BACHELOR’S THESIS 2004:152 SHU Promotion Strategies for Banking Services Case Study of Nordea in Estonia Social Science and Business Administration Programmes INTERNATIONAL BUSINESS AND ECONOMICS PROGRAMME ANNA GRANKVIST CAROLINA KOLLBERG ANNA PERSSON Department of Business Administration and Social Sciences Division of Industrial Marketing and e-Commerce Supervisor: Manucher Farhang 2004:152 SHU • ISSN: 1404 – 5508 • ISRN: LTU - SHU - EX - - 04/152 - - SE
Transcript
BACHELOR’S THESIS
2004:152 SHU
Promotion Strategiesfor Banking Services
Case Study of Nordea in Estonia
Social Science and Business Administration Programmes
INTERNATIONAL BUSINESS AND ECONOMICS PROGRAMME
ANNA GRANKVISTCAROLINA KOLLBERG
ANNA PERSSON
Department of Business Administration and Social SciencesDivision of Industrial Marketing and e-Commerce
Supervisor: Manucher Farhang
2004:152 SHU • ISSN: 1404 – 5508 • ISRN: LTU - SHU - EX - - 04/152 - - SE
ACKNOWLEDGEMENTS
ACKNOWLEDGEMENTS This Bachelor�s thesis was written as a part of the program for International Business and Economics at Luleå University of Technology in the spring of 2004. We would like to thank our supervisor Manucher Farhang at the division of Industrial Marketing for his help and guidance during the process of writing this thesis. We would also like to thank our respondent Mr. Christer Rosentröm, country manager of Nordea Bank Finland plc Estonia branch, for taking time of to answer our questions. Without him we would not have been able to complete this thesis. Finally, we would like to express our gratitude to all the people that have supported us during the process. Luleå, May 2004 Anna Grankvist Carolina Kollberg Anna Persson
ABSTRACT
ABSTRACT The issues of promotion are becoming more and more complicated as internationalization of financial services continues to increase. In the latter years, the Baltic States have emerged as attractive markets for many western countries, and several banks have initiated operations there. The purpose of this thesis is to gain a better understanding of international banks� promotion strategies in the Baltic States. In order to reach our purpose we have conducted a case study of a Nordic retail bank�s promotion strategy in Estonia. For our data collection we have used interviews and documentations. Our study shows that the most important promotion tools for financial services are personal selling and advertising, in order to create awareness of the brand and establish personal relationships. The external factors influencing the choice of promotion strategy are technology orientation of the industry, cultural aspects, competitiveness of the market, and economic factors. Adaptation of the promotion strategy is performed to a great extent, due to customers� different preferences and expectations, as well as local conditions of the host country. However, banks attempt to standardize their promotion as much as possible in order to reduce costs and reach economies of scale.
SAMMANFATTNING
SAMMANFATTNING Frågor gällande marknadsföring blir alltmer komplicerade i takt med att internationaliseringen av finansiella tjänster ökar. Under de senaste åren har de Baltiska staterna utvecklats till attraktiva marknader för många länder i västvärlden, och ett flertal banker har initierat verksamhet där. Syftet med denna uppsats är att öka förståelsen för internationella bankers marknadsföringsstrategier i de Baltiska staterna. För att nå syftet har en närmare studie av marknadsföringsstrategier hos en Nordisk bank, aktiv i Estland, genomförts. För insamling av data har vi använt oss av intervjuer samt dokumentationer. Vår studie visar att de viktigaste marknadsföringsverktygen för finansiella tjänster är personlig försäljning samt reklam. Detta för att skapa medvetenhet om varumärket och för att etablera personliga relationer. De viktigaste externa faktorerna som påverkar valet av marknadsföringsstrategi är teknikintensitet inom industrin, kulturella aspekter, konkurrens på marknaden samt ekonomiska faktorer. Adaptering av marknadsföringsstrategin genomförs i mycket stor utsträckning, främst på grund av kundernas varierande preferenser och förväntningar, men även på grund av lokala betingelser. Emellertid försöker banker att standardisera sin marknadsföringsstrategi i så stor utsträckning som möjligt, för att minska kostnaderna samt uppnå skalekonomi.
TABLE OF CONTENTS
TABLE OF CONTENTS 1 INTRODUCTION ......................................................................................................1
1.1 Background ...........................................................................................................1 1.1.1 Internationalization of the Banking Industry....................................................1 1.1.2 Promotion of Financial Services......................................................................2 1.1.3 Financial Services in the Baltic States .............................................................3
1.2 Problem Discussion ...............................................................................................3 1.3 Purpose & Research Questions ..............................................................................4 1.4 Demarcations.........................................................................................................5
2.1 The Promotion Mix for Banking Services ..............................................................6 2.2 External Factors Influencing the Choice of Promotion Strategy .............................9 2.3 Adaptation and Standardization of the Promotion Strategy...................................15
3 FRAME OF REFERENCE......................................................................................18
3.1 The Promotion Mix for Banking Services ............................................................18 3.2 External Factors Influencing the Choice of Promotion Strategy ...........................19 3.3 Adaptation and Standardization of the Promotion Strategy...................................21 3.4 A Conceptual Frame of Reference .......................................................................22
4.1 Research Purpose.................................................................................................24 4.2 Research Approach..............................................................................................25 4.3 Research Strategy ................................................................................................25 4.4 Data Collection....................................................................................................27 4.5 Sample Selection .................................................................................................29 4.6 Data Analysis ......................................................................................................30 4.7 Quality Standards ................................................................................................31 4.8 A Visual Design of Methodology.........................................................................32
5.1 The Nordea Group ...............................................................................................33 5.2 The Promotion Mix for Nordea�s Banking Services .............................................35 5.3 External Factors Influencing the Choice of Promotion Strategy ...........................38 5.4 Adaptation and Standardization of the Promotion Strategy...................................40
6 DATA ANALYSIS....................................................................................................42
6.1 The Promotion Mix for Banking Services ............................................................42 6.2 External Factors Influencing the Choice of Promotion Strategy ...........................44 6.3 Adaptation and Standardization of the Promotion Strategy...................................47
7.1 How can the promotion mix for banking services in the Baltic States be described?..................................................................................................................................52
TABLE OF CONTENTS
7.2 How can the external factors influencing the choice of promotion strategy for banking services in the Baltic States be described? ....................................................53 7.3 How can the adaptation vs. standardization of the promotion strategy for banking services in the Baltic States be described?..................................................................54
8.1 Implications for Management ..............................................................................56 8.2 Implications for Theory .......................................................................................56 8.3 Implications for Further Research ........................................................................57
REFERENCE LIST ....................................................................................................58 APPENDIX 1 � Interview Guide: English Version APPENDIX 2 � Interview Guide: Swedish Version
LIST OF FIGURES
LIST OF FIGURES Figure 2.1 A Testable Framework of Product and Promotion Adaptation.......................10 Figure 3.1 External Factors Influencing the Choice of Promotion Strategy ....................21 Figure 3.2 A Conceptual Frame of Reference ................................................................23 Figure 4.1 A visual design of Methodology ...................................................................32 Figure 5.1 The Nordea Group........................................................................................33
LIST OF TABLES
LIST OF TABLES Table 4.1 Relevant Situations for Different Research Strategies.....................................26 Table 4.2 Six Sources of Evidence: Strengths and Weaknesses......................................27 Table 6.1 Comparison between Theory and Empirical Data...........................................47 Table 6.2 Basic Conditions for Adaptation or Standardization .......................................49 Table 6.3 Arguments for Adaptation..............................................................................50 Table 6.4 Arguments for Standardization.......................................................................51
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1 INTRODUCTION This introductory chapter is divided into four subsections. Firstly, a brief background will be presented. Thereafter, the problem discussion will be provided, which in turn will lead to the purpose and research questions. Finally, the demarcations will be set forth.
1.1 Background Globalization is growing faster than ever. In order to keep up with the competition, companies are forced to think globally and to expand their business across borders. National boundaries are falling and multi-national companies are increasing in numbers. The focus on internationalization efforts and development of global strategies has tended to fall upon manufacturing companies. However, due to the growth of the service sector and its important role for many countries in compensating trade deficits, as well as its increasing internationalization, service companies have become more and more important. (McLaughlin & Fitzsimmons, 1996) Today, services are the fastest-growing part of world trade and account for the largest share of gross domestic product in almost every country (Albers-Miller & Straughan, 2000). In an internationalization process, services are assumed to be encountering larger risks than manufactured goods, since service providers often immediately have to establish its operations abroad and cannot gradually export the goods (Välikangas & Lehtinen, 1994). This is due to the fact that services generally cannot be separated from the person performing or selling them (Nicolaud, 1989). One of the sectors within the service industry that has been influenced the most by the changes in the globalization process, and at the same time has been highly internationalized, is the banking sector. (Sanchez-Peinado, 2003)
1.1.1 Internationalization of the Banking Industry Financial activity across borders is a phenomenon as old as international trade (Marquardt, 1994). Since the 1960s, the internationalization of banks has expanded at a rapid pace, and banks from all over the world have established themselves abroad since then (Lindström, 2003). According to Albers-Miller & Straughan (2000) banks have been encountering numerous challenges during the past two decades, including competition, recessions and image problems. Additionally, many banks have been facing mature domestic markets with limited future growth potential, which as a result, has led to expansion of their services abroad (ibid). Until recently, banks were seen as highly bureaucratic organizations operating solely in national markets. Today, they are more likely to be efficient and modern institutions operating in a highly competitive environment, and often on international markets. (Quintana, 2003) There are three primary driving forces behind these transformations. The first force is the process of globalization (Daniels & Radebaugh, 2001). Globalization has affected the banking sector both directly, through
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the increasing interdependence of national financial markets, and indirectly, through the parallel internationalization of organizations. The second force is the reduction of regulations concerning the banking industry in most countries, including the decreasing interference of central banks. (Quintana, 2003) Finally, the technological expansion has been an important factor behind the transformations (Daniels & Radebaugh, 2001). For a long time retail banking1 operations have to a great extent been conducted nationally. However, internationalization within this sector is now taking place, either through cross-border mergers and acquisitions, or through the establishment of subsidiaries in foreign countries. (Quintana, 2003) Flohr-Nielsen et al., (2003) claim that the best place to study how companies meet market and technology challenges is within the Nordic-banking sector. What makes this banking sector particularly interesting are the ongoing changes reflected in mergers, acquisitions and technological developments. (ibid) Apart from the Benelux countries, the Nordic countries appear to be the only region within Western Europe where cross-border bank mergers have achieved satisfactory results. The reason for this success is said to be the resemblance in culture, language and history of the countries within those regions. (Quintana, 2003)
1.1.2 Promotion of Financial Services Promotion is the direct way an organization tries to reach its publics. This is performed through the five elements of the promotion mix, i.e. advertising, sales promotion, personal selling, public relations, and direct marketing (Czinkota & Ronkainen, 2004) With the growing importance of the financial sector, pressures are escalating for more effective marketing management of the financial services. Despite the recent recessions, the financial services sector is continuing to grow in terms of turnover and profits and thus, has a supreme impact on the other spheres of the economy. Consequently, there is currently growing interest in applying marketing techniques and tools in financial services. (Meidan, 1996) In spite of major changes on the market of financial institutions, there are indications that banks have not yet successfully embraced the marketing philosophy or achieved levels of its implementation consistent with satisfied customers. Financial institutions are realizing that their established promotion practices are inadequate for new market conditions as levels of customer defection in the sector grow. Traditionally, banks have tried to reach out to everyone in the community, but recent research proposes that banks should aim to identify and serve micro-segments. (Dawes & Brown, 2000) The role of promotion has been redefined into managing long-term relationships with carefully selected customers, including construction of a learning relationship where the marketer maintains a dialogue with an individual customer (Dawes & Brown, 2000). Due to this fact, the personnel are one of the most important resources of a bank. Their
1 Banks that focus on private persons and smaller companies (Lindström, 2003)
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competence will determine the quality of the bank and how well it operates. (Marquardt, 1994) The difficulties with understanding a foreign culture2 often leads to insecurity, which as a result makes it harder to operate on a new market. This is a reason why many banks choose to operate in markets that are similar to those of their home countries. (Marquardt, 1994)
1.1.3 Financial Services in the Baltic States The transition economies in Central and Eastern Europe are emerging as attractive target markets for companies in Western Europe. The notable economic growth that is taking place in the former East block has triggered interaction, especially across the Baltic Sea. The Nordic countries have demonstrated an increasing interest in trade relations and in making direct investments in Estonia, Lithuania and Latvia. (Ghauri & Holstius, 1996) The Baltic States are some of the most developed transition economies (Fleming et al., 1997). Since the independence of the three countries in 1991, the development from planned economy to a functioning market economy has been rapid. A great number of new corporations have been established, and almost all economic activity is now operated privately. (Exportrådet, 2003) Initially the three countries took different approaches regarding their financial systems (Fleming et al., 1997). Today, however, the basic structures of the financial system in the Baltic States are quite similar, in the sense that they are strongly dominated by retail banks, which increasingly tend to be foreign owned (Berglof & Bolton, 2002). For example, in Estonia the market share of foreign-owned banks is more than 90 percent (Ghauri & Holstius, 1996).
1.2 Problem Discussion Experience has shown that operating abroad involves many difficulties, such as cultural differences, language, laws and regulations, lack of foreign contacts and business connections. These factors are ever so difficult for banks, since their operations involve a high degree of risk taking. The establishment of banks has generally taken a long time, and very few have attained a strong position on foreign markets. (Marquardt, 1994) Promotion of financial services is an understudied area. Much of the bank marketing literature has concentrated on marketing theory more than promotion practice. Unfortunately, the issues of marketing are becoming more complicated as internationalization of financial services continues to increase. (Albers-Miller & Straughan, 2000) Effective promotion of financial services is crucial since services are intangible products, and it is hard to stand out, considering the fact that all banks offer similar products (Meidan, 1996). A bank�s services are seldom unique and they are easy
2 Culture is the specific learned norms of a society, based on attitudes, values and beliefs (Daniels & Radebaugh, 2001)
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for competitors to copy (Marquardt, 1994). Additionally, many people cannot make a distinction between different banks� services, and they are often not aware of the wide range of different financial services available. (Meidan, 1996) Since the independence from the Soviet Union, advertising in the Baltic States has been reinforced. Advertising did exist prior to 1991, but mainly in the form of outdoor poster sites and shop-window displays, promotional techniques far from those mostly familiar in the west, i.e. television and press. Since the adoption of the free market, advertising has become an inevitable feature of the Baltic economies, especially through the activities of western companies. Although, in actual terms, advertising expenditure remains small, it is continuously growing. In comparison to other central and eastern European countries, there is evidence that advertising growth will continue. Perhaps most significant is the contribution that advertising is already beginning to make to the GDP of these countries. (Arnold et al., 2001) According to Ghauri & Holstius (1996) transition economies are very different from industrialized countries, and their banking and communication systems tend to be rather underdeveloped. However, since the Baltic States are referred to as some of the most developed transition economies by Fleming et al. (1997), it would be very interesting to know to what extent their rapid development has affected the promotional activities of Banks operating within this region. Berglof & Bolton (2002) state that the banks in the Baltic States are to a great extent foreign owned, and yet there has not been enough significant research concerning the challenges facing international banks� when promoting themselves in these countries. Our main motive for conducting this study is due to the fact that limited research is available within this area. We think that this is ever so interesting to study now, as the Baltic States are entering the European Union.
