Thought Leaders II
Changing Marketing Models for Financial Services

In the 10 years that Professor Jagmohan Raju has been teaching in Competitive Marketing Strategy, he has seen the effects of deregulation and other competitive shifts in the dynamics of different industries, from utilities to pharmaceuticals to financial services. As these industries are restructured, executives also need to restructure their marketing model. Brokerage houses have been hit with technological advances that have made them question their target audience. "When Schwab went after the low-end customer, that had an effect on other brokerages, as well as on Schwab's mainstream clientele," Raju said. In one sense, the financial services arena faced a situation like that of tax preparers when a software program like Intuit's Quicken was introduced. This new technology led to new forms of competition by making its services easier for people to do themselves.

Other forms of competition include not only new technology and other players in your own industry but other industries, such as banks encroaching on traditional brokerage services, Raju said.

The pharmaceuticals industry also changed its strategies and organization to move from a focus on patent protection to marketing, which provides a lesson for other industries. "Pharmaceutical people are realizing that it doesn't really matter whether they have a good compound or not, but how you fight the battle out in the market. They might have thought having a patent for 14 years was a good enough marketing strategy, but they've been finding out their competitors can take much of the financial value out of the patent through better marketing," he said.

Raju helps participants focus on which business model is right for their industry before they make a huge commitment to one particular model.

"It's important to ask: Who might be your potential competitors? Who has the capability to enter your industry? Who has skills to compete against you? How can you change your business model rather than be destroyed by them?" By using this "pre-emptive marketing strategy approach," Raju said, companies can diminish the competitive threats.

   

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