banking promotion paper

8/12/2019 Banking Promotion Paper

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BACHELORS THESIS

2004:152 SHU

Promotion Strategies

for Banking ServicesCase 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-CommerceSupervisor: Manucher Farhang


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ACKNOWLEDGEMENTS

ACKNOWLEDGEMENTS

This Bachelors thesis was written as a part of the program for International Business andEconomics at Lule University of Technology in the spring of 2004.

We would like to thank our supervisor Manucher Farhang at the division of IndustrialMarketing for his help and guidance during the process of writing this thesis. We wouldalso like to thank our respondent Mr. Christer Rosentrm, country manager of NordeaBank Finland plc Estonia branch, for taking time of to answer our questions. Without himwe would not have been able to complete this thesis.

Finally, we would like to express our gratitude to all the people that have supported usduring the process.

Lule, May 2004

Anna Grankvist Carolina Kollberg Anna Persson


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ABSTRACT

ABSTRACT

The issues of promotion are becoming more and more complicated as internationalizationof financial services continues to increase. In the latter years, the Baltic States haveemerged 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 ofinternational banks promotion strategies in the Baltic States. In order to reach ourpurpose we have conducted a case study of a Nordic retail banks promotion strategy inEstonia. For our data collection we have used interviews and documentations. Our studyshows that the most important promotion tools for financial services are personal sellingand advertising, in order to create awareness of the brand and establish personalrelationships. The external factors influencing the choice of promotion strategy aretechnology orientation of the industry, cultural aspects, competitiveness of the market,and economic factors. Adaptation of the promotion strategy is performed to a greatextent, due to customers different preferences and expectations, as well as localconditions 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.


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SAMMANFATTNING

SAMMANFATTNING

Frgor gllande marknadsfring blir alltmer komplicerade i takt med attinternationaliseringen av finansiella tjnster kar. Under de senaste ren har de Baltiskastaterna utvecklats till attraktiva marknader fr mnga lnder i vstvrlden, och ett flertal

banker har initierat verksamhet dr. Syftet med denna uppsats r att ka frstelsen frinternationella bankers marknadsfringsstrategier i de Baltiska staterna. Fr att n syftethar en nrmare studie av marknadsfringsstrategier hos en Nordisk bank, aktiv i Estland,genomfrts. Fr insamling av data har vi anvnt oss av intervjuer samt dokumentationer.Vr studie visar att de viktigaste marknadsfringsverktygen fr finansiella tjnster rpersonlig frsljning samt reklam. Detta fr att skapa medvetenhet om varumrket ochfr att etablera personliga relationer. De viktigaste externa faktorerna som pverkar valetav marknadsfringsstrategi r teknikintensitet inom industrin, kulturella aspekter,konkurrens p marknaden samt ekonomiska faktorer. Adaptering avmarknadsfringsstrategin genomfrs i mycket stor utstrckning, frmst p grund avkundernas varierande preferenser och frvntningar, men ven p grund av lokala

betingelser. Emellertid frsker banker att standardisera sin marknadsfringsstrategi i sstor utstrckning som mjligt, fr att minska kostnaderna samt uppn skalekonomi.


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TABLE OF CONTENTS

TABLE OF CONTENTS

1 INTRODUCTION ......................................................................................................11.1 Background ...........................................................................................................1

1.1.1 Internationalization of the Banking Industry....................................................1

1.1.2 Promotion of Financial Services......................................................................21.1.3 Financial Services in the Baltic States .............................................................3

1.2 Problem Discussion ...............................................................................................31.3 Purpose & Research Questions ..............................................................................41.4 Demarcations.........................................................................................................5

2 THEORETICAL FRAMEWORK.............................................................................62.1 The Promotion Mix for Banking Services ..............................................................62.2 External Factors Influencing the Choice of Promotion Strategy .............................92.3 Adaptation and Standardization of the Promotion Strategy...................................15

3 FRAME OF REFERENCE......................................................................................183.1 The Promotion Mix for Banking Services ............................................................183.2 External Factors Influencing the Choice of Promotion Strategy ...........................193.3 Adaptation and Standardization of the Promotion Strategy...................................213.4 A Conceptual Frame of Reference .......................................................................22

