The online product that I propose are online value added fixed deposits of maturities of three years. The interest rates will be indexed against inflation. If inflation rate rises during the period of the deposits the interest rates too will raise correspondingly to off-set the negative impact of inflation. However, there will be no downward effects on the interest rates due to decline in rates of inflation.
The marketing strategy will be centred on the four Ps of the traditional marketing as well as relationship marketing. Relationship marketing will be an especial focus because we want to create a loyal base for our customers. It is especially important to retain customers for long term profitability of the product.
According to estimates of marketing research, the estimated size of the market is around 375 million pounds. If we capture 5% of the market in the first year, the estimated revenues in the first year will be around 18.75 million. In the second year it will be 37.5 million (if market rate grows to 10%) and 56.25 million pounds if market rate grows to 15%. (Cateora & Graham 2007)
The effectiveness of the marketing plan will be based on such metrics like increase in sales and increase in market share. The marketing plan will be controlled depending on the performance of the marketing plan against these metrics. (Hollensen 2003)
This product is a breakthrough in the current market environment. It has all the requirements that are needed in this recessionary situation. With savings being at an all time low, banks need to inculcate the savings mindset in the minds of the people. Governments all over the world are trying to encourage savings so that they can jump back from this financial mess. With the government of United Kingdom promoting savings to increase liquidity all the banks will come up with various schemes to promote their products.
MACRO ANALYSIS OF THE MARKET
As a whole, the product market in United Kingdom does not seem to be growing at the same speed it used to. The demand has shrunk and the expenditures have gone down. This is because of the ongoing liquidity crisis. People are afraid to spend their current income thinking times will get worse. The government wants to encourage savings since that will fill in the default in the balance sheets. The long term trend of the interest rate is on the rise and analysts are predicting that the economy will revive soon. This would give advantage to the pound vis-à-vis the dollar. It is being predicting by analysts that the market in the United Kingdom will revive soon picking up the rate of savings.
Political factors- Britain enjoys a climate of political stability. The strong democracy is conducive to business. The political climate is conducive to introduction of new savings products. The government may provide incentives to citizens to save more in the form of tax rebates. (Madura 2006)
Economic factors- The success of our product depends on the economic environment. The worst phase of the economic crisis is over and the economy of UK is recovering its health. Employment and wages as well as productivity are expected to increase in the next five years.
Social Factors- The social environment is in favor of low-risk fixed interest products. The risk taking culture is at its low and people are realizing the importance of savings for their economic and social well-being. (Madura 2006)
Technology factors- Britain has the most sophisticated technologies available. It has one of the highest internet penetration rates in the world. The population is well versed in using these technologies. Banks are already offering a lot of online products. (Madura 2006)
Legal factors- The deposits up to a certain limit are insured under the Financial Services Compensation Scheme (FSCS). The legal structure provides all the safeguards for consumers. The banking sector is regulated by the Bank of England which is the central bank of UK.
Strengths- The strength is our product. It offers a high rate of interest that is insulated against negative exposure to inflation. Our bank has acquired a brand image of credibility in the minds of the consumers. We have the processes and infrastructure to support such an operation.
Weaknesses- If rates of inflation run amok to galloping or hyper inflation levels, then our liabilities will increase too much. But such a scenario does not have that high probability.
Opportunities- The opportunities are unlimited. This is predated on the expected recovery in economy and the increased savings rate accompanying them .The online savings market is still largely untapped and there are huge opportunities for market growth.
Threats- The threats in the external environment come in the form of competitors who have already captured a substantial percentage of this lucrative market. If the economy derails from the path of recovery and unemployment rates rise, the savings rate will shrink. The bank has no control over the variables that affect the macro-environment of Britain.
The main competitors include Halifax, HSBC, Lloyds, Smile, ING, Natwest, Cahoot etc. The competition is tough and the ferocity of it is expected to increase. To gain a competitive advantage in such a scenario will be extremely difficult.
