Chapter 7: Communication and

promotion

MKT 335 financial services marketing

Financial Services Marketing: An Intern

ational Guide to Principles and Practice
 Learning objectives

By the end of this chapter you should be able to:

•explain the basic principles of communication to marketing
•examine the process of planning a promotional campaign
•provide an overview of the strengths and weaknesses of
different approaches to promotion for financial services
•Understand the impact of new media on the management of
marketing communications
 Introduction
• The term 'communication and promotion' refers to the range of
methods used by an organization to communicate with actual and
potential customers in order to evoke an attitudinal position and an
appropriate behavioral response.

• The 'communications and promotion' aspect of the marketing mix

focuses attention on employees as well as customers.

• With the devel­opment of social networking, communication and

promotion may be occurring between consumers and separately from
the product or service provider.
• Word of mouth (whether positive or negative) has always been recognized as an
important method of communication but developments in digital technology
mean that it is happening in a way and on a scale that is very different from
traditional one-to-one exchanges.
 Introduction (cont’d)
• Communication and promotion include tools such as advertising,
publicity/public relations, personal selling, sales promotion, and direct
market­ing.

• Advertising is defined as any paid form of non-personal presentation

and promotion of ideas, goods, or services by an organization (whether
through television, radio, internet, or newspapers).

• Personal selling is defined as a process of encouraging and persuading

poten­tial customers to purchase a good or service, or to respond to any
idea presented orally.

• Sales promotion covers activities which mainly provide short-term

stimulation to purchase through the use of incentives ( e.g. contests,
coupons, rebates, gifts, etc.).
 Introduction (cont’d)
• Publicity/public relations describes any form of communication about
the organization which is basically not paid for and not personal.
• Good examples of public relations include significant news about the organization
or its services in the media, speeches, reports, etc.
• Sponsorship is often also seen as a form of public relations.

• Direct marketing is often considered to be a fifth tool; in some respects,

it overlaps with advertising and sales promotion and entails a direct
approach to customers with a personalized marketing message and a
request for action
• The message may be personalized at the level of the market segment;
increasingly organizations are able to personalize to the individual.
 Introduction (cont’d)
• Communications and promotions for financial services are very similar to
promoting physi­cal products in many respects.
• However, financial services organizations do face some sig­nificant challenges.

• They have no physical product to present to consumers and

consequently, a major requirement of the communications process is to
develop a message and a form of presentation that allows the
organization to make their offer seem more tangible.

• financial services can be difficult to differentiate and this can make it

difficult for an organization to develop a clear message about the
superiority of its own prod­ucts.

• Consumers tend to be relatively uninterested in financial services and

this sug­gests that there may be a greater need to attract attention and
so developing creative approaches to communication may be
particularly important for financial services organizations.
The Communication Process
 The Communication Process (cont’d)
• Communication – A sharing of meaning through the transmission of
information
• Source – A person, group, or organization with a meaning it tries to
share with a receiver or an audience
• Receiver – The individual, group, or organization that decodes a
coded message
• Audience – Two or more receivers
• Coding process – Converting meaning into a series of signs or
symbols
• The source must consider certain characteristics of the receiver
or audience.
• The source needs to use signs or symbols that the receiver or
audience uses to refer to the concepts the source intends to
convey.
• Communications channel – The medium of transmission that carries
the coded message from the source to the receiver
 The Communication Process (cont’d)
• Decoding process – Converting signs or symbols into concepts and
ideas
• Noise – Anything that reduces a communication’s clarity and
accuracy
• Feedback – The receiver’s response to a decoded message
• Can be verbal and nonverbal
• In interpersonal communication, feedback occurs through
talking, teaching, smiling, nodding, eye movements, and other
body movements and postures.
• Channel capacity – The limit on the volume of information a
communication channel can handle effectively
The Interactive Communications Process
 The purpose of marketing
communications
• Differentiate what it offers to the market – in
Differentiate order to try to create some element of
perceived uniqueness

• Reinforce, remind and reassure customers

Reinforce about the benefits that the product or service
offers

• Inform customers and ensure that there is

Inform awareness, knowledge and understanding of
the products offered and their features

• Persuade customers to behave in a particular

Persuade way – most usually by making a purchase
 Planning a promotional campaign
• There are arguably three core components to any
promotional campaign:
• The tools that are being used (advertising, personal selling, sales promotion,
public relations, and direct mar­keting).
• The media that are selected.
• The message to be conveyed.