1.3 Purpose & Research Questions Based on the problem discussion above, the purpose of this thesis is to gain a better understanding of international banks� promotion strategies in the Baltic States. In order to fulfil this purpose three research questions have been constructed and will be used as a foundation for the research: RQ1: How can the promotion mix for banking services in the Baltic States be
described? RQ2: How can the external factors influencing the choice of promotion strategy for
banking services in the Baltic States be described? RQ3: How can the adaptation vs. standardization of the promotion strategy for banking
services in the Baltic States be described?
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1.4 Demarcations Ghauri & Holstius (1996) state that the Baltic countries are three different areas with different cultures and history. Yet they can be seen as one area as far as the establishment of Nordic companies is concerned. Out of all the Baltic States, Estonia is the most developed economically, especially in its banking system. (ibid) The system was effectively reformed in the early 1990s, and today it is working satisfactorily (Exportrådet, 2003). As far as technological advances are concerned, and the impact that they have on the way business is done, Estonia is in the forefront in Europe (Bokros et al., 2001). Estonia is called a transition economy, but appears to be relatively comparable to the industrialized countries of Western Europe. Since it is the Baltic country that is most similar to the Nordic countries, we think that it will be interesting to see what possible obstacles or differences in terms of promotion might be facing a Nordic bank operating there. As a further demarcation we will solely focus on one form of banking activities, namely retail banking. Based on the facts stated above, this thesis will focus on promotion strategies pursued by Nordic retail banks operating in Estonia.
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2 THEORETICAL FRAMEWORK In this chapter the theoretical framework relevant to our purpose and research questions will be presented. The chapter begins with a presentation of the promotion mix for banking services, followed by the external factors influencing the choice of promotion strategy, and thereafter theories regarding adaptation and standardization of promotion will be discussed.
2.1 The Promotion Mix for Banking Services Promotion is according to Brassington & Pettitt (2000) the direct way in which an organization communicates the product or service to its target audiences. Within the financial services industry, promotion is used in many different ways (Meidan, 1996). Brassington & Pettitt (2000) has categorized the promotional tools into five main elements; ! Advertising, ! Sales Promotion, ! Public Relations, ! Personal Selling, and ! Direct Marketing
Advertising Brassington & Pettitt (2000) define advertising as any paid form of non-personal communication directed towards target audiences and transmitted through various mass media in order to promote and present a product, service or idea. The key difference between advertising and the other promotional tools is that it is impersonal and communicates with large numbers of people through paid media channels. (ibid) Meidan (1996) states, that a financial services organization can use its advertising for either its short-term or its long-term objectives. A bank attempting to generate a long-term build-up of its name would use institutional advertising, while a bank interested in promoting its brand name and its different services would use a brand advertising policy. (ibid) Meidan (1996) further states that the institutional advertising consists of promotion of the firm�s image as a whole, and promotion of the products offered, with extra emphasis on the specific firm�s name organization. The organization seeks through its marketing communications, to build awareness and to impress customers looking for the best range of financial services. Due to the former impression of banks as impersonal institutions with no interest in their customers as people, and of financial services as abstract and quite similar, the institutional advertising has become more and more important. Brand advertising follows closely in the footsteps of institutional advertising. Its purpose is to create awareness of the bank�s name and to advertise the different services it is offering. Since financial firms are serving a mass of people, the problems of brand advertising are
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to know who to advertise to, and how to advertise. While institutional advertising is directed towards the whole population, the brand advertising of particular products has to be much more selective, since it has to show that the consumer will benefit from the service. Furthermore, all the individual campaigns of brand advertising have to be compatible in tone and presentation, and match the image the bank has created through its institutional advertising. (ibid) Mortimer (2001) states that an important part of advertising is to make the service tangible in the mind of the consumer in order to reduce perceived risk and provide a clear idea of what the service comprises. Furthermore she considers it important to advertise consistently, with a clear brand image, in order to achieve differentiation and encourage word-of-mouth communication (ibid). According to Meidan (1996), there are two types of advertising channels appropriate for financial advertising. That is �above-the-line� and �under-the-line� advertising. Above-the-line advertising contains different channels of communication, such as television, radio, posters, magazines and newspapers. Under-the-line advertising constitutes a huge part of a financial organization�s advertising activities. It is the invisible advertising of the bank�s services, including leaflets, pamphlets, explanatory guides and manuals that can be used to support selling of a specific service. It is hard to draw a definite distinction between under-the-line advertising and sales promotion. Under-the-line advertising is very easy and cheap to produce, but it must be used discreetly. Furthermore, this kind of advertising does not attract new customers, and it is depending on personal selling for its effectiveness. (ibid) Sales Promotion According to Brassington & Pettitt (2000) sales promotion is different tactical marketing techniques with mostly short-term incentives, which are designed to add value to the product or service, in order to achieve specific sales or marketing objectives. Furthermore, Meidan (1996) states that it has two distinctive qualities. Firstly, it provides a �bargain chance�, since many sales promotion tools have an attention-gaining quality that communicates an offer that will not be available again to purchase something special. The disadvantage, however, is that although they appeal to a wide range of buyers, many customers tend to be less brand loyal in the long run. Secondly, if sales promotions are used too frequently and carelessly, it could lead to insecure customers, wondering whether the service is reliable or reasonably priced. (ibid) Meidan (1996) indicates that due to the conflicting ideas concerning the benefits of sales promotions, a financial service organization must base its decisions upon relevance and usefulness of sales promotion, as well as cost-effectiveness. Peatti & Peatti (1994) claim that normally, coupons, special offers and other forms of price manipulation are the dominant forms of sales promotion. However, price-based promotions are difficult and probably dangerous to use for financial service markets. This due to the fact that the price setting of a financial service is already a difficult process, and that consumers often see lower prices as a result of lower quality. (ibid) However, Meidan (1996) states that sales promotion within financial services appears to be most effectively used in combination
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with advertising. The primary objectives with sales promotion within financial services are to attract new customers; to increase the level of deposit accounts, thereby increasing the banks share of savings; to increase market share in selected market segments; and to lower the cost of acquiring new customers by seeking to avoid direct price competition with other financial institutions. (ibid) Public Relations According to Brassington & Pettitt (2000) the essence of public relations (PR) is to look after the nature and quality of the relationship between the organization and its different publics, and to create a mutual understanding. PR covers a range of activities, for example the creation and maintenance of corporate identity and image; charitable involvement, such as sponsorship, and community initiatives; media relation for the spreading of good news, as well as for crisis management, such as damage limitation. Moreover, an organization can attend trade exhibitions to create stronger relationships with key suppliers and customers as well as enhancing the organization�s presence and reputation within the market. (ibid) Meidan, (1996) states that another part of public relations is the publicity gained through magazines. Financial services obtain considerable publicity in so called quality press, such as different financial journals. In popular newspaper the publicity is, in contrary to the quality press, often negative from the financial firm�s point of view. (ibid) Meidan (1996) further claims that the importance of public relations is being increasingly attended, and financial services often have public affairs officers, working actively to generate publicity. Personal Selling Brassington & Pettitt (2000) define personal selling to be a two-way communication tool between a representative of an organization and an individual or group, with the intention to inform, persuade or remind them, or sometimes serve them to take appropriate actions. Furthermore, personal selling is a crucial element in ensuring customers� post-purchase satisfaction, and in building profitable long-term buyer-seller relationships built on trust and understanding (ibid). Verhallen et al. (1997) state that the increased competition within the fast changing environment of financial services has lead banks to develop and maintain comprehensive relationships with their customers. Furthermore, Julian & Ramaseshan (1994) state that the long-term person-to-person relationship is an important factor for a retail bank to achieve a competitive advantage. Meidan (1996) points out that once a customer has chosen its bank, he is unlikely to switch to another. Thus, personal selling is probably the most important element in the communication process within the financial services industry. (ibid) Lee (2002) state that personal selling can be performed either face-to-face or through technological aids such as the Internet. According to Julian & Ramaseshan (1994) the relationship between the salesperson and the customer is perceived as being of great importance for the marketing of a bank. Hence, the sales force within the financial services industry needs not only to be trained
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in the art of selling, but also to be aware of all the services available and be able to clearly explain what each service offers. Since customers� needs and motivation are likely to be complex, and their ability to assess alternative courses of action without professional assistance is likely to be limited, it is of great significance for the sales force to know their customers, as well as their products. (ibid) Verhallen et al. (1997) indicate that banks should see the selling as a problem-solving process in which the sales force engages and co-operates towards the customer, trying to find a solution to the customer�s problem, rather than only persuading him to purchase the products or services. In addition, Meidan (1996) claims that it is up to the sales force to enhance the bank�s reputation by looking after its customers. Direct Marketing According to Brassington & Pettitt (2000), direct marketing is an interactive system of marketing, using one or more advertising media to achieve measurable response anywhere, forming a basis for creating and further developing an on-going direct relationship between an organization and its customers. To be able to create and sustain quality relationships with sometimes hundreds or even thousands of individual customers, an organization needs to have as much information as possible about each one, and needs to be able to access, manipulate and analyze that information. Thus, the database is crucial to the process of building the relationship. (ibid) Lee (2002) states that the fast advances in technology over the past 30 years have reshaped how consumers today interact with their financial institutions. The financial sector has extended its �face-to-face� selling towards direct marketing of products and services in the form of phone, mail, or computer transactions. (ibid) Mols (2000) claims that as computer literacy and the availability of computers increase and the costs decrease, Internet banking consumers are increasing considerably. Through the Internet banks, the customers can identify what interests them. Furthermore, the Internet technology also makes it possible to follow individual customer usage. With the information gathered in an integrated database it is possible to read the customers needs and satisfy them. This knowledge can be used for different kinds of direct marketing. (ibid)
2.2 External Factors Influencing the Choice of Promotion Strategy According to Cavusgil et al. (1993) there are three categories of influences on the choice of adaptation of the promotion strategy; the product and industry, the company and the export market of choice.
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Figure 2.1 A Testable Framework of Product and Promotion Adaptation
Modified from Cavusgil, et al., 1993, p. 485 The Product and Industry According to Cavusgil et al. (1993) the product and industry influences include four factors; type of product, product uniqueness, technology orientation of the industry and cultural specificity of the product. Type of Product Cavusgil et al. (1993) define the type of product as the product�s classification. Nicolaud (1989) & Meidan (1996) state that services are intangible products which often cannot be separated from the person performing or selling them. Czinkota & Ronkainen, (2004) further state that the value of services is harder to measure, its performances are harder to observe and to possess, compared to manufactured goods. According to Bossone (2000) banks are intermediaries between savers and users of capital. They supply transaction services and provide liquidity to both consumer and industrial markets (ibid). Meidan (1996) states that banks need to offer a wide range of products and services to meet a
variety of financial and related needs from different customers in different areas. The general types of products offered by a bank can be divided into five categories; • Cash accessibility (for instance telephone banking) • Asset security (for instance safety of money deposits) • Money transfer (for instance payment service) • Deferred payments (for instance loans) • Financial advice (for instance advice on investments, taxation or wills) Meidan (1996) further states that a service such as bank credit cannot appeal to a buyer�s sense of touch, smell, taste, sight or hearing, which as a result makes it very important for the marketer to explain what the service actually comprises. However, the general promotion strategy tends to focus on the brand rather than the product (ibid). Product Uniqueness Cavusgil et al. (1993) define the product uniqueness as the degree to which the product is made or designed to satisfy unique needs of the customers. According to Julian & Ramaseshan (1994) there is constant pressure within the competitive environment of banking to innovate and develop new ways to improve customer service. Long-term person-to-person relationships between a financial institution, its distributors and its customers, are seen as an important factor for a bank to achieve a competitive advantage (ibid). However, Meidan (1996) claims that since banks offer similar products, it is very hard to stand out. According to Marquardt (1994) a bank�s services are seldom unique and they are easy for competitors to copy. Additionally, Meidan (1996) states that banking services tend to meet general needs rather than specific, and since there are no particular benefits distinguishing different banks from each other, promotion of financial services is essential. A bank must strive to attain a good overall image and to attract customers with the right message (ibid). Technology Orientation of the Industry According to Cavusgil et al. (1993) the technology orientation refers to the technology intensity of the industry. Joseph et al. (1999) claim that technology has increasingly been applied in the delivery of services since the mid-eighties. The adoption of technology into service industries has become important, and service providers are being urged to invest in technology as a way of securing their future in the electronic age (ibid). Meidan (1996) states that new products, new payment systems, new forms of distribution and delivery and improved management information systems are increasing the demand of technology within the financial services sector. According to Flohr-Nielsen (2002) Internet banking should be seen as part of general trend in which customer relationships as well as new Web-technologies have become very important. The banking industry provides strong incentives for banks and customers to use the Internet. Banks can reduce their costs considerably, and at the same time meet potential demands of customers, such as convenience and cheap transactions. (ibid)
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Cultural Specificity of Product According to Cavusgil et al. (1993) cultural specificity of a product concerns if the product relates to the extent to which the product mediates the needs of a specific culture. Albers-Miller et al. (2000), state that consumer expectations can differ tremendously and the issues of culture should therefore be thoroughly examined by the bank in wish of conducting international business. An understanding of the customers is essential in order to create effective promotion (ibid). Root (1994) indicates that the greater the distance between two cultures, the harder it is to communicate effectively. Culture can affect many, if not all, of an organization�s strategic decisions (ibid). Meidan (1996) states that banking services tend to meet general needs rather than specific. He claims that a bank should analyze the wants and needs of different market segments and design its marketing mix to fulfill them. Consequently, market segmentation is essential. Consumer behavior towards financial services is very much a function of social class. (ibid) Papavassiliou & Stathakopoulus (1997) claim that the development of a basic advertising campaign with country-specific adaptations is very important, especially when there are great linguistic differences across different host countries. The advertising messages must correspond with the beliefs and traditions of the citizens in each country traditional, since cultural values have an impact on advertising message appeal (ibid). The Company According to Cavusgil et al. (1993) the company influences include the firm�s international experience, export sales goal for the venture and entry scope. Firm�s International Experience According to Cavusgil et al. (1993) a firm�s international experience refers to its previous international practice and the amount of information management had gained about the target country. A firm can gain international experience through involvement in international transactions, operating in many foreign markets, and through interaction with foreign suppliers or distributors. (ibid) Ghauri & Holstius (1996) mean that gaining information about the target market can be very difficult in developing countries and in the former socialist countries, because the infrastructure is often underdeveloped. Getting information from local counterparts may also be difficult, and it necessitates the development of relationships and mutual trust. However, research shows that this is less of an issue in the Baltic countries. (ibid) Export Sales Goal for the Venture According to Cavusgil et al, (1993) the export sales goal for the venture refers to what the penetration aim of the venture is in the target country. When a venture sets ambitious goals for it self, it will require a deeper penetration and a better understanding of the market of interest, in order to achieve success (ibid). Claessens & Jansen (2000) state that in comparison with domestic banks, foreign banks tend to be larger and have better quality loan portfolios, higher net worth and higher ratios of operating income to costs. They specialize in different activities and have a slightly smaller share of income from services than domestic banks. Foreign banks also tend to be less involved in consumer
