CGAP-MicroSave Virtual Savings Exchange
"Serving Small Depositors: Meeting Demand while Managing Costs"
Summary of Dec. 8, 2005 Virtual Discussion of Marketing 1
Marketing / Promotion Overview
Marketing is not about making tall claims or advertising services in a larger than life manner. It is about communicating strengths that the institution has, based on a solid premise. Before marketing, the solid premise must exist. It is the small savers who can ill-afford to lose their savings who are to be converted into clients (Srinivasan).
Promoting savings is different than promoting credit. The savings habit has to be promoted before the savings product. The need to set aside some part of the income—regardless of how small—for future use should be articulated and instilled as a habit. Product promotion and institution promotion are important, but they are secondary aspects of the overall promotional strategy (Srinivasan). Promoting savings is primarily about savers' perception and trust of the MFI, and secondarily about the features and design of the savings product (Lab-oyan, The Philippines). MFIs have found public relations strategies more valuable (from a cost-benefit perspective) when promoting savings products rather than credit products (Frankiewicz).
Some keys to building trust
In an environment where most people have lost their banked money more than once, developing trust in a bank is crucial. Ways to develop this trust include: having excellent trained staff; having an active personal promotion on the streets and at events (to explain the advantage of savings with a bank instead of under the mattress); having at least one prime branch (to show stability and to save marketing costs); and having a well balanced product mix (Mueller, Eastern Europe).
Trust is the main factor for successfully selling an institution’s products. As a branch-based institution, trust translates into excellent and timely service, as well as adequate safety measures. For clients, these two factors are far more important than interest rates (Zuniga, México).
Institutions must deliver what they say they will deliver. The nature of what is promised is important, but perhaps even more important is being able to consistently and reliably deliver on a promise. Putting key standards or commitments in writing and advertising how these have been met is worth considering (Frankiewicz). Marketing and operations departments need to be aligned so that promotion does not promise that which operations cannot deliver (Cracknell).
Marketing messages should be crafted so they answer the question, "Why should clients trust you?" The answer may include the institution’s leadership (management and governance), history, values, staff commitment, supervision, systems, deposit insurance, partners, etc. Using clients' own words to convey these reasons can make them more convincing. Institutions should keep track of the positive feedback received from clients, not just the complaints (Frankiewicz).
Institutions should invest more in the public relations component of the promotion communications mix, looking for regular, small opportunities to demonstrate that the institution is part of the community it serves and that it intends to stick around for the long-term, contributing to that community's development. Rather than simply put up a billboard or advertisement, institutions should invest in the town square; provide garbage cans, or light or a clock (with the MFI's name and logo on it, of course). An MFI could sponsor a local sports team, organize occasional volunteer opportunities for staff in the community, or offer an academic scholarship (or a school fees lottery rather than a "win this car" lottery) (Frankiewicz).
Trust (reputation) is built on two pillars: on the institution, and on the people that work for it. For the reputation of the institution, the MFI can advertise in major mass media. This can be very costly and makes sense only if the MFI already has good market penetration. The second possibility, building the reputation on the staff, only goes via personal promotion in all its forms. The key issue is the proper training of staff. Banks and MFIs invest too much time on the layout of brochures and other promotion material, and too little in preparing employees. People are what make the difference. “Honesty,” “integrity,” and “reliability” are words that a potential client should automatically think about when talking to the staff (Moelders, Bosnia and Herzegovina).
The reputation of the employees and the institution are almost as one. Both can benefit from the other other, but each also can be spoiled by the other. So, it is important to work on both. If this is not possible (because of the structure of the country or the financial resources of the MFI), then the priority should be placed on the staff, as they will make the difference in the long run. There is nothing stronger in this world than the word of mouth (Moelders, Bosnia and Herzegovina).
Developing savers' trust takes time. The following are some keys to promoting trust: (Gobezie, Ethiopia)
- Make sure that potential saving clients know that the MFI is legally licensed and that the government authorities monitor it
- Be mindful of social and physical distance: operational systems and (especially) staff's ethnicity, culture, and social class must feel familiar to clients.
