How do financial services companies create value for customers – that is, what underlying needs are they satisfying? Think about: The need for security…iefinancial protection against death, loss, illness, theft which is provided by life or general insurance companies. The need to fulfil desires…ieto meet future financial requirements either on retirement, loans for home, car, etc., The need to meet responsibilities…finances for child higher education/marriages by investing in savings plans, mutual fund or unit linked products or finances or health insurance policies for family member or savings for any unknown purpose
Other…For immediate spending companies provide credit cards/ debit cards for convenience so that there is no need to carry large amounts of money physically
Why does anyone place their funds in the hands of financial services companies?
In order to manage their funds investors place their funds in hands of financial service companies.
This helps them to earn higher return as companies invests pooled funds in large amounts.
Also these companies have specialist fund managers who can strategically earn higher returns and help the customer to mitigate the risk of investmemnt.
What sources of advantages can financial services companies use to create value for customers? Financial service companies would like to go for gaining sustainable competitive advantage over others via different methods e.g. Superior assets such as making use of scarce resources and patterns, good location, superior distribution and sales of a recognized brand.
Strategic relationships such as…building better customer relationships via better communication support. Distinctive capabilities such as… Steps that help to innovate and manage information via converting information into opportunities and sustain privileged assets by offering specialized services like after-sale support etc.
How do financial services companies capture value from the customer for providing services? i.e. in which ways can they generate profits? They earn money on a regular basis by…way of fund management charges or as a part of margin from return earned on funds or by charging regular premiums for the protection they provide.
They earn money for specific transactions when…funds are moved or switched from one portfolio to another, or by ways of termination charges, or charges on early termination.
What factors have been changing the levels of profits companies can gain from specific types of products or segments of the market? Profit margins are being squeezed by…changes in economic scenarios, bad experience than expected, market downfall, wrong investment choices, more supply than demand, recession, etc.
Overall sales volumes are being affected by…miss selling of products, new competitor entrants in market, lack of approach and selling skills, not understanding customers needs, bad customer service, market crashes, bad past performances, introducing complicated products that are difficult to understand or explain, delay in launching the proposed product at the right time.
What external factors are now having an impact on customer needs and how do companies serve these needs? What will change in the future?
Various external factors related to different stages of life, seasonal, social, technological, economic and political factors and general awareness of these could impact customer needs. These needs can be met by focusing on customer needs and making products that could help in fulfilling potential needs of the customer. Also having variety of product for different customers may also help in serving the needs of different customers.
In future, the above mentioned factors could make an impact in changing the needs of the customer.
How do financial needs change in relation to an individual’s life stages in adult life? Young adults: They need finances for self education, for amusements with friends but they may not require for and others responsibilities..
‘Building family’ stage:
Individuals at this stage may require finances for buying new homes, new car, for setting up a house, for vacations and also will require to start saving
for future needs. They will require product to provide security due to death illness, etc. Middle age:
At this stagefinances would be required for repaying mortgages, savings for retirement, child higher education or marriages, health insurances, etc. Retirement :
At this stage finances to meet health needs, finances for day-to-day spendingare also required.
Are these life stages as predictably linked to typical age ranges as they once were?
There are demographic changes as follows:
Birth rates are falling this will reduce the size of younger working population. Previous baby booms have led to increase in size of retired population. Changes in retirement patterns due to people taking early retirements. Increase in longevity will have longer life for retired population. Also due to longer educations people start working at later ages.
Thus people who should be at Family building stages are still studying and many people who should be working are falling under retirement stage, there by having lesser people working for shorter durations.