The Peculiarities of Promotional Activity in the Sphere of Financial Services

Course Project.

" The Peculiarities of Promotional Activity in the Sphere of Financial Services" .

Completed by: Stefan Dimitrijevic.

Moscow, 2015.

Table of Contents.

• Chapter I. General Promotion
• 1.1 Notion of Promotion
• 1.2 The Purpose of Promotion
• 1.3 DRIP Model
• 1.4 Promotional Mix
• Chapter II. Promotion in the Sphere of Financial Services
• 2.1 Overview and the Unique Aspects of Financial Services Industry
• 2.2 Financial Services
• 2.3 Financial Promotion
• 2.4 Promotional Activity
• 2.5 Customer Trust
• 2.6 Customer Loyalty
• 2.7 Relationship Building
• Conclusion
• References

Introduction.

It has been quite difficult to make a choice when it came to establishing a proper topic, especially in the financial services sphere. Nonetheless, there are still many areas that are worthy of proper exploration; I have chosen to examine the peculiarities of promotional activity in the context of financial service.

The topic itself covers several points together and is relevant in its own right, independently. Marketing and promotion is often overlooked in financial services industry, and little has been published and brought up as an issue on the very matter. That is exactly the reason why it has been chosen to delve deeper into marketing activities and explore the degree of its importance for financial services companies, which heavily rely on relationship building and trust. Here we can state that it is questionably appropriate to apply such concepts as the Marketing Mix, including 4Ps, and even the 7Ps concept, regardless of the fact that it is a service industry. It is not a regular service industry, but one that is primarily about reciprocal interaction of service providers and their respective clients.

The first chapter of the course project will be devoted to the theory of general promotion, with basic and general concepts examined. The nature of promotion and its objectives will be examined, as well as the DRIP model, which is a communicational process of promotion, along with the promotional mix and its key elements. The second chapter of the project will be devoted to the analysis of the promotional aspects that relate to the financial services sphere specifically. The specificities of the industry itself will be analyzed, with some characteristics that are unique to the sphere. Financial promotion, trust, loyalty and the relationship process will be examined in the second chapter as well. Afterwards, the conclusion will be drawn that will make an attempt to summarize the overall work.

Chapter I. General Promotion

1.1 Notion of Promotion

Before exploring the nature of promotion in financial services, the term promotion must be analyzed as well, since financial promotion and promotion in financial services is a derivative, a type of general promotion.

Promotion is an element of the marketing mix, being one of the 4Ps. The basic notion of promotion refers to the activity of increasing the existing level of customers' awareness, or actually building their awareness from the ground-up, in case it is non-existent for a specific product or service. Companies primarily engage in promotion because it generates sales, because of delivering the message to a target market and can even create a sentimental bond with a brand, company or a product known as brand loyalty.

Promotion is also considered to be a device to communicate the outstanding properties of different mixes to the customers and clients with the intention to influence them. Promotion, therefore, can be well defined as a managerial process to inform, sense, sensitize, persuade and transform the potential customers to actual, existing and habitual (repeat) clients and customers.

1.2 The Purpose of Promotion

Promotion as a process has three key objectives, and they can be defined as follows:

1. To present (deliver) the information (message) to customers, clients, or consumers in general.

The first stage is about communicating the promotional message about a product or service typically to the target market. It can be done with the help of various means, being print, television, radio, direct mail or personal selling.

2. To increase the level of demand.

This objective is about boosting sales because of the recently-developed brand awareness in the minds of customers.

3. To differentiate a product or service.

The third stage can be regarded as the most sophisticated one, since it deals with decreasing existing competition in the industry by providing a product or service that is different from the rest, and is not as generic as those of the competitors.

The main points above demonstrate that the concept of promotion has diverse objectives and primarily deals with sales boosts, positioning, competitive relations through product acceptance and differentiation as well as such aspects as bond development and even nostalgia triggering by establishing brand awareness and maintaining brand’s image consistency. Promotion is ultimately about increasing sales and solidifying the brand, product or service in the minds of consumers in such a way that differentiation can be achieved successfully and competition dealt with accordingly.

promotion financial communication flow.

1.3 DRIP Model

Aims of promotion can also be the following: persuasion, informing, reminding and reinforcing. The following goals are commonly abbreviated as the DRIP model, which easily describes the main points that promotional activity should cover. There are certain aims of the DRIP elements, it is a «communication flow» model of promotion.