- Establish good and professional offices that potential clients can trust.
- Encourage locally respected people to save with the MFI. They will spread good word of mouth.
- Ensure that clients know that the MFI is lending out savings locally.
- Demonstrate a good track record for repayment.
Marketing is Much Bigger than Promotion
Promotion includes advertising, personal selling, direct marketing, public relations, and sales promotion. Marketing includes the 8 P's: price, place, promotion, positioning, physical evidence, product, people, and processes (Wright). Marketing savings products is not simply selling the product. It should commence through systematic product development and refinement and careful market segmentation. It is always important not to sell the product's features, but rather the product's benefits to the clients (Messan, West Africa).
Market Segmentation and Promotion
To develop adequate products, MFIs must understand the different market segments they expect to serve, the preferences of clients in these market segments, and what they are using their savings for at the moment. This also will help the MFI craft more appropriate and specific messages geared towards selling the true benefits of the products according to the clients' needs (Bhattacharya, India). For example, marketing tools for rural customers with an agricultural base income may include direct and indirect marketing, like word of mouth savings promotion. These are more effective than using printed media or even electronic media (TV is too expensive; local radio stations are cheaper, but not as effective). It is important to keep in mind that there are many marketing strategies that may be effective in some localities and not effective in others. (Zakaria, Indonesia)
Instead of developing many different products, an institution should develop a relatively standard product with features that could vary slightly depending on the market segment. This structure allows MFIs to sell the product differently, depending on the clients' needs (Messan, West Africa). Having a small number of products which meets the requirements of all customer segments is better than having a large number of products that create confusion (Bhattacharya, India).
MFIs should segment their clients, and market differently to them. 5% of clients often hold 50% of value of deposits. This often means using branch managers to sell directly to high-value clients (Cracknell and Wright). An institution should design its promotional activities based on its targeted market segments. For example, the Cooperative Bank of Benguet found that small and medium savers prefer more personalized service, value a positive relationship with the public more highly, and prefer simple product features. Because small and medium savers are its primary target market, the bank's promotional activities include advertising on the radio (e.g., paying the radio announcer and radio station for airing greetings to the institution instead of a pre-recorded message); participating in government and private gatherings such as cooperative month celebrations, farmers congresses, community festivals, and clan reunions; personal sales; and offering just two simple savings products. In contrast, large savers place more importance on advertisements, publicity, and promotional gimmicks (Lab-oyan, The Philippines).
An institution new to savings mobilization may initially want to target potential clients that are within the present client base: relatives, neighbors, and, perhaps, factory and office workers. A Cambodian MFI that used this strategy found, through a survey, that these market segments preferred direct marketing; no TV, radio or newspaper ads were necessary (Ayo, Cambodia, Philippines). Compared to advertising, publicity, and branding, direct sales may be most cost-effective for promotion to current customers. This changes when seeking to attract the general public (Zuniga, México).
Different segments of clients may have different levels of loyalty. For example, small entrepreneurs may be very loyal. As long as products are somewhat competitive, what matters to them is that they feel heard and attended to. Salaried workers may not be loyal at all. This segment may respond to technology, image, promotion and accessibility (Santamaría Bolaños).
MFIs should not forget about the kids! Children will not produce a lot of deposits right away, but they are very good for building a positive image and they are the future as they will eventually become adult depositors (Moelders, Bosnia and Herzegovina).
When it comes to savings by the poor, there is an absolute need for trust, and word of mouth can be a powerful tool. What would it take for an MFI or bank to command the kind of trust found in some women's savings groups? (Mary George, India)
Understand the competition: Institutions should perform competitive research and analysis against competitors to determine how savings products compare in relation to the 8Ps? (Cracknell)
Have the right product: MFIs should design the product carefully, check it with customers, and pilot test the product to ensure that it is free from operational challenges and that it is priced and marketed correctly (Cracknell). MFIs should identify their USP (unique selling proposition) and present it to focus groups for discussion before final print (Ayo, Cambodia, Philippines). A recent study in South Africa found that simply suggesting a single product—rather than an array of maturities and interest rates—was valued highly by potential customers (See Monday's summary).