THEORETICAL FRAMEWORK
13
lending, and focus their portfolios rather on the manufacturing sector. Foreign banks thus differ in their operations from domestic banks. (ibid) Entry Scope According to Cavusgil et al. (1993) the entry scope refers to if the product is exported to a single foreign market or multiple foreign markets. When a product enters multiple markets at the same time, the cost of adapting the product and promotion to fit each market is likely to be compounded with by substantial initial investment costs (ibid). Ghuari & Holstius (1996) claim that the Baltic States differs to a great extent from entry into traditional developing countries since these countries are more developed. The Export Market According to Cavusgil et al. (1993) the export market influences include three factors; similarity of legal regulation, competitiveness of export market and product familiarity of export consumers. Similarity of Legal Regulation According to Cavusgil et al. (1993) similarity of legal regulation is defined as the degree of market similarity, and similarity of legal regulation between the host and home country. Brassington & Pettit (2000) name political stability, ownership restrictions, employment laws, safety regulations, financial laws, promotion constraints, price regulations, and consumer protection legislation as some of the political and legal factors affecting an international organization. Cavusgil et al. (1993) further state that in an export market where the legal regulations are comparable with those in the home market, firms have less pressure to modify their promotional program. However, when there are great differences, modification promotion will be required (ibid). Ghauri & Holstius (1996) claim that when international companies start operations in East European transition economies, the environment is very different to their home country. However, according to Fleming et al. (1997) the Baltic States are some of the most developed transition economies. Exportrådet (2003) states that since the independence of these countries, the development from planned economy to a functioning market economy has been rapid. Ghauri & Holstius (1996) also claim that out of the Baltic countries, Estonia has done the most to harmonize laws with Western ones, but Lithuania is not far behind. Politically, all three countries are going through a democratization process (ibid). Competitiveness of Export Market According to Cavusgil et al. (1993) competitiveness of export market refers to the competitive intensity of the host country. Czinkota & Ronkainen (2004) mean that there is a greater variance of competition in the international market than the domestic. To be successful, an organization has to learn about the competitive activities and evaluate the actual and potential impact it has on its own operations (ibid). Papavassiliou & Stathakopoulus (1997) further state that by making a competitive analysis, multinational corporations can gain a �competitive advantage� for the role of advertising in their
THEORETICAL FRAMEWORK
14
marketing strategies in foreign markets. When this is not fulfilled, competition may force organizations to adapt promotion (ibid). According to Quintana (2003) increased competition has strongly affected banking organizations throughout the industrialized world, and there is now greater diversity than ever before in the activities and markets in which banks decide to operate. Deregulation and growing European integration have facilitated both domestic consolidation and internationalization of banking firms (ibid). Arnold et al. (2001) claim that the banking industry hardly existed in the Baltic States at the turn of the decade, but tens of companies have been establishing after 1991, many without the reserves to maintain their position. Product Familiarity of Export Consumers According to Cavusgil et al. (1993) product familiarity of the export consumers refers to if the customers are familiar with the product or not. Lindström, (2003) state that banks are generally important for the functioning of any country�s economy. However, according to Watters (1995) the financial services sector has no worldwide brands and has even lacked this extensive expansion across borders. This is because some of the considerations, such as management control and language, are the same as other business sectors, and others, such as legislation and regulation, are distinct to this sector (ibid). Other External Factors Influencing the Choice of Promotion Strategy Papavassiliou & Stathakopoulus (1997) state a few other factors that are influencing the advertising adaptation. These factors are country of origin image, economic factors and advertising infrastructure. Country of Origin Image Root (1994) implies that people in industrial countries tend to have a more favorable image of their own country�s product than foreigners do. Knowledge of made-in images can be of great help when operating abroad. Each image contains both positive and negative attitudes towards the product identifiable with the country of origin. By being aware of these attitudes and promoting on the positive ones, a company can increase the chance of success. (ibid) Claessens & Jansen (2000) mean that the increasing internationalization of financial services eliminates discrimination in treatment between foreign and domestic financial services providers, and removes barriers to the cross border provision of financial services. Economic Factors Papavassiliou & Stathakopoulus (1997) indicate that the economic conditions prevailing in the host country are of major concern in influencing international strategy. Brassington & Pettit (2000) mean that these economic factors can include inflation, exchange rates, income, consumption potential, rate of unemployment and exchange control regulations. Ghauri & Holstius (1996) state that the Baltic countries have made free trade agreements with the Scandinavian countries and have started to redesign their legislation to follow Western principles better. That is very important, since modern taxation laws are crucial for foreign investors. There are also some investment incentives for foreign enterprises in
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all the Baltic countries, such as tax relief and improved protection of foreign property against nationalization. (ibid) Advertising Infrastructure Papavassiliou & Stathakopoulus (1997) further state that the availability, performance and cost aspects of the advertising infrastructure can affect the promotion decisions. The advertising infrastructure consists of the institutions and functions essential to the advertising process, such as availability of media, the structure of media, availability of technical equipment, local advertising experience and staff talent in the target country (ibid). Arnold et al. (2001) claim that in the latter years, a great deal of money has been invested in advertising in the Baltic States, and this in turn has increased availability of media and development of the advertising structure.
2.3 Adaptation and Standardization of the Promotion Strategy The decision whether to adapt or standardize the marketing mix is, according to Brassington & Pettitt (2000), complicated for any organization operating in more than one environment. Too much adaptation might lead to failure of the organization to exploit the synergies that become possible when going international. (ibid) However, Van Mesdag (2000) states that a pure, comprehensive standardization is not possible, since the differences in for example language, retail structure, regulations and cultural features between countries are too great. Adaptation Agrawal (1995) states that marketers in favor of the adaptation strategy tend to argue that advertisers have to take differences including culture, stage of economic and industrial development, stage of product life cycle, media availability and legal restrictions into consideration. Brassington & Pettitt (2000) claim that when acting on an international market, an organization always have to consider to which degree a customer�s needs and wants are different from those on the domestic market, and if adaptation is necessary. Brassington & Pettitt (2000) further state that promotional mixes often have to be adjusted to suit the local environment and reflect the target markets preferences. Promotion has to take language as well as local regulations, in terms of both media choice and content, into account. Sales promotion is also affected by local regulations; therefore the choice of activities must respect these regulations and consider the preferences of the customers. (ibid) Brassington & Pettitt (2000) also indicate that marketing communication might have to be adapted, due to consumer readiness stage. A product that is mature in one market might be totally unknown in another market, and therefore the promotional mix will have to be adapted. Cavusgil et al. (1993) claim that adaptation of the promotion includes the costs of using different promotional messages, appeals, packaging/labeling and media. There are four variables that significantly and constantly impact the promotion
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adaptation. These are the firm�s international experience, technology orientation of the industry, product exclusivity and the competitive intensity of the market. (ibid) Cavusgil et al. (1993) further state that both reactive and proactive approaches of promotional adaptation exist. Proactive harmonizing with the characteristics of the market includes modification of positioning, packaging/labeling, and promotional approach. Firms may also choose to reactively adapt their products in order to improve their competitive position, especially if competition in the market is intense, the industry is technology intensive, or the product is unique. (ibid) There are three basic conditions, stated by De Mooij (1994), that have to be fulfilled in order to use a standardized approach, and if these are not realized adaptation should be considered.
1. A brand�s advertising cannot be universal if different national markets are in diverse stages of maturity.
2. A brand�s advertising cannot be universal if the idea depends on a large budget which is unsupported in some markets
3. A brand�s advertising cannot be universal if it defies local customs and regulations and ignores the efforts of the competition.
De Mooij (1994) presents eight arguments in favor for choosing an adaptive promotion strategy:
1. The heterogeneity of the countries concerned. 2. The �not invented here� syndrome: the desire to create own campaigns. 3. Differences in the media scene. 4. Differing regulations regarding service or advertising. 5. The nature of the competition in different markets. 6. The service is at different stages of its life-cycle in different markets. 7. The danger of being seen as a foreign company. 8. Reduced economic advantage because of higher co-ordination costs.
According to Czinkota & Ronkainen (2004) adaptation also has to be carefully investigated in emerging market economies, where the consumers are more likely to be interested in rational advertising that has a clear message. They see advertising as information, which they can use in order to sort out between the numerous and sometimes confusing offers. This has led to the fact that many consumers tend to prefer advertisements in newspapers to those on television, particularly if they are well organized and informative. (ibid) Standardization Cavusgil et al. (1993) state that the development in communication and transportation technologies, together with the increased travel contributes to the globalization of markets, has resulted in emerging global customer groups. Therefore, in a market where needs and preferences of the customers are largely universal, standardization might be
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preferable. In order to succeed in the global market it is of importance for companies to be able to deliver high-quality products at a competitive price. Standardization of marketing programs might be crucial to achieve a low-cost competitive position. (ibid) Agrawal (1995) explains that people favoring a standardization approach believe that differences between countries are more a matter of degree than direction. That is why advertisers should focus on the similarities of the consumers in the international marketplace rather than the differences (ibid).
De Mooij (1994) claims that the following nine arguments are a reason for choosing a standardized promotion strategy:
1. Cost reduction is the most important argument for standardization. 2. A uniform brand image and corporate image worldwide avoid confusion. 3. The globalization of media. 4. Simplified planning through uniform objectives. 5. Maximum use of good ideas and transmission of know-how. 6. Centrally managed international enterprises. 7. Better use of manage abilities and resources. 8. Universal guidelines and quality standards. 9. Better access to know-how and experience of other countries.
According to O�Donnell & Jeong (2000) the main characteristic of global marketing tends to be to standardize the elements of the marketing mix as much as possible. The advantages are economies of scale within the three elements product, place and promotion, which are captured in the marketing mix (ibid). O�Donnell & Jeong (2000) further claim that the amount of standardization needed depends on the type of product. Industrial products are seen to be more suitable than consumer products for standardization, since industrial buyers tend to be more rational in their purchasing behavior and demand for industrial products is more homogenous across markets. (ibid) Furthermore, Cavusgil et al. (1993) state that in a captive market, where the product already has achieved a leader position, a higher degree of standardizations may be advantageous. The Contingency Theory O�Donnell & Jeong (2000) indicate that it is not possible to use either total standardization or complete adaptation. The degree to which these are used depends on a number of internal factors, for example organizational structure and managerial orientation, and external factors, such as target market and environment. (ibid) Cavusgil et al. (1993) states that standardization and adaptation should be seen as two extremes, and choosing one of these approaches without adjusting it will not be successful.
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3 FRAME OF REFERENCE Based on the theoretical framework presented in the previous chapter, this chapter will show the conceptualization of the theories and help to clarify how they will answer the research questions. Miles & Huberman (1994) state that the meaning of conceptualization is to explain, either through graphics or text, the main things that will be studied. Because of the extensiveness of the literature review, parts of each theory has been chosen and conceptualized. Our conceptualization will be presented accordingly with the order and content of our research questions stated below: RQ1: How can the promotion mix for banking services in the Baltic States be
described? RQ2: How can the external factors influencing the choice of promotion strategy for
banking services in the Baltic States be described? RQ3: How can the adaptation vs. standardization of the promotion strategy for banking
services in the Baltic States be described?
3.1 The Promotion Mix for Banking Services In order to answer our first research question, we will apply theories regarding promotion of financial services. We will use the five general promotional tools, which according to Brassington & Pettit (2000) are advertising, sales promotion, public relations, personal selling and direct marketing. For the characterization of each tool, we will use the definitions provided by these authors. The theories we will rely on for describing the five tools are theories concerning promotion of financial services, presented mainly by Meidan (1996), but also by Julian & Ramaseshan (1994), Peatti & Peatti (1994), Verhallen et al. (1997) and Lee (2002). We believe that with these theories as a foundation, the comparison with our research findings will be facilitated and more accurate, and that we will be able to describe the promotion mix of a bank�s services. Concerning advertising, we will look at institutional and brand advertising, which according to Meidan (1996) covers advertising of the company image as a whole versus advertising the brand name and the different products. He also talks about above-the-line advertising as channels of communication that can be applied, and under-the-line advertising as a discreet but significant part of a financial services organization�s promotion. These two communication approaches will also be considered. Meidan (1996) also presents a number ways to use sales promotion, such as through coupons, special offers and other forms of price manipulation. This will also be of relevance for our research. Moreover, he describes to what extent sales promotion can be used by financial institutions, which also will be of interest.
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With public relations, we will look at significant issues, which according to Brassington & Pettit (2000) are relationships building, image maintenance, charitable involvement, sponsorship, and community initiatives. We will also consider Meidan�s (1996) statement regarding the importance for financial institutions to appear in financial magazines. Concerning personal selling, we will look at the importance of interaction and relationships with customers, which according to Verhallen et al. (1997) is increasingly important for banks due to the competition intensity. Lastly, within direct marketing our concerns will mainly include measurable response achieved through different tools such as the Internet, which according to Lee (2000) and Mools (2000) is to a large extent replacing face-to-face interaction.
3.2 External Factors Influencing the Choice of Promotion Strategy Our second research question concerns external factors influencing the choice of promotion strategy. In order to answer this question we will mainly use selected parts from the theory of Cavusgil�s et al. (1993) and also some facts mentioned by Papavassiliou & Stathakopoulus (1997), which we believe covers most of the issues that are relevant to describe the external influences on the choice of promotion strategies. There are no theories to be found that suit the exact approach of our research, but although our chosen theories concern influences on promotional adaptation, we think that the theories provide a suitable framework for defining of the external factors that can influence the choice of promotion strategy. We will focus on the factors that Cavusgil et al. (1993) state are the product and industry and the export market. The product and industry influences include four factors; type of product, product uniqueness, technology orientation of the industry and cultural specificity of the product. The export market influence will include two factors; similarity of legal regulation and competitiveness of export market. (ibid) Most of the basic definitions of each subtitle have been applied, but the theory has been adjusted with a number of authors� statements regarding financial services and the general conditions in the Baltic States. This has been done in order to make a relevant comparison and to answer our research question more properly. Although it provides a general framework for possible influences, the theory by Cavusgil (1993) is in many ways inadequate. This is due to the fact that it only comprises factors relevant for manufactured products and does not consider services. Furthermore, we also found the theory limited, since it concerns a number of factors, which we believe are only relevant for a market entry strategy. Those factors will not be of significance for our research, since we will focus on current promotion strategies performed by an established bank operating in the Baltic States. The concerned factors are all three of the factors regarding the company as an influencing factor, and also one of the export market influences: product familiarity of export consumers.