4 METHODOLOGY ...................................................................................................244.1 Research Purpose.................................................................................................244.2 Research Approach..............................................................................................254.3 Research Strategy ................................................................................................254.4 Data Collection....................................................................................................27

4.5 Sample Selection .................................................................................................294.6 Data Analysis ......................................................................................................304.7 Quality Standards ................................................................................................314.8 A Visual Design of Methodology.........................................................................32

5 EMPIRICAL DATA.................................................................................................335.1 The Nordea Group...............................................................................................335.2 The Promotion Mix for Nordeas Banking Services .............................................355.3 External Factors Influencing the Choice of Promotion Strategy ...........................385.4 Adaptation and Standardization of the Promotion Strategy...................................40

6 DATA ANALYSIS....................................................................................................426.1 The Promotion Mix for Banking Services ............................................................426.2 External Factors Influencing the Choice of Promotion Strategy ...........................446.3 Adaptation and Standardization of the Promotion Strategy...................................47

7 CONCLUSIONS.......................................................................................................527.1 How can the promotion mix for banking services in the Baltic States be described?..................................................................................................................................52


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TABLE OF CONTENTS

7.2 How can the external factors influencing the choice of promotion strategy forbanking services in the Baltic States be described? ....................................................537.3 How can the adaptation vs. standardization of the promotion strategy for bankingservices in the Baltic States be described?..................................................................54

8 IMPLICATIONS ......................................................................................................568.1 Implications for Management ..............................................................................568.2 Implications for Theory .......................................................................................568.3 Implications for Further Research ........................................................................57

REFERENCE LIST ....................................................................................................58

APPENDIX 1 Interview Guide: English VersionAPPENDIX 2 Interview Guide: Swedish Version


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LIST OF FIGURES

LIST OF FIGURES

Figure 2.1 A Testable Framework of Product and Promotion Adaptation.......................10Figure 3.1 External Factors Influencing the Choice of Promotion Strategy ....................21Figure 3.2 A Conceptual Frame of Reference ................................................................23

Figure 4.1 A visual design of Methodology ...................................................................32Figure 5.1 The Nordea Group........................................................................................33


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LIST OF TABLES

LIST OF TABLES

Table 4.1 Relevant Situations for Different Research Strategies.....................................26Table 4.2 Six Sources of Evidence: Strengths and Weaknesses......................................27Table 6.1 Comparison between Theory and Empirical Data...........................................47

Table 6.2 Basic Conditions for Adaptation or Standardization .......................................49Table 6.3 Arguments for Adaptation..............................................................................50Table 6.4 Arguments for Standardization.......................................................................51


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INTRODUCTION

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1 INTRODUCTIONThis introductory chapter is divided into four subsections. Firstly, a brief background

will be presented. Thereafter, the problem discussion will be provided, which in turn willlead 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 tendedto fall upon manufacturing companies. However, due to the growth of the service sectorand its important role for many countries in compensating trade deficits, as well as itsincreasing 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 largestshare of gross domestic product in almost every country (Albers-Miller & Straughan,2000). In an internationalization process, services are assumed to be encountering largerrisks than manufactured goods, since service providers often immediately have toestablish its operations abroad and cannot gradually export the goods (Vlikangas &Lehtinen, 1994). This is due to the fact that services generally cannot be separated fromthe person performing or selling them (Nicolaud, 1989). One of the sectors within theservice industry that has been influenced the most by the changes in the globalizationprocess, 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 arapid pace, and banks from all over the world have established themselves abroad sincethen (Lindstrm, 2003).

According to Albers-Miller & Straughan (2000) banks have been encountering numerouschallenges during the past two decades, including competition, recessions and image

problems. Additionally, many banks have been facing mature domestic markets withlimited future growth potential, which as a result, has led to expansion of their servicesabroad (ibid). Until recently, banks were seen as highly bureaucratic organizationsoperating solely in national markets. Today, they are more likely to be efficient andmodern institutions operating in a highly competitive environment, and often oninternational markets. (Quintana, 2003) There are three primary driving forces behindthese 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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INTRODUCTION

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the increasing interdependence of national financial markets, and indirectly, through theparallel internationalization of organizations. The second force is the reduction ofregulations concerning the banking industry in most countries, including the decreasinginterference of central banks. (Quintana, 2003) Finally, the technological expansion hasbeen an important factor behind the transformations (Daniels & Radebaugh, 2001).