Differentiate:

The first element deals with the product or service differentiation from others in the same domain. Although it is difficult but it can be done by understanding how a product is positioned in the market. The goal here is to develop awareness and appeal, «liking» for the product among our target group from the pool of other similar products. Commonly 7P's of service marketing and digital marketing are used for this. An example would be a comparative advertisement, where one company claims that it is better than the other one, thus differentiating itself from its competitor in the process.

Reinforce:

Here the aim can be as a reminder to consumers of the benefits of a product or service, or persuading them to start a new transaction. A brand can be described as an experience wrapped in a promise. The brand’s message needs to be appropriately reinforced. Reinforcement can be achieved via demonstrating experiences, since such demonstration should show why your product is superior or why is it different from others. There may be cognitive dissonance in the minds of consumers and that is exactly the reason why one should remind about their product.

Informing (Inform):

As simple as its name, informing about a certain offering or making the target group aware about it — that is informing — the process of communicating and educating about your offering to your prospects. This usually includes new features, benefits, availability, offers, value etc. This will educate the consumer about your product. The customer will become informed.

Persuade:

Persuade, in this context, means inducing your prospect (customer or the client) to behave in a certain way. Audiences should be persuade in such a way that they start behaving in a particular way; certain attitude within customers should also be intrinsically evoked. At this point, it is essentially about building a relationship with your customers, developing an emotional connection with them, establishing a rapport. These days it is so easy to get in touch with customers. Therefore, talking about the product on social media websites, engaging with customers on social media, offering free trials to encourage positive customer behavior is not a very difficult task to accomplish.

1.4 Promotional Mix

Promotion is generically defined as one of five pieces of in the promotional mix, which is also sometimes referred to as promotional plan. The concept is actually a combination of promotional tools that are exploited by the marketing department in order for the company to reach its goals and objectives. Different sources indicate different promotional mix elements, but the most acknowledge ones are the following: advertising, sales promotion, public relations, corporate image campaigns, product placement, sponsorship, personal selling, and direct marketing (as well as Guerilla marketing, which is a form of innovative, unusual and generally unconventional way of promoting a product or service). The figure to the right depicts only the basic elements of the promotional mix, and they will be now briefly examined.

Advertising:

Advertising is widely described as means of communication with the users of a product or service. Advertisements are messages paid for by those who send them and are intended to inform or influence people who receive them. Advertising is always present, though people and target markets may not be aware of it. Nowadays, advertising uses every possible media to get its message through. It does this via television, print (newspapers, magazines, journals etc), radio, press, internet, direct selling, hoardings, mailers, contests, sponsorships, posters, clothes, events, colours, sounds, visuals and even people (endorsements, when famous actors or activists advertise certain products).

Sales Promotion:

Sales promotion is one level or type, element of the promotional mix aimed either at the consumer or at the distribution channel (in the form of sales-incentives). It is applied to introduce new product, clear out inventories, attract traffic, and to lift sales temporarily. It is more closely associated with the marketing of products than of services. The American Marketing Association (AMA), in its Web-based «Dictionary of Marketing Terms,» defines sales promotion as «media and non-media marketing pressure applied for a predetermined, limited period of time in order to stimulate trial, increase consumer demand, or improve product availability.» .

Personal Selling:

In the language of sales and marketing, «personal selling» singles out those situations in which the actual salesperson is trying to sell something to another face-to-face. Personal selling is a promotional method in which one party (e.g., salesperson) uses skills and techniques for building personal relationships with another party (e.g., those involved in a purchase decision) that results in both parties obtaining value. In most cases the «value» for the salesperson is realized through the financial rewards of the sale while the customer’s «value» is realized from the benefits obtained by consuming the product. However, getting a customer to purchase a product is not always the objective of personal selling. For instance, selling may be used for simply delivering information and the messsage. Because selling involves personal contact, this promotional method often occurs through face-to-face meetings or via a telephone conversation, though newer technologies allow contact to take place over the Internet including using video conferencing or text messaging (e.g., online chat).

Public Relations.

Public relations (commonly abbreviated as PR) is the way organizations, companies and individuals communicate with the public and media. A Public Relations specialist (a PR specialist) communicates with the target audience directly or indirectly through media with an aim to create and maintain a positive image and create a strong relationship, even bond with the audience. Examples include press releases, newsletters, public appearances, etc. as well as utilization of the internet. (world wide web.).