Promotional Tools
Institutions should carefully prepare their promotional message, materials, and methodology. They should not think of promotion as just advertising. In the early days of a savings program there will always be considerable direct marketing (Cracknell and Wright, various).
Word of mouth: Word of mouth typically drives at least 60% of the new customers coming into microfinance institutions. Most customers hear about accounts from a friend or relative. Therefore, focusing marketing to facilitate positive word of mouth is crucial. Word of mouth is developed through branding, a positive stream of public relations, presence at community events, customer relationship building through branch managers and staff, dinners with opinion leaders where they get to meet the Managing Director, and delivery on promises (Cracknell, Wright).
In order to encourage staff to treat clients well, the institution must show staff that same respect. Clients will look forward to transacting with an institution when speech, actions, and products all demonstrate that the MFI cares for them and wants them to join (Walden).
The National Savings Institute (NSI) is very careful about their relationship with their customers. They have to see that the customers are satisfied, and perhaps this is one of the reasons that they have retained their traditional customers who have been saving with them for more than 40 or 50 years. In cases of customer complaint, NSI tries to redress it within 5-6 days. The NSI has an ambitious plan to computerize all of their distribution networks and also to make their delivery system more high-tech, which will certainly help in reducing time/cost, as well as make the delivery system more effective (Bhattacharya, India).
MFIs must train all staff in the products. And they must make it as easy as possible to open accounts. Many, many sales are lost due to lengthy account opening processes (Cracknell).
Transparency of decisions, reliability, a long track record, et cetera, make it easy for a promotional campaign to succeed. Ease of access, close proximity of POS, risk mitigation factors, et cetera add value. Regulated institutions enjoy more credibility. Where there is no regulation in place, is it not worthwhile for the MFIs operating in a region to voluntarily set up a regulatory body as well as a common risk fund that would provide some comfort to savers? These could then become USPs in a marketing effort (Srinivasan).
The way to inform the target market and how to select key persons within the community must be understood by the MFI field officer. In rural areas, the role of informal leaders is very strong and when they become savings customers, the community will follow them. For that reason, field officers and all MFI employees should live (stay) in the same community they serve, so that they better understand the culture and community. This will help a lot in marketing efforts as proven by BRI. In the early years of Simpedes (Village passbook saving), BRI assigned all employees and their families to be involved in marketing. This strategy was very successful and was instrumental to the rise in amounts deposited in Simpedes accounts (Zakaria, Indonesia).
Public relations is often the least expensive and most credible form of promotional communications, particularly in environments where the media is hungry for pre-packaged materials to broadcast or print (Wright).
Publicity through print and radio, especially community radio, is the most important promotional tool (Bhavani, India).
Personal selling: In rural areas, local institutions, informal groups, and agents who canvas door-to-door access savings easily (Bhavani, India). MFIs should identify specific large deposit opportunities. For example, churches after Sunday masses are one of the biggest depositors (Ayo, Cambodia, Philippines).
For banks that are into microfinance, creating cross-selling opportunities can broaden the bank-client relationship to the benefit of both the client who has access to more services, and the bank that generates more business. The more services customers use, the more loyal they are likely to be. The cost to keep a client is far lower than the cost to attract a new one. For example, banks cross-sell savings products when they sell their remittance services by arranging to automatically deposit a part of the remittance in the client's bank account. They might also link the deposit of part of a remittance to a housing loan.
Savings schemes have also been linked to life and disability insurance and to housing credit schemes (Arévalo). Insurance-linked savings could help promote savings, but simple products should be devised. Literacy in savings products and insurance is needed to enable greater and more effective outreach (Bhavani, India). A lack of awareness among the public may be a challenge, especially when a large percentage of the population is illiterate (Bhavani, India).