For a long time retail banking1 operations have to a great extent been conductednationally. However, internationalization within this sector is now taking place, eitherthrough cross-border mergers and acquisitions, or through the establishment ofsubsidiaries in foreign countries. (Quintana, 2003)

Flohr-Nielsen et al., (2003) claim that the best place to study how companies meetmarket and technology challenges is within the Nordic-banking sector. What makes thisbanking 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 saidto be the resemblance in culture, language and history of the countries within thoseregions. (Quintana, 2003)

1.1.2 Promotion of Financial Services

Promotion is the direct way an organization tries to reach its publics. This is performedthrough 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 moreeffective marketing management of the financial services. Despite the recent recessions,

the financial services sector is continuing to grow in terms of turnover and profits andthus, has a supreme impact on the other spheres of the economy. Consequently, there iscurrently growing interest in applying marketing techniques and tools in financialservices. (Meidan, 1996)

In spite of major changes on the market of financial institutions, there are indications thatbanks have not yet successfully embraced the marketing philosophy or achieved levels ofits implementation consistent with satisfied customers. Financial institutions are realizingthat their established promotion practices are inadequate for new market conditions aslevels of customer defection in the sector grow.Traditionally, banks have tried to reachout to everyone in the community, but recent research proposes that banks should aim toidentify and serve micro-segments.(Dawes & Brown, 2000)

The role of promotion has been redefined into managing long-term relationships withcarefully selected customers, including construction of a learning relationship where themarketer maintains a dialogue with an individual customer (Dawes & Brown, 2000). Dueto this fact, the personnel are one of the most important resources of a bank. Their

1Banks that focus on private persons and smaller companies (Lindstrm, 2003)


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INTRODUCTION

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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 culture2often leads to insecurity, which as aresult 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 targetmarkets for companies in Western Europe. The notable economic growth that is takingplace 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 inmaking 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 fromplanned economy to a functioning market economy has been rapid. A great number ofnew corporations have been established, and almost all economic activity is now operatedprivately. (Exportrdet, 2003) Initially the three countries took different approachesregarding their financial systems (Fleming et al., 1997). Today, however, the basicstructures of the financial system in the Baltic States are quite similar, in the sense thatthey 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-ownedbanks is more than 90 percent (Ghauri & Holstius, 1996).

1.2 Problem Discussion

Experience has shown that operating abroad involves many difficulties, such as culturaldifferences, language, laws and regulations, lack of foreign contacts and businessconnections. These factors are ever so difficult for banks, since their operations involve ahigh 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 marketingliterature has concentrated on marketing theory more than promotion practice.

Unfortunately, the issues of marketing are becoming more complicated asinternationalization of financial services continues to increase. (Albers-Miller &Straughan, 2000) Effective promotion of financial services is crucial since services areintangible products, and it is hard to stand out, considering the fact that all banks offersimilar products (Meidan, 1996). A banks services are seldom unique and they are easy

2Culture is the specific learned norms of a society, based on attitudes, values and beliefs (Daniels &Radebaugh, 2001)


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INTRODUCTION

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1.4 Demarcations

Ghauri & Holstius (1996) state that the Baltic countries are three different areas withdifferent 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 mostdeveloped economically, especially in its banking system. (ibid) The system waseffectively reformed in the early 1990s, and today it is working satisfactorily(Exportrdet, 2003). As far as technological advances are concerned, and the impact thatthey have on the way business is done, Estonia is in the forefront in Europe (Bokros etal.,2001).

Estonia is called a transition economy, but appears to be relatively comparable to theindustrialized countries of Western Europe. Since it is the Baltic country that is mostsimilar to the Nordic countries, we think that it will be interesting to see what possibleobstacles 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 byNordic retail banks operating in Estonia.