Those were the basic and integral elements of the promotional mix. There are definitely more to each one of them, but the basic idea should be clear from that and tendencies do change over time, since trends are oftentimes altered by ever changing people and the world around us. At this point, all of the general points of promotional activity have been brought up and briefly discussed. Now is the time to make a transition to the second chapter of the course project.

Chapter II. Promotion in the Sphere of Financial Services

2.1 Overview and the Unique Aspects of Financial Services Industry

Before commencing the actual analysis of the promotional activity in the sphere of financial services, the sphere itself should be described and some of its peculiarities should be brought up and considered as well.

The term «financial services» became more prevalent in the United States, partly as a result of the Gramm-Leach-Bliley Act of the late 1990s, which gave an opportunity to different types of companies operating in the U.S. financial services industry at that time to merge. Financial services can be described as the economic services provided by the finance industry, which encompasses a wide range of organizations that manage money, including credit unions, banks, credit card companies, insurance companies, accountancy companies, consumer finance companies, stock brokerages, investment funds, real estate funds and some government sponsored enterprises.

One unique aspect of financial services marketing which differentiates it from other marketing and promotional practices is the illusive notion of quality. In the traditional context of marketing manufactured goods, quality is typically measured using standard quality assessment methods and by assessing product defect rates on the production line. However, unlike the traditional marketing manufactured goods, in the context of financial services, the notion of quality is a highly subjective phenomenon. Let us appeal to the following example: while the objective quality of an insurance company might be reflected by the willingness of the company to pay out customer claims, the average customer seldom knows this measure. In the insurance business, the majority of policyholders do not utilize their policy benefits since the events being insured typically have low probabilities of occurrence. As a result, most policyholders never experience the process of filing a claim, and for those that do, the outcome of their experience may not be captured or recorded anywhere for others to examine and learn from. The net effect is that the majority of consumers may never determine the most objective aspect of the quality of an insurance company, which is the protection it offers its policyholders in case of losses. Quality assessments in such a context are therefore not objective and largely based on subjective factors such as the customer’s recognition of the name of the company or suggestions and advice provided by friends or insurance brokers, or even by their subjective perception. In a similar fashion, in the context of securities brokerage services, customers may not necessarily be able to determine whether the broker is providing them with the most objective and informed advice. The objective quality of a broker-recommended investment portfolio may not be evident for many years until the securities within that portfolio have exhibited their long-term characteristics. A similar issue can be identified in the context of tax returns. While a tax accountant’s ability to secure the highest tax refund is probably the most objective aspect of quality, a client may never be certain of having received the highest possible refund. Such an inquiry would require one to file taxes with multiple accountants as a means of «testing,» which is a highly impractical exercise. In all these contexts, despite the important role that the financial services provider plays in securing the financial well-being of the customer, quality assessments by the customer may be driven by highly subjective aspects of the service experience such as the friendliness of the service providers or perceptions of the level of expertise portrayed in the service process.

The prices of financial services are intrinsically complex. For example, the lease price of an automobile might consist of monthly payments, the number of payments and a down payment, rather than the single sticker price used when purchasing the vehicle with cash. Often the price consists of multiple numbers, some of which the consumer may not even completely understand. This not only makes the task of understanding the various prices available in the marketplace difficult for the consumer, but it also creates scenarios that may lead to deceptive and, in some cases, unethical practices by marketers and financial professionals as well as salespeople in general.

The practice of marketing financial services is distinctly different from other marketing practices due to the dozens of regulations that rule the industry. For example, the type of content included in a financial service advertisement is controlled and closely monitored by regulatory bodies, such as the Securities and Exchange Commission, the Federal Trade Commission, and the departments of insurance in individual countries along with the states of the USA.