The opportunity is expected to be exploited through offering product differentiation in the form of realizing higher value for our customers who invest in our fixed deposit products. Relationship marketing will be used extensively to create bonds with the customers.
Market research is the research on the market and the kind of consumers the product will cater to. The Market Research required for this product is the statistics of the approximate amount of people who would subscribe to this product. Mostly it is meant for the salaried people or upper middle class people to ensure that they save a particular amount and get an interest over that. With the full time employees increasing by 2% every year earnings per week rose up to ₤531.
Hence the people could save about 20-30% of their weekly income. If one reaches to this conclusion the market the product would cater to would result in a huge audience ranging form not only the salaried class but lower middle class as well as multinational banks. The research methodology can be taken through a survey of about 10000 people asking them if they would like to use this interest bearing direct savings product and what amount would they be ready to save. This would give the bank a fair idea on the kind of people they would target and the number of customers they would set to aim for. The market information required should be the number of people who would be able to as well as willing to use this product. Then the bank can act according to that. (Chaffey 2007)
The kind of marketing strategies to apply would be directly related to the type of market information gathers and the research information concluded through surveys. One of the best marketing strategies for a product that is not very well known is to promote is on a large scale. This will increase awareness as well as make the people act in using the service. Marketing the product online would be the best strategy. Large scale marketing with added incentives to the first 1000 account openers would be good. A good plan should be advertising at lower costs to attract consumers. Keeping a higher margin on the interest rates of savings and lending would help the bank in maintaining the services. Marketing goals and action sequences need to be set in accordance to the financial situation and market information. (Sandhusen 2000)
Advertising strategy should be used online or on hoardings. Since the target audience is mainly office going salaried class employees advertising in offices and canteens would help increase awareness. Aim based advertising should be used to avoid additional useless costs. The strategies once made should be reviewed often. Their measurement would depend on the aims set and the time taken to achieve the targets. The rate at which the competitors are going also forms a part of measurement in strategies. The kind of product mix should be achieved based on the survey of the market. Pricing should be done in a way that it does not only recover the marketing and advertising costs but also provides a cushion for the future. The pricing for this product can be high at the starting stage of product life cycle since the product is relatively new in the market and there are no competitors for this kind of product.
Market segmentation is required so that the bank can understand each set of prospective customers and target them in a way that suits their demands. Changing the product according to the liking and requirements of each segment of people is important for the long term survival of the product. Hence these precautions need to be taken before the product is launched. (Krugman & Obstfeld 1997)
IMPLEMENTATION - HUMAN RESOURCES
The implementation of this product needs to be done as soon as possible so that someone else might not steal the idea before the bank. Its implementation should also be done according to the strategies in the form of clear planning and good control procedures. Implementation it is said is the first and most important aspect of product success hence care should be taken in its implementation stage. For this direct online product the numbers of Human resource personnel needed are relatively less and mostly would comprise of technical staff apart from the top management. Here the cost on rent and personnel will be highly reduced but the cost to maintain the technical staff and the online process would make up for it. The top management would need to make a critical path with information on the number of tasks to be completed and the number of days that need to be given for a particular task to be completed. This would make the process simple and give the employees a target and a short and long term plan. The critical path needs to be followed at all costs and the management should consider it as a barometer in the product development. (Madura 2006)
The bank should always be prepared for the ‘what if's' scenario. This is a worse case scenario and would realistically help the bank in setting a performance measurement scale. (Howells 2005) It also acts as a good plan B in case plan A does not do too well. Here it would be relatively easy for the banks to scrap the product since the cost required to scrap would not be too much. But in order to get the product moving proper roles and responsibilities need to be shared by the staff. There should be good communication between the staff to make the project a success.
To conclude, the detailed marketing plan for this product is relatively easy to plan since it does not require much information to begin with. The implementation of the strategies in marketing and advertising is what matters in the future of the product. Since this idea has never been used before or has not been very well known the number of subscribers is bound to increase. All that the bank needs to be sure of is to keep the technology frequently updated.
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