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THEORETICAL FRAMEWORK

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2 THEORETICAL FRAMEWORKIn this chapter the theoretical framework relevant to our purpose and research questionswill 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 promotionwill be discussed.

2.1The Promotion Mix for Banking ServicesPromotion is according to Brassington & Pettitt (2000) the direct way in which anorganization communicates the product or service to its target audiences. Within thefinancial services industry, promotion is used in many different ways (Meidan, 1996).Brassington & Pettitt (2000) has categorized the promotional tools into five mainelements;

! Advertising,! Sales Promotion,! Public Relations,! Personal Selling, and! Direct Marketing

AdvertisingBrassington & Pettitt (2000) define advertising as any paid form of non-personalcommunication directed towards target audiences and transmitted through various massmedia 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 andcommunicates with large numbers of people through paid media channels. (ibid)

Meidan (1996) states, that a financial services organization can use its advertising foreither 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 inpromoting 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 thefirms image as a whole, and promotion of the products offered, with extra emphasis on

the specific firms name organization. The organization seeks through its marketingcommunications, to build awareness and to impress customers looking for the best rangeof financial services. Due to the former impression of banks as impersonal institutionswith no interest in their customers as people, and of financial services as abstract andquite similar, the institutional advertising has become more and more important. Brandadvertising follows closely in the footsteps of institutional advertising. Its purpose is tocreate awareness of the banks 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 isdirected towards the whole population, the brand advertising of particular products has tobe much more selective, since it has to show that the consumer will benefit from theservice. Furthermore, all the individual campaigns of brand advertising have to becompatible 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 servicetangible in the mind of the consumer in order to reduce perceived risk and provide a clearidea of what the service comprises. Furthermore she considers it important to advertiseconsistently, with a clear brand image, in order to achieve differentiation and encourageword-of-mouth communication (ibid).

According to Meidan (1996), there are two types of advertising channels appropriate forfinancial 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 hugepart of a financial organizations advertising activities. It is the invisible advertising ofthe banks services, including leaflets, pamphlets, explanatory guides and manuals thatcan be used to support selling of a specific service. It is hard to draw a definite distinctionbetween under-the-line advertising and sales promotion. Under-the-line advertising isvery easy and cheap to produce, but it must be used discreetly. Furthermore, this kind ofadvertising does not attract new customers, and it is depending on personal selling for itseffectiveness. (ibid)

Sales PromotionAccording to Brassington & Pettitt (2000) sales promotion is different tactical marketingtechniques with mostly short-term incentives, which are designed to add value to theproduct or service, in order to achieve specific sales or marketing objectives.Furthermore, Meidan (1996) states that it has two distinctive qualities. Firstly, it providesa bargain chance, since many sales promotion tools have an attention-gaining qualitythat 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, manycustomers tend to be less brand loyal in the long run. Secondly, if sales promotions areused too frequently and carelessly, it could lead to insecure customers, wonderingwhether the service is reliable or reasonably priced. (ibid)

Meidan (1996) indicates that due to the conflicting ideas concerning the benefits of salespromotions, a financial service organization must base its decisions upon relevance andusefulness of sales promotion, as well as cost-effectiveness. Peatti & Peatti (1994) claimthat normally, coupons, special offers and other forms of price manipulation are thedominant forms of sales promotion. However, price-based promotions are difficult andprobably dangerous to use for financial service markets. This due to the fact that the pricesetting of a financial service is already a difficult process, and that consumers often seelower prices as a result of lower quality. (ibid) However, Meidan (1996) states that salespromotion 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 servicesare to attract new customers; to increase the level of deposit accounts, thereby increasingthe banks share of savings; to increase market share in selected market segments; and tolower the cost of acquiring new customers by seeking to avoid direct price competitionwith other financial institutions. (ibid)

Public RelationsAccording to Brassington & Pettitt (2000) the essence of public relations (PR) is to lookafter the nature and quality of the relationship between the organization and its differentpublics, and to create a mutual understanding. PR covers a range of activities, forexample the creation and maintenance of corporate identity and image; charitableinvolvement, such as sponsorship, and community initiatives; media relation for thespreading of good news, as well as for crisis management, such as damage limitation.Moreover, an organization can attend trade exhibitions to create stronger relationshipswith key suppliers and customers as well as enhancing the organizations presence andreputation within the market. (ibid)