The Promotional Message
MFIs should ensure that promotional communications reflect the key value drivers of the customer in "clear, concise, client language." Prior to mass-printing/dissemination, MFIs should be sure to test promotions in a few focus groups to ensure they are understood the way that the institution wants them understood (Wright).
The promotion of a savings culture and of a corporate image closely related to local life lies at the core of more successful savings banks' marketing strategies. Participation in local and community social events makes customers perceive banks as part of their daily lives (Fernandez).
Other concepts from behavioral economics may be relevant to marketing savings. People dislike a loss more than they like a gain; people tend to choose the default option; and because people may have "accounts" in their mind for various purposes (e.g., school fees for their children), offering accounts which correspond to these purposes may attract customers (Karlan).
Staffing for Promotion
In institutions that have primarily been engaged in credit, marketing of savings may—at least initially—be carried out by credit agents, cashiers, and customer service staff. Staff incentives that encourage both credit and savings promotion may be used to encourage staff to focus on promoting savings in addition to credit (Zuniga, México). However, MFIs should consider very carefully how to market savings with credit officers; very often credit officers market loans better than savings and can increase pressure for credit beyond any savings they gather (Cracknell and Wright, various). Incentivize savings mobilization with care. Branch-based models, rather than individual schemes, are more appropriate. While there is less experience with savings incentive schemes internationally, experience is growing.
Marketing Resources
(from MicroSave available on www.microsave.org)
- Lessons from Pilot Testing study
- Pilot Testing toolkit
- Strategic Marketing toolkit
- Strategic Marketing for MFIs paper
- CGAP/MFN/MicroSave Staff Incentive Schemes Toolkit
APPENDIX A: Some Examples of Promotion:
Credit union campaign in the Central African Republic: These are elements of the promotional campaign of a credit union network to inform the target of the campaign—which consisted of poor active women, micro-entrepreneurs, and petty traders living in specific sections of the capital—about the functioning of a Credit Union and the advantages of mobilizing savings through a Credit Union:
- Two plays ("sketches de theatre") about savings: one about the value of savings in a CU (avoid the risk of hiding or keeping money at home: stealing, natural disaster, fire, family pressure); and the second about the advantages of a cooperative (having safe savings, access to loans, social safety net, etc.)
- A song, produced by a national star, which explains to people how to save money safely in a Credit Union and how to be responsible in credit repayment
- Two videos on savings (GTZ/FAO) translated into the national language
- Some radio and TV interviews of the campaign's participants
- Some credit union members testified about the importance Credit Unions for a better management of their own money.
- Distribution of a brochure about CUs
- Gift of T-shirt for the new members who sign-up by the 31st December 2005
After the big campaign, each member credit union organizes its own actions to continue the campaign. Each receives get a CD with the sketches and videos played during the campaign that they can project these in a local cinema in each neighborhood. The biggest success was the sketch/plays that showed in a very simple and real way what happens when people keep their money at home (money is destroyed by termites) and explained why and how a member pays to enjoy the services of a CU: shares, administration and penalty fees, interest rate on loans, and social funds (Stefanini, Central African Republic).
Some marketing ideas: MFIs can send a thank you note after an account is opened; send birthday greetings or a cake, and holiday gifts. They can invite customers to participate with bank staff in community activities like a tree planting and/or a distribution of wheelchairs to create a sense of pride among depositors that they are remembered and made part of the financial institution. The CEO could even personally visit them (Ayo, Cambodia, Philippines). MFIs can advertise in the local cinema, through cable television, Village Knowledge Centres, or government office in villages (Bhavani, India).
The Peruvian Municipal Savings and Loans institutions (CMACs) stand out with a corporate branding strategy mostly based on relational marketing. Rather than aggressively marketing, the CMACs invest in customer service. In addition, they participate in sports, cultural and educational events organized at the local, regional and national level, distribute numerous merchandising articles and organize frequent drawings. Publicity (printed publications, press, radio and television) is mostly used to emphasize features of their products which motivate customers to save with CMACs. Their education and awareness campaigns focus on savings and enterprise creation. A large percentage of these are targeted to the youth (at vocational fairs, youth events, concerts and congresses) (Fernandez).
