PRODUCT – FINANCIAL SERVICE
Ing. Kateřina Matušínská, Ph.D.
MARKETING OF FINANCIAL SERVICES/NAMAF
OUTLINE OF THE LECTURE
1. Financial service – basic terms
2. Product mix of financial services
3. Product levels of financial products
4. Cross-selling and up-selling
5. Financial product life cycle
5.1 Financial product innovation
5.2 New financial product development
PRODUCT – FINANCIAL SERVICE
1. FINANCIAL PRODUCT – BASIC TERMS
• Financial service - any activity or benefit associated with the
finances (current account, credit card, mortgage, life
insurance, savings, securities trading, ...)
• Basic (key) product - the main cause of the financial service
purchase of services (access to cash, security of assets,
savings, insurance, credit, return on investment etc.).
• Supplementary (peripheral) product - offered within the
basic service and creating added value (account statements,
advice, personal banker, internet banking, insurance, services
assistance etc.)
PRODUCT – FINANCIAL SERVICE
2. PRODUCT MIX OF FINANCIAL SERVICES
• Product mix (PM) - all products and items that a particular seller
offers for sale to its customers.
• Product line – a group of products within a product class that are
closely related because they perform a similar function, are sold to
the same customer groups, are marketed through the same outlets
or channels.
• Width of PM - number of different product lines.
• Depth of PM – number of product variants in each product line.
• Length of PM - total number of items in product mix.
• Diversification of risk!
PRODUCT – FINANCIAL SERVICE
CHANGES OF PRODUCT MIX IN FS
• Add a totally new product line.
• Increase the number of products in the product line.
• Modifications (small product modifications).
• Innovations (more significant product modifications).
• Elimination (reducing in the number of product lines or
products in the product line).
PRODUCT – FINANCIAL SERVICE
Basic product
Expected
product
Augmented product
Potential product
 TOTAL MARKETING PRODUCT
Core
benefit
3. PRODUCT LEVELS OF FINANCIAL PRODUCTS
PRODUCT – FINANCIAL SERVICE
EMOTIONAL VALUE ADDED AS A SOURCE OF COMMERCIAL SUCCESS
HOW TO CREATE THE VALUE FOR CUSTOMERS?
> FINANCIAL SERVICE
PRICE
The sphere of
rational influence
The sphere of emotional influence
EMOTIONAL ADDED VALUE
PRODUCT – FINANCIAL SERVICE
4. CROSS-SELLING VERSUS UP-SELLING
PRODUCT – FINANCIAL SERVICE
CROSS-SELLING
• CROSS-SELLING = the action or practice of selling an
additional product or service to an existing customer.
• Activities designed to increase overall customer order thanks to
recommendations of complementary goods, ie. targeted and
absolutely correct offer.
• Product package (package) should represent certain
advantage for the customer (usually lower price).
• Mortgage + life insurance, term life insurance, bank account +
pension insurance, …
PRODUCT – FINANCIAL SERVICE
UP-SELLING
• UP-SELLING = sale of product or service qualitatively better
than the original order.
• Higher product or service model or a more advanced version of
the service as opposite solution of complementary products
offering (cross-selling).
• The basic version of travel insurance - just covering health risks
X travel insurance - health insurance with higher limits, baggage
insurance, liability insurance, COVID-19, …
• The basic version of bank account X a bank account with an
improved payment card, higher overdraft limit, …
• Standard Erasmus package of the bank account G2 X Premium
Erasmus package of the bank account G2 for students
PRODUCT – FINANCIAL SERVICE
5. FINANCIAL PRODUCT LIFE CYCLE
• Product life cycle (PLC) = time when the financial product is
offered in the market.
• Specifics of PLC of financial products:
• short time of product introduction,
• development costs are relatively low, these products can not be
patented easily,
• very difficult product differentiation,
• a short life cycle.
PRODUCT – FINANCIAL SERVICE
time
sale
Innovation
"Innovations are essential for
profitable growth, cost
reduction and competitiveness,
which is a prerequisite for
success."