• These components are then used by financial providers to

communicate with a target market

• They are specifically expected to help the organization to

differentiate, reinforce, inform and persuade
Planning a promotional campaign (cont’d)

• The simplest way to think about the

planning of a promotional campaign is
to think of it as a series of stages as
shown in this figure.
 Planning a promotional campaign (cont’d)
• Objectives
• Defining objectives is important so that all involved in a promotional
campaign know what they are trying to achieve.

• Often objectives are specified in terms of an increase in sales but other

objectives may concern themselves with raising awareness, creat­ing a
particular image, evening out patterns of demand, etc.

• In general, there are two broad types of objectives that may underpin any
promotional campaign- one of these focuses more on behavior and
specifically purchase behavior; the other will have a strong focus on attitudes
- and particularly on thoughts and feelings:

• Influence demand: Promotions may be directed explicitly towards influencing the

level of demand for a service or range of services.

• Corporate image: Many promotional campaigns are directed towards creating

and maintaining a particular corporate image. Such campaigns have been
particularly noticeable in the financial services sector because the characteristics
of financial services

• Objectives should be quantified.

 Planning a promotional campaign (cont’d)
• Identify target audience
• The next stage in promotional planning requires the identification of which
groups are to be the target of the promotional activity- that is, which groups
are to receive the message.

• At one level, this may simply involve defining the target market for a specific
service or specifying 'the general public' (if the promotion is concerned with
corporate image).

• However, it is also important to recognize that there will be differences

between con­sumers in terms of their knowledge and awareness of an
organization’s image and range of services.

• In particular, researchers have suggested that consumers pass through a

number of different stages when considering a purchase. (AIDA stages)
• Awareness
• Interest
• Desire
• Action
 Planning a promotional campaign (cont’d)
• Formulate message
• Any message can be divided into two key components - the message
content and the message form.

• The message content relates to the basic ideas and information that
the sender wishes to convey to the receiver.
• It should make clear why the product is different, what benefits it offers, and why
the consumer should buy this product rather than one of the available alternatives.

• the next stage is to con­sider the form this message should take.
• It is at this point that the creative input from outside organizations such as
advertising/communications agencies becomes important.
• This process involves finding the most appropriate combination of verbal, audio,
and visual signals which will present the content of the message in a form that is
most suitable for the target audience.
 Planning a promotional campaign (cont’d)
• Set budget

• A budget must be established for the communications exercise as a

whole, and, at a later stage for the individual components of the
promotional mix.

• There are no hard and fast rules for determining the size of the
communications budget and even within the same broad market,
organizations will vary enormously in terms of promotional expenditure.

• A growing number of researchers argue that the marketing budget in

general and a communi­cations budget in particular should be seen not as
an annual cost but rather as an investment

• There are a number of different approaches to the formulation of

communications budg­ets including:
• The affordable method
• Sales revenue method
• The incremental method
• The competitive parity approach
• The objective/task method
 Planning a promotional campaign (cont’d)
• Set budget (cont’d)

• The affordable method

• This simply suggests that the organization’s expenditure on promotion is deter­
mined according to what the overall corporate budget indicates is available. The
organization basically spends what it thinks it can afford.

• Sales revenue method

• This approach sets the communications budget as some percentage of sales
revenue.
• By implication, this means that sales 'lead' promotion rather than pro­motion
'leading' sales which is what might be desired. That is to say, the size of the
promotional budget will be dependent on past sales rather than desired future
sales.

• The incremental method

• The budget is set as an increment on the previous year's expenditure.
• This is widely used, particularly by smaller firms. However, it does not allow for
feedback from the market-to-communications spend and does not allow pro­
motional or marketing objectives to guide the level of expenditure.
 Planning a promotional campaign (cont’d)
• Set budget (cont’d)

• The competitive parity approach

• This approach focuses on the importance of promotion as a competitive tool and
entails setting budgets to match those of competitors.

• The objective/task method

• This is probably the most logical approach to the establishment of communica­tions
budgets, but perhaps also the most difficult to implement because of the
complexity of many of the calculations.

• It relies on specific quantified objectives and then requires that a precise cost is
calculated based on the activities required to achieve these objectives.

• The budget is then based on these costs, so that marketing managers have a
precise budget which should allow them to achieve their stated objectives.
 Planning a promotional campaign (cont’d)
• Choosing the promotional mix
• Having determined the appropriate level of communications expenditure this
must be allocated between the various promotional tools available to the
organization - namely, advertising, personal selling, sales promotion, public
relations, and direct marketing.

