FACTORS CONSIDERED WHILE SELECTING A BROKERAGE HOUSE

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FACTORS CONSIDERED WHILE SELECTING A BROKERAGE HOUSE

Executive Summary This research study focuses on understanding the factors that affect the selecti on of brokerage firms and propose ways for brokers to target their potential cus tomers. The management and research problem are clearly identified and the research obje ctives are subsequently clearly laid out. Here the task is to identify specific points that would help provide pointers to steps that could directly and favorab ly or otherwise impact the use of the broker services. Since this is not a live case study our analysis and conclusions are not specifi c to any individual company. These are a representation of the factors affecting the preference in reference to the stated research problem. Since research design is always an integral part of any study, the reasons for t he use of a particular research design in comparison to others are explained. Th e study uses a survey questionnaire gather both demographic and psychographic cl assification data. Also, the sampling plan involved is effectively outlined. The concluding part of the study mentions the specific recommendations made to b rokerage firms at larger in light of the analysis results and the vast amount of respondent data collected for the duration of the study. Table of Contents 1 INTRODUCTION: 5 1.1 RATIONALE: 5 1.2 JUSTIFICATION 5 2 RESEARCH PROBLEM & RESEARCH OBJECTIVES 6 2.1 RESEARCH PROBLEM 6 2.2 RESEARCH QUESTIONS AND RESEARCH OBJECTIVES 6 2.3 DUMMY VARIABLES: 7 3. RESEARCH METHODOLOGY: 7 3.1 GENERAL FRAMEWORK: 7 4. DESIGN OF QUESTIONNAIRE: 7 5. DATA COLLECTION: 8 6. DATA ANALYSIS AND INTERPRETATION OF RESULTS: 8 6.1 DATA ANALYSIS 8 7. CONCLUSIONS AND RECOMMENDATIONS 14 8. REFERENCES 14 9. APPENDIX: 15 9.1 QUESTIONNAIRE: 15 List of Illustrations: Figure Figure Figure Figure Figure Figure Figure Figure 1: 2: 3: 4: 5: 6: 7: 8: Brokerage vs. Online Service 8 Brokerage vs. Tips 9 Reputation 9 Brokerage vs. Analysis & Reports Brokerage vs. Response Time 11 Security vs. Faster Service 11 Reputation vs. Tips 12 Reputation vs. Acquaintance 12

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Figure 9: Referrals

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1 Introduction: 1.1 Rationale: The topic of our Marketing Research Project was Factors affecting the selection of brokerage firms. We realized that in this economic environment people would b e more conscious and try to get maximum information about the brokerage firm bef ore going for it. A brokerage firm is the name for an intermediary (an individual or firm) liaisin g between buyers and sellers of financial products (shares, insurance, mortgages , and so on) for a commission or brokerage fee. Even though many individuals are active traders but the number of people who are aware and are using the online trading facilities provided by the brokerage fir ms is the aspect which we wanted to look into and also the factors that play a s ignificant role in the decision of the person for the selection of the brokerage firm. We are looking at the attitude of people towards online brokerage firms and not at any particular firm. The analysis of this project would give us an idea about whether people in India are comfortable using the online facilities of brokers or still prefer the traditional methods of trading. The question in itself incorporated multiple research questions within it; to fi nd: • Whether firstly they are doing any trading and if they use online services provi ded by brokers? • How willing were they to pay extra money for online trading services? • What role does the reputation of the brokerage firm play in the choice of custom er? • Consumer preference between security of transactions and faster service? • Preference between a Full service broker and and discount broker? • What is the impact of referral by friends or relatives? • Would the customers compromise on the reputation of firm due to personal acquain tance? • Is there any impact of demographic factors like age, gender, marital status, inc ome and profession? 1.2 Justification We chose this project for it had well defined goals• To assess the awareness levels amongst the consumers about the online brokerage service. • To see the opportunities and suggest to brokerage firms to market their services based on our analysis of preferences. Since this is not a live project our objective was more to analyze the various f actors which could affect the consumer behavior. Our aim was also to understand the marketing research concepts and apply them in our future live studies. 2 Research Problem & Research Objectives 2.1 Research Problem

