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Case Study - E*TRADE Financial Corporation – Financial Services Management

Introduction: Marketing services is very important issue these days because of many reasons including its huge rule in developed economies, it is a very profit generating process if it is done correctly and it is different than marketing of products. (Zeithaml et al. 2006) In this case study I will discuss the issue of service marketing based on a leading financial service company. The company is a US financial services provider company called E*TRADE Financial Corporation. In this discussion I will analyze, evaluate and solve some issues related to the marketing of the company’s services. First of all a market research was done to find out what are the main drawbacks and concerns around the services the company is providing. Then these issues are analyzed and investigated more to get some recommendations. After that a practical action plan was designed to deal with these issues. Company Overview: Company Name: E*TRADE Financial Corporation. Headquarter: 135 East 57th Street, New York, NY 10022, United States. Phone: 646-521-4300 Fax: 212-826-2803 Web Site: http://www.etrade.com E*TRADE Financial Corporation was founded in 1982 and is based in New York. The company offers wide range of financial services to individuals and institutional customers. The company provides brokerage services for many US stock exchange markets, option markets, future markets, mutual funds markets, currency trading and bonds trading. It also provides researches and reports related to these markets; and advisory and asset management services to retail clients. The company is working also as a bank by providing services such as checking accounts, saving accounts, mortgage, credit card products, certificate of deposit, and different types of loans. The company provides its services through a network of customer service representatives, relationship managers, investment advisors and its web site at www.etrade.com. The company is a member of S&P500 (Standard and Poor’s) Index, and is traded in New York Stock Exchange in the financial sector under investment brokerage industry. (Finance.yahoo.com 2009) Analysis, Findings and Recommendations, and Action Plan: E*TRADE Financial Corporation, is a very successful company in providing many financial services especially those related to exchange markets in the USA. I was assigned to the position of marketing manager of the equity related services. In my first meeting with the managing director, he was concerned about two main issues that are customer satisfaction and meeting customer expectation. As a marketing manager, he encouraged me of developing and managing tools and methods to improve these marketing related issues.

Analysis and Market Research: First thing to do is to seek for the truth, to make sure that weather the issues we are dealing with are true or not, and this is done by designing a market research to find the issues behind our concerns. My plan was to use some tools to test customers’ satisfaction. The company holds a very precious data that could help me and my team search for some good findings. The company holds a deep profile about each customer, his/her trading pattern and strategies, complains that were received from customers about our services, and the issues related to the banking service provided to customers. We have purchased an advanced data mining system that was used to analyze customer spending pattern on our services and the satisfaction level through these service purchases patterns. In the same time, my team has designed a survey that was send to a randomly selected 10,000 customers using equity related services of the company world wide. This survey asks the customers about their purchasing pattern, desired and adequate level of service (their expectation of our service), services that will satisfy their need, and their opinion about some of our old improved services (example: 2 seconds execution time guarantee for US stock market purchases) and new designed services (example: ETFs – exchange traded funds, and free independent market research from six leading sources). (E*TRADE Financial Corporation 2009) Note: sending this survey to all our customers will be very powerful and accurate research, but because we have 4.3 million accounts world wide, it is very time consuming to analyze this huge amount of data; hence we decided to send the survey to 10,000 randomly selected active customers. The team also sent emails to our active customers inviting them to try our new services, such as ETFs- exchange traded funds, free independent market research from six leading sources, our easy online retirement plan, and our free quick online money transfer service. (E*TRADE Financial Corporation 2009) The results drown from the above research was analyzed and correlated to the company’s operational performance and the following important points where derived from this effort: - Some customers have a very high standard of expectation that neither our company nor our market competitors could provide with the recent available technology used. - Many of our customers especially the older ones, have difficulties in using some of our advanced services; such as and not only triggered stop loss order and options trading. - Some customers are concerned about our brokerage services price, and they are considering the movement to another brokerage firms that provide same services with lower prices. Findings and Recommendations: First Issue: Some customers have a very high standard of expectation that neither our company nor our market competitors could provide with the resent available technology used. What is customer’s expectation?

“Customer expectations are beliefs about service delivery that serve as standard or reference points against which performance is judged.” (Zeithaml et al. 2006, p. 81) Customer’s expectation is measured by The Zone of Tolerance that was derived from customer satisfaction and service quality. The zone of tolerance is the difference between desired service (what is wished for) and the adequate service (the lower tolerated level of service). (Parasuraman et al. 1991; cited by Gwynne et al. 2000) Some customers think that by the available advanced technology existed, we as a company having a magic rod to wish for what ever we want. In our business many customers ask for unrealistic services, this key problem is associated with their expectations of the service. Two examples of services that our customers are asking for but it is very hard to accomplish are; 1- Asking for 24 hrs trading for stocks and options market. 2- Asking for the availability of insider materials in our market research reports. My recommendation for this issue is that we should deliver the right massage for the customers about our promised service. Don’t overestimate it so that the customer increases his/her adequate level of service; and in the other direction don’t underestimate our services so that the customer leave our firm and go to our competitors. This is done by educating the customer and giving him/her the right and unified massage from all our company stuff about our services that can we really provide with high quality. For the two problems mentioned above, we can send explanatory materials as part of our daily market research e-mail, talking about issues like this. 24 hrs trading is truly available and we can do it for our customers but because it needs too much effort and money, our company is offering it for institutional and big clients only. For the insider information that is classified as material and non-public, trading using such information is not allowed and is punished by the law in the US. (wikipedia.org – Insider trading 2008) Second Issue: Many of our customers especially the older ones, have difficulties in using some of our advanced services; such as and not only triggered stop loss order and options trading. Technology is very powerful tool in developing new products and services. Because of our believe that it should be used to deliver the best services, we have implemented technology in many of our services. But some times because of the advanced technology and techniques we are offering, many customers have had hard time adapting and learning how to use these services. My recommendation is that our company should work in two areas related to this issue. First the service design should be convenient and easy to use by the customers, and this is done by simplifying the service as possible as it takes. Customers’ recommendations and feedbacks are very important in service design process. Secondly, customers should have full education and support about all our services. Part of this is done already by online education material available on the web site and our 24 hrs world wide call centers. But this should be improved by putting more tools and authority under the control of call center employees (i.e. empowering our employees) (Zeithaml et al. 2006), and by providing call center services in other languages since we have many customers from Latin America, China, Japan, Russia, India and the Middle East.