One of the other unique aspects of financial services marketing is the fact that consumers' needs for financial services vary significantly from one customer to the other. As a result, the types of services that a financial services organization introduces to the marketplace may be best suited for specific groups of consumers rather than for the mass markets. Recognizing and identifying individuals that a particular financial service is best suited for is the task of the financial services marketer. Therefore, it is important to not only understand the underlying technology that is used for segmenting and grouping customers based on their needs, but also to have an accurate understanding of consumer segments that are most relevant to a given financial service. This is especially true in light of the abundance of customer data available for segmentation analysis. For example, most financially active have credit history records that can be purchased and used as the basis for understanding each person’s credit behavior and financial needs. Financial institutions also possess large 12 Marketing Financial Services amounts of transaction-based data on their existing customers that can be effectively used to target them with relevant financial services. Consumer Protection: Any informed discussion of financial services marketing must also include issues related to consumer protection and conflicts of interest, which have historically characterized the industry. The human inability to make rational financial decisions has fascinated researchers in psychology, economics, finance and marketing for decades. Consumers can often make catastrophic decisions related to financial services. Research in psychology has for example established an array of human judgment errors that are persistent and highly influential in consumers' financial decisions (Chapters 2 and 3). It appears that the human brain is simply not hardwired to respond rationally to financial stimuli. This issue is further complicated by the fact that most financial service offers are so complex that by making minor changes in the presentation of the offer, one could make many otherwise unattractive products look highly attractive. This can be a highly problematic concern from both an ethical and regulatory perspective.

2.2 Financial Services

Let us give some examples of the actual financial services in order to simply understand why promotion in this sphere should be delicate and peculiar. Since there are certain limitations to the number of pages of this project, let us narrow the scope of examination and simply refer to some examples of the financial services (products) that financial consultancies provide. Let us take a look at the most interesting and beneficial services that international financial brokerages may offer to its clients:

Education Fee Planning:

Education costs have been on the rise for years. This tendency is unlikely to change in the near future. Still, the importance of the educational process and its resulting benefits has not diminished and higher education is a must for those who want to be successful in the future. In this case, financial advisors persuade their clients by depicting the lives of their children with and without higher education and with and without their help. The earlier the start, the more efficient their saving will be as parents guarantee their young ones the best gift they could ever give them.

International Pension (Retirement) Planning:

Moving abroad and becoming an expatriate businessperson opens up a number of investment opportunities, which would otherwise remain out of reach for such people. This is one of the reasons why engaging in an international retirement plan is becoming increasingly popular amongst those people who think about their life when they stop working. Many international financial advisories promote this very service and the idea that thinking about your future pension is crucial. Using psychology, making them reflect on their current situation, calculate what they have at the present moment and comparing that against their needs in the future is a powerful tool when promoting your financial products, and reaching out for new clients.

Regular Saving Plans:

A regular savings plan is an option for a customer to invest a certain amount of money on a monthly basis and accumulate it over a certain period of time (example: 1000 $ a month over 15 years) and with an interest earned in the process. This type of the financial service is one of the most popular among the clients as it is considered to be one of the most reliable means of saving money for whatever the reason.

The given services are a tiny part of what financial services companies truly offer and were given merely to illustrate the nature of what clients usually get, should they engage in the financial services interaction.

2.3 Financial Promotion

The first aspect that should be noted is that the terms «financial promotion» and «promotion» in financial services are different things and encompass different activities. Unlike promotion in financial services, which includes the implementation of the promotional mix and marketing activities for selling financial services, financial promotions can be defined as an «invitation or inducement to engage in investment activity, communicated by a person in the course of business». Certain restrictions can be applied to any form of interaction (communication), both written and oral, meaning that there are certain limits and stipulations when it comes to promotional activities in the sphere of financial services, due to the subtle nature of the very process. To engage in financial promotions, companies must either be authorized to issue or approve a financial promotion or use an exclusion available for the particular promotion. Some of the exclusions can only be used by a DPB licensed firm as described below.

Financial promotions are a complex area. The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005 No 1529) (FPO) defines the controlled activities and controlled investments for the purposes of section 21 of the Act. It also contains a large number of exemptions and only those of particular interest to unauthorised firms (i.e. firms not authorised by the FSA) are discussed here. If a firm is unsure about any promotion it is making, it should seek external advice.

The Financial Promotions Order, an act that controls and establishes regulations for financial promotions, includes a number of specific terms that describe the process of communication. The types described in the table below are integral when it comes to understanding the financial promotion regime and are described in the following table.

2.4 Promotional Activity

It can be said that no matter the area, financial promotion or promotion, the financial services are most commonly sold and communicated using the means of direct marketing, namely, cold calling and warm calling (which applies to existing clients.) What usually happens is companies develop a «sales pitch» and then deploy it for persuading the customer that they offer something he truly needs and desires. Effectively, for promoting financial services, companies do not heavily advertise their services and financial products, they rarely engage in sales promotions and the key focus is on the direct marketing and selling, while PR is still used frequently. However, oftentimes, financial services companies suffer from jeopardy and lawsuits, and they brand images tend to be tarnished easily. Therefore, the main promotional tools that financial services enterprises have at their disposal are intangible, emotional factors. The presence of the factors most likely drive the sales, while their absence can become a start of a perilous journey for the company. Below, the key aspects will be discussed, when it comes to dealing with financial services.