Meidan, (1996) states that another part of public relations is the publicity gained throughmagazines. Financial services obtain considerable publicity in so called quality press,such as different financial journals. In popular newspaper the publicity is, in contrary tothe quality press, often negative from the financial firms point of view. (ibid) Meidan(1996) further claims that the importance of public relations is being increasinglyattended, and financial services often have public affairs officers, working actively togenerate publicity.

Personal SellingBrassington & Pettitt (2000) define personal selling to be a two-way communication toolbetween a representative of an organization and an individual or group, with the intentionto inform, persuade or remind them, or sometimes serve them to take appropriate actions.Furthermore, personal selling is a crucial element in ensuring customers post-purchasesatisfaction, and in building profitable long-term buyer-seller relationships built on trustand understanding (ibid).

Verhallen et al. (1997) state that the increased competition within the fast changingenvironment of financial services has lead banks to develop and maintain comprehensiverelationships with their customers. Furthermore, Julian & Ramaseshan (1994) state thatthe long-term person-to-person relationship is an important factor for a retail bank toachieve a competitive advantage. Meidan (1996) points out that once a customer haschosen its bank, he is unlikely to switch to another. Thus, personal selling is probably themost important element in the communication process within the financial servicesindustry. (ibid) Lee (2002) state that personal selling can be performed either face-to-faceor through technological aids such as the Internet.

According to Julian & Ramaseshan (1994) the relationship between the salesperson andthe 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 clearlyexplain what each service offers. Since customers needs and motivation are likely to becomplex, and their ability to assess alternative courses of action without professionalassistance is likely to be limited, it is of great significance for the sales force to knowtheir 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 forceengages and co-operates towards the customer, trying to find a solution to the customersproblem, rather than only persuading him to purchase the products or services. Inaddition, Meidan (1996) claims that it is up to the sales force to enhance the banksreputation by looking after its customers.

Direct MarketingAccording to Brassington & Pettitt (2000), direct marketing is an interactive system ofmarketing, using one or more advertising media to achieve measurable responseanywhere, forming a basis for creating and further developing an on-going directrelationship 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 needsto be able to access, manipulate and analyze that information. Thus, the database iscrucial to the process of building the relationship. (ibid)Lee (2002) states that the fast advances in technology over the past 30 years havereshaped how consumers today interact with their financial institutions. The financialsector has extended its face-to-face selling towards direct marketing of products andservices in the form of phone, mail, or computer transactions. (ibid)

Mols (2000) claims that as computer literacy and the availability of computers increaseand the costs decrease, Internet banking consumers are increasing considerably. Throughthe Internet banks, the customers can identify what interests them. Furthermore, theInternet technology also makes it possible to follow individual customer usage. With theinformation gathered in an integrated database it is possible to read the customers needsand 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, thecompanyand theexport marketof 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 IndustryAccording to Cavusgil et al. (1993) the product and industry influences include fourfactors; type of product, product uniqueness, technology orientation of the industry andcultural specificity of the product.

Type of Product

Cavusgil et al.(1993) define the type of product as the products classification. Nicolaud(1989) & Meidan (1996) state that services are intangible products which often cannot beseparated 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 toobserve and to possess, compared to manufactured goods. According to Bossone (2000)banks are intermediaries between savers and users of capital. They supply transactionservices 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

COMPANY EXPORT MARKET

PRODUCT & INDUSTRY

Product Familiarity ofExport Customers

Similarity of LegalRegulations

Competitiveness ofExport Market

Firms InternationalExperience

Export Sales Goalsfor the Venture

Entry Scope

Promotion Adaptation! Positioning! Packaging/Labeling! Promotional

Approach

Type of Product

TechnologyOrientation of

Industry

ProductUniqueness

CulturalSpecificity of

Product


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variety of financial and related needs from different customers in different areas. Thegeneral 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 buyerssense of touch, smell, taste, sight or hearing, which as a result makes it very important forthe marketer to explain what the service actually comprises. However, the generalpromotion strategy tends to focus on the brand rather than the product (ibid).