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Due to the facts stated above, we have decided to construct our own adapted version of the theory by Cavusgil (1993). As mentioned before, all company factors have been removed, partially because we see those factors as internal factors which to a great extent would have been the same as in the home market, and also since the factors focus on a company�s entry strategy. The export market influence called product familiarity of export consumers also felt irrelevant, since banks exist everywhere and people tend to know to some extent what kind of function they have, and this factor would have been more relevant if we were looking at goods instead of services. Further adaptations have been made since the theory concerns manufactured goods that are being exported to a new country and our approach is to investigate promotion strategies of a foreign bank established in the Baltic States. The remaining factors describing the external influences on the choice of promotion strategy will be utilized, however, with some adjustments on either their names or their purpose, in order to suit the situation. The export market will be renamed to the international market, the competitiveness of the export market will be renamed to the competitiveness of the market. Furthermore, the cultural specificity of the product will be called cultural aspects, and will be adjusted to the theories found and consider general cultural issues, such as differing expectations, attitudes and preferences, facing the company, with focus on the influence on promotion strategies. Apart from the theory of Cavusgil et al. (1993), we have also found a few other external influences, which we consider to be relevant for our research. Papavassiliou & Stathakopoulus (1997), state that country of origin image, economic factors and advertising infrastructure also can affect promotion decisions. These factors will also be considered and will help us to answer research question number two. The new model used for our research will comprise the following factors: the type of product, product uniqueness, technology orientation of the industry and cultural aspects (product and industry factors), similarity of legal regulation and competitiveness of export market (international market factors) and country of origin image, economic factors and advertising infrastructure (other external factors). The factors presented in figure 3.2 are the ones that have been selected and adapted to serve the purpose of answering research question number two.
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Figure 3.1 External Factors Influencing the Choice of Promotion Strategy
3.3 Adaptation and Standardization of the Promotion Strategy The third research question regards to what extent the promotion is standardized or adapted. In order to answer it, theories regarding adaptation and standardization will be applied. We believe that the theories mentioned in this section will enable us to describe the adaptation vs. standardization of an international bank�s promotion strategy in the Baltic States, and thereby answer research question number three. We will look at a number of basic conditions that have to be fulfilled in order to choose strategy and arguments in favor for choosing one or the other of the two strategies. There are three basic conditions, stated by De Mooij (1994), that have to be fulfilled in order to use a standardized approach, and if these are not realized adaptation should be considered.
1. A brand�s advertising cannot be universal if different national markets are in diverse stages of maturity.
OTHER EXTERNAL FACTORS
PRODUCT & INDUSTRY
INTERNATIONAL MARKET
Similarity of Legal Regulations
Competitiveness of the Market
Country of Origin Image
Economic Factors
Type of Product
Technology Orientation of
Industry
Product Uniqueness
Cultural Aspects
Advertising Infrastructure
Promotion Strategy
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2. A brand�s advertising cannot be universal if the idea depends on a large budget which is unsupported in some markets
3. A brand�s advertising cannot be universal if it defies local customs and regulations and ignores the efforts of the competition.
De Mooij (1994) has stated eight arguments in favor for choosing an adaptive promotion strategy:
1. The heterogeneity of the countries concerned. 2. The �not invented here� syndrome: the desire to create own campaigns. 3. Differences in the media scene. 4. Differing regulations regarding service or advertising. 5. The nature of the competition in different markets. 6. The service is at different stages of its life-cycle in different markets. 7. The danger of being seen as a foreign company. 8. Reduced economic advantage because of higher co-ordination costs.
Furthermore, de Mooij (1994) also states nine arguments for choosing a standardized promotion strategy.
1. Cost reduction is the most important argument for standardization. 2. A uniform brand image and corporate image worldwide avoid confusion. 3. The globalization of media. 4. Simplified planning through uniform objectives. 5. Maximum use of good ideas and transmission of know-how. 6. Centrally managed international enterprises. 7. Better use of manage abilities and resources. 8. Universal guidelines and quality standards. 9. Better access to know-how and experience of other countries.
Furthermore, we will use the theories presented below. Brassington & Pettitt (2000) presents some theory regarding adaptation and preferences of the customers, which is relevant for our research questions. According to O�Donnel & Jeong (2000) products or services directed to the industrial market are seen as more suitable for standardization than consumer products or services. Moreover, Czinkota & Ronkainen (2001) claims that adaptation has to be carefully investigated in emerging market economies, where the people are interested in rational advertising and see it as information. Finally, Cavusgil et al. (1993) state that the development of communication possibilities together with the increased travel contributes to the globalization of markets.
3.4 A Conceptual Frame of Reference In order to fulfill the purpose of this study concerning international banks� promotion strategies in the Baltic States, the three research questions will be applied to cover all
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significant parts of the area. The first research question will provide the different promotion tools available for banking services. Research question number two will describe the external factors influencing why and how a specific promotion strategy is chosen. Finally, research question number three will clarify how the strategy will be implemented in terms of adaptation and standardization of the original concept. These research questions are interrelated and together they will serve the purpose of this study. Below the conceptual frame of reference model provides an overview of the theoretical parts that have been chosen, and which will aid the collection of data, and later also facilitate the data analysis.
Figure 3.2 A Conceptual Frame of Reference
RQ 2: External Factors Influencing the Choice of Promotion Strategy
1. Product and Industry 2. The International
Market 3. Other External Factors
RQ1: The Promotion Mix for Banking Services
1. Advertising 2. Sales Promotion 3. Public Relations 4. Personal Selling 5. Direct Marketing
RQ 3: Adaptation vs. Standardization of the Promotion Strategy
1. Standardization of the Promotion Strategy
2. Adaptation of the Promotion Strategy
Promotion Strategy for Banking Services in the
Baltic States
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4 METHODOLOGY This fourth chapter will discuss and motivate the methodological issues connected to this study. First, the purpose of the research and the research approach will be provided. This will be followed by the research strategy and the method used for the data collection. After that, the sample selection will describe the case company and respondent. Thereafter, the strategy for analyzing the data and the method problems that can occur in this type of study will be discussed. Finally, a figure summarizing the methodological path chosen will be provided.
4.1 Research Purpose According to Eriksson & Wiedersheim-Paul (2001) the purpose of a research can be exploratory, descriptive or explanatory depending on the nature of the problem. Exploratory studies are useful when the aim of the research is to seek new insights into phenomena, to ask questions and to assess phenomena in a new light (Saunders et al., 2003). Furthermore, it is useful for clarifying ambiguous problems. Usually, exploratory studies are an initial research conducted with the expectation that subsequent research will be required. (Zikmund, 2000) An advantage with exploratory research is that it is flexible and adaptable to changes. The focus tends to initially be wide and then narrows down as the research develops. (Saunders et al., 2003) Descriptive studies are designed to describe characteristics of a population or a phenomenon. It seeks to determine the answer to questions asking; who, what, when, where and how. Furthermore, descriptive studies are, unlike exploratory research, based on some previous understanding of the nature of the problem. (Saunders et al., 2003) According to Wallén (1996), descriptive research is suitable when the problem is clearly structured but the intentions are not to establish connections between cause and symptom. Explanatory studies are according to Saunders et al. (2003) studies with the emphasis to study a situation or a problem in order to explain the cause and effect relationship between given variables. In order to accomplish that, well-defined research problems has to be done and hypotheses need to be stated (Eriksson & Wiedersheim-Paul, 2001). Explanatory research is mostly used within areas where extensive research has already been done (Wallén, 1996). As mentioned, the purpose of this thesis is to gain a better understanding of international banks� promotion strategies. In order to attain this better understanding we are describing the different tools in the promotion mix used by financial services, external factors influencing the choice of promotion mix and adaptation and standardization theories. Thus, the thesis can be explained as mostly descriptive. However, since we have not been able to find studies that focus on the exact same problem as we have chosen to study in this thesis, the topic area will also be explored. Finally, towards the end of the thesis our own conclusions are presented and through this we are beginning to explain the
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phenomena we have explored and tried to describe. This makes our study mainly descriptive but with both explorative and some explanatory influences.
4.2 Research Approach According to Saunders et al. (2003) research can be categorized into either qualitative or quantitative approach. Whether the research should be qualitative or quantitative depends on the defined problem and the investigated type of data, in order to solve the problem (Holme & Solvang, 1997). For a qualitative research, information is gathered to gain a deep and thorough understanding, and to describe a holistic view (Saunders et al., 2003). It involves gathering, analyzing and interpretation of data impossible to quantify (Holme & Solvang, 1997) and is based on meanings expressed through words (Saunders et al., 2003). Furthermore, Holme & Solvang (1997) state that a qualitative approach is characterized by a closeness to the respondent or source and intends to capture its values , attitudes and perceptions regarding of the investigated area. Therefore, the researcher strives to obtain a complete understanding and overview of the problem rather than just focusing on certain specific variables. (ibid) Quantitative research, on the other hand, is a research approach that is formalized and highly structured. Through the study of some specific variables on a great number of objects of investigation, this approach enables the researcher to make universal generalizations. All variables are measured by statistical methods, since the information is transformed into numerical data and thus easy presentable in figures. Finally, a quantitative approach is characterized by selectivity and distance between the researcher and the source. (Holme & Solvang, 1997) The choice of research approach should be based on the purpose of the study. In order to gain a better understanding of our purpose, we have chosen a qualitative approach that enables us to obtain more in-depth information.
4.3 Research Strategy Which strategy to use in the research can, according to Yin (1994), be determined by looking at three different conditions. These conditions are: 1. The type of research question posed 2. The extent of control an investigator has over actual behavioral events 3. The degree of focus on contemporary as opposed to historical events Table 4.1 shows how Yin (1994) relates each condition to the five alternative research strategies.
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Table 4. 1 Relevant Situations for Different Research Strategies
Strategy Form of research question
Requires control over behavioral
events?
Focuses on contemporary
events?
Experiment how, why yes yes
Survey who, what, where, how many, how much no yes
Archival analysis who, what, where, how many, how much no yes/no
History how, why no no
Case Study how, why no yes
Source: Yin, 1994, p. 6 The purpose of this thesis is to gain a deeper understanding for international banks� promotion strategies in the Baltic States. In order to obtain this purpose, all three research questions have been stated as openly as possible. The intention with this strategy when stating the research questions was to avoid questions that would not cover the broad understanding sought in our purpose. This is also the reason why all our research questions were stated in the form of �how�. An experiment is done when an investigator can manipulate behavior directly and precisely. This can occur in a laboratory and focus on isolated variables. (Yin, 1994) In our study, we could not control behavioral events and thus the experiment strategy was not used. Survey research is according to Yin (1994) concerned with systematic gathering of information from respondents, generally in the form of a questionnaire. It often answers questions of what, where and who. (ibid) With this strategy, we could have investigated a few variables, but we would not have been able to cover all the aspects of financial promotion that we believe are necessary to obtain the understanding sought after in our purpose. Therefore, we decided not to use the survey strategy. Moreover, Yin (1994) states that analysis of archival records is advantageous when the research goal is to describe the incidence or prevalence of a specific occurrence. Since our purpose is to gain an understanding, archival records were excluded. Yin (1994) further presents a historical strategy as dealing with the �dead� past. That is, when no relevant persons are alive to report and the investigator must rely on documents and cultural and physical artifacts as the main sources of evidence (ibid). However, since this thesis focuses on contemporary events, which occur at the present moment, the historical strategy was eliminated. This leaves us with only one strategy � the case study. A case study involves investigating few entities but many variables, in order to get an in-depth situational picture (Wiedersheim-Paul & Ericsson, 1997). In general, case studies is the preferred strategy when �how� and �why� questions are posed, when the investigator has little control over events and when the focus is on a contemporary phenomenon
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within some real-life context (Yin, 1994). He further describes a case study as an empirical inquiry that investigates a contemporary phenomenon within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident (ibid). Since the research questions that we base this thesis on are of �how� character and because our purpose is to gain an understanding of our research area, we have chosen to adopt the case study as our research strategy. According to Yin (1994) a case study can involve either a single-case or multiple-case study. The single-case study investigates one case thoroughly whereas a multiple-case study investigates several cases. Furthermore, in a single-case study, the research is compared with existing theory. (ibid) Due to the time limitations we have chosen to do a single-case study.
4.4 Data Collection According to Yin (1994), data can be collected for case studies via six different sources. No single source has a complete advantage over all the others. Instead, they are highly complementary and a good case study should include as many sources as possible. The author calls this use of multiple sources �triangulation�, which gives the researcher an opportunity to obtain multiple measures of the same phenomenon. This will in turn increase the validity when performing any scientific study (ibid). The six sources of evidence are presented below. Table 4. 2 Six Sources of Evidence: Strengths and Weaknesses
Source of Evidence STRENGTHS WEAKNESSES Documentation # Stable: can be reviewed
repeatedly # Unobtrusive: not created as a
result of the case # Exact: contains exact names,
references, and details of an event
# Broad coverage: long span time, many events, and many settings
# Retrievability: can be low # Biased selectivity: if
collection is incomplete # Reporting bias: reflects
(unknown) bias of author # Access: may be deliberately
blocked
Archival Records # (Same as above for documentation)
# Precise and quantitative
# (Same as above for documentation)
# Accessibility due to privacy reasons
Interviews # Targeted: focuses directly on case study topic
Direct Observations # Reality: covers event in real time
# Contextual: covers context of event
# Time consuming # Selectivity: unless broad
coverage # Reflexivity: event may
proceed differently because it is being observed
# Cost: hours needed my human observers
Participant Observations # (Same as for direct observations)
# Insightful into interpersonal behavior and motives
# (Same as for direct observations)
# Bias due to investigator�s manipulation of events
Physical Artifacts # Insightful into cultural features
# Insightful into technical operations
# Selectivity # Availability
Source: Yin, 1994, p.80 Archival records are produced for a specific purpose and a specific audience. When those conditions are not fully fulfilled the usefulness of an archival record cannot be assured. In addition to that, they have the same strengths as documentation, but are focusing on past events and will thus not be used in this study. Direct observations and participant observations could have been used in this study, however they are ruled out as possible sources of evidence, due to limitations regarding time and financial recourses. Physical artifacts are described as insightful when it comes to cultural features and technological operations, but since our study is concerned with perceptional questions, this type of evidence is not relevant. In this research, the two sources of documentation and interviews were used, allowing for multiple sources of evidence. (Yin, 1994) According to Yin (1994) interviews are the most important source in case studies. An interview can be based on three different strategies:
Case study interviews are mostly of an open-ended art, where the interview does not follow any structured questions. The investigator can ask the respondent for the facts of a matter as well as for the respondents� opinions about events. Sometimes, the investigator can ask the respondent to propose his or her own insights into certain occurrences and might use such propositions as basis for additional inquiries. In a focused interview the respondent is interviewed for a short period of time. In such situations, the interview may still remain open-ended and assume a conversational manner, but the investigator is more likely to follow a pre-determined structure derived from the case study protocol. Finally, a structured interview follows a set of strictly pre-determined questions and can thus be characterized more as a combination of a survey and an interview. (Yin, 1994) The type of interview used in this study is a focused interview. We will use an interview guide (provided in Appendix 1 & 2) to be able to discuss a limited number of issues
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connected to the frame of reference. This way, the focused interview can be used to confirm or dismiss certain facts, or in this case, theories. In general, a focused interview can be conducted by telephone or in person. Telephone interviews are less costly and time consuming, which makes them useful when contacting a distant respondent (Lundahl & Skärvad, 1992). We have conducted a telephone interview, due to the long distance to our respondent and the time we were able to save compared to a face-to-face interview. According to Yin (1994) the use of a tape recorder during the interview is essential to register the empirical data with an absolute accuracy. We used a tape recorder and by registering the data, we were provided with the possibility to transcribe the interview word by word. The respondent was aware of the tape recorder and had no objections. In order to collect secondary data about the sample company, we visited the different websites of Nordea as well as their intra-websites. There, we found general information about the company. The exactness and trustworthiness of this documentation makes it valuable for the background information about the sample company.