2.5 Customer Trust

Establishing and securing a sense of mutual and reciprocal trust between the financial institution (financial services company) and its respective clients has, at certain times, been a challenging process in financial services markets. The presence of distrust or simple lack of trust influence both the clients and the companies, since both parties may get a sense of uncertainty when it comes to the underlying needs and intentions of the other party. Let us refer to the following example: a recent consumer survey indicated that one in every four consumers (or existing clients, even) would not hesitate to cheat their financial services and investment providers, should they get a chance to do so, that is. Such clients may, for example, opt to misinform their providers about their personal risk characteristics when signing up for an insurance policy, they might as well misrepresent the reason why and how exactly they were lead to file a claim, or even go as far as neglecting to disclose crucial information that could potentially render their insurance policies invalid.

Such issues of distrust can be found in clients' and regulators' opinions about financial services providers' true intentions in various marketing contexts in categories that range from credit cards and home mortgages to securities brokerage services and insurance. The recent increase in lawsuits and punitive measures imposed by the Securities and Exchange Commission and various other regulatory bodies against major insurance companies has resulted in strengthened client distrust in the financial services community. A study conducted by the Gallup Inc. regarding consumer attitude towards various professions shows that consumers generally have a mixed picture and opinion about financial services professionals (consultants). Therefore, we can argue that lack of trust appears to be an inherent characteristic of many financial services companies and related transactions, meaning that it is a continuing challenge to the practice of marketing financial services in general.

The reason why there is a case of distrust could be the fact that we are talking about financial assets here. The very nature of people is strongly dependent upon money, and, on a subconscious level, clients start doubting whether their providers are truly sincere, while providers take that into account and question their clients' intentions as well, thus creating the existing discrepancy of trust and healthy relationship. Other reasons may include the fact that financial services are a service industry and therefore there is a case of low tangibility, indicating that sometimes companies should rely on physical evidence, which is not frequently effective. The lawsuits and numerous companies that underwent brand jeopardy also triggered the status quo we can see today. Still, it is not the case for every single company operating in the field of financial services, and trust could be gained through appropriate relationship building and management.

Every financial services company should understand completely that trust is the key to successful business conduction and is the driver of marketing and promotional activity in the industry. Without it, the services lose their primary function — to help people achieve financial security. We cannot talk about security without trust and reciprocity. There are certain ways to build relationship with clients and shortly the ways will be explored.

2.6 Customer Loyalty

It has been well established that in the vast majority of financial services categories, customer and client defection rates are substantially lower than they are compared to most other markets. The tendency of customers to remain with their existing financial services provider has traditionally and, as the practice has shown, been quite strong. It is important to note though that defection patterns differ significantly by the financial service category. For instance, life insurance policyholders have an intrinsic interest in staying with the same insurance provider, since changing insurance carriers may lead to the reassessment of the application, a need for new health exams, and potential higher rates and lower coverage levels. Credit cards accountholders, on the other hand, may feel less obligated to stay with the same company because the negative impact of switching is limited, the switching cost itself is generally low, and changing credit card companies may in fact considerably lower borrowing costs due to intense competition within a certain category. The incentives offered by competitors in the credit card markets often outweigh any potential switching costs, resulting in lower rates of customer retention. However, this is to be expected, since such behavior is simple psychology and occurs frequently in other industries, simply because low switching costs or any other competitor with more alluring services can and do take customers away.

Even though there are certain benefits that low customer defection rates present to financial services marketers, this does necessarily reflect customers' true preferences for their existing financial services providers. Still, this behavioral pattern may limit financial services providers willingness to improve their current offerings and service provision and thus become more competitive. Customer retention in financial services may oftentimes simply tell us that many customers and existing clients alike lack initiative to find the most competitive offerings, which means that they are not necessarily attracted by the very best offering, and may, in reality, fail to take into account all possible competing options available to them. Even with the knowledgeof competitive offerings, clients may still choose to remain with the current financial services provider once considering the possible inconveniences associated with switching. Such inconveniences in switching may happen to be in transactions that often have to occur, billing arrangements that may have to be rearranged, and contracts and paperwork that would have to be redrafted, negotiated, and, signed, as well as other related administrative formalities and procedures that could be regarded as nuisances by the clients.

