Marketing Strategies of Providers of Financial Products - Assignment Example

A1. Some providers of financial products, such as insurance policies, are happy to allow their products to be offered by independent comparison sites, (such as Moneysupermarket), while others (such as Directline) insist potential customers visit their sites directly. Critically evaluate the merits of both approaches, taking into account both online branding and intermediation/disintermediation, and using real-world examples to support your arguments.  Companies who allow their financial products to be offered by independent comparison sites prefer this approach especially if they have weak brand or online presence. The idea is that by piggybacking on the popularity of the independent comparison sites, they are able to reach as much consumers as possible. In addition by using the services of these sites, they are able to compete better especially if they are offering better deals. Sites such as Moneysupermarket.com have online applications that allow consumers to compare financial products against each other. End users of the financial services can usually be counted on to constantly search for the best deals – the best price and the most innovative products and services. (Walter 2004, p. 9) In this case, consumers reject all relationships and buys purely on the basis of current perceived value. This is the reason why there are companies who even setup intermediation websites of their own in order to attract customers who need additional help from an intermediary in selecting products and services. Some examples of these are those that were setup by groups of brokers such as uSwitch and moneyextra. On the other hand, there are insurance companies who prefer to have their clients visit their site directly. This is the conventional strategy of organizations who wants to take advantage of the opportunities offered by the Internet. This principle is characterized by the elimination of the middleman and is often described as disintermediation. This strategy is beneficial for established companies, those that have strong brands and products. These companies, such as GEICO, no longer need additional help from an intermediary because its customers specifically seek out the brand. In this case, the insurance companies save money and create competitive advantage by removing the channel infrastructure costs and intermediary margins. In addition, they are able to develop direct relationships with their customers. B2. Accenture, the management consultancy, claims that B2B reverse auctions have saved their clients in the private sector an average of 17 per cent on the historic price of previous contracts, while government departments, such as the DVLA and Royal Mail, have saved between 22 per cent and 25 per cent on previous contracts. Describe how this might operate, taking into account both the buyer’s and seller’s perspectives, and critically discuss the implications for both buyers and sellers, using real-world examples where appropriate to support your discussion.  The use of the auction system is one of the current and most interesting trends in online commerce. Today, almost any product or service can be auctioned off using web applications through the so-called B2B system. When many players – firms, individuals, suppliers, purchasers – interact in a B2B exchange, there emerges a dynamic mode of pricing, which is similar to the way stocks are priced in the New York Stock Exchange, wherein the price, quality, and delivery terms are driven by the movements within the market. (Warkentin 2003, p. 9) This has been made possible due to the empowering capability of the web that allows people to interact by buying, selling or negotiating regardless of where they are. As a result, purchases have expanded beyond the domain of niche markets to reach potential bidders across geographic barriers and traditional industry lines. (Ross 2003, p. 258) Accenture’s use of the reverse auction demonstrates the benefits of this e-commerce system. The process involves a traditional auction, but this time the mechanism favors the purchasing side. This involves one buyer and multiple sellers as opposed to the classical mechanism wherein sellers solicit bids from the marketplace for one-time, high value purchases. In this process, a buyer posts a request and suppliers bid for the job. For example, Accenture would host a reverse e-auction for stationery supplies using their own auctioning facility. Suppliers can then bid for the contract within a particular period and the price would drop for each of the bid. The buyer gets to choose from multiple bids. Because of many factors such as the use of the Internet, the costs involved, such as in terms of setup and training, are minimal. The experience of Accenture demonstrates how the reverse auction can lead to benefits through the significant lowering of supply costs by as much as 20 percent depending on the maturity and experience of the e-procurement system in place. The important dimension here is that as an organization becomes better at e-procurement, more and more benefits are acquired. C3. Many online communities and social networks are “free”, in that participants are able to use these without charge. However, participants may well be subjected to persistent online advertising. Watts and Dodds (2007) comment that “most social change is driven by easily influenced individuals influencing other easily influenced individuals”. Critically evaluate the ethical issues associated with advertising to online communities and social networks, commenting on the motivations of advertisers, using appropriate real-world examples where appropriate.  There are two fundamental issues associated with online advertising in the context of people’s use of- or membership in online communities and social networking sites. The first is the individual rights to privacy. Today, most of the websites who offer online communities, social networking feature, mail, and so forth, ask people for personal information such as birth date, among other details including medical and financial data. Some websites insist on the anonymity of these data while some have pointed to the privacy statements/agreements found in their websites. But these assurances are not enough especially with the fact that online advertising as well as the aggregate data of the profiles of people collected by websites command steep prices in the market. Today, more and more applications are developed in order to gather data about people’s Internet activities and surfing behavior. DoubleClick is a case in point. This company develops various applications, such as a spyware which used HTTP cookies in order to track users as they surf from website to website and document all the information they view. (Spinello 2006, p. 149) The data that the organization is able to gather as well as the technology and services that were developed out of it are sold to advertising agencies and companies such as Microsoft, General Motors, Coca-cola, among others. This last variable underscores the second ethical issue raised against online advertisers: the potential abuse of information technology by individuals. The abuse of information and technology can mainly be driven by money. DoubleClick insisted that profiles remain private and that they are mainly used to better match surfers with appropriate ads. However, the company recently announced plans to add names and addresses to its databases. Unfortunately, as people are drawn to the Internet, online communities and social networking sites, their privacy and personal, financial and other details are in danger of being viewed, used and even altered by other individuals and organizations, such as DoubleClick, compromising their individual civil rights. References Ross, F 2003, Introduction to e-supply chain management: engaging technology to build market-winning business partnerships. CRC Press. Spinello, R 2006, Cyberethics: morality and law in cyberspace. London: Jones & Bartlett Learning. Walter, I 2004, Mergers and acquisitions in banking and finance: what works, what fails, and why. Oxford: Oxford University Press. Warkentin, M 2003, Business to Business Electronic Commerce: Challenges and Solutions. London: IRM Press. Read More