5.1 FINANCIAL PRODUCT INNOVATION
Recycle
PRODUCT – FINANCIAL SERVICE
INNOVATION
• The idea, service, product or technology that is developed
and offered to customers who can perceive it as a new and
original  discernible positive change of the product.
• Innovation according to the level of change:
fundamentally new products, products representing the
improvement of existing products (modification), analogous
products (expansion of the range with a new variant).
PRODUCT – FINANCIAL SERVICE
INNOVATION SEGMENTS
Innovators 2.5 %
The innovators are the most willing to adopt innovations. They are openminded,
adventurous, and tend to be younger, better educated, and
more financially secure. They try new things just because they like
having something new and unusual.
Early adopters 13.5 %
Early adopters are more socially aware than innovators and consider the
prestige or social implications of being seen using a new product. They
are media savvy, and more mainstream groups look to early adopters for
cues as to what is the “next big thing”.
Early majority 34 %
Members of the early majority do not want to be the first or the last to try
a new product. Instead, they wait to see what excites the early majority
adopts a product, it is no longer a cutting-edge item, but has become
part of the mainstream.
Late majority 34 %
Older and more conservative than other groups, the late majority will not
adopt a product they consider to be too risky. They will purchase
something only if they consider it to be a necessity or when they are
under some form of social pressure.
Laggards 16 %
Laggards are heavily bound by tradition and are the last to adopt an
innovation. By the time laggards take up a product, it may already have
been rendered obsolete by another innovation.
Source: Levens (2012, p. 172-73)
PRODUCT – FINANCIAL SERVICE
5.2 NEW FINANCIAL PRODUCTS DEVELOPMENT
• The emergence of themes, topics filtration, development and
testing of the concept, assessment of potential markets, new
product development and testing and commercialization.
• New products can:
• attract clients from external (to the institution) markets,
• increase sales in existing markets, mainly the development
of the sale of various types of products (cross-selling) to the
same customers,
• reduce the cost of providing the same or similar services.
• Market cannibalization!
• Marketing mortality!
• Ansoff matrix
PRODUCT – FINANCIAL SERVICE
ANSOFF MATRIX IN FINANCIAL MARKET
PRODUCTS
Existing
MARKETS
Existing New
Market penetration through
increased providing of services, intensifying
the degree of use
offering advisory services, extension of
branches and ATMs, business cards offer to
other business entities.
Market development by attracting new
customers, eg. sale of mortgage loans or
other life
insurances, loans
to finance vacation, providing payment
cards, pet insurance, establishing
children's accounts, etc.
New
Product development via product
innovation, specialization,
new products – new savings programs, new
types of loans for different segments,
student accounts with innovative
characteristics.
Diversification - accepting higher risks,
the development of new market segments
(insurance of paragliding), providing of
completely new services (building
societies can provide screening and real
estate services).
PRODUCT – FINANCIAL SERVICE
NEW PRODUCT DEVELOPMENT – PROCESS STRUCTURE
• Fuzzy front-end is the set of activities employed before the formal and
well defined requirements specification is completed.
• Product design is the development of both the high-level and detailedlevel
design of the product: which turns the what of the requirements into
a specific how this particular product will meet those requirements. On
the marketing and planning side, this phase ends at precommercialization
analysis stage.
• Product implementation is the phase of detailed engineering design of
mechanical or electrical hardware, or the software engineering of
software or embedded software, or design of soft goods or other product
forms, as well as of any test process that may be used to validate that the
prototype objects actually meet the design specification and the
requirements specification that was previously agreed to.
• Fuzzy back-end or commercialization phase represent the action steps
where the production and market launch occur.
PRODUCT – FINANCIAL SERVICE
NEW PRODUCT STRATEGY
• Focus on digital financial services.
• Develop a vision and strategy focusing on the priority of the
customer relationship.
• Be prepared for cooperation with business partners.
• Gaining an advantage as the first innovator in the market.
PRODUCT – FINANCIAL SERVICE