The traditional resistance that consumers have towards switching financial services providers has over time resulted in creation of a non-competitive environment or in an environment with an unhealthy level of competition. Since clients tend to remain with their current provider, they may seek very little information on competing offers and the chances of them terminating their relationship with their current financial services provider has been minimal thus far. The end-result is that financial services organizations may lack motivation for self-improvement, offering their customers sub-standard products and services, which are ultimately not as appealing and useful as they could have been. The harmful impact of this on the management and leadership of today’s financial organizations is to be noted. For instance, a research conducted by the American Bankers Association has revealed that the prevailing number (more than 50%) of all CEOs do not have formal plans to guide their short-term and long-term marketing and promotional activities. Even though this figure is troubling, it happens to be a peculiarity of the industry, which is caused by a highly regulated market environment and lack of healthy competition. The companies have not bee forced to develop strategies to better market its products and subsequently serve their customers. This relaxation of the industry regulations will however challenge the mode of conduct and the need for strategic marketing in the sphere should and most probably experience a significant increase in the coming years.

The shape of the financial services sector in the coming, let us say, ten years, is also likely to be significantly different from its current states, largely due to the rapid integration of new technologies into financial services and changing consumer base preferences, underlying needs and tastes. Moreover, consumers' growing level of education and awareness on financial decision-making and a marketplace that is becoming overly fragmented will demand thoughtful approaches to the marketing practice and promotion itself. An example of that would be the growing number of consumers who engage in online banking who start doubting whether it is a wise and rational approach to managing and earning money or not. In the meantime, the number of checks that customers write and issue is decreasing on a steady basis, while the number of prepaid debit cards being issued and used in transactions is growing exponentially. Such trends illustrate that our marketplace is rapidly evolving, and consumer preferences are most likely to alter the way financial services providers compete in the future.

It should be noted that trust and loyalty go together, since those clients who experience a certain lack of trust they cannot really be loyal to your company, thus meaning that it would be challenging to expect word of mouth activities or any other positive feedback about your company. At this point, having discussed the issues of customer trust and loyalty, we can now talk about relationship building process.

2.7 Relationship Building

As mentioned earlier, no trust and loyalty means no effective and efficient business. Therefore, it is a prudent decision to approach the process of relationship building strategically. Financial services companies generally engage in customer relationship building in the following way:

Building reputation and networking:

Financial professional and consultants can benefit from appropriate networking, whilst attending special events and promoting their company in a subtle, inexplicit way. Building rapport prior to conducting cold calls is a very effective tool, since the potential acquaintance could become potential clients. Other examples could be professional acquaintances, prospective and existing customers, referrals through clients that are satisfied with the services provided. In fact, some clients may introduce many names to financial advisers to take care of. It is also essential to add value to the relationship, since hoping that someone will remember you just like that because you engaged in a conversation during a networking event is ultimately pointless. Professionals usually send a «nice to meet you» e-mail to let the other party know that they are well remembered; it is also crucial to reinforce yourself, by elaborating on the discussion you had had during the event. Hence, the more value added, the bigger the chance that the contact will pay off. It should be noted that oftentimes how you begin interacting with your potential client would define the future of your professional relationship. Networking is a long-term investment, after all.

Maintaining communication:

One peculiar aspect to take into account when making acquaintances and potential clients is the fact that they are seldom and rarely interested or experience a need in what financial professionals could potentially offer them. Needless to say, that is the reason why it is imperative to keep a connection warm from the very start and financial advisors should and usually do remind about themselves since it would be already irrational to remind of their presence when the trail becomes cold once again. That way the communication is kept in a professional fashion, and once prospects experience a need in securing their finances — they will most likely remember about the financial professional, which is also one important stage in healthy relationship building process.

E-mail marketing and telephone calls, and face-to-face meetings:

One of the most frequently used tools in financial services is E-mail marketing and telephone calls. Coherent and intelligent, you-oriented e-mails keep relationships strong and сan even make them flourish. Giving away some free insight on latest services or financial products as well as general pieces of advice is a way to show your professionalism in a genuine way. Regular e-mails to both prospective and existing clients about novelties and relevant things that are related to their personal situation will show them how caring financial professionals are and is a solid way to establish rapport. E-mail marketing is a cost-effective and easy way to stay on customers' minds, build their confidence in your expertise, and retain them. E-mail marketing is also a cost-effective solution. Should it be done appropriately, it can even be viral: contacts, customers and existing clients who find what their providers do is interesting, valuable, and useful and are generally content with the services will forward their e-mail messages or newsletters to other people, just like word of mouth marketing, albeit in the virtual context.

