Review Questions 121.docx

Review Questions 121.docx

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ReviewQuestions121

FIN2108ReviewQuestions12.1

Reviewquestions12.1

1.Pleaseattemptquestions1,2,3,5,6onp.477ofSathyeetal.

2.Bankmarketingcouldbedescribedastheactivitywhichdirectstheflowofbankingservicesprofitablytoselectedcustomers.Sathyeidentifies6stepsinvolvedinachievingthisgoal.Listthese.

3.Writenotesondatamininginthecontextofthebankingsector

4.WriteshortnotesonSWOTanalysisinthecontextofthebanksector.

5.Writenotesoncustomerrelationshipmanagement（CRM）systemsandtheirapplicationtothebankingsector.

6.Writenotesoncustomerprofitabilityanalysis.

7.OutlinesthepricingstrategiesdiscussedbySathyeonpages463-4.

8.Pleaseattemptquestions6and12onpp.202-3ofKochandMacDonald.

Chapter15

Marketingofloans

Solutionstodiscussionquestions

Q1.Whatistheimportanceofthemarketingofloansintheoverallloansportfoliostrategyofafinancialinstitution?

A.Loanportfoliostrategyisdecidedonthebasisofseveralconsiderationslikefinancialandhumanresources,risk-returntradeoff,overallcompetitivestrategyetc.Oncetheloanportfoliocompositionisdecided,itisnecessarytoachievethegoalssettherein.Amarketingplanhelpsafinancialinstitutiontorealisethesegoals.Thegoalofanyfinancialservicesmarketingplanistoidentifythecustomer’sfinancialneedsandwants,developappropriatebankingproductsandservicestomeetcustomer’sneeds,determinethepricesatwhichtheproductsandserviceswillbesold,advertiseandpromotetheproductsandservices,arrangeforappropriatedistributionchannelsandlastlyforecastandresearchfuturefinancialneeds.Themarketingpolicyandplanthushelpsafinancialinstitutioninrealisingitsgoals.

Q2.Whatisamarketingplan?

Whydofinancialinstitutionsneedtoprepareone?

A.Allorganisationswhetherfinancialornon-financial,operateinacompetitiveenvironmentandneedtoprepareamarketingplan.Themarketingplanisadocumentthatgivesinformationaboutaspectslikethetargetmarket,competitors,howdoestheorganisationintendtoadvertiseandpromoteitselfatthemarketplace,howproductsandservicesshouldbepriced,whatarethechannelsofdistributionofproductsorservices,whatarethestrengths,weaknesses,opportunitiesandthreatsthatanorganisationneedstotakeintoconsideration.

Afinancialinstitutionlikeanyorganisationoperatesinacompetitiveenvironmentandneedstoconsidertheseaspectsifithastosucceed.Henceitisimportantforittoprepareamarketingplan.

Q3.Whatiscompetitoranalysis?

Howisitcarriedout?

A.Competitoranalysisisalsoknownasmarketanalysis.Itinvolvesdefiningthemarket,identifyingcompetitors,identifyingproducts/servicesinwhichtocompete,identifyingstrengthsandweaknessesofcompetitor’sproductsandservicesetc.Marketsinfinancialservicesindustryareeitherretailorwholesale.Inretailmarketsclientsareindividualswhileinwholesalemarketclientsarecorporatebodies.Suchananalysisbasicallyinvolvestwosteps:

screeningofwholesaleandretailmarketandSWOTanalysis.Screeningofthewholesalemarketinvolvesdeterminingthemarketsize,determininggeographicalclusters,etc.Screeningtheretailmarketinvolvesidentifyingvariousmarketsegments,understandingcustomers,definingtheirneeds,analysingopportunities,analysingindustry/marketcharacteristicsandsuchotherissues.SWOTanalysisisaboutdeterminingthestrengths,weaknesses,opportunitiesandthreatsofcompetitorsvis-à-visourown.

Q5.Whatfactorsneedtobetakenintoaccountinthedevelopmentandpromotionofnewfinancialproducts?

A.AsstatedbyEnnew（1991）,thevariousfactors（framedasquestions）thatneedtobetakenintoaccountwhiledevelopingandpromotingnewfinancialproductsarethefollowing:

∙Cantheservicebemarketedthroughtheexistingdeliverysystem?

∙Istheservicehardtoimitate?

∙Willtheserviceassistinbuildinggoodcustomerrelationships?

∙Istheservicecompatiblewithcorporateimage?

∙Isservicequalityeasilymaintained?

∙Istheservicecompatiblewithexistingskills?

∙Istheservicecompatiblewithresourceavailabilities?

∙Istheretheopportunitytobuildastrongbaseintherelevantmarketsegment?

∙Istheservicesimpletounderstand?

∙Aretheincome-generatingopportunitiesgood?

Note:

thesequestionsaretakenfromFigure15.4onp.459ofyourtext.Theyarecalleda‘first-phasescreen’fordevelopmentofanewproduct.

Q6.Whatarethethreekeydeterminantsofthepricingstrategyofabank?

A.Anypricingstrategyneedstotakeintoconsiderationthefollowingobjectives:

∙Willithelpachievemaximisationofprofits?

Apricingstrategyshouldhelpmaximiseprofits.Pricesneedtobefixedkeepinginviewwhatthemarketcanbearandwhatthecompetitorsarecharging.

