Consumer Behavior and Product: Jaiib/DBF Paper 1 (Module D) Unit 3
As we all know that is Consumer Behavior and Product for JAIIB Exam. JAIIB exam conducted twice in a year. So, here we are providing the Consumer Behavior and Product (Unit-3), SUPPORT SERVICES – MARKETING OF BANKING SERVICES/ PRODUCTS (Module D), Principle & Practice of Banking JAIIB Paper-1.
Maslow’s Hierarchy Needs
- While Considering the marketing of a product, whether a physical or a service product, we must understand the customer’s need as per Maslow’s theory of hierarchy of needs and human behavior:
Security and Safety Needs
- Financial security
- Heath and wellness
- Safety against accidents and injury
- Romantic attachments
- Social groups
- Community groups
- Churches and religious organizations
Family Life Cycle
The Family life cycle is divided into four stages and the financial status and Banking
|Stage||Financial Situation||Banking Needs|
|Young Bachelor||Per capita income high, as no Dependants. Few financial burdens.||Credit cards, auto loan, low cost banking services|
|Half nest (Married with young children)||Home buying priority, low liquidity||Mortgage loan, credit card, overdraft, durables loan|
|Full nest (Older couple, grown up children)||Income stabilized, good financial position||Home improvement, equity investment flexi-deposit, investment services|
|Empty nest (Older couple)||Significantly reduced income||Social security services, some loans|
Customer Relationship Management
Relationship marketing is the attracting, maintaining and nurturing relationship with customer in a multi-service organization aimed at customer relations.
Objective of Relationship Marketing
- Long term customer retention
- Relationship with external market who influence or provide referrals
- Integrating marketing activities, customer service and quality standards
Note: CRM concept and the database becomes the focal point for all marketing activities from customer loyalty programmes to internal communication.
Comparison between Transaction Marketing and Relationship Marketing
|Transaction Marketing||Relationship Marketing|
|Single sale focus||Customer Retention Focus|
|Product Feature Oriented||Product Benefit Oriented|
|Short –time frame||Long time scale|
|Low Emphasis on Customer Service||High Emphasis on customer Service|
|Moderate Customer Contact||High Customer Contact|
|Moderate Quality Concern||High Quality Concern|
Activities under CRM
- Establish and maintain a customer information information database
- Planning customer contact points
- Analyzing informal customer feedback
- Conducting customer satisfaction survey
- Managing communication programmes
- Hosting special events
- Auditing and reclaiming lost customers
- Gap 1: Difference between Customer Expectations and Perceptions of needs by Management. Occurs when the company management does not understand what customers really want.
- Gap 2: Difference between Perception of needs by Management and Specification of the service. Occurs when Management understand what customers want but this does not translate into correct specifications and orders to the rest of the company.
- Gap 3: Difference between Specification of the service and the Service produced. Occurs when the people who “produce” the service are unable, unwilling or do not know how to reach the specified standard.
- Gap 4: Difference between the Service produced and Communication. Occurs when the service expectations formed by customers based on corporate communication are not met.
- Gap 5: There is no clear consensus on what this gap means. Initially, it meant the difference between Expectations and Perception of service, which may arise when the customer sees a characteristic of service quality as something undesirable. But this gap is also now used to identify overall customer dissatisfaction, which appears as the result of the sum of the other gaps. At Openmet, we prefer the first of the two versions because it adds to the analysis of the causes of dissatisfaction.
Kotler has defined product as:
A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need.
- The Core Features
- The Associated Features
- The Brand Name and Logo
- The Package and Lebel
The five product levels are:
- Core benefit: The fundamental need or want that consumers satisfy by consuming the product or service. For example, the need to process digital images.
- Generic product: A version of the product containing only those attributes or characteristics absolutely necessary for it to function. For example, the need to process digital images could be satisfied by a generic, low-end, personal computer using free image processing software or a processing laboratory.
- Expected product: The set of attributes or characteristics that buyers normally expect and agree to when they purchase a product. For example, the computer is specified to deliver fast image processing and has a high-resolution, accurate colour screen.
- Augmented product: The inclusion of additional features, benefits, attributes or related services that serve to differentiate the product from its competitors. For example, the computer comes pre-loaded with a high-end image processing software for no extra cost or at a deeply discounted, incremental cost.
- Potential product: This includes all the augmentations and transformations a product might undergo in the future. To ensure future customer loyalty, a business must aim to surprise and delight customers in the future by continuing to augment products. For example, the customer receives ongoing image processing software upgrades with new and useful features.
Product Planning comprises the process of developing and maintaining a portfolio of products, which satisfy the needs and wants of customers from different segments.
The following are main tasks in managing the product mix:
- Appraisal of each product line and each product item
- Decision on packaging
- Product differentiation and positioning
- Managing brands and developing brand equity
- New product development
- Managing the product life cycle of products/ brands
- Managing product quality
Product Life Cycle
The product life cycle has 4 very clearly defined stages, each with its own characteristics that mean different things for business that are trying to manage the life cycle of their particular products.
- Introduction Stage – This stage of the cycle could be the most expensive for a company launching a new product. The size of the market for the product is small, which means sales are low, although they will be increasing. On the other hand, the cost of things like research and development, consumer testing, and the marketing needed to launch the product can be very high, especially if it’s a competitive sector.
- Growth Stage – The growth stage is typically characterized by a strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. This makes it possible for businesses to invest more money in the promotional activity to maximize the potential of this growth stage.
- Maturity Stage – During the maturity stage, the product is established and the aim for the manufacturer is now to maintain the market share they have built up. This is probably the most competitive time for most products and businesses need to invest wisely in any marketing they undertake. They also need to consider any product modifications or improvements to the production process which might give them a competitive advantage.
- Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s known as the decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the customers who will buy the product have already purchased it), or because the consumers are switching to a different type of product. While this decline may be inevitable, it may still be possible for companies to make some profit by switching to less-expensive production methods and cheaper markets.
New Product Development
The Process of product development comprises of following five main stage:
- Idea generation and screening
- Concept development and testing
- Product development
- Test marketing
- Commercial launch
Marketing strategies which are on the product element are called product strategies.
- Quality Improvement
- Feature Improvement
- Style Improvement
The Major reasons for product elimination are:
- Sales keep declining continuously and there is no possibility of increasing sales.
- Profits keep declining continuously and there is no possibility of improving profits.
- Product prices are declining continuously and it may be difficult for the firm to supply at the prevailing market price.
- Excessive administration expenditure and time.
Diversification refers to entering attractive opportunities which are outside the existing business of the firm. Three types of diversification are generally observed:
- Concentric Diversification: A type of diversification in which a company acquires or develops new products or services (closely related to its core business or technology) to enter one or more new markets.
- Horizontal Diversification: Horizontal diversification involves the extension of a production of products or service above and beyond the industry, in which the company operates.
- Conglomerate Diversification: Conglomerate diversification is growth strategy that involves adding new products or services that are significantly different from the organization’s present products or services.
♦Other Aspects of Product Development
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