6 Discuss the likely impact on the marketing mix of a bank that decides to make increasing use of the Internet to provide its services. [20 Paper 12]
The marketing mix is made up of four inter-related decisions − the 4Ps. These are product design and performance, price, promotion including advertising and place, where and how a product will be sold to consumers. The 4cs is a more modern view of the marketing mix focused on the customer based on Customer solution Cost to customer, Communication with customer, Convenience to customer. A successful firm will continually adjust and refine the marketing mix in line with customer needs and a dynamic business environment. A shift to online banking will require large changes to parts of the marketing mix in order to reflect the focus online rather than in brick and mortar banks. Virtually all traditional high street banks have had to rethink their marketing mix as online banking has become so popular. They also have to compete against new entrants to the market who are completely online like N26 and Munzo.
– Product / Customer – moving it services online will radically alter the customer solution. This means that customers can have instant access to their bank accounts to view the balance. Customers will be able to make payments, apply for loans overdrafts and mortgages. It will also allow banks to offer a large range of bank accounts - and much easier switching between these accounts or set up the accounts. For example banks could offer a current account with home insurance included in the monthly price.
– Place / Convenience – moving online gives customers the opportunity to manage your account wherever they are – on laptop – tablet – phone. Instead of having to go to a bricks and mortar bank they can do their banking virtually. This is much more convenient for the majority of customers as they don’t have to travel to banks physically and means customers can have access to bank services 24/7. However this may mean that they have to close their high street banks as less customers are using them. Traditional bank staff may lose jobs. This may make it less convenient for elderly customers or less tech savvy customers who find it difficult to shift online after years of banking.
Price / Cost – potential reduction in location costs – although setting up an online system of banking will require a large start up cost and maintaining the network will need a large increase in the IT budget, this will be hugely offset by the reduction in costs by automation. High street banking locations are highly expensive to rent and maintain. Furthermore, staff in a previously labour intensive service are a huge cost which can be massively reduced by moving online. However, with banking now available online with competitors like Munzo and N26 it means the barriers to entry of needing physical premises have been taken away. As their new competitors don’t have to pay for high street banks they can have much lower margins and charge lower prices to customers. This means that the bank will be under pressure to reduce it’s price to keep customers.
Promotion / Communication – significant change here – as the bank will have the opportunity to sell many more bank-related services such as insurance or a larger range of bank accounts. Moving communication online allow banks to sue the data of customers to target their promotion much more accurately and effectively. For example they could target car loans at younger customers with a high income but low savings. Investment accounts to customers with high savings. They can also use email, social media like Instagram or their own app to target different customers and try and gain new customers.
Overall, the marketing mix will be effected mostly by place and promotion. Place because moving online will mean that for most customers most of their transactions and banking business will now be done online rather than going into a physical bank. This presents opportunities in terms of cost reduction but also a greater threat from competitors. It is also now much easier for customers to move to online banks who don’t need to have a physical presence near to their customers. The bank needs to put huge effort to make sure that the new “place/convenience to customer” is easy to use, but also secure so customers feel their money is safe. They also need to make sure if there is a problem they can get the problem solved quickly and they still feel like a valued customer when the customer service management at the physcial bank is no longer there.
This means promotion/communication with customer is critical if the bank it to take advantage of the opportunities afforded by moving online. The bank can retain it’s exisiting customers and add value through additional services if it communicates effectively and maintains a positive relationship through the transition. It will have to radically change it’s promotion strategy to keep their services relevant and competitive against the new entrants to the market and existing banks.
In reality although place/promotion will be most impacted - all of the marketing mix will be hugely changed by moving online. It is probably the biggest innovation in banking since people first started using banks, so getting the right balance in the marketing mix between all the different elements will be crucial to capitalising on the opportunity.