As for the telephone calls, when it comes to relationship building, that should be warm calls. Cold calls are appropriate when building up a client base from scratch, which is not the case for sustaining healthy business relationship. Sometimes, such telephone calls are made for informing existing clients on the new beneficial plans and financial products (the message contains similar content to that of the e-mails, only in a verbal way). Calling clients with no specific reason to make sure that everything is running just fine and simply checking up on them from time to time to see whether they are content with the service provision or not is an effective way of building and sustaining healthy relationship with the client. It does not mean that one type of calls should be omitted; the main point is that companies should find the golden middle between promoting new services, topping up their sales and the general client relationship management. Both of them affect clients' perception positively. In the former, clients feel that they are looked after in the way that the provider would like to choose something more reasonable for them, while the latter makes clients truly secure about their situation, when they are really asked how they feel about their plans and whether something should be changed or improved.

It is also necessary to organize face-to-face review meetings with clients every once in a while (once in every three months) simply to ensure that their financial plans are operating correctly, with no unexpected lapses. Such meetings can make clients feel appreciated and that they are priority clients, which is a very positive aspect when building a healthy relationship. It is more than reasonable to say that e-mails and phone calls are sometimes insufficient for client maintenance. The key is being able to do it in a reasonable succession — not too frequently and not too rarely. Frequent e-mails and calls can make clients annoyed and distracted, while rare signals of your presence and care may result in suspicion and, ultimately, lack of trust and loyalty.

Rewarding loyal customers:

The financial services company should undoubtedly award those customers and clients who remain loyal, stable and reliable in a certain way. Bain & Co., a management consulting company conducted a research and according to the results, it identified that a 5% increase in retention rate yields respective profit increase equal to 25−100%. It had also been revealed that repeat customers.

According to global management consulting firm Bain and Co., a 5 percent increase in retention yields profit increases of 25 to 100 percent. In addition, on average, repeat customers spend more than 65% more than new customers in any industry; in the context of financial services it cannot be regarded as a mere increase in sales, but rather an increase in the willingness to engage in the investment activity. Thus, those clients who bring you most of your profit are the existing ones. In financial services, existing clients may decide to invest more, an example being a monthly increase from $ 500 to $ 1000 over 10 years in the regular service plan; having established trust can customers become loyal. Financial services companies should encourage their clients to maintain a working relationship, rather than make them doubt their attitude and overall expertise. As mentioned earlier, the companies should stay in touch, and give their clients something of value in exchange for their time, attention and business. It does not necessarily mean that is should be too much; a special savings plan, for instance, available solely to existing clients, a notice of an upcoming event, helpful insights and advice, or news they can use are all effective ways of rewarding loyal customers. One thing that companies should not forget is that if they are not those who are rewarding customers, then their competitors are likely to lure them and award them eventually.

Managing complaints and feedback gathering:

Companies should never avoid dealing with customer complaints and should at all times consider their customer feedback. The subtlety of the financial services industry drives around the notion of intangibility, and miscommunication should be put away. If a client has a complaint, then the professionals should meet with him and help him in the best way possible. Otherwise, the client may become disappointed and become disloyal. This might also result in clients sharing their negative experiences with colleagues and, in turn, companies' potential clients. Of course, the motivation to help clients should not only be caused by possible negative outcomes, but there are more than enough reasons to listen to them, since they are the drivers of the business. Their feedback, suggestions and advice on existing services and their potential improvement should also be taken into account and even partially implemented, rather than ignored. For more than enough reasons, dissatisfied and angry clients are deadly for financial services companies.

Gaining referrals and understanding the benefits of relationship building.

It is important to implement the above-mentioned aspects of relationship building, especially for financial services companies. Most financial institutions and consultancies get more than 50% of their clients not out of cold calls and direct marketing, but rather from introductions and referrals. Referrals and introductions are those people whose names are passed to financial providers' professionals by their clients in case they are satisfied with their services. People feel a need to share with something useful if they believe is. The better financial professionals and consultants perform at their meeting with clients, the likelier the outcome that they will receive several «warm» referrals. Hence, this helps us draw a conclusion that not only clients make our business, but also they are ultimate salespeople in the process. Word of mouth is one of the most effective tools, especially in the service industry. It should not be underestimated. Stable inflow or referrals from existing clients are also an indicator of well-established trust and loyalty.

