 0.06
Costs related to investor communication 0.08
Cost of funds transfer from location to
location
0.05
Other Expenses 0.05
Service tax 0.15
Total Expenses 2.5

32. CHANGES IMPACT
Lower expense ratio for direct investors Higher returns for direct investors
Cash investment up to Rs.20,000 Rural population without bank accounts
can now invest in mutual funds
Evolving a system of product labelling More broad categorisation of mutual fund
products likely, based on risk involved,
fund objective etc…
NAV only after availability of funds Removes undue advantage to large
investors at the cost of smaller ones

33. Mutual Fund Distribution
• Post-office agents
• Retired government officials
• Retired teachers
• Retired bank officers.
For this, a special category of schemes that includes
diversified equity funds, FMPs and index funds will
be created
Members of this new cadre of distributors will require
National Institute of Securities Market certification

34. Banks
"Bank marketing is the aggregate of functions, directed at
providing services to satisfy customers’ financial (and other
related) needs and wants, more effectively and efficiently than
the competitors keeping in view the organizational objectives
of the bank."

35. IMPORTANCE OF MARKETING FOR INDIAN
BANKS
"The relevance of aggressive marketing in banks has come to
the fore as never before" - M N Goiporia.
CHARACTERISTICS OF SERVICES
• Intangibility
• Inseparability
• Heterogeneity
• Perishability

36. Bank marketing deals with providing;
• Services to satisfy customers' financial needs and wants.
• Banks have to find out the financial needs of the customers and
offer the services which can satisfy those needs.
• The individuals and corporate bodies have certain needs in relation
to money commodity. To satisfy these financial needs, customers
want specific services.
• Different banks offer different benefits by offering various schemes
which can take care of the wants of the customers.
• Marketing helps in achieving the organizational objectives of the
bank. This means that marketing is equally applicable to achieve
commercial and social objectives of the banks.

37. Banks’ Success
1. The bank cannot exist without the customers.
2. The purpose of the bank is to create, win, and keep a customer.
The customer is and should be the central focus of everything the
bank does.
3. It is also a way of organising the bank. The starting point for
organisational design should be the customer and the bank should
ensure that the services are performed and delivered in the most
effective way. Service facilities also should be designed for
customers' convenience.
4. Ultimate aim of a bank is to deliver total satisfaction to the
customer.
5. Customer satisfaction is affected by the performance of all the
personnel of the bank

38. Marketing Function of Banks Involves
• Market research
– Identification of customers’ financial needs and wants and forecasting and
researching future financial market needs and competitors’ activities
Market Research are mainly done on
– New service development,
– New service product acceptance,
– Research and development of existing financial service,
– Bank image study,
– Measuring banks advertising effectiveness,
– Measurement of market potentials,
– Market research of competitive service products
– Customer opinion study
– Customer profile study
– Market share analysis

39. • Product development
– Appropriate products to meet consumers’ financial needs
• Pricing of the service
– Promotional activities and distribution system in accordance
with the guidelines and rules of the RBI and at the same time
looking for opportunities to satisfy the consumers better.
• Developing market orientation
– Marketing culture-among all the customer-consciousness
‘Personnel’ of the bank through training.

41. Marketing approach of Banks requires
• A detailed understanding of marketing principles and activities by
the top management
• Adoption and demonstrated commitment to marketing at the top
management of the bank
• Conducting appropriate market research to understand the
market/consumer better
• More emphasis to product development and the process of product
development to the needs of the consumer
• Exploitation and adoption of new technology, systems, and
procedures for marketing advantages for customers' convenience
and not for only cost advantage
• A commitment to customer orientation marketing (need
satisfaction) culture throughout the bank including those staff who
are not in direct contact with the customers

42. 7 Marketing Mix of Bank Services
• Product
– Formal Product
– Augmented Product
• Price
• Place
• Promotion
• Process
• People
• Physical evidence

43. Services
• Currency option
• Interest rate cap
• Interest rate floor
• Interest rate collar
• Forward rate agreement
• Total Branch
Automation
• Automated Teller Machine
• Electronic Fund Transfer
• Anywhere banking
• Anytime Banking
• Home banking
• Tele banking
• Plastic Card

44. New Trends in Banking
• E-Newsletters
According to the website Bank Advisor, banks need to reach
customers when they are not in the bank, because customers are
using other channels to meet their banking needs. One example is
to use teller machines in convenience stores not owned by the
bank. Another example is online banking. Another option is e-
newsletters. Banks can use them to educate their customers about
improving their financial decisions and to educate customers about
the banks' products and services.

45. • Social and Mobile Media
Banks need to take advantage of social media. According to
the research company Nielsen, the use of Twitter grew 1,444
percent in 2008-2009, and time spent on Twitter grew 175 percent
during the same time period. In addition, web visitors using a
mobile device grew 34 percent from July 2008 to July 2009.
Bank can provide mobile personal finance applications to help
customers manage and improve their financial situation. It can also
use social media tools to help promote special deals.

46. • Fee Changes
To differentiate your bank from the competition, consider stopping
charges for fees. Instead of fees, generate income by advertising other
revenue-generating services such as financial counseling or long term-
planning assistance.
• Innovate
Give away free money. Periodically place an extra $100 bill in ATMs. This
will create a lot of conversation about the bank.
• Customer reclamation
One of the reasons customers leave a provider is because of a perceived
attitude of indifference. Communicate with customers who have left you by
giving them a compelling message indicating you want them back. Some will
return.

