Customisation: Need of the Hour

With customisation scoring a direct hit in the Asian personal financial services market, things will never be the same again

Asia until recently had been the dominion of local players in the personal financial services (PFS) market. The shift towards a global economyhas prompted the Asian finance markets to respond to the call for international quality products and services. Customers too now seek a wide variety of products and services that are best in class.

Banks will now have to develop new strategies to market their tailor-made products. Local players are slowly realising the need to pursue strategies, which cater to the requirements of individuals, customer segments, products and channels with a specific rather than generic emphasis.

Trends that signal opportunities

The PFS market in Asia has been growing despite the financial crisis and the general economic slowdown. The rate of financial products usage has increased from 2.7 holdings per average income user in 1998 to 3.1 in 2001. Investors are now more aware of the various types of risks and methods to diversify them. The need for high investment returns has prompted consumers to switch over to more profitable products like life insurance, equities and credit cards.

Customers have started realising that savings account cannot provide adequate returns to secure their future. In China, savings accounts representing personal (household) assets dipped by 8%. An increasing number of individuals are inclined towards other financial activities thereby providing an opportunity for banks to develop new products and services.

Customer segmentation

Asian customers are showing a growing dissatisfaction with the available services and are constantly searching for new and better products. This lack of loyalty has become disturbingly common among the customers.

To drive business expansion and volumes, local banks will require stronger marketing skills. ‘Segementation’ has been identified as a fundamental tool to strategise in this market. The first step in a customer driven system is to segment customers on the basis of potential users, and find profitable groups. North American and European financial institutions use segmentation, before investing in sophisticated systems.

McKinsey has divided the average income consumers into four categories, based on the attitude of the customers.

Risk averse: Old people and less educated ones fall under this category. They avoid high-risk products. It is advisable to direct such customers to local banks that offer low risk products.

Adaptable: Educated people, who like to use low-risk products but are not averse to high-risk products, fall under this category. These customers use varied products. International banks as well as local banks that have been around for long would serve the needs of these customers.

Knowledgeable: Well-educated customers with a high income regularly access reasonable risk products. They do not seek advice, but instead analyse information about products before they make a choice. Even though they are happy with the present product, they are always in search of new offerings. For example, Fidelity, a mutual fund company targets such customers through both retail outlets , as well as, remote channels .

Inconsistent: These customers constantly keep changing products based on the need for high interest, low risk products based on fund availability. Familiar brands tend to gain the loyalty of fickle customers.

Strong marketing skills are required by the local banks to drive business expansion and volumes. Also if the customer base of the bank were spread across the segment, then it would be very difficult for the banks to find a suitable strategy. We will talk about strategic options available to banks in our next article.

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