• This mix will vary across organizations, products, and markets.

• While it is difficult to generalize, retail markets will often make more use of
mass communication methods such as advertising, sales promotion and
public relations/publicity, while personal sell­ing will be more important to
corporate customers.

• In financial services, as is explained in previous chapters, personal selling is

relatively widespread in retail markets for more com­plex financial services.

• However, mass forms of communication remain popular for the less complex
products such as credit cards, current accounts and savings accounts.
 Planning a promotional campaign (cont’d)
• Implementation and monitoring

• Implementation concerns itself with the allocation of tasks and the

specification of the timescale.

• Monitoring focuses on the regular evaluation of the progress of the promo­

tional campaign and the identification of any areas where changes may be
necessary.

• The problem that faces many organizations is the difficulty of measuring the
effective­ness of promotional activities.

• There are a number of approaches that might be used to assess the

effectiveness of promotional campaigns:
• Pre-testing
• Live-testing
• Ex post commercial market research
• Statistical analysis
 Planning a promotional campaign (cont’d)
• Implementation and monitoring
• Pre-testing
• Pre-testing involves demonstrating the promotional campaign to selected consum­
ers. Based on their response, the organization attempts to predict the likely effec­
tiveness of a campaign and eliminate weak spots.

• Live-testing
• Digital enables organizations to get campaign performance feedback in almost real-
time.
• Marketers are able to judge the success of paid online advertising banners on
third-party sites and retire and replace low-performing ones with speed and
efficiency.

• Ex post commercial market research

• Commercial market research once a campaign has started is widely used to
determine levels of recall and comprehension.

• Statistical analysis
• Statistical analysis is often used to assess the impact of advertising on the level of
sales. Basically, this involves a comparison of sales before the campaign with sales
after the campaign.
The Promotion Mix
 The Promotion Mix (cont’d)
• Advertising
• Advertising is a form of mass communication that is paid for and involves the
non-personal presentation of goods/ideas.

• As such, it covers television, radio, internet, and press advertis­ing and some
would also include other approaches such as direct mail and direct-response
advertising.

• Advertising is usually classified as being of two types, above-the-line and

below-the-line.

• Above-the-line: refers to all forms of advertising where a fee is payable

to an advertising agency and includes press, TV, radio, internet, cinema,
and poster advertising.
• The major advantage of above-the-line advertising is that it enables an
organization to reach a large and diverse audience at a low cost per person.
• A further strength is that the sponsor (i.e. the organization) retains a good degree
of control over the message content, its presentation, and timing.
• A potential disadvantage is that advertising messages are highly standardized and
as such advertising can be an inflexible promotional tool. It may also be wasteful
because it reaches a large number of individuals who are not potential consumers.
 The Promotion Mix (cont’d)
• Advertising (cont’d)
• Below-the-line: describes forms of advertising for which no commission
fee is payable to an advertising agency and includes direct mail, direct-
response advertising, exhibitions and point-of-sale material.
• These methods tend to be much more focused, they reach a smaller number of
people at a higher cost per person, but this is often counterbalanced by the higher
degree of accuracy associated with such methods.

• Advertising is one of the most widely used promotional tools in retail

financial services because of its ability to reach large numbers of customers
cost-effectively.

• Because customers will often need a lot of information in order to make a

decision, above-­the-line advertising is often thought to be more suited to
the process of raising awareness and generating interest while other
promotional tools are used to encourage desire and action (remember the
AIDA)

• Above-the-line advertising can also be particularly effective in building

organisational rep­utation and image because this type of communication
does not require detailed information but rather focuses on a broad
general message.
 The Promotion Mix (cont’d)
• Personal selling
• Personal selling has a dual role to play in the marketing of financial services.
It is a channel of distribution and also a method of communication.

• Personal selling is probably most common in corporate markets but is also

widely used in personal markets in relation to some of the more complex
financial services.
• indeed, with the options that digital technologies present ( e.g. chat-bots, live
chat), personal interactivity may even increase in the retail environment.

• One of the major benefits of personal selling as a form of communication

is that it allows immediate feedback from consumers to the organization (
or its representative).
• personal selling is two-way communication.

• The customer can raise queries with the salesperson and those queries or
concerns can be dealt with immedi­ately.

• This means that the information communicated can be very accurately

tailored to the needs of particular individuals.
 The Promotion Mix (cont’d)
• Personal selling (cont’d)

• Although personal selling can be a valuable and effective form of promotion,

it is also very expensive.