4.5 Sample Selection After having determined the appropriate sources of evidence, it is essential to find relevant and manageable samples to collect the empirical data from. The choice of sampling technique is dependent on the feasibility and sensibility of collecting data to answer the research questions and to address the objectives (Saunders et al., 2003). In accordance with Saunders et al. (2003), non-probability sampling was chosen since a better understanding of a problem was required. To answer the research questions and to meet the objectives with this study, an in-dept study was carried out, focusing on one small case purposively selected in accordance with Saunders et al. (2003). We have chosen to conduct a single-case study on promotion strategies within the Banking sector, due to the fact that the banking sector is one of the most internationalized service sectors and has been influenced by the changes in the globalization process. The Estonian market was chosen since it is one of the most developed transition markets, being a new member of the European Union. After research, we discovered that Nordea is the only Nordic bank acting on the Estonian market with a full ownership of the bank, and therefore this bank was chosen. According to Holme & Solvang (1997) the selection of respondent is crucial. If the wrong persons are being interviewed, the research may turn out to be invalid or worthless (ibid). First, we contacted the company via e-mail and explained the intentions of our study. Thereafter we were recommended the most appropriate interview respondent. In order to fulfill our purpose, it was essential to reach the person who possessed the most knowledge and experience of our research area. The country manager of Nordea bank Finland plc Estonia branch was the most suitable person for our interview, since he had the knowledge relevant to answer the questions brought up in the interview guide.
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4.6 Data Analysis According to Yin, (1994), research studies should begin with a general analytical strategy providing the researcher with a system by which he or she can set priorities for what to study and why. That includes examining, categorizing, tabulating, or otherwise recombining the data used for the study. Two general analytical strategies are available when performing a case study; ! Relying on theoretical propositions: the results from previous studies are
compared to the researchers� findings from the case study. This is the most preferred strategy and also the strategy used in this study.
! Developing a case description: a descriptive framework is developed for
organizing the case study. This is used when there is little previous research on the subject.
According to Yin (1994) specific techniques can be used to analyze the data; within-case analysis compares the collected data with the used theory whereas cross-case analysis compares data from one case with another case. As mentioned before we have chosen to do a within-case analysis since the study is analyzing only one case. Miles & Huberman (1994) states that qualitative data analysis consists of three concurrent flows of activities; ! Data reduction: This stage of qualitative data analysis selects, abstracts,
simplifies, focuses, and transforms the collected data. The purpose is to organize the data in order to draw and verify conclusions.
! Data display: After having reduced the data, it should be displayed in an
organized and compressed way to enable easy conclusion drawing. ! Conclusion drawing and verification: In the last stage the researcher decides the
meaning of occurrences, noting regularities, patterns, explanations possible configuration, causal flows, and propositions.
The propositions presented by Miles & Huberman (1994) concerning how the analysis-activity should flow, were followed when the empirical data of the study was analyzed. Firstly, the data was reduced by selecting and simplifying data relevant to the research questions. Secondly, the data was presented in a structured and feasible way, following the structure of our research questions. Finally, conclusions of the study were drawn and verified.
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4.7 Quality Standards When determining the quality standards of a case study research, Yin (1994) suggests four commonly used tests; construct validity, internal validity, external validity and reliability. Since Yin (1994) claims that internal validity only is used for explanatory or causal studies and this study mainly is descriptive, this test will not be dealt with. Furthermore, Yin (1994) states that external validity deals with the problems of making generalizations of the case study. The aim of this study is mainly to gain a deeper understanding and not to make generalizations. However, some generalizations regarding the Baltic States will be done, but this will be carefully performed and to a limited extent. Thus, the test of external validity will not be taken into consideration. Construct Validity Validity is the extent to which the researcher is able to study what he or she had sought to study rather than studying something else (Gummesson, 2000). More specifically, construct validity establishes correct operational measures for the concepts being studied (Yin, 1994). Furthermore, he states that there are three different tactics to increase construct validity. The first tactic is the use of multiple sources of evidence during the data collection. The second tactic is to establish a chain of evidence. This is based on the principle to allow an external observer to follow the derivation of any evidence from initial research questions to the conclusions of the case study. The third and last tactic is to have the draft case study report reviewed by key informants. (ibid) In this study we have followed all of the recommendations from Yin (1994) to increase the construct validity. During the data collection, we have used a multiple strategy for source of evidence since we have conducted an interview as well as used documents. In order to create strong chains of evidence we have throughout this study made citations to all the sources from where evidence has been collected. This in turn makes it possible for any external observer to follow any evidence throughout the study. Finally, our supervisor has read and improved our drafts as well as the interview guide before we conducted the interview. Reliability Reliability demonstrates that the operations of the study such as the data collection procedures can be repeated with equal result. A researcher that repeat the exact same procedure and research as described by an earlier researcher should arrive at the same result and draw the same conclusions. (Yin, 1994) In order to obtain a high degree of reliability, we have in this thesis carefully explained the procedures of our research, in this, as well as in every other chapter. Moreover, we have followed a structured approach in which every sequential chapter, from introduction to conclusions, is based on the preceding one. This in order to provide readers and other researchers with a study that follows a logical flow and thus is easy to read and use in future research.
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4.8 A Visual Design of Methodology
Figure 4. 1 A visual design of Methodology
RESEARCH PURPOSE EXPLANATORY DESCRIPTIVEEXPLORATORY
RESEARCH APPROACH QUALITATIVE QUANTITATIVE
RESEARCH STRATEGY
ARCHIVAL ANALYSIS
EXPERIMENT
SURVEY
CASE STUDY
HISTORY
DATA COLLECTION METHOD DIRECT OBSERVATIONS
INTERVIEWS
ARCHIVAL RECORDS
DOCUMENTATION
PHYSICAL ARTIFACTS
PARTICIPANT OBSERVATION
SAMPLE SELECTION • ONE CASE • NORDEA IN ESTONIA • RESPONDENT: COUNTRY
MANAGER
DATA ANALYSIS • WITH-IN CASE
ANALYSIS
QUALITY STANDARDS
• CONSTRUCT VALIDITY • RELIABILITY
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5 EMPIRICAL DATA In this chapter the empirical data collected for our case study will be presented. The first section gives an introduction to the company and thereafter data covering the points raised in our frame of reference will be presented. The material presented in this chapter is based on two interviews with Mr. Christer Rosenstöm, Country Manager of Nordea Bank Finland plc Estonia branch and information from websites of Nordea.
5.1 The Nordea Group Nordea is the result of an extensive chain of Nordic fusions in 2001 between the Finnish Merita Bank, the Swedish Nordbanken, the Danish Unibank and the Norwegian Christiania Bank og Kreditkasse. Nordea AB now includes Nordea Bank Norway, Nordea Bank Sweden and Nordea Bank Denmark, Nordea Bank Finland, the insurance companies Vesta, Livia and Nordea Life as well as a number of subsidiaries dealing with leasing, real estate and securities services. Together they form the largest financial group in the Nordic region. The market share in the Nordic banking markets is significant with 40 percent in Finland, 25 percent in Denmark, 20 percent in Sweden and 15 percent in Norway. The Nordea share is listed in Stockholm, Helsinki and Copenhagen. (http://www.nordea.com)
Figure 5. 1 The Nordea Group
Source: http://www.nordea.com, 2004-04-20
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In addition to the Nordic countries, the Baltic States and Poland, which are commonly referred to as the home market, Nordea is present in 13 countries where it operates through full service branches, subsidiaries and representatives� offices. In the United Kingdom, Germany and USA Nordea is present through branches. In Russia presence through a jointly owned bank is managed and in Iran, Singapore, Brazil and China it has representative offices. Nordea also has a private banking entity, Nordea Bank S.A. in Luxemburg and Switzerland with representative offices in Belgium, France and Spain. (http://www.nordea.com) Nordea operates through three business areas: retail banking, corporate and institutional banking and asset management & life. The retail operations provide a complete range of financial services and products for a broad circle of private individuals, companies and institutions as well as the public sector. In order to make some of its services tangible in the mind of the customer, Nordea has chosen to refer to them as products. (http://www.nordea.com) Business Concepts and Objectives There are three fundamental principles, which Nordea is based on: focus, speed and performance. Focus should be on creating value for customers and shareholders and to concentrate on strengths and core activities. Nordea strives to adjust to market conditions and to carry out its operations. Continuous improvement in order to deliver better solutions than competitors is also of great importance. (http://www.nordea.com) Nordea�s objective is to be valued as the leading financial services group, with a considerable growth potential, in the Nordic and Baltic markets. It is also of importance to be in the top league or show superior and profitable growth in every market and product area where it chooses to be present. Other objectives are to have the leading multi channel distribution with a top world ranking in e-based financial solutions and a high level of use of its e-services. Lastly, Nordea aims to be a good corporate citizen ensuring confidence and trust. (http://www.nordea.com) Nordea in Estonia The Nordea Bank Estonia is a part of the Nordea Bank Finland, and it belongs to the Retail Banking Poland and Baltic countries. Nordea launched its first branch office in Estonia in 1995, under the name Merita Bank. Today Nordea is the third largest bank in Estonia and it is the only fully foreign owned bank established there. It has four offices and five sales points3, a total of 200 employees, and it has a market share of 7% in deposits and 12% in credits. It offers a full range of financial services to both corporate and private customers. These services include payment services, cash services, currency exchange, deposits, investment funds, documentary payments for import/export, loans and guarantees, corporate and private banking services. The primary customers of Nordea are Estonian companies, subsidiaries of foreign companies doing business in Estonia, companies in neighbouring countries, municipalities, employees of corporate customers and high income earners. (http://www.nordea.ee) 3 Offers same services as regular offices except cash expenditure (Nordea, 2004)
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Throughout the rest of this thesis, Nordea in Estonia will be referred to as Nordea unless something else is stated.
5.2 The Promotion Mix for Nordea�s Banking Services According to Mr. Rosenström, Nordea is cooperating with an external media agent, who is taking care of practical and organizational matters in terms of promotion, such as making media reservations at press conferences and ordering the material needed. Once a year, the media agent, together with Nordea, discusses marketing strategy and target market planning. Moreover, Mr. Rosenström states that the five promotional tools advertising, sales promotion, public relations, personal selling and direct marketing are all used to a certain degree when promoting banking services of Nordea. Advertising Institutional advertising is currently the most frequent form of advertising used by Nordea. It was especially important after the merger in 2001 in order to make people aware of the new brand name, Nordea. Institutional advertising is mostly exposed through television or out-side media, such as ad-pillars and posters. Furthermore, television commercials are mainly used for the purpose of building the brand name and brand recognition. However, since the market became aware of Nordea, advertising in magazines and radio also has become significant. In addition, brand advertising, which is concentrated mostly on specific services, is also of great importance. It focuses on reaching the customers who are most likely to be interested in the service, and on being cost efficient. It is performed in order to reach short-term goals such as selling a specific amount of home loans or credit cards within a certain period of time. However, in order to conduct brand advertising, the target segment firstly needs to be defined, since the aim is to advertise specific services to specific customer-segments. Thereafter, the type of media is chosen. Magazines and circulars are the most commonly used distribution channels whereas television is a less used media channel. Over-the-line advertising is frequently used through television, radio, poster, magazine and news paper advertising. However, the usage of banners on websites of other companies are also an important way to promote Nordea. Under-the-line advertising is commonly used at the offices and sales-points. Leaflets, pamphlets, explanatory guides and manuals are made available, either in combination with personal selling or for customer self-service. Normally, Nordea has about ten advertising campaigns in one year; however this depends on the economical and competitive situation on the market. The duration of each campaign varies from one to six months. The individual brand advertising campaigns follow the image the bank has created through its institutional advertising in form of having the same color scheme and always using the Nordea logotype. According to Mr. Rosenström, advertising is the second most important promotional tool after personal
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selling, since it effectively creates awareness of the brand, and helps to create a brand image. Sales Promotion Nordea does to some extent use sales promotion, in the form of special offerings and giveaways. An example of a special offering is when a customer decides to sign up for internet banking, telephone-banking or a credit card. The customer then receives beneficial charges or home loan offerings. Currently, Nordea is promoting special home loan offers, using low interests as a way to attract customers. However, special offerings are not commonly used by Nordea and only when the market conditions are favorable. Giveaways are mostly offered to corporate customers and private customers in the upper segment. Examples of giveaways include Nordea branded gifts, such as pens, calendars and torches. These are handed at meetings with the corporate or private customers. Public Relations Public relations are handled through a number of media and ways, with varying objectives. In order to inform the public about Nordea and its products, the company tries to appear in news television-programs and to write articles in financial magazines. There are a number of well-respected financial magazines in Estonia, in which Nordea is active. Approximately once a month Nordea tries, on its own initiative, to make a contribution in a magazine, and at least once a week journalists contact Nordea for a statement. Nordea has no specific person hired to take care of the public relation activities in Estonia, instead it is managed by external agents at press releases and by the personnel at the marketing department. For the creation of goodwill, Nordea is sponsoring a number of social projects, where the main fields include culture, sports and social affairs. The sponsorship principles are based on the objectives established by the Nordea Group, as well as the local circumstances, relevance and significance of the supported projects to the whole society or certain social groups. First and foremost, integrity, cultural value and social background of the projects are evaluated. The budget and significance of the project as well as the bank's current resources also influence the volume of the sponsorship and the choice of projects. Most attention include projects related to children's social problems, for example the UNICEF jubilee concert "Right to be a Child", the soccer event "No to Drugs" and the purchase of reanimation ambulance for the Tallinn Children's Hospital. Nordea has never experienced a crisis in Estonia. According to Mr. Rosenström, the reason for this is the customer segments Nordea has chosen to focus on. On the contrary, Nordea has been able to benefit from different crises, for example, the Estonian bank crisis in 1995 and the Russian crisis in 1998 that generally deteriorated the situation of the banking sector of Estonia. Personal Selling Personal selling is performed through the Internet, telephone, and personal interaction at the offices. Services such as accounts, credit cards, loans, investment funds and home insurance are offered to the customers. In order to effectively manage the personal selling
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activities, Nordea has segmented its customer-groups. Customers in the upper segment have their personal banking advisor, as well as corporate customers with a turnover above a certain level also have their own contact person. All customers can reach Nordea�s telephone central, and they can expect to get the same service as they get at an ordinary office. Furthermore, the customers who have their own banking advisor can also contact that person directly. Additionally, the telephone bank calls customers, mostly from the upper segment, to inform about offerings and new products. Less profitable customers are mostly informed about these offerings via mail. This concept is called one-to-one and one-to many, and was developed in order to be more cost efficient. Customer relations are also handled on commission by telemarketing companies who contact Nordea�s customers to inform about offerings or new products. Customers of competing banks are also contacted and provided with information in order to convince them to choose Nordea over other banks. As technology develops, self-services such as banking via the Internet or telephone is partially replacing the traditional interaction of personal selling. This enables the customers to manage their banking errands on their own. Most of the personal selling, however, is performed in the everyday work at the offices. It is commonly used in order to reach customers �right on the spot�, for example by promoting Nordea�s services to employees of a firm that is already a customer of the bank. Making �right on the spot� selling is a very central part of the promotion strategy, since Nordea believes that this is what generates the most sales. This is sometimes performed when the customer visits the office for another cause than actually buying a service. However, personal selling is also often performed on request of the customer. The employees working with personal selling annually acquire additional education, in order to increase their competence. According to Mr. Rosenström, personal selling is the most important tool in the promotion mix, since it focuses on the different target segments and builds relationships with individual customers. Personal interaction covers a great part of the bank�s operations and is the most determining factor for the success of Nordea. Direct Marketing Direct marketing is mostly related to new products, price changes and special offers. The bank has a data base with customer information in order to perform segmentation and targeting efficiently. Firstly, the already existing customers are targeted, and thereafter potential customers within Nordea�s target segment. After deciding which target segment to focus on, the choice of media is made. Direct marketing is mostly performed through post circulars. Nordea also uses telemarketing companies, which contact the customers and offer them special services and offerings. Nordea has not been able to make a lot of direct marketing via the Internet, since it does not have a complete list of e-mail addresses of private persons. However, this is something Nordea is working on, and an external agent has been hired in order to get access to these e-mail addresses.