We wanted to gauge the preferences of customers while choosing a brokerage firm. For this we identified the major factors as reputation, brokerage charge, secur ity, quality of the tips, availability of research reports and online services. 2.2 Research Questions and Research Objectives Who are the customers of brokerage services? Research Objective: To identify the kind of customers who are likely to buy brok erage services, whether they seriously consider these services as a value additi on and approximately how much they are willing to spend. How willing are customers to use online trading services from a broker? Research Objective: To understand how customers perceive the internet as a conve nient and secure medium for trading vis-à-vis the traditional mechanism. How willing are customers to pay extra for using online trading services? Research Objective: To gauge customers’ inclination towards paying extra if servic es like security, reduced response time and convenience is provided to the custo mers. Till what extent can you compromise on reputation for personal acquaintance in c ase of brokerage firm? Research Objective: To assess whether the reputation of the broker is of primary importance to the customer. It could be that people are more aware and inclined to use the online services firm because of personal acquaintance with a brokera ge firm. How willing are you to pay extra money for regular detailed research reports and market analysis? Research Objective: To get an insight into whether customers consider services l ike research reports and market analysis as a value addition and would pay extra for the same. 2.3 Dummy Variables: The variables identified to be analyzed are: 1. Age – young, middle age, old (to ascertain awareness levels and perception differences amongst different generations) 2. Gender 3. Income Level 4. Profession/ Occupation 5. Marital Status 6. Price Consciousness 3. Research Methodology: 3.1 General Framework: The research method adopted was through surveys. With concise and straightforwar d questionnaire, we can analyze a sample group in an efficient way. This is beca use the research problem dealt with determining the awareness of online trading services and the factors underlying buying behavior, very little was known a-pri ori regarding preference patterns. We have used email surveys to reach to the de sired audience and since the objective was to get 100 samples this was the most

efficient way. The nature of the research topic was such that we had decided to focus on the age group of 20 to 35 years though care was taken to spread the que stionnaire to the maximum audience. 3.2 Sampling Plan: The sampling will be convenience sampling. Convenience sampling is used in exploratory research where the researcher is int erested in getting an inexpensive approximation of the truth. As the name implie s, the sample is selected because they are convenient. This non-probability meth od is often used during preliminary research efforts to get a gross estimate of the results, without incurring the cost or time required to select a random samp le. Non-Probability sampling was used as online trading is a service which not every body in the population would be aware of, willing, and able to afford. The target population was defined as people who were likely to know about or pur chase paid online trading services. The sampling methods adopted for the study c onsisted of convenience and judgment sampling. 4. Design of Questionnaire: The various stages of questionnaire design were meticulously followed. First, th e exact kind of information sought in terms of the skew between qualitative and quantitative data and the amount of depth in the data we wanted to capture was d ecided upon. Since our objective was to clearly understand the characteristics o f customer behavior in addition to getting a preliminary insight into certain in tangibles that also play a crucial role in a typical customer’s trading habits, th e questionnaire was designed keeping these particular objectives in mind. This specifically translated into questions that were largely multichotomous wit h a few open ended questions. Emphasis was given to the wording of questions to ensure unambiguous, easily understandable questions considering the sample that we had in mind. Thus, relevant demographic questions were also incorporated. In addition, a lot of emphasis was given to the sequencing of questions since it ha s direct bearing on the respondent behavior. The questionnaire is shown in Appendix. 5. Data Collection: Data Collection was carried out in alignment with our sampling plan. A google sp readsheet was sent to the respondents to submit their responses. As discussed in the research methodology our focus was to understand the preference of the youn ger age group people who are more comfortable with the online trading services. 6. Data Analysis and Interpretation of Results: 6.1 Data Analysis The total sample size in the survey conducted was 105 of which 5.7% of the respo ndents were less than 20 years of age, majority of the survey takers belonged to the age group of 20-25 years, the percentage of which stood at 80.95%. People f alling in the age group 25-30 years constituted 7.6% of the total sample, while 5.7% were over 30 years of age. While numbers in the age parameter showed bias towards a particular age group, t he other parameter ‘Salary’ showed a rather balanced distribution wherein there has been somewhat equal participation in the less than Rs 200000 and Rs 200000-50000 0 group.