• It tends to be used more heavily for relatively high-value products and more
heavily when customers are close to making a purchase.

• As well as being expensive, it is also a form of promotion that can be difficult

to manage.
 The Promotion Mix (cont’d)
• Publicity/public relations
• Publicity is normally defined as being any form of non-paid, non-personal
communica­tion, and like advertising, it involves dealing with a mass audience.

• Public relations is paid for whereas publicity is assumed to be 'free'. However, it

is included under this heading because it is concerned more generally with
building and maintaining an understanding between the organization and the
general public.

• Example: When Metro Bank launched its new banking service in the UK, it
briefed a communica­tions agency to create a genuine level of interest and
excitement that would ensure positive media coverage when the first new
branch opened.

• Publicity offers a number of benefits to the organization:

• It has no major time costs
• It provides access to a large audience and the message is considered to have a high
degree of credibility.

• However, they are also one of the more difficult forms of promotion to
implement and to control since the final presen­tation and timing of information
about the organization will usually be edited by the media such as television,
newspapers ad online news providers.
 The Promotion Mix (cont’d)
• Publicity/public relations (cont’d)
• With increasing pres­sure on advertising space and costs, the importance of
publicity seems likely to increase. Two areas took particular attention:

• Corporate Image: The development of a suitable corporate image is an

aspect of public relations that is of particular importance to financial
services organizations because the reputation or image of the company
has a major impact on consumer choice.
• corporate image is often seen as one of the most important forms of branding
that is available to a financial services organization.

• Sponsorship: The extent to which this method of communication is used

varies considerably across organizations, but with increased com­petition
for advertising slots on television and rising media costs in general,
sponsorship is seen as an important and effective way of projecting the
image of the organization.
• Financial services organisations are involved in sponsorship of a vari­ety of
events including sports events ( e.g. football), entertainment ( e.g. music
concerts) and cultural events ( e.g. art exhibitions).
 The Promotion Mix (cont’d)
• Sales promotion
• Sales promotions in financial services are usually described as being demand-
pull methods of promotion.

• Demand-pull promotions are specifically concerned with providing consum­

ers with a direct incentive to try and buy a product.

• The use of sales promotions as part of a marketing campaign has increased

considerably in recent years.

• There are a variety of techniques available although the most popular are
probably:
• Benefits tied to product use: If the consumer uses/buys a particular product or
service, he or she receives a free or discounted gift.
• Examples: Cashbacks when using credit card

• Reduced price: This constitutes the most direct method of sales promotion in that
it simply involves offering the product to the consumer at a reduced price.
• Example: Arab Bank offered a one-year fee waiver as a promotional device
when they launched their Citibank Black Credit Card.
 The Promotion Mix (cont’d)
• Sales promotion (cont’d)
• There are a variety of techniques available although the most popular are
probably:
• Competitions: Consumers of the product are offered the opportunity to enter a
competition to win attractive prizes.
• Example: Bank El Etihad Weekly prizes

• Couponing: Money-off coupons are probably the technique that is most commonly
associated with sales promotions.
• It is less common in financial services, although a number of compa­nies will
offer particular discounts through direct mailing to certain target customers
and this can have a similar effect in that it should encourage purchase.

• Sales promotions can be very effective towards the final stage of the AIDA.
 The Promotion Mix (cont’d)
• Direct marketing and digital marketing
• Involves engaging directly with carefully targeted individual consumers and
customer communities to both obtain an immediate response and build
lasting customer relationships.

• Direct marketing (and the associated technique, direct-response advertising)

involve direct communication from the organization to actual or prospective
customers with a view to stim­ulating a purchase, referral or other related
behavior.

• The particular advantage of both direct mail and direct-response advertising

is that they can potentially provide customers with a lot of the detail
necessary to make a final purchase decision.

• Direct mail which is accurately targeted to the right customer group can be
very effective at generating new business, as well as cross-selling to existing
customers.

• These methods of advertising are likely to be more effective in encouraging

the final stage in the AIDA.
The digital effect
• Success is delivering the right content, in the right context, and the
right time and data is the key to that success

• Effective use of CRM & cookies to dive targeted communications

• Digital disruption: the uber effect

• Blended robot & human advice models

• Programmatics & digital advertising

• Aggregators & cashback sites

Digital marketing promotional
tools
• Email
• A/B & multivariate testing
• Mobile websites & app marketing
• SMS mobile marketing
• QR codes
• Social media
• Online customer service
• Viral marketing
• Affiliate advertising
• Display advertising
• Organic and paid search