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5.3 External Factors Influencing the Choice of Promotion Strategy The Product and Industry According to Mr. Rosenström, Nordea offers a full range of financial services to both corporate and private customers. The type of service offered does not influence the promotion strategy. Promotion is performed in a similar way, regardless of the product or service, but the segments are targeted differently. For example, advertising is used mainly to reach private customers and is presented through television, magazines, radio and by using out-door media. Promotion to corporate customers normally only consists of post circulars and personal selling. The most significant promotion concerns the brand Nordea and not a particular product or service. However, Mr. Rosenström points out that it is very important to promote the features of each service, and therefore Nordea always encourages its potential or established customers, through its advertising, to read more about them on the web site. Nordea has no products that are unique in comparison with those provided by their competitors in Estonia. However, corporate customers are offered a specialized service where Nordea helps them to avoid financial risks, something that competitors in Estonia do not offer in the same way. In order to be competitive, Nordea continuously strives for improvement in order to deliver better solutions than competitors. Since Nordea is a cost efficient bank, it can manage to provide lower prices than competitors and still receive a high profit margin. Nordea has three experienced people in the marketing department working solely with the process of making the marketing mix as cost efficient as possible. These people are primarily self-taught through �learning by doing�, but have great experience of the banking sector. It is very important for Nordea to maintain a good overall image and remain consequent in its actions. Nordea aims to be a good corporate citizen ensuring confidence and trust. The technology within the banking industry is of great importance, since Estonia is a forerunner in adapting modern technology. One of the Nordea group�s objectives is to have the leading multi channel distribution with a top world ranking in e-based financial solutions and a high level of use of its e-services. Nordea has been using the Internet as a promotional tool since 2001. Nordea believes that it is necessary to adapt technology into its operations, in order to keep up with the external pressure, and also to reduce costs, since it strives for cost efficiency. In all of its advertising, Nordea refers to the website, http://www.nordea.ee, for further information. Customers of Nordea can, apart from the traditional way, handle their bank errands through an Internet bank, telephone bank or WAP and GPRS phones. Banners on other companies� web pages are of great importance. However, Nordea initiated its technological development rather late and has not yet reached the development it desires. Currently, the major problem of making advertising through the Internet more efficient is that e-mail addresses of private persons are often hard to find. According to Mr. Rosenström, Internet and other high technological information channels are important tools for the segment that Nordea focuses on. However, it is not possible to state that customer satisfaction has increased due to the more extensive use of technology.
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Nordea considers cultural aspects to be of great importance, since it affects almost everything that it does. Most of the promotion is created locally to fit the needs and culture of the Estonian market. The preferences and expectations of Estonian customers somewhat different in comparison with Scandinavian customers. However, it is hard to describe what the actual differences are. Generally, the Estonian market is becoming more and more like the Scandinavian in terms of customer preferences and expectations. The promotion in Estonia applies the Nordea group concept and is as standardized as possible when it comes to colors, music and the information given. The Nordea bank offices also look similar to the Scandinavian regarding furnishing and equipment. The people working at Nordea in Estonia are Estonians, since �banking business is local business�. All promotion developed is translated into Estonian. Normally, commercials developed in Scandinavia include no dialogue, which makes it less complicated to adjust these. As mentioned before, Nordea has chosen to segment its customers. According to Mr. Rosenström, the primary customers of Nordea are corporate customers and high income earners, since these segments are the most profitable ones. This focus has enabled Nordea to avoid being affected by banking crises to the same extent as competitors. The International Market Laws and regulations on the Estonian market are quite similar to Scandinavian. The country is liberal and following these regulations has never been a problem for Nordea. Naturally, there are restrictions on promotion, but Mr. Rosenström claims that they are not better or worse than the Nordic ones. Estonia is at a rapid pace becoming more and more like any west European country. The competition in Estonia is tough, and there are a number of large banks which Nordea is benchmarking itself against. The three major competitors are three banks partially owned by the Swedish banks Föreningssparbanken and Skandinaviska Enskilda Banken and the Finnish bank Sampo. Since Nordea�s establishment, the competitive situation has intensified dramatically, including a number of consolidations between different banks and establishment of totally new banks. Only this year, two new banks have established on the Estonian market. As a consequence, the product range has broadened, prices have decreased and the overall costs for Nordea have increased. Nordea has been forced to conduct promotion much more intensively, and in accordance with the promotion of competitors. As a result, more effort has been put on television commercials. The competitive situation tends to determine the number of advertising campaigns Nordea conducts every year. Other External Factors Influencing the Choice of Promotion Strategy In order not to be seen as a foreign company, Nordea tries to highlight the local aspects rather than the Nordic. Since Nordea attempts to promote itself as a local bank, the country of origin image is of less importance. Nordea has never met any difficulties due to its origin and the promotion strategy in general has not been affected by the fact that Nordea is a foreign owned bank. Economic factors are of great importance when making a decision about the promotion strategy. If the economy is growing, it is essential to make sure that the growth of the
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bank is more rapid than the growth of the market. In order to manage this, Nordea intensifies its promotional activities. However, if the economy does not grow at all, Nordea diminishes its promotional actions. The economic situation does also to a great extent control which products that are most demanded. If, for example, the interest level is low, Nordea will choose to promote loans and if the stock market has a positive growth; mutual funds will be prioritized over funds based only on interest. The advertising structure in Estonia is well-developed, including commercial television and radio channels and numerous magazines. According to Mr. Rosenström all the media Nordea needs are available and are working satisfactorily.
5.4 Adaptation and Standardization of the Promotion Strategy Adaptation Nordea has to adapt almost all its promotion to a certain level. Firstly, when Nordea launched the new brand name in 2001, institutional advertising developed for Nordea in Scandinavia was used. However, this turned out to be less successful, since the people of Estonia were not aware of what kind of company the brand name represented to the same extent as the Scandinavian people were. Therefore, the bank had to adapt its promotional approach of the institutional advertising, so that the market could understand what the brand actually symbolized. Thereafter, pictures from the local market have been used for this type of advertising. The design of the website also has to be adapted with regard to the differing preferences of the customers. Moreover, in order to make it easier to standardize, the television advertising of Nordea in Scandinavia often does not include any dialogue. However, this type of advertising did not suit the Estonian market, since the Estonian people prefer talking commercials. As a result of this, all commercials are now created locally. Furthermore, promotion developed for the whole Nordea group always has to be translated. Additionally, promotion directed towards the private customers has to be more adapted than promotion towards the corporate customers, since the promotion towards the latter group generally includes mostly personal selling. The competition is tough, and the situation has intensified dramatically since the establishment of Nordea. This has forced Nordea to intensify its promotion, especially television commercials. Laws and regulations on the Estonian market are quite similar to Scandinavian. The country is liberal and following these regulations has never been a problem for Nordea. Nordea uses the same media channels as in Scandinavia, including commercial television and radio as well as papers and financial magazines. According to Mr. Rosenström, television is the best way to create awareness of the brand name and building a brand identity. Due to this fact, Nordea has adapted the advertising media used to focus on television. In order not to be seen as a foreign company, Nordea tries to highlight the local aspect rather than the Nordic when making statements in magazines. However, the promotion strategy in general has not been adapted due to the fact that Nordea is a foreign corporation, since it is not seen as a major problem.
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Standardization The cost of adapting promotion material is considerable, and therefore Nordea tries to standardize as much as possible in order to reach economies of scale. The logotype, colors used and giveaways are mostly standardized in order to create a consistent brand image. Since the services offered in Estonia are the same as the ones on other markets, a great part of the promotional material, such as pamphlets and leaflets, used for personal selling, only has to be translated. Internet marketing such as banners, as well as giveaways can also be partly or totally standardized. Moreover, some posters are totally standardized with the same slogan in all Nordea markets. Currently, a poster with the slogan �You are always at home with Nordea� is present at all larger airports in Nordea�s home markets. Although, the media available in Estonia are the same as in Scandinavia, this does not enable Nordea to standardize, since the Estonian market has other preferences regarding media. According to Mr. Rosenström, the Estonian market becomes more and more equal to the Scandinavian when it comes to customer preferences and expectations.
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6 DATA ANALYSIS In this chapter a within-case analysis will be presented, comparing the theories from the frame of reference with the empirical findings attained from Mr. Christer Rosenström and the Nordea web sites. The structure of this chapter will follow the order of the research questions presented in chapter one.
6.1 The Promotion Mix for Banking Services Research question number one concerns the different promotion tools for banking services in the Baltic States. The promotion tools discussed are advertising, sales promotion, public relations, personal selling, and direct marketing. Advertising Nordea uses both institutional and brand advertising to promote itself. This is in accordance with Meidan (1996), who states that a financial organization can use both institutional and brand advertising activities and often in combination with each other. In order to build up its brand name and for brand recognition, Nordea uses institutional advertising, exposed through television and outdoor media. Since the merger in 2001, Nordea has extensively used institutional advertising, but as the market has become aware of the brand, the method of advertising has developed. The institutional advertising today is also exposed through magazines and radio. Meidan (1996) confirms that institutional advertising can be used for the long-term build-up of its brand name and the firm�s image as a whole. However, he further states that institutional advertising can be used to promote specific products offered, which is not done by Nordea. The brand advertising of Nordea focuses on promoting the specific services the bank is offering to selected segments. This is done in order to reach the customers who are most likely to be interested in the service and in order to be cost efficient. It is also performed in order to reach its short-term goal such as selling a specific amount of home loans or credit cards within a certain period of time. Meidan (1996) agrees that, while institutional advertising is directed towards the whole population, the brand advertising of particular products has to be much more selective, since it is has to show that the consumer will benefit from the specific services. Nordea�s individual brand advertising campaigns follow the image the bank has created through its institutional advertising in the sense that it uses the same color scheme and the Nordea logotype. Meidan (1996) also mentions that all the individual campaigns of brand advertising has to be compatible in tone and presentation, and match the image the bank has created through its institutional advertising. Nordea has divided its advertising into �under-the-line� and �above-the-line� advertising. For its �above-the-line� advertising Nordea communicates with its customers through television and radio, magazines and newspapers. According to Meidan (1996), above-the-line advertising can be communicated through television, radio, posters, magazines, and
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newspapers. Furthermore, Nordea also has banners on company websites, which is not mentioned in theory. Nordea often uses �under-the-line� advertising at its offices and sales points. Leaflets, pamphlets, explanatory guides and manuals are made available, either in combination with personal selling or for customer self-service. This corresponds with Meidan�s (1996) statement that under-the-line advertising represents an important part of a financial organization�s indirect advertising. Sales Promotion Nordea is careful with the usage of sales promotion. It has some special offerings, for example for customers signing up for its Internet bank. At the moment, it has a special loan offering, using low interests to attract new customers. Peatti & Peatti (1994) claim that normally, coupons, special offers and other forms of price manipulation are the dominant forms of sales promotion. According to Meidan (1996) sales promotion tools have the advantage of an attention gaining quality and it provides a �bargaining chance� with the consumers. On the other hand, although it appeals to a wide range of buyers, it could make the consumers more suspicious whether the service is reliable or reasonably priced. Thus, financial organizations must be careful in the use of sales promotion. (ibid) Additionally, Nordea uses giveaways, which are mostly intended for corporate customers and for its main private customers of the upper segment. Public Relations Nordea is active in a number of well respected financial magazines in Estonia. Once a month it tries to make a contribution in a magazine, and every week the bank gets contacted for statements. As a part of Nordea�s charitable activities, it is sponsoring different social projects. Nordea has never experienced a crisis in Estonia. Instead, it has benefited from the two crises that have affected the banking sector since 1995, due to its choice of customer segments. According to Brassington & Pettitt (2000) PR covers a range of activities including media relation, charitable involvement as well as crisis management. Nordea does not have any specific person hired to facilitate the public affairs. Instead it is managed by different persons working with more general duties and by external agents when it comes to press releases. This is not in accordance with Meidan (1996), who states that many financial organizations have special public affairs officers, working actively to generate publicity. Personal Selling Personal selling is the most important promotion tool for Nordea, since it builds relationships with the individual customers and focuses on the different target segments. This is confirmed by Verhallen et al. (1997) who state that due to the extensive competition within banking services and the fast changing environment they are working in, banks need to develop and maintain comprehensive relationships with their customers. Because of this, Nordea attempts to nurture the relationships with its customers. All customers can reach the bank through the bank offices, via telephone or the Internet. Customers belonging to the upper segment as well as corporate customer also have the ability to contact their individual sales person. To increase the competence of the sales
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persons, they annually obtain further education. Julian & Ramaseshan (1994) also comment the importance of a good relationship between the customer and the bank and they agree that the sales force within a financial organization therefore needs to be trained in the art of selling. Direct Marketing Nordea normally uses direct marketing in connection with price changes, new product launches and special offers. It is mostly conducted through post circulars, but also through telemarketing companies contacting existing and potential customers. The bank has a data base for the customers, which confirms Brassington�s & Pettitt�s (2000) theory of the importance of having extensive information of customers collected in a database. However, the lack of e-mail addresses of private persons hinders the bank from using the Internet to reach the customers. Lee (2002) brings up how the development of technology has reshaped the interaction between financial institutions and their customers. According to the author, the financial sector has extended its �face-to-face� selling towards direct marketing of products and services in the form of telephone, mail and computer transactions. Nordea has not yet achieved to fully use the Internet for its direct marketing, however, it has hired an external agent to solve the problem.