There are numerous other ways of building customer relationship, yet the methods vary in different industries, and the above-mentioned way of sustaining solid retention rate and loyalty is a general way how financial services companies operate and build relationship with their both existing and potential customers.

Conclusion

As we can see, financial services do have certain peculiarities when dealing with the promotional activity, thanks to specific pricing aspects, regulations and other things that differentiate the sphere from others. The overall essence of intangible interaction between the client and the company is one that should be dealt with appropriately and importance of which should not be underestimated. The conventional tools of the promotional mix can only be partially applied in the financial services sphere, due to its specific nature. The subjectivity of perception of quality by the customers is a very subtle process and many companies do manipulate with their potential and existing clients, by simply putting an emphasis on their brand image, corporate identity, reputation etc. yet that does not truly mean that high quality is what clients get. In fact, oftentimes, they are treated in a mediocre way and they fail to undertake any serious actions partly because they are in doubt whether everything is done correctly and whether they are treated nicely (due to the fact that they are frequently unaware of trends and are thus misinformed) and partly because there are high switching costs for certain financial plans or products that require time, money and patience to be improved and/or changed. Here, we come to the notion of trust, loyalty, and relationship building. Since customers do not fully trust their respective financial services providers, because they have their identity jeopardy or other factors, being the lack of information provided, we can conclude that companies should engage in adequate relationship building, with healthy motivation being intact. It should not be done solely to increase profits and drive sales, but because clients are your bread and they should be maintained, taken care of and informed on novelties and special offers. Loyal customers should awarded and trust should be established, while potential customers must imperatively be lured in an intelligent fashion, with proper relationship building, which is the result of solid networking. Referrals in introductions given by existing clients also happen to be a good indicator of the overall situation of your company.

The financial services promotion mostly communicates its services using the means of direct marketing — telephone calls and e-mail marketing for giving its clients insights on new information and checking up on them, simply to see how they are doing and whether a meeting should be arranged. Overall, for promoting financial services, companies do not heavily rely on advertising, they seldom engage in sales promotions and primary focus is on the direct marketing and selling, while PR is still used frequently so that they can improve and create an appropriate image in the minds of customers. However, oftentimes, financial services companies suffer from jeopardy and lawsuits, and they brand images tend to be tarnished easily. Therefore, the main promotional tools that financial services enterprises have at their disposal are intangible, emotional factors, which, in fact, are trust and loyalty. Only having developed and established a healthy relationship and interaction with the client, can the company feel successful and go in the right direction.

The ultimate conclusion is that financial services companies should focus on relationship building, and should never put the trust that their customers exude at risk, because not only can they seize being their customers, but they might as well generate a wave of negative word-of-mouth, which could, in the long run, destroy the business. Clients should be taken care of, and this is a case for every sphere and, where financial services sphere should orchestrate everything in the way most personal.

References

1. Financial Promotions — Article 1 | DPB licence and FSA authorisation | ICAEW. 2015. Financial Promotions — Article 1 | DPB licence and FSA authorisation | ICAEW. [ONLINE] Available at: http://www.icaew.com/en/technical/financial-services/dpb-licence-and-fsa-authorisation/is-it-investment-business/financial-promotions-article-1.

2. Financial promotions — Financial Conduct Authority. 2015. Financial promotions — Financial Conduct Authority. [ONLINE] Available at: http://www.fca.org.uk/firms/being-regulated/financial-promotions.

3. The Challenges of Marketing Financial Services — Article. 2015 [ONLINE] Available at: http://www.bnet.fordham.edu/estelami/fsmbooksample.pdf.

4. Practical Law. 2015. ONLINE] Available at:

http://uk.practicallaw.com/7−376−6656?service=ld. [Accessed 10 March 2015].

5. Financial Services and Content Marketing: 3 Examples of Success. [ONLINE] Available at: http://contentmarketinginstitute.com/2013/03/creative-content-marketing-financial-services/.

6. Five Challenges of Financial Services Marketing | [ONLINE] Available at:

https://stevensonfinancialmarketing.wordpress.com/2012/02/20/top-five-challenges-of-financial-services-marketing/.