Product UniquenessCavusgil 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 ofbanking to innovate and develop new ways to improve customer service. Long-termperson-to-person relationships between a financial institution, its distributors and itscustomers, 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 veryhard to stand out. According to Marquardt (1994) a banks services are seldom uniqueand they are easy for competitors to copy. Additionally, Meidan (1996) states thatbanking services tend to meet general needs rather than specific, and since there are noparticular benefits distinguishing different banks from each other, promotion of financialservices 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 technologyintensity of the industry. Joseph et al. (1999) claim that technology has increasingly beenapplied in the delivery of services since the mid-eighties. The adoption of technology intoservice industries has become important, and service providers are being urged to investin 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 deliveryand improved management information systems are increasing the demand of technologywithin 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 newWeb-technologies have become very important. The banking industry provides strongincentives for banks and customers to use the Internet. Banks can reduce their costsconsiderably, and at the same time meet potential demands of customers, such asconvenience and cheap transactions. (ibid)


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Cultural Specificity of ProductAccording to Cavusgil et al. (1993) cultural specificity of a product concerns if theproduct 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 andthe 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 orderto create effective promotion (ibid). Root (1994) indicates that the greater the distancebetween two cultures, the harder it is to communicate effectively. Culture can affectmany, if not all, of an organizations strategic decisions (ibid). Meidan (1996) states thatbanking services tend to meet general needs rather than specific. He claims that a bankshould analyze the wants and needs of different market segments and design itsmarketing mix to fulfill them. Consequently, market segmentation is essential. Consumerbehavior towards financial services is very much a function of social class. (ibid)

Papavassiliou & Stathakopoulus (1997) claim that the development of a basic advertisingcampaign with country-specific adaptations is very important, especially when there are

great linguistic differences across different host countries. The advertising messages mustcorrespond with the beliefs and traditions of the citizens in each country traditional, sincecultural values have an impact on advertising message appeal (ibid).

The CompanyAccording to Cavusgil et al. (1993) the company influences include the firmsinternational experience, export sales goal for the venture and entry scope.

Firms International ExperienceAccording to Cavusgil et al. (1993) a firms international experience refers to its previousinternational practice and the amount of information management had gained about thetarget country. A firm can gain international experience through involvement ininternational transactions, operating in many foreign markets, and through interactionwith foreign suppliers or distributors. (ibid) Ghauri & Holstius (1996) mean that gaininginformation about the target market can be very difficult in developing countries and inthe former socialist countries, because the infrastructure is often underdeveloped. Gettinginformation from local counterparts may also be difficult, and it necessitates thedevelopment of relationships and mutual trust. However, research shows that this is lessof an issue in the Baltic countries. (ibid)

Export Sales Goal for the VentureAccording to Cavusgil et al,(1993) the export sales goal for the venture refers to what thepenetration aim of the venture is in the target country. When a venture sets ambitiousgoals for it self, it will require a deeper penetration and a better understanding of themarket of interest, in order to achieve success (ibid). Claessens & Jansen (2000) state thatin comparison with domestic banks, foreign banks tend to be larger and have betterquality 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 fromservices than domestic banks. Foreign banks also tend to be less involved in consumer


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lending, and focus their portfolios rather on the manufacturing sector. Foreign banks thusdiffer 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 multiplemarkets at the same time, the cost of adapting the product and promotion to fit eachmarket 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 entryinto traditional developing countries since these countries are more developed.

The Export MarketAccording to Cavusgil et al. (1993) the export market influences include three factors;similarity of legal regulation, competitiveness of export market and product familiarity ofexport consumers.

Similarity of Legal RegulationAccording to Cavusgil et al.(1993) similarity of legal regulation is defined as the degreeof market similarity, and similarity of legal regulation between the host and homecountry. Brassington & Pettit (2000) name political stability, ownership restrictions,employment laws, safety regulations, financial laws, promotion constraints, priceregulations, and consumer protection legislation as some of the political and legal factorsaffecting an international organization. Cavusgil et al. (1993) further state that in anexport 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 aregreat differences, modification promotion will be required (ibid).