6.2 External Factors Influencing the Choice of Promotion Strategy Research question number two concerns the external factors influencing the choice of promotion strategy for banking services in the Baltic States. The chosen factors of influence are the product and industry, the international market and other external factors. The Product and Industry Nordea offers a broad supply of services to private as well as corporate customers, which according to Meidan (1996), is generally needed by a bank in order to meet a variety of financial and related needs from different customers in different areas. The type of service offered does not influence Nordea�s promotion strategy, and all services are promoted in a similar way, with different approaches towards its different segments. The most significant promotion concerns the brand Nordea and not a particular product or service. Meidan (1996) agrees that the general promotion strategy focuses on the brand rather than a specific product. Nordea considers it to be important to inform about the features of each service, and therefore in its advertising, it always encourages its potential or established customers to read more about them on the web site. Meidan (1996) states that since financial services cannot appeal to a buyer�s physical senses, it is very important for the marketer to explain what the service actually comprises. Nordea has no products that are considered unique in comparison with those provided by its competitors in Estonia. Meidan (1996) claims that since banks offer similar products, it is very hard to stand out. According to Marquardt (1994) a bank�s services are seldom unique and they are easy for competitors to copy. However, one of Nordea�s main objectives is to strive for continuous improvement of its offerings to its customers.
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Corporate customers are offered a specialized service where Nordea helps them to avoid financial risks, something which competitors in Estonia do not offer in the same way. Another way of maintaining its competitiveness is that Nordea focuses on being a price leader. Since the bank is cost efficient, it can manage to provide lower prices than competitors and still receive a high profit margin. According to Julian & Ramaseshan (1994) the pressure within banking forces the banks to constantly attempt to improve customer service. It is also very important for Nordea to maintain a good overall image and remain consequent in its actions. The bank aims to be a good corporate citizen ensuring confidence and trust. Meidan (1996) confirms that since banking services tend to meet general needs rather than specific, a bank must strive to attain a good overall image. Nordea believes that technology within the banking industry is of great importance, particularly since Estonia is a forerunner in adapting modern technology. According to Meidan (1996) there is an increasing demand of technology within the financial services sector. One of the Nordea group�s objectives is to have the leading multi channel distribution with a top world ranking in e-based financial solutions and a high level of use of its e-services. In all of its advertising, Nordea refers to the website for further information, and it frequently uses banners online. Customers of Nordea can, apart from the traditional way, handle their bank errands through an Internet bank, telephone bank or WAP and GPRS phones. Despite this, Nordea has not yet reached its desired level of technology. According to Flohr-Nielsen (2002) Internet banking is a general trend in which customer relationships as well as new Web-technologies have become very important. Internet and other high technological information channels are considered important tools for the segments that Nordea focuses on. Nordea believes that it is necessary to adapt technology into its operations, in order to keep up with the external pressure, and also in order to reduce costs, since Nordea strives for cost efficiency. Flohr-Nielsen (2002) agrees that the banking industry provides strong incentives for banks to use the Internet, since they can reduce their costs considerably. Nordea claims, however, that it is not possible to state that customer satisfaction has increased due to the more extensive use of technology. This does not fully correspond with the statement by Flohr-Nielsen (2002) who claims that a bank at the same time can meet potential demands of customers, such as convenience and cheap transactions. Nordea considers cultural aspects to be of great importance, since it affects almost everything that it does. Root (1994) also indicates that culture can affect many, if not all, of an organization�s strategic decisions. Most of Nordea�s promotion is created locally to fit the needs and culture of the Estonian market. Papavassiliou & Stathakopoulus (1997) state that the advertising messages must correspond with the beliefs and traditions of the citizens in each country, since cultural values have an impact on advertising message appeal. The preferences and expectations of Estonian customers are somewhat different in comparison with Scandinavian customers. However, they are becoming more and more alike, and it is hard to describe what the actual differences are. Albers-Miller et al. (2000), confirm that consumer expectations can differ tremendously and the issues of culture should therefore be thoroughly examined in order to create effective promotion. All promotion developed is translated to Estonian. Normally, commercials developed in
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Scandinavia include no dialogue, which makes it less complicated to adjust these. Papavassiliou & Stathakopoulus (1997) claim that the development of a basic advertising campaign with country-specific adaptations is very important, especially when there are great linguistic differences across different host countries. Nordea has chosen to segment its customers and focuses on corporate customers and high income earners. This due to the fact that these segments are the most profitable ones. Meidan (1996) also stresses that market segmentation is essential and that consumer behavior towards financial services is very much a function of social class. (ibid) The International Market Laws and regulations on the Estonian market are quite similar to Scandinavian. The country is liberal and following these regulations has never been a problem for Nordea. Naturally, there are restrictions on promotion, but Nordea believes that they are not better or worse than the Nordic ones. Estonia is at a rapid pace becoming more and more like any west European country. Cavusgil et al. (1993) state that in a market where the legal regulations are comparable with those in the home market, firms have less pressure to modify their promotional program. Fleming et al. (1997) claim that the Baltic States are some of the most developed transition economies. Ghauri & Holstius (1996) claim that out of the Baltic countries, Estonia has done the most to harmonize laws with Western ones. The competition in Estonia is tough, and there are a number of large banks which Nordea is benchmarking itself against. Czinkota & Ronkainen (2004) mean that there is a greater variance of competition in the international market compared to the domestic one. To be successful, an organization has to learn about the competitive activities and evaluate the actual and potential impact it has on its own operations (ibid). Since Nordea�s establishment, the competitive situation has intensified dramatically, including a number of consolidations between different banks and establishment of totally new banks. According to Quintana (2003) increased competition has strongly affected banking organizations, and facilitated internationalization of banking firms. Arnold et al. (2001) claim that tens of companies within the banking industry have been established after 1991 in the Baltic States. The consequence of the intensified competition is that the product range has been broadened, prices have decreased and the overall costs for Nordea have increased. Nordea has also been forced to conduct promotion much more intensively, and in accordance with the promotion of competitors. The competitive situation tends to affect how many advertising campaigns Nordea conducts every year. Papavassiliou & Stathakopoulus (1997) confirm that competition may force organizations to adapt promotion. Other External Factors Influencing the Choice of Promotion Strategy Nordea attempts to promote itself as a local bank, and therefore country of origin image is of less importance. Nordea has never met any difficulties due to its origin. Claessens & Jansen, (2000) mean that the increasing internationalization of financial services eliminates discrimination in treatment and removes barriers between foreign and domestic providers.
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Economic factors are of great importance when making a decision about Nordea�s promotion strategy. If the economy is growing, it is essential for Nordea to make sure that its own growth is more rapid than the growth of the market. In order to manage this, Nordea intensifies its promotional activities. However, if the economy does not grow at all, Nordea diminishes its promotional actions. The economic situation controls, to a great extent, which products that are most demanded. If, for example, the interest level is low, Nordea will choose to promote loans and if the stock market has a positive growth; mutual funds will be prioritized over funds based only on interest. Papavassiliou & Stathakopoulus (1997) agree that the economic conditions prevailing in the host country are of major concern. Brassington & Pettitt (2000) mean that economic factors include inflation, exchange rates, income, consumption potential, rate of unemployment and exchange control regulations. Nordea believes that the advertising infrastructure in Estonia is well-developed, including a great supply of different media such as commercial television and radio channels and numerous magazines. Arnold et al. (2001) confirm that in the latter years, a great deal of money has been invested in advertising in the Baltic States, and this in turn has increased availability of media and development of the advertising structure. In the table below an overview of the comparison between theory and empirical data will be provided and show how the findings correspond and if the factors were considered to influence the promotion strategy of Nordea. The first column shows the possible factors influencing the promotion strategy. Column number two explains if the factors were considered to influence the choice of promotion strategy for Nordea. Moreover, since the theory is based on manufactured products, a comparison between theory and empirical data is presented in column number three. Table 6. 1 Comparison between Theory and Empirical Data
External factors influencing the promotion strategy
Influences the promotion strategy (yes or no)
Corresponds with theory (yes, no or partially)
Type of product no yes Product uniqueness no yes Technology orientation of the industry yes partially Cultural aspects yes yes Similarity of legal regulations no yes Competitiveness of the market yes partially Country of origin image no partially Economic factors yes partially Advertising infrastructure no yes
6.3 Adaptation and Standardization of the Promotion Strategy Research question number three concerns the adaptation and standardization of the promotion strategy for banking services in the Baltic States. Since the facts presented by
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De Mooij in table 6.2 and 6.3 are interrelated and to some extent concern the similar issues, these facts will be analyzed simultaneously. Adaptation The people in Estonia have somewhat dissimilar preferences from the Scandinavian, although it is hard to describe exactly in what way they differ. Estonian people prefer talking commercials, and since most of the Nordea group�s television commercials developed for Scandinavia include no dialogue, Nordea now creates all commercials locally. The Estonian website also has to be adapted because of the differing preferences. According to Brassington & Pettitt (2000) an organization acting on an international market always has to consider to which degree customer�s needs and wants differ between different markets. They further state that promotion mixes often have to be adjusted in order to suit the local environment and the target market preferences. De Mooij (1994) means that the advertising of a brand cannot be universal if it defies local customs, and in these cases adaptation should be considered. He further states that one argument in favor for choosing an adaptive approach is the heterogeneity of the countries concerned. Nordea uses the same media channels as in Scandinavia, including commercial television and radio as well as papers and financial magazines. De Mooij (1994) claims that if there are differences in the media scene it might be an argument for adaptation. Furthermore, television is the best way to make people aware of the brand name and building brand identity. Therefore, Nordea has adapted the media used to focus on television advertising. The regulations regarding financial services and advertising are quite similar to the Nordic ones. Following these regulations has never been a problem. According to De Mooij (1994) differing regulations regarding service or advertising should be considered when making decisions concerning adaptation. Moreover, competition is tough and the competitive situation has intensified dramatically since the establishment of Nordea, which has forced Nordea to intensify its promotion, especially television commercials. The nature of the competition in different markets is according to De Mooij (1994) a reason why companies might find it preferable to choose to adapt parts of the promotion strategy. When Nordea launched the new brand name, standardized institutional advertising created for Scandinavia, was used. However, this was not very successful since the people in Estonia were not aware of what the brand name represented. Nordea now creates all its institutional advertising locally, including pictures from the local market and also dialogue, which is preferred by the Estonian market. De Mooij (1994) confirms that a brand�s advertising cannot be universal if different national markets are in diverse stages of maturity, and therefore adaptation must be performed. He further argues that if the service is at different stages of its life-cycle in different markets adaptation is favorable. Furthermore, in order to not be seen as a foreign company, Nordea tries to highlight the local aspect rather than the Nordic, especially when making statements in financial magazines. This is, however, not seen as a major problem and therefore no other promotional activities have been adapted because of the fact that Nordea is a foreign
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company. De Mooij (1994) argues that if there is a danger with the fact that the company is seen as foreign, an adaptive approach is preferable. Nordea�s promotion directed towards the private customers has to be more adapted than promotion towards the corporate customers, since promotion towards the latter group include mostly personal selling and no television or radio commercials. O�Donnel & Jeong (2000) agree that products or services directed to the industrial market are seen as more suitable for standardization than consumer products or services. In Estonia, television is seen as the best medium to use in order to make people aware of the brand name. However, Czinkota & Ronkainen (2001) argues that adaptation has to be carefully investigated in emerging market economies, where the people are interested in rational advertising and see it as information. They further state that this has led to the fact that many customers tend to prefer advertisement in newspapers to those on television. One of the basic conditions for adaptation or standardization, and two of the arguments for adaptation were not mentioned by Nordea. In the tables below an overview of the comparison between theory and empirical data presented above, will be provided and show if the factors presented in the data analysis affect the level of adaptation or standardization of Nordea. Table 6.2 shows if the basic conditions motivate the use of either adaptation or standardization. Table 6.3 illustrates if the provided arguments pro adaptation are reasons for adapting according to Nordea. Table 6. 2 Basic Conditions for Adaptation or Standardization
Basic conditions Fulfilled for adapting Fulfilled for standardizing
A brand�s advertising cannot be universal if different national markets are in diverse stages of maturity
Yes No
A brand�s advertising cannot be universal if the idea depends on a large budget which is unsupported in some markets
Not mentioned Not mentioned
A brand�s advertising cannot be universal if it defies local customs and regulations and ignores the efforts of the competition
Yes No
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Table 6. 3 Arguments for Adaptation
Arguments for adaptation
Reason for adapting at Nordea
The heterogeneity of the countries concerned Yes
The �not invented here� syndrome: the desire to create own campaigns Not mentioned
Differences in the media scene Yes
Differing regulations regarding service or advertising No
The nature of the competition in different markets Yes
The service is at different stages of its life-cycle in different markets Yes
The danger of being seen as a foreign company No
Reduced economic advantage because of higher co-ordination costs Not mentioned
Standardization The Estonian market becomes more and more equal to the Scandinavian when it comes to customer preferences and expectations. Cavusgil et al. (1993) state that the development in communication together with the increased travel contributes to the globalization of markets. He further claims that this has resulted in emerging global customer groups, which might make a standardized approach preferable. The cost of adapting promotional material is of great importance, and therefore Nordea tries to standardize their promotion as much as possible in order to reach economies of scale. A great part of the material used for personal selling, such as leaflets and pamphlets have a uniform layout and only have to be translated into Estonian. De Mooij (1994) agrees that cost reduction is the most important reason for choosing a standardized promotion strategy. Moreover, some posters are totally standardized with the same layout and slogan in all of Nordea�s markets. Promotional material such as giveaways as well as colors used at the promotional material and interior at the offices and the logotype are standardized in order to create a uniform brand image. This is also a reason, which De Mooij (1994) points out as an argument for standardizing the promotion strategy. The media available in Estonia are the same as in Scandinavia; however, this does not enable Nordea to standardize, since the Estonian market has other preferences regarding media. Several of the arguments for standardization were not mentioned by Nordea.
