Switching In The Financial Services Industry – Part 3 of 3

Influences on the buying decision

Let’s for a minute step outside the field of financial services and consider the mind of the general public in our search for how emotions effect buying decisions. Take the car buying public. Can we really say why we switched from that practical estate to a 4X4 off-roader to take the kids to school? For sure the question gets rationalised – “we have a steep drive and it can be difficult to get out of in the snow” (yes, on the one day a year that it does snow!); or “I feel safe in it with the kids” (yes, even though the stability is less than for most conventional saloons). In general we recognize more readily these emotional pulls and tugs in other people than we do in our rational selves.

The buyer of financial services is no less influenced by emotions when they make their decisions. Figure 3 gives a stylized indication of how the emotional factors according to the types of goods we are talking about – but even in the most mundane of products, emotions are known to play their part, often accounting for 10% or more of the buying decision.

Figure 3 The Influence Of Emotional & Rational Factors On Buying Decisions

This discussion is leading us to a point where we can build a check list of factors that prompt switching:

Switching more readily takes place when:

– The product is a commodity supported by very few services
– There is no strong relationship between the buyer and the seller
– Products and services are easily interchangeable with little or no testing/prequalification
– The product or service is not supported by a strong brand
– A market is awakened by a new supplier or an energetic supplier who runs a campaign that talks about the benefits of buying a different product or service
– The buying company has switched a number of times and has no fears of the difficulties of switching again
– The product or service is not of strategic relevance to the buying company
– The financial benefits of switching to a different product or service are considerable.

Stopping the flow

Once we have won a new customer, our aim should be to make sure that from now on there is as little switching as possible for it is agreed that finding a new customer is 10 times more expensive than selling a product to or servicing an existing customer. We conclude the white paper with three important ways to generate loyalty – in other words, stopping switching:

Build a strong brand

A definition of a strong brand is one that people insist on to the exclusion of all others. A strong brand is a great means of creating loyalty and stopping switching. A key to strong branding is to build on and emphasise values that have a strong relevance to the market and which are not the high ground of competitors.

Build interlocking relationships

Strong brands involve far more than the promotion of company names, logos and value statements. They are strengthened enormously by the relationships built up between the financial services company’s sales teams and the customer. It will be hard to dislodge the sales person who regularly calls on a customer, that sends a birthday card and that calls occasionally to check if everything is in order.

Segment your customers by needs

We conclude this white paper where we came in. At the end of the day, all marketing is about segmentation; namely understanding and responding to the different needs of customers. With this understanding it will be possible to create different customer value propositions that meet those needs more closely and so resonate with customers better than a vanilla offer for everyone.

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