Wednesday, March 28, 2007

Smit N Shah

Article # 6
FREE stuff helps marketing

Corporate marketing or product marketing can be done in several different ways. One of the ways companies have been marketing for a long time is by giving out free stuff. This method helps gather a decent crowd. Free signs always get attention. Marketers take advantage of the fact that it does and place their banners and posters with offer information in locations where they are bound to catch your eye. The term FREE is usually highlighted in the entire advertisements, which is what draws more attention. Similar strategies are also being used for radio and television marketing, where companies try go reach a bigger audience by marketing it as a free product. The idea of giving out free stuff always draws a crowd. Most of the free stuff usually carries a logo or an advertisement about the sponsoring company. So when an individual takes that item to work or at home or even to school others curiously enquires about it and thus helping increase the awareness about a company. Getting a customers attention is winning half of the battle. Most products on the market are good, but its the competition that makes it harder to sell, so having the customers attention definately helps increase market awareness.

I remember when I was in school doing my bachelors, Citigroup used to be on the campus quite frequently giving out free t-shirts for applying for their credit card. Their agents always drew a big crowd. I remember me and all my friends signing up for those offers. The t-shirts that they gave out had their logo on them. So every time we wore them to school, our friends would joke about where we got them from. But at the end of day, it did get us talking about Citigroup. As a matter of fact, here I am four years out of school still writing an article about it.

I would say that this does help build market awareness. However, on the flip side this kind of marketing is expensive. The marketing expense are comparatively higher and the per lead expense also increases. I also remember us at times, signing up multiple times, under different names to get the free stuff they had to offer. Hence, the quality of leads also tended to detoriate as the word got around. In general I think if the companies and their agents are cautious enough, they could walk away with valuable leads and it definitely helps increase awareness.

Monday, March 26, 2007

Smit N Shah

Article # 5
Mortgage Lending Companies Marketing Strategy

Most of today's home buyers use some kind of financing for their homes. There are mortgage lenders which provide a loan to borrowers holding their property; in our case their home as a collateral. Their properties are valued by qualified and certified individuals or companies commonly known as appraisers. They value the property based on its condition, location and age. The lenders offer a loan to borrowers up to a percentage of the property's value. Generally, if the borrower is borrowing more than 80 percent of the property's value, the lenders secure the loan by requiring a PMI or Primary Mortgage Insurance.

A couple of years back during the real estate boom, lending companies came up with a new type of loan called "Interest Only" loan. Traditionally borrowers would pay a monthly payment from which a part would go towards the interest and a part towards the principle. With the interest only loans, they borrowers did not pay anything towards their principle but only the interest on their loan. These kinds were highly profitable to the lending companies. Because they get higher returns on their investment, and even after the life of their loan, they still have the original amount. The borrowers were happy because they had lower monthly payments. These loans were also for a short period, and their rates would adjust after that.

This was a great marketing strategy which fueled further sales for the lending companies. To stay competitive, companies also started lending to borrowers with "less than perfect" credit scores. Since last year, the federal interest rates have gone higher and those borrowers who bought new homes in hopes of having an affordable home are now worried. Increase in these interest rates would directly impact their monthly payments, and for borrowers who just cutting even, this increase would bring them to a point where they might start falling behind on their payments and end up foreclosing the property.

This situation is bad for the borrower and the lender. Because prospective buyers know that the lenders are eager to sell, they wont offer what would be the "market price" of the property. Also, due to the recent slowdown in the real estate market, the price of these properties have gone down as well. Hence a lender who lent eighty thousand dollars for a hundred thousand dollar home, now the home being depreciated to seventy thousand, and only earning interest would be loosing money doing business.

I think that marketing should help drive up sales, but not to the extent that it becomes a liability instead of an asset. A balance has to be attained between margin and volume.

Wednesday, March 14, 2007

Smit N Shah

Article # 4
Capital One's New Ad campaign

Capital One is one of the leading financial services provider in the country. They provide various loans for individuals and businesses. They also provide banking facility to their customers. Their target market is customers with a little less then perfect credit rating. They provide loans at a higher interest rate than their competition for such individuals. Most customers have a low credit limit, but something that they can use on a daily basis.

Interest rate is not their best trait and so they don't really talk a lot about that. But they have been emphasizing on their "no hassle" strategy. Where they are trying to sell to their customers the ease and honesty with which they do business. They have created this feeling amongst credit card users that its usually very difficult to redeem your cash-back bonuses, your free airline miles or other benefits from your credit card company. And that Capital One will not hassle you with what is yours. This gives an individual some sort of mental comfort knowing that they will be rewarded with what they deserve based on their terms and conditions. Their previous ad campaigns focused on the "no hassle" concept. Continuing that same concept, they moved into criticizing other companies for being really unfair on their rates and the "what's in your wallet" phase. Where they show a bunch of people from middle ages being unemployed because Capital One took away the hassle from borrowing and hence their customers switched to Capital One.

In their recent ad campaign they have been making fun of the terms and conditions that credit card use to issue credit cards. Most credit card users find it really hard to understand the financial jargon's used in the terms and conditions of their credit cards. More over there are certain conditions which might have been amended to the existing conditions without the knowledge of credit card owners. Using this insecurity as a marketing tool, they are targeting their customers with something that they can associate themselves with. All their advertisements are light and interesting which most television viewers enjoy watching, and it conveys the message intended.

Overall, I think that Capital One has been successful in creating a brand image of being a hassle free, reliable credit card company.

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