The Unique Distribution Challenge Faced By Financial Industry

The Unique Distribution Challenge Faced By Financial Industry

Ajay Sudame | 3rd Mar 2017
This blog discusses the last mile connectivity problems faced by BFSI sector and possibility of a Digital Marketing solution to it.

It’s quite easy to understand that all big organizations, which are dependent upon retail sales for revenue, spend a lot on development of their product and services. Even after spending huge resources on Conceiving of product, (Very Few) Manufacturing, (Many more) and Trading or Sales (Almost everybody) they typically need to spend a lot on making it reach to the customer. This means additional costs! Hence can be bit difficult to comprehend for middle management and at times frustrating for many in top management! 

The reason behind this being, that though Money & Finance are one of the critical aspects of our life, saving for future is not a very popular habit. Unlike many other items such as an expensive watch or a car or jewelry there is no immediate gratification here.


Most of the businesses invest heavily in Distribution networks, including companies in BFSI (Banking, Finance and Insurance) sector. Actually, dependence of BFSI on Distribution network is much bigger than many sectors in consumer retail space, such as FMCG. The reason behind this being, that though Money & Finance are one of the critical aspects of our life, saving for future is not a very popular habit. Unlike many other items such as an expensive watch or a car or jewelry there is no immediate gratification here. Whatever returns you are going to get are in distant future. And hence, however logical it may sound but to save for our own future we need external push. We need to be cajoled by someone else to look at tomorrow and start saving today. This is where Financial Distributor comes extremely handy.
One more reason why Distributors rule the roost in Financial Distribution space is, it is very difficult if not impossible to create differentiation between products. Most of the people can’t tell between  saving and investment, Mutual Funds and stocks etc. But a Distribution network functioning like well-oiled machine can be a real differentiator here. The Distributor, with market knowledge and access to prospective customers! Along with access also knows financial strength of the prospective customers. And most importantly he/she is trusted by a portion of society. Which means ability to push a financial product of own liking!
Along with these two, another minor cause for Financial Distributors having virtual free run is, overall lack of Financial Literacy. Most of the investment decisions are taken impulsively, and on basis of impression. At times, just because someone recommends a good “scheme”. Simple concepts such as ‘Compounding of Money’ or ‘Inflation’ are not even considered while taking Financial decisions. Lastly this person is trusted by consumers, and is supposed to be ‘Knowledgeable’ just because working in Financial sector.
So if Financial Distributors are not able to provide services in fitting manner, why industry is continuing with them? Well there is a reason. Be it Mutual Funds, or Insurance or investment in Stocks, people not only need external push but also individual counseling. And a Distributor not only provides that but also provides the missing connectivity link between vast consumer base and Financial behemoths. Unfortunately the price paid by the customer and cost by the company to maintain this connectivity with each other is too high. As this person, who is providing last mile connectivity, unfortunately hardly has  any long term vision and is only interested in working for his own upfront remuneration. And for  which can go to any extent; can obfuscate facts, provide incorrect data or plainly lie. And sadly most of the time, majority of the customers are ready to go in without looking at any data. Or even match and map own Financial needs with those benefits provided by the product offered. And this, more than often results in purchase of wrong product. Which of course is a lose-lose situation for both customer and the company. 

So how can Digital Marketing help? Well by being more persuasive and less intrusive at the same time! Online or Digital marketing tool such as an e-mail or FB post once created stays there permanently (until deleted).


So is there a way out? Surely there is. Digital Marketing provides a new, exciting way to nurture a lead till he/she are ready to take a decision. Let me explain, what I mean by that. If you analyze a Sales call (particularly Financial product sales call) it typically takes 2-4 meetings for a customer to arrive at a decision. The initial meetings (first two/three) are spent in knowing each other, sharing of primary information (say about the company) and problem identification. Presenting of solution and closing happens in last one or two meetings. Now the first half of the whole sales process may appear to be less important, but that’s the part where the customer gives out important information about himself. Which of course is the most critical input to present a sensible solution. But this vital info will only be divulged by the customer if the Sales Person (Distributor or Distributor rep) is able to strike a rapport with the prospect and create a positive impression. And this is where most of them falter!
On account of low skills possessed by these Sales persons, prospects often dish out incorrect or incomplete information. Which results in wrong solution and ultimately unsatisfied customer. So how can Digital Marketing help? Well by being more persuasive and less intrusive at the same time! Online or Digital marketing tool such as an e-mail or FB post once created stays there permanently (until deleted). And unlike a Sales person does not disturb you. It allows you all the room you want. You can choose not to look at it. Which is not possible if a person in flesh and blood is seating opposite to you! 

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There is another distinct advantage which Digital Marketing possesses over conventional marketing. That is of cost. As we all understand every sales call is a cost to the company. And of course all calls don’t produce results. Contrary, as explained above, at times too many calls can be counterproductive. So if these unnecessary calls can be avoided, they will benefit the company in all aspects.
Through upcoming blog series will try and throw more light on how Digital Marketing can be of use to BFSI sector.