The factors that were considered during the analysis and that have an impact on consumer’s mind while choosing a brokerage house have been listed as :1. Online Services 2. Reputation of the firm 3. Tips 4. Market Research and Analysis 5. Faster Service 6. Security 7. Acquaintance 8. Referrals from friends and family The analysis will be done according to the salary groups keeping in mind the var ious factors that are responsible in choosing a brokerage firm. The questions as ked have pitted brokerage amount against the services that a customer would desi re for. Hence the graphs plotted will tell the extent the customers would go for a particular service. Figure 1: Brokerage vs. Online Service In the above graph, the lower income group have shown more proclivity towards us ing online services as compared to the higher income groups. On a scale of 5, re spondents with salary less than 200000 have given a rating of 2.46 (mid way betw een a little and moderate) for preference towards online services. Figure 2: Brokerage vs. Tips People surveyed have not responded well to the tips received from the broker. Th e graph above stresses on the fact that people belonging to the higher income gr oup are more likely to pay extra money for getting tips from the broker as compa red to the lower income groups. Also it strengthens the fact that people with lo wer incomes are not very upbeat about paying extra money for the tips. Figure 3: Reputation The market reputation is one of the significant factors in assessing performance of the broker. It has been the single most influencing factor amongst all the f actors considered across all the age groups. Again people with higher salaries h ave favoured the reputation with whopping majority. In case of the lower salary groups (<5,00,000), people have given a rating of 3.85 on an average ( more towa rds ‘Mostly’) . Figure 4: Brokerage vs. Analysis & Reports Market analysis and reports has been given greater weight by the respondents wit h lower incomes as compared to the higher income groups. This can be attributed to the amateurishness of the people with lower incomes as they may not be aware about the technicalities of the markets. Figure 5: Brokerage vs. Response Time The response time has been a major priority for the customers as everybody is lo oking for quick responses from the broking firm. People falling in the 5,00,00010,00,000 INR bracket are more expected to disburse extra money in exchange of b etter response time as compared to other salary groups. Also surprisingly, peopl e with salaries above 10,00,000 are satisfied with the response time. Figure 6: Security vs. Faster Service While faster service has always been wanted by the customers, in recent turbulen t times the security of the money invested has also been of paramount importance

. Based on the graph, people have still voted for security as opposed to faster service, which can be accredited to the recent uncertain times. Irrespective of the income range people rated security higher than faster service. Figure 7: Reputation vs. Tips The people surveyed were asked to give their preferences between two factors i.e . reputation and tips, where most of the people seem to have given a clear major ity to reputation over tips received, as most of the people surveyed had salarie s below 5,00,000. Also, it reinforces the earlier analysis that people favoured reputation more than any other factor. Figure 8: Reputation vs. Acquaintance A personal acquaintance with a broker with lesser reputation seems to have prefe rence only with the population having medium high salary range (5,00,000-10,00,0 00). Others have shown a high preference for reputation of the brokerage house o ver any other factor considered in our study. Figure 9: Referrals Suggestions from family and friends may very often influence the decision to go for a particular broker, and it is also portrayed by the above graph where peopl e surveyed have agreed to have considered the advices of their friends and relat ives. The higher income groups have resorted to their help more than the lower i ncome groups. 7. Conclusions and Recommendations Thus our study proves that the most important factors while choosing a brokerage firm are firm’s reputation and referrals by friends and relatives. Our recommenda tions for a brokerage firm looking to increase its market share will be to come up with different pricing and services products according to the target customer . Having such a diverse portfolio of products will allow the firm to target a bi gger market and hence with competitive rates also capture a greater market share . 8. References 1) 2) 3) 4) 5) www.investopedia.com www.wikipedia.org www.sharekhan.com www.icicidirect.com http://encyclopedia.farlex.com/brokerage+firm

9. Appendix: 9.1 Questionnaire: Section 1: Demographic Information Age (Years) -30 (4) >30 Income Group (1)<2,00,000 (2)2,00,000 – 5,00,000 (3) 5,00,000 – 10,00,000 (4) >10,00,000 Marital Status: Gender: Male / Female (1) <20 (2) 20-25 (3) 26

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Section 2 : 1-How willing are you to pay extra money for online trading services? (1) Not at all (2) A little (3) Moderately (4) Mostly (5) Fully 2- How much will you consider the reputation of the brokerage? (1) Not at all (2) A little (3) Moderately (4) Mostly (5) Fully 3- How willing are you to pay extra money for regular detailed research reports and market analysis? (1) Not at all (2) A little (3) Moderately (4) Mostly (5) Fully 4- How willing are you to pay extra money for better response time? (1) Not at all (2) A little (3) Moderately (4) Mostly (5) Full y 5-Till what extent can you compromise on security on faster service? (1) Not at all (2) A little (3) Moderately (4) Mostly (5) Fully 6- Till what extent can you compromise on reputation for better tips? (1) Not at all (2) A little (3) Moderately (4) Mostly (5) Fully 7- Till what extent can you compromise on reputation for personal aquaintance in case of brokerage? (1) Not at all (2) A little (3) Moderately (4) Mostly (5) Fully 8-What kind of broker will you prefer to open a account with AFull service (Traditional) BDiscount. 9-Till what extent would you consider referral by friends or relatives? (1) Not at all (2) A little (3) Moderately (4) Mostly (5) Fully

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