What we now call “marketing” began long before the name was coined. In the mid-1800s, traveling salesmen camouflaged worthless tonics in fancy bottles in order to peddle their “snake oil” to a gullible public. Early successes led to the belief that the right marketing approach could help produce favorable results in virtually any business situation. The result was a proliferation of new promotional applications-some ethical, many not. Over the years, companies of all types have spent billions of dollars to figure out what works and what does not and marketing has evolved from its rather crude beginnings to encompass a plethora of sophisticated strategic and tactical techniques.

Over the years, the consumer products industry has led the marketing charge and created marketing best practices that helped spawn consumer giants. Meanwhile, most financial services firms are being dragged, kicking and screaming, into the era of sophisticated marketing.

Putting The Customer First

Peter Drucker was an academic and marketing luminary whose writings have greatly influenced the thinking of marketing practitioners. Over fifty years ago, Drucker developed the concept of a customer-centric marketing approach and coined the term “customer defined value.” This concept has since become an integral part of marketing literature and the guiding principle of modern marketing. The following statements, paraphrased from Drucker’s extensive writings, reflect his fundamental mandate that “the customer’s interests must come first:”

• The only valid definition of business purpose is to create a customer.
• What the business thinks it is producing is not as important as what customers think they are buying; what customers consider to be of value is decisive.
• Every business has only two basic functions: marketing and innovation.
• Marketing is your whole business as seen from the customer’s point of view.

While the concept is straight-forward and easily articulated, most financial services organizations have found it difficult to implement meaningful customer-centric practices. Some of the most common obstacles have included a product-push mentality, a focus on short-term profitability, under-investment in marketing activities, and the lack of solid market intelligence about the needs and wants of target markets.

However, in the future the most successful financial services organizations will be those that make Drucker’s principles their own through client-centric and creative applications.

The Advancing State of Financial Services Marketing

The financial services industry has lived on the edge of turmoil for the last couple of decades. As a result, the industry has undergone significant structural changes. Further, in response to increased competitive pressures, many financial services organizations have also become aware of the need to reconsider their traditionally conservative, undisciplined and very expensive marketing practices. They realize that future success depends on developing and refining market-driven processes.

Our observations suggest that the more progressive financial services organizations are currently experiencing an intellectual and practical transition that has caused them to elevate the role of marketing within their firms.

Traditionally, marketers concentrated their efforts on implementation initiatives while management dealt with the broader strategic issues that affected the firm’s future. The advent of customer-driven marketing and the attendant need to understand market-driven influences caused management to recognize the importance of accurate, timely and in-depth marketing intelligence-concerning customers, markets, distribution channels, products and services-to the strategic process. To address these new needs, Marketing Directors began to play an increasingly important role in the strategic planning and decision-making process.

As a result, the very nature of the marketing function in many firms is changing dramatically. This new breed of marketing professional now works closely with senior management on important strategic projects that will impact the entire organization and shape its future success. These projects include the development and refining of:

• the firm’s mission statement and key messages
• business objectives and value propositions
• statements of the company’s relevant differentiation and competitive advantages.

At the same time, however, the status quo still prevails in many financial services organizations that have not yet recognized the benefit of adding sophisticated marketing to their business mix. Some organizations continue to squander valuable marketing resources on advertising campaigns focused on increasing visibility or gaining “share of voice.” In addition, the persistent problem of differentiating marketing from sales still remains largely unresolved in many of these organizations.

The Bottom Line

The financial services industry is currently going through a dramatic marketing transformation. As effective financial services marketing evolves to a cross-functional, multi-disciplinary activity, successful firms will create a culture of customer orientation throughout the organization and incorporate advocacy for customer welfare in all corporate decision-making. Unfortunately, this puts the goalpost a significant distance away for far too many financial services firms.

The challenge for management is to provide the leadership required to displace the status quo and create a culture of opportunity. To compete effectively, financial services firms must become attuned to the market and adopt (and maintain) a market-driven focus on an organization-wide basis. Those firms that successfully develop a customer-oriented culture will be rewarded with enhanced opportunities for innovation, improved performance and incremental profitability.