In Sri Lanka, National Savings Bank launched three innovative products with campaigns targeted to their intended market segments: (1) "Hapan" and "Punchi Hapan" Children Savings Schemes, under the motto "Encourage your children to save for a secure future" and (2) "Ithuru Mithuru" Youth Savings Accounts, under the motto "The future of the nation is in the hands of our youth." Hapan and Punchi Hapan were promoted with cheerful story/poem books and colorful passbooks given when customers opened an account. They were also promoted through propaganda walks, TV and radio advertising, quarterly prize-drawings at schools, and advertising in print-media and public buses.
The "Ithuru Mithuru" Savings Account offered higher interest rates, free standing orders, and loans at advantageous rates. In addition, it provided discounts at selected establishments; a free annual pocket diary; and prizes such as airline tickets, cellular phones and cash. Its communication campaign was based on the denim concept (passbook cover imitates denim material and fits any jeans' back pocket). The product was launched with propaganda walks from every branch and publicity with advertising campaigns in print media and television (featuring attractive youth wearing fitted jeans, moving to fresh, rhythmic music) (Fernandez).
After conducting nation-wide research into customers' likes and dislikes regarding banking institutions, the Tanzania Postal Bank addressed its fiercely competitive environment by renovating the bank's corporate image (including branch renovation); introducing new products; and re-branding old ones. Introducing the Uhuru (Freedom) debit card transformed the bank's image into an institution that is available 365 days a year by granting 24-hour ATM service, cash-back facilities, and the possibility of buying goods, services and re-charge vouchers from merchants' outlets. The card was launched with big TV campaigns nationwide. In two months, the Uhuru card had attracted USD 2.5 million and 6000 customers (Fernandez).
The French Savings Banks' communication is designed around the traditional French savings banks logo: the squirrel. The squirrel forms part of the French cultural heritage, referring to the values of saving and planning for the future in an organized manner. The squirrel allows for a direct, sympathetic, and humorous campaign. The human/animal comparison makes it easier to refer to money more freely and directly. This strategy, now converted into a complete animal saga, has ranked the Savings Bank's brand second amongst the French banking brands overall (Fernandez).
To promote trust in our institution, we created a TV spot, billboards, and newspaper ads featuring our own employees to transmit our mission and values. This was very successful. Since then, we are recognized in the market as a very solid and trustworthy institution. This is reflected in a monthly increase of deposits to more than three times what we have seen in the past. We also got some very big deposits from companies and organizations that we would not have thought about before. Unfortunately, this approach to the market requires quite a huge investment and requires an already high market penetration to pay off (Moelders, Bosnia and Herzegovina).
To create awareness among the customers, the National Savings Institute in India periodically advertises its products through radio, electronic, and print media. Radio has proven a very effective medium for advertising in the rural, hilly and far flung areas. Fares and exhibitions are very popular in rural India and stalls are created during such events to promote small savings products. In most of the advertisements, we use the caption "Save with NSI and be a partner in the National Development Programme," "NSI is the torch-bearer of Small Savings" (Bhattacharya, India).
In Nepal, marketing tools like door-to-door visits, informal communication with potential clients, and awareness campaigns are not very cost- or time-effective. Rural people (usually illiterate, with no exposure to outside situations and difficulties with trusting outsiders) are reluctant to believe outsiders unless their savings is substantiated and properly commented on by local leaders or their most trusted elites (Dhakal, Nepal, Afghanistan).
Above all, Nepali Savings and Credit cooperatives rely on word of mouth marketing. Some give prizes to members who contributed substantially to increasing membership. Some expect every old member to bring in at least one new one (Simkhada, Nepal).
1Summarized by Exchange Facilitator, Madi Hirschland