∙Willithelpincreasemarketshare?

Pricingstrategyshouldhelpinbuildingmarketsharesoastoestablishthepositionofthefinancialinstitutionasamarketleader.

∙Willitprovideleadershipinproductquality?

Theintentionistodemonstratethatthecustomerispayingforhigherquality.

∙Willitmaintainexistingcapacity?

Financialinstitutionswithalreadyestablishedmarketsmayliketochargelowerpricestoincreaseturnover.

AdditionalQuestions:

2-8

2.Bankmarketingcouldbedescribedastheactivitywhichdirectstheflowofbankingservicesprofitablytoselectedcustomers.Sathyeidentifies6stepsinvolvedinachievingthisgoal.Listthese.

1.Identifycustomers’financialneedsandwants

2.Developappropriatebankingproductsandservicestomeetcustomer’sneeds

3.Determinepricesforproducts/servicesbeingdeveloped

4.Advertiseandpromotetheproducts/services

5.Setupsuitabledistributionchannels

6.Forecastandresearchfutureneedsandwants

3.Writenotesondatamininginthecontextofthebankingsector.

Dataminingistheprocessofdiscoveringstrategicinformationinlargedatabasesthroughtheuseofspecificalgorithms.Itisadiscovery-basedformofanalysis.Ratherthanaquery,theuserappliesavarietyofalgorithmstoseekoutunderlying（hidden）patternsandrelationshipsinthedata.

Datamininginvolvesfourclassesoftasks:

1.Clustering-discoveringgroupsandstructuresinthedatathatareinsomeway"similar",withoutusingknownstructuresinthedata.Forexample,isolatinggroupswithinacustomerdataset.

2.Classification–thisinvolvesgeneralizingaknownstructuretoapplytonewdata.Forexample,anemailprogramthatdecideswhetheranewemailbelongstothegroup‘spam’,orwhetheranewborrowerbelongstothegroup‘good’.

3.Regression–thisinvolvesfindingamathematicalfunctionthatmodelsthedatawiththeleasterror.Abankmightanalysethekeyvariablesaffectingcustomerdemandforaproduct.

4.Associationrulelearning（ormarket-basedanalysis）–thisinvolvesfindingrelationshipsbetweenvariables.Forexample,abankmightanalyseseparatecustomerclusterstofindoutwhichproductsarefrequentlyboughttogetherbymembersoftheclusterandusethisinformationformarketingpurposes.

Anotherexampleofmarket-basedanalysisisthestudyofAlphaConsumers.Theseconsumersplaykeyrolesinconnectingwiththeconceptbehindanewproduct,thenadoptingthatproduct,andfinallyvalidatingitfortherestofsociety.

4.WriteshortnotesonSWOTanalysisinthecontextofthebanksector.

∙SWOTanalysisistheanalysisofstrengths,weaknesses,opportunitiesandthreats.

∙SWOTanalysisisextremelyusefulinidentifyingandassessingthestrategicsituationfacedbythebank.Bankexecutivesmaybeaskedtoprioritizewhattheyconsidertobethebank’skeystrengthsandweaknesses.Analysisofopportunitiescanhelpidentifywaysinwhichtorealizetheseopportunities.Similarly,strategiescanbeidentifiedtocombatthekeythreats.

∙SWOTanalysisdoesnotsimplyrequirecategorizationofinformation;italsorequiressomeevaluationoftherelativeimportanceofvariousfactorsunderconsideration.

SomeexampleSWOTquestions,adaptedfromtheWestpacBankingsite（.au/SWOT-Analysis.html）are:

Strengths

∙Whatadvantagesdoyouhave?

∙Whatdoyoudowell?

∙Whatrelevantresourcesdoyouhaveaccessto?

∙Whatdopeopleseeasyourstrengths?

∙Thinkaboutyourstrengthsinrelationtoyourcompetitors.Ifallyourcompetitorsprovidehigh-qualitybankingproducts/services,ahigh-qualityprocess/offeringisnotastrengthinthemarket,itisanecessity.

Weaknesses

∙Whatcouldyouimprove?

∙Whatdoyoudobadly?

∙Whatshouldyouavoid?

∙Consideryourweaknessesfromaninternalandexternalbasis.Doothersperceiveweaknessesthatyoudonotsee?

Areyourcompetitorsdoinganybetterthanyou?

Berealisticandfaceanyunpleasanttruthsassoonaspossible.

Opportunities

∙Wherearetheregoodopportunitiesfacingyou?

∙Arethereanyinterestingtrendsyou’venoticed–changesintechnologyandmarketsonbothabroadandnarrowscale;changesingovernmentpolicythataffectbankingactivities;changesinsocialpatterns,populationprofilesorlifestylechangesthataffectdemandforbankingproducts?

∙Lookatyourstrengthsandaskyourselfwhethertheseopenupanyopportunities.Lookatyourweaknessesandaskyourselfwhetheryoucouldopenupopportunitiesbyeliminatingthem.

Threats

∙Whatobstaclesdoyouface?

∙Whatisyourcompetitiondoing?

∙Ischangingtechnologythreateningyourposition?

∙Aretherequiredspecificationsforyourjob,productsorserviceschanging?

∙Doyouhavebaddebtorcashflowproblems?

∙Couldanyofyourweaknes