Product strategy in the marketing of financial services: a survey of the commercial banking sector in Kenya
This study was conducted between April and July 2003. It focused on one of the 4P's of the marketing mix, namely, the product and studied how the product strategy was used in the marketing of financial services by commercial banks in Kenya. A survey study was done. The population of interest was 41 banks. The research instrument used was a questionnaire, which was used to collect data through the drop and pick later method. A response rate of 46.3% was attained. In relation to objective number one, whose aim was to determine the extent to which the five levels of a product are used in the marketing of financial services in commercial banks, it was established that value added products like electronic banking are increasingly becoming a common feature of the banking industry. These findings were explained by the competition for market share among the various banks through the use of high-value products that were not easily imitated. The findings also revealed that a cumulative total of 73.3% of the banks that responded use modern technology as a service delivery medium at levels ranging from high- to a great-extent This could be explained by the observation that technology is of prime importance as a tool for delivering high quality service, which is attained through the d¥velopment of value added products. -. The second research objective was aimed at determining the rate of product innovation. It was addressed by findings that revolved around activities concerning the product line strategies of line stretching, modernization and filling. On the measurement scale used, these three scored the highest mean. Product width had valid percentages of 33.3% and 38.9% with product widths of 10-15 and 5-10 respectively. Only 27.8% had product widths of less than 5.16.7% of the banks had product lengths of 20-30 compared to 44.4% with lengths of less than 10. Product innovation was seen to take place on a monthly, quarterly, halfyearly and annual basis where the distribution of respondents engaged in innovation for the different periods was seen to be fairly evenly distributed. The product line strategy and product width findings are indicators of continual change of the product mix. This occurs with a frequency ranging from monthly to annually. It can be safely concluded that the rate of product innovation is high and involves a moderate turnover of individual product items on offer. The bigger majority of banks have small product lengths, which can be explained by the need to focus on niches. Given the generally large size of product width in the industry, it can be concluded that these few products are highly differentiated, an observation that can be explained by the fact that most of our local banks focus on market niches and offer selective services and products. With respect to the third objective, that is the kind of product innovations, 30.4% of the responses were those centered along development of completely new concepts in banking with 26.2% responding as being engaged in developing new basic products. This can be explained by a shift in competition to the higher value added items in the market, motivated by the urge to differentiate, the basic items being saturated in the market. The product strategy is thus prominent in the marketing of financial services locally. In particular, the five levels product concept has also gained wide credence among banks seeking to marl\et their services in an increasingly crowded marketplace. This supports the literature re-v.iew observation that particular financial service products may have a range of features, which are used as a differentiation strategy to appeal to given consumer segments. Recommendations for further research: 1. The product strategy is only one element of the four P's of marketing. Other elements that would need to be investigated include price and place. Despite earlier researches done, promotion is also a possible avenue for a prospecting researcher since the earlier researches done date back to 1992 and in view of the recognition that a lot of things have changed since then, now would be ideal to conduct a parallel research. 2. This research is specific to commercial banks only. It would be interesting to observe the kind of results that would be obtained if one expanded the population to cover Non Bank Financial Institutions (NBFl's) as well such as building societies and so on.