Third Issue: Some customers are concerned about our brokerage services price, and they are considering the movement to another brokerage firms that provide same services with lower prices. Many customers are very sensitive for services’ prices regardless of the quality behind that price. Some customers gave us a massage about this issue, they are seriously thinking about leaving our company to other brokerage firms that may offer lower prices. My recommendation: To retain our customers we have to develop a strong customer relationship. This is done by 3 strategies: 1- Core service provision by delivering excellent service, 2- Putting some switching barriers, 3- Building relationship bonds with the customer. (Zeithaml et al. 2006) - First strategy is very applicable in our case. Our company is providing a bundle of complete and integrated financial services that our competitors could not provide their customers with. So we are competing on service quality and high value of our service. Many services are unique to our firm and our competitors having hard time provide or copy these services. E*TRADE provides total solutions for customers’ financial needs. For example: E*TRADE is not only a broker for many exchange markets it is also a bank that gives interests on deposited money and loans for financing different activities such as buying a car or a house. One of our advanced free services is the guaranteed 2 second execution on US stocks and options. Our brokerage services is ranging from 3-19.99 $ for a transaction, other brokers may provide lower prices but offering all in one account is E*TRADE’s competitive advantage. A customer who wants to trade in stocks and currencies should open two accounts for each service by other brokers, E*TRADE account can provide both and more other things such as and not only future contracts trading and option trading. This massage about our core advantage should be delivered to our customers throw an integrated service marketing campaign. - Second strategy could not be that applicable in our business, since most of our business is done throw the internet and phone, and switching cost is very low especially in the US and Europe because of the availability of other alternatives. - The third strategy is about relationship building. We as a firm can build financial bonds with customers by providing financial incentives. Example: low transaction costs for active traders. We also can work on structural bonds by designing the right service into the service delivery system; this is applicable by providing customized services for some customers who are asking for these types of services. Building Social bonds is not that easy because of the large amount of customers we have and the physical barriers to our mostly used services encounters (i.e. the internet and the phone). Customization bonds could be improved by organizing events and build customer loyalty. (Zeithaml et al. 2006) Action Plan: - Redesign our complicated services to be convenient to as much customers as we can. - Design a big promotional advertising campaign, that should be lunched through business related TV channels and financial web sites. - Training our employees to the new services and on customer relationship marketing.

- Give the authority, the tools and empower our employee for optimum customer service satisfaction. - Educate the customers on our services in an easy and convenient way. - E*TRADE should participate in exceptions, seminars and events about financial services. This will have good impact on the company’s image and brand loyalty. - A well organized and highly skilled team should be formed to direct this action plan step by step, evaluating its effectiveness and updating it to meet new changes in the industry. Conclusion: The paper describes the role of marketing manager in a service oriented corporation. The role of the marketing manger is not related only to the advertising and service promotion, it is rather beyond this point. The first thing to do is to asses the market and customer requirements and satisfaction level by doing an informative market research. After that key points should be analyzed and recommendation should be made. The practical part is to design an action plan to implement. Then the whole improvement work should be evaluated and updated regularly to meet ever changing standards in service marketing. E*TRADE Financial Corporation is a leading company in financial services. Our recommendations were made upon a market research to reserve the excellent image of the company and satisfy the customers as far as our resources allow. The wished for result is a win-win situation, where the customer and the organization are satisfied. References: -E*TRADE Financial Corporation [online] (cited 8 November 2009) Available from <URL:www.etrade.com> -Finance.yahoo.com – ETFC [online] (cited 8 November 2009) Available from <URL:http://finance.yahoo.com/q/pr?s=ETFC> -Gwynne, Devlin, J and Ennew, C (2000) ” The Zone of Tolerance: Insights and Influences”, Journal of Marketing Management, 16, 545-564. -Wikipedia.org – Insider trading [online] (cited 25 April 2008) Available from <URL: http://en.wikipedia.org/wiki/Insider_trading> -Zeithaml, V Bitner, M and Gremler, D (2006) Service Marketing: Integrating Customer Focus Across the Firm, 4th Edition, McGraw Hill, Singapore, Chapter 1, 7 and p. 81.

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