47. “READY TO ACCESS” “CUSTOMER
SERVICE” WITH AND BY TWITTER

49. New entrants – Telco & Retail
• Insurance
• Credit cards
• Loans
• Savings
• Credit card
• Payment through
phone bill

50. Housing Finance
• Housing demand could be simply defined as housing needs backed
up by an ability and willingness to pay.
• The actual amounts that households set aside for housing
investments tend to be variable depending on household income
and economic development in general
• Estimating and responding to "effective demand" i.e., the ability
and willingness of households to make housing investments, is
perhaps the critical first step in public policy strategies for housing
development
• Housing, accounts for one of the largest components of the wealth
holdings.

51. • Housing is a long lived asset.
• In developed countries such as the USA, housing is the largest
component of non-human wealth.
• Been identified as a priority sector by the Indian Government.
• Establishment of a "National Housing Bank", to support the
financing of housing activities is another proof of such a realization
• All governments have a similar objective for their citizens: "to
ensure that all families have a decent house in a suitable living
environment".
• The finance of housing thus assumes greater importance for
households for wealth creation and tends to be a major motivation
for household thrift.

52. • Housing investments are inextricably linked with intertemporal
investment choices that households make for acquisition of housing
stock (and services) depending on the savings rate, the wealth
effect, the access to long-term finance (its availability and cost) as
well as the inflation rate (expected future prices of the housing
stock).

53. Housing Finance in India
• First Pillar : 1970’s - Housing and Urban Development Corporation
(HUDCO)
• Second Pillar : The cooperative movement catering largely to the
private sector. Households were encouraged to form cooperative
societies, invest initial capital for land purchase and then were
financed through state level apex co-operative housing finance
societies
• Third Pillar : Housing Building Advance (HBA)
• Final : Housing finance, as a financial intermediation process,
commenced only in 1978, with the establishment of Housing
Development Finance Corporation (HDFC) as a specialized lender
to households and corporate entities specifically for housing
purposes

54. Key Element in Housing Finance
• To enhance the loan origination process for housing throughout the
country.
• To develop an institutional network that would facilitate these
origination processes.
• To identify a potential resource base for the system as whole.
• To codify and simplify the legal system with respect to risk
management of housing finance institutions (liquidity, interest rates
and default risks in particular).

55. • To rationalize and reorient the fiscal system to reallocate funds to
the housing sector by providing incentives for household thrift is
the vexing question as well as institutional growth.
• To link formal network with informal networks which are the major
source of financial and economic activity for the rural and urban
poor.

56. Recent Developments
• A major entry by the Life Insurance Corporation of India in direct
household mortgage loan origination (upto 1987 their total
originations in the sector were Rs 2482 crores). During 1988, 4,525
loans were originated and by 1990 it grew to 10,000.
• A major initiative by the National Housing Bank to include the
commercial banking system in the direct loan origination process
through network of 55,015 branches throughout the country.
• Major initiatives by the commercial banks to create housing finance
subsidiaries either jointly with existing housing finance institutions
or on their own.
• Entry of the General Insurance Corporation of India into home loan
origination through a subsidiary company.

57. Factoring
• Factoring is a financial service covering die financing and
collection of receivables in domestic as well as international
trade.

58. Function of Factor
• Providing finance against bills receivable and trade debts.
• Undertaking sales ledger administration responsibilities of the client
including maintenance of books, accounting, asset management,
collection of debts and furnishing information reports to the client.
• Providing debt insurance facility to the client against possible losses
arising from insolvency/bankruptcy of the debtors.
• Offering relevant consultancy services in the areas of finance,
marketing, etc.

59. Management Issues : Marketing
• Type of Services to be Offered
– Providing finance against bills receivables.
– Sales ledger administration, collection of
dues, accounting, providing information reports, etc.
– Providing debt insurance facility to the clients, on a selected
basis.
• Price to be Charged
– Administrative cost
– Discount charge
• To Whom to be Offered
• Capital Required and Resources

60. Marketing Factoring Services
Marketing of the factoring services essentially involves a study of
The Market, Consumers and Competitors.
• The Market
– How big is the market?
– What is the potential growth of business, say during the next 10
years?
– Is the market local, national or international?
– Is the market segmented?
– Who are the other players in the market?
– Can a specific targeted market share be achieved, etc.?

61. • The Consumers
– Who are the likely consumers?
– What are their buying behaviours and processes?
– What type of package(s) of service would they require?
– What kind of pricing can be sustained keeping in view their
profile, etc?
• Pricing
– The factoring organization has to keep the cost of overheads to
the minimum so that it can operate within a thin spread
available to him. Discounting charges to be levied by a factor are
kept at par with that of banks

62. Promotion of Factoring
• Canvassing new business and contacting the people.
• Visit to their business premises.
• Getting business proposals.
• Discussion with the clients.
• Organising a survey.
• Finalization of deal

63. The main sources of organising advertisement campaigns may
be:
• Printed literature.
• Publicity campaign / articles in business magazines / books
• Branch managers of sponsoring bank(s)
• Existing clients/customers.

64. Thank You.