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In the table below an overview of the comparison between theory and empirical data will be provided and show if the factors presented in the data analysis affect the level of standardization of Nordea. The table illustrates if the provided arguments pro standardization are reasons for standardizing according to Nordea. Table 6. 4 Arguments for Standardization
Arguments for standardization
Reasons for standardization at Nordea
Cost reduction is the most important argument for standardization Yes
A uniform brand image and corporate image worldwide avoid confusion Yes
The globalization of media No
Simplified planning through uniform objectives Partially
Maximum use of good ideas and transmission of know-how Not mentioned
Centrally managed international enterprises Not mentioned
Better use of manage abilities and resources Not mentioned
Universal guidelines and quality standards Not mentioned
Better access to know-how and experience of other countries Not mentioned
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7 CONCLUSIONS In this chapter the conclusions will be drawn from the analysis, and thereby the answers to the research questions will be provided. Before drawing our conclusions we have taken into consideration that some of the theories used were developed for manufactured products rather than for services. Since only one case study has been done, general conclusions regarding banks cannot be drawn. However, since the Baltic States are considered to be similar in terms of development and culture, we believe that some general conclusion concerning the Baltic States can be drawn from the case study. When making conclusions regarding banks, we refer to banks in the Baltic States.
7.1 How can the promotion mix for banking services in the Baltic States be described? Our research shows that all parts of the promotion mix are used to some extent for promotion of banking services. Personal selling is considered to be the most important promotional tool, as it aims to build relationships between the customer and the bank. Relationships are crucial, since they make the customer loyal to the brand and enable the bank to reach its long-term goals. It is also of great importance to make a thorough segmentation of the customers in order to make the personal selling as cost-efficient as possible. Concerning advertising, banks use both institutional and brand advertising. Institutional advertising is conducted for brand building, which is vital due to the fact that all banks offer similar products. It is of great importance to have a strong brand in order to attract customers. Institutional advertising is conducted through television, magazines and outdoor media, in order to combine a strategy that reaches a broad crowd and that is somewhat cost efficient. Thereby less profitable and potential customers are also targeted. The brand advertising aims specific services towards specific customer segments. Banks tend to be selective when it comes to promoting specific services and they focus on their primary customers. Brand advertising is primary used in order to reach short-term goals. Above-the-line and under-the-line advertising are both of importance for banks. A combination of the two in their promotion strategy is preferable, as they are a great complement to one and other. Furthermore, under-the-line promotion is an essential complement for personal selling, since it provides the customer with information regarding the different services that are offered. Banks are careful in their use of sales promotion. However, special offerings and other forms of price manipulation are used to some extent. Public relations are performed in order to create goodwill and to spread information. This is done through participation in magazines as well as via sponsoring of social projects. The aim of direct marketing is to inform as well as to promote. It is commonly used through post circulars, but the use of Internet is also considered to be of importance.
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From the discussion above, the following conclusions are drawn: ! All promotion tools in the promotion mix are used to some extent for the
promotion of banking services ! Personal selling is the most important promotion tool when promoting banking
services. ! Segmentation of customers is an essential part of the promotion for banking
services. ! A strong brand is crucial in order to attract customers.
7.2 How can the external factors influencing the choice of promotion strategy for banking services in the Baltic States be described? Concerning the external factors influencing the choice of promotion strategy, we found that theory and empirical findings to a great extent corresponded. We also found that less than half of the factors actually influence the promotion strategy. The only factors that truly affect banks choice of promotion strategy are cultural aspects, technology orientation of the industry, competitiveness of the market, as well as economic factors. The technology orientation factor influences the choice of promotion strategy to a great extent. Banks have faced increased competition and pressure to apply technology in its operations. This has led to some changes of the promotion strategy as telephone banking and Internet, for instance, have been added as tools for reaching customers. The factor concerning cultural aspects is the most important one, since it affects almost all of banks decisions regarding promotion. The competitiveness of the market is a very important influence that affects banks promotion strategies. The competition is tough, and that in turn, affects the promotion intensity. Concerning the economic factors, the overall economic situation of the country also affects the promotion strategy. Many of the factors that influence the choice of promotion strategy according to Cavusgil et al. (1993) and Papavassiliou & Stathakopoulus (1997) were not considered to affect banks. We believe that this is partially due to the fact that very little research has been made within our chosen research area and that we therefore had to apply theories regarding export companies and manufactured products instead of services. We also think it is a consequence of the case study we chose to conduct, since factors influence to a varying extent in different industries and countries. The similarity of legal regulation factor is not a problem for a Scandinavian bank operating in Estonia, since it is such a liberal and westernized country. However, it could very well have been a very restraining factor in other countries. The country of origin image is not an issue relevant, since banks in many ways try to act locally. The advertising infrastructure is not an issue for banks operating in Estonia, since they have access to the communication channels needed.
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We consider a bank to be such a distinct form of institution that it cannot be separated from its offerings. Additionally, banks offer similar products and therefore the promotion of a product is mainly promotion of the brand. As a consequence, we believe that factors such as type of product and product uniqueness are not applicable. We also believe that since influences are somewhat abstract, it is very subjective and individual amongst companies what they themselves believe is influencing promotion decisions. From the discussion above, we have drawn the following conclusions: ! The cultural aspects- factor is the most important external factor influencing the
choice of promotion strategy. ! The other external factors that influence the choice of promotion strategy are the
technology orientation of the industry, the competitiveness of the market and the economic factors.
7.3 How can the adaptation vs. standardization of the promotion strategy for banking services in the Baltic States be described? Banks use neither a pure adaptation nor a pure standardization strategy and therefore the conclusion is that a contingency approach of the promotion strategy is applied. The most important reason for adapting seems to be the different preferences and expectations of the Estonian market. Our empirical data shows that television and radio commercials have to be adapted, with regard to the fact that talking commercials and pictures with a local connection are preferred. The fact that Estonian people prefer television commercials to other forms of advertising, forces banks to adapt their choice of media. Furthermore, our case study indicates that the language barrier must be taken into account. Consequently, all promotional material has to be translated. When a brand is in a different stage of the life cycle in different markets, the amount and type of advertising has to be adapted. Banks are also forced to adapt their choice of media. Moreover, harsh competition forces banks to adapt their promotion intensity. Lastly, promotion directed towards private customers needs a higher degree of adaptation than promotion directed towards corporate customers. The most important reasons for standardizing are cost-reduction and economies of scale. Our empirical findings points out that a lot of material, especially connected to personal selling, should be standardized. Another important reason for standardizing is the creation of a consistent brand image. Our findings show that promotional material such as giveaways, as well as the usage of colors and the logotype are standardized for this reason. However, since the preferences and expectations of the Estonian people are becoming more similar to the Scandinavian people, more focus on the standardization approach might be suitable in the future. Moreover, the fact that Estonia has the same media channels as Scandinavia, including commercial television and radio, as well as papers and financial magazines, this might be a reason for a higher degree of
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standardization. Moreover, since laws and regulations regarding banking services and advertising in Estonia are quite similar to Scandinavian this is not an obstacle for standardization of promotion. From this discussion the major findings gives us the following conclusions: ! A contingency approach with emphasis on adaptation is used for the promotion of
banking services. ! The most important reason for adapting is differing customer preferences and
expectations. ! Adaptation is carried out with regard to media, language, competition and stage in
the life cycle of the bank as a brand. ! The most important reason to standardize is cost-reduction and economies of
scale. ! The second most important reason for standardizing is to be able to create a
uniform brand image.
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8 IMPLICATIONS With the findings of this study as a basis, this chapter will provide implications for managers within the banking industry. Furthermore, implications for theory and future research will be provided.
8.1 Implications for Management ! Managers who wish to conduct promotion in Estonia should focus on personal
selling, since it is the most important promotion tool and it involves establishment of relationships with individual customers. We believe that it is of great importance to provide specific education for the sales personnel, since they are the ones interacting with customers, and thereby affecting customer perception of the bank. Advertising should also be emphasized, due to its ability to reach a broader public and create awareness and interest among potential customers. The remaining three promotion tools are also applicable, and should be used as a complement to personal selling and advertising.
! The factors that are most influential on the choice of promotion strategy, and
therefore should be taken into extra consideration, are the cultural aspects, the technology intensity of the industry, the competitive environment of the market and the economic factors involved. Culture can affect all managerial decisions, and it is significant for managers to consider the needs, attitudes and preferences of the host market in order to conduct effective promotion. As modern technology is increasing in importance in Estonia, managers also need to make an effort in developing and extending its usage of technology. This is essential for development of a bank�s operations and helps to reduce costs. Additionally, the increasing competition in Estonia forces managers to adapt and intensify their promotion strategies to keep up with the competing banks.
! Managers should attempt to standardize their promotion to the extent possible, in
order to diminish expenses and achieve economies of scale. However, due to differing preferences and expectations of the customers as well as the local conditions prevailing in Estonia, a great deal of the promotion must be adapted.
8.2 Implications for Theory The purpose of this thesis was to gain a deeper understanding of international banks� promotion strategies in the Baltic States. In order to reach this purpose we have described the different tools in the promotion mix used by financial services, external factors influencing the choice of promotion strategy, and adaptation and standardization theories. The study has been exploratory since we have gained a deeper understanding of the area of research. Towards the end of the thesis our own conclusions were presented and through this we begun to explain the phenomena we have explored and tried to describe.
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57
This thesis� contribution to theory is based on empirical studies of the investigated phenomenon in one case study. No prior research with the exact same approach as our study has been conducted; therefore it can serve as a base for further research within this area. As theories are directed towards the product industry we recommend the theories to be revised in order to better fit the service industry, particularly considering the external factors that can influence the choice of promotion strategy.
8.3 Implications for Further Research ! It would be highly interesting to conduct another study within the same area of
research, however, investigating less developed transitions countries such as Romania or Slovenia and comparing it with this study regarding the Baltic States. This would highlight the similarities and differences between different markets and how promotion strategies are influenced. A study like this is best conducted as a multiple case study of two different firms active in the chosen markets of research.
! Since our study only focuses on one element of the marketing mix, namely
promotion, it would be of interest to conduct a study of the other three elements, i.e. price, place and product. It would give an overview of how banks are acting in transition countries, which might be helpful to banks planning to enter transition countries or banks already active within this type of market. A study like this could be conducted through a multiple case study of two banks active in different transition countries.
! Furthermore, it would be of great interest to investigate the mode of entry
strategies for banks when entering a transition country. This connects to our study, since the promotion strategy is highly affected when launching a new company or brand on a new market. This might help financial institutions interested in entering transition countries and could be conducted through a single case study of one firm entering two or more different countries.
! Another interesting field of study is brand management within the banking
industry. Due to the fact that banks offer similar services and the fact that it hard to stand out makes it a stressing issue to create and maintain a well known and positive brand. Such a study could be conducted through a multiple case study of two or more different banks.
! It would also be of interest to study how the Internet should be used as a
marketing tool for banks in the most efficient way. There is little previous research made within this area and research on this subject would be a useful contribution to existing theory. This is best conducted through a multiple case study of banks, or other companies within the service sector, using the Internet to a great extend as a promotional tool.
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APPENDIX 1
APPENDIX 1 � Interview Guide: English Version I Company Facts: • Name and title of the respondent • General facts about Nordea
o number of employees in Estonia o establishment year in Estonia o type of products in Estonia o annual turnover in Estonia
• In how many countries is the company operating • Market share in Estonia II The Promotion Mix for Banking Services Which promotion tools are applied by Nordea on the Estonian market? Examples are stated below. • Advertising
o Institutional advertising o Brand advertising o Above the line advertising o Under the line advertising o Etc.
• Sales Promotion
o Special offers o Giveaways o Etc.
• Public Relations
o Publicity in financial journals o Sponsorship o Etc.
• Personal Selling
o Face to face o Internet o Etc.
• Direct Marketing
o Internet o Direct mail o Etc.
APPENDIX 1
III External Factors Influencing the Choice of Promotion Strategy • The Product and Industry
o Type of product, for example bank loans compared to saving accounts o Product uniqueness, for example differentiation of services o Technology orientation of the industry, for example use of internet o Cultural aspects, for example culture specific adaptation o Etc.
• The International Market
o Similarity of legal regulation between countries, for example promotion constrains and financial laws
o Competitiveness in Estonia o Etc.
• Other External Factors o Advertising infrastructure, for example structure and availability of media o Country of origin image o Economic factors o Etc.
IV Adaptation and Standardization of the Promotion Strategy • To what extent, and why, is standardization versus adaptation applied in the different
countries?
o Elements of the promotion mix o Media used o Etc.
APPENDIX 2
APPENDIX 2 � Interview Guide: Swedish Version I Företags Fakta: • Respondentens namn och titel • Generell information om Nordea
o Antal anställda i Estland o Etableringsår i Estland o Typ av produkter i Estland o Årlig omsättning i Estland
• Hur många länder är Nordea etablerade i, vilka? • Nordeas marknadsandel i Estland II Marknadsföringsmix för banktjänster Vilka marknadsföringsverktyg används av Nordea på den Estniska marknaden? Vi har nedan angivit olika exempel på marknadsföringsverktyg. • Reklam
o Institutionell reklam o Varumärkesreklam o �Above the line� reklam, t ex. kommunikation via TV, Radio, tidningar o �Under the line� reklam, dvs. osynlig reklam såsom reklamblad, broschyrer och
informationsfoldrar o Etc.
• Försäljningsaktivitet
o Special erbjudanden o Gåvor o Etc.
• PR
o Publicitet genom finansiella magasin o Sponsring o Etc.
• Personlig försäljning
o Face to face o Internet o Etc.
• Direkt reklam
o Internet o Direkt brev o Etc.
APPENDIX 2
III Externa faktorer som påverkar valet av marknadsföringsstrategi • Produkt och industri
o Typ av produkt, t ex. banklån jämfört med sparkonto o Produktens unikhet, t ex. differentiering av service o Teknologins betydelse för industrin, t ex. användningen av Internet o Kulturella aspekter o Etc.
• Den internationella marknaden o Likhet mellan ländernas lagar och bestämmelser, t ex. reklamrestriktioner och
ekonomiska lagar o Konkurrenssituation i Estland o Etc.
• Övriga faktorer
o Kommunikations infrastruktur, t ex. struktur och tillgång till media o Betydelse av företagets/produkternas härkomst o Ekonomiska faktorer o Etc.
IV Standardisering och Adaptering av marknadsförings strategi I vilken utsträckning, och varför används standardisering respektive adaptering
o Elementen i marknadsföringsmixen o Valet av media o Etc.