Ghauri & Holstius (1996) claim that when international companies start operations inEast European transition economies, the environment is very different to their homecountry. However, according to Fleming et al. (1997) the Baltic States are some of themost developed transition economies. Exportrdet (2003) states that since theindependence of these countries, the development from planned economy to afunctioning market economy has been rapid. Ghauri & Holstius (1996) also claim that outof 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 ademocratization process (ibid).

Competitiveness of Export Market

According to Cavusgil et al. (1993) competitiveness of export market refers to thecompetitive intensity of the host country. Czinkota & Ronkainen (2004) mean that thereis a greater variance of competition in the international market than the domestic. To besuccessful, an organization has to learn about the competitive activities and evaluate theactual and potential impact it has on its own operations (ibid). Papavassiliou &Stathakopoulus (1997) further state that by making a competitive analysis, multinationalcorporations can gain a competitive advantage for the role of advertising in their


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marketing strategies in foreign markets. When this is not fulfilled, competition may forceorganizations to adapt promotion (ibid).

According to Quintana (2003) increased competition has strongly affected bankingorganizations throughout the industrialized world, and there is now greater diversity than

ever before in the activities and markets in which banks decide to operate. Deregulationand growing European integration have facilitated both domestic consolidation andinternationalization of banking firms (ibid). Arnold et al. (2001)claim that the bankingindustry hardly existed in the Baltic States at the turn of the decade, but tens ofcompanies have been establishing after 1991, many without the reserves to maintain theirposition.

Product Familiarity of Export ConsumersAccording to Cavusgil et al.(1993) product familiarity of the export consumers refers toif the customers are familiar with the product or not. Lindstrm, (2003) state that banksare generally important for the functioning of any countrys economy. However,

according to Watters (1995) the financial services sector has no worldwide brands andhas even lacked this extensive expansion across borders. This is because some of theconsiderations, such as management control and language, are the same as other businesssectors, and others, such as legislation and regulation, are distinct to this sector (ibid).

Other External Factors Influencing the Choice of Promotion StrategyPapavassiliou & Stathakopoulus (1997) state a few other factors that are influencing theadvertising adaptation. These factors are country of origin image, economic factorsandadvertising infrastructure.

Country of Origin ImageRoot (1994) implies that people in industrial countries tend to have a more favorableimage of their own countrys product than foreigners do. Knowledge of made-in imagescan be of great help when operating abroad. Each image contains both positive andnegative attitudes towards the product identifiable with the country of origin. By beingaware of these attitudes and promoting on the positive ones, a company can increase thechance of success. (ibid) Claessens & Jansen (2000) mean that the increasinginternationalization of financial services eliminates discrimination in treatment betweenforeign and domestic financial services providers, and removes barriers to the crossborder provision of financial services.

Economic FactorsPapavassiliou & Stathakopoulus (1997) indicate that the economic conditions prevailingin 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 agreementswith the Scandinavian countries and have started to redesign their legislation to followWestern principles better. That is very important, since modern taxation laws are crucialfor 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 propertyagainst 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. Theadvertising infrastructure consists of the institutions and functions essential to theadvertising process, such as availability of media, the structure of media, availability oftechnical 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 beeninvested in advertising in the Baltic States, and this in turn has increased availability ofmedia 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 toBrassington & Pettitt (2000), complicated for any organization operating in more thanone environment. Too much adaptation might lead to failure of the organization to exploitthe synergies that become possible when going international. (ibid) However, VanMesdag (2000) states that a pure, comprehensive standardization is not possible, since thedifferences in for example language, retail structure, regulations and cultural featuresbetween countries are too great.

AdaptationAgrawal (1995) states that marketers in favor of the adaptation strategy tend to argue thatadvertisers have to take differences including culture, stage of economic and industrial

development, stage of product life cycle, media availability and legal restrictions intoconsideration. Brassington & Pettitt (2000) claim that when acting on an internationalmarket, an organization always have to consider to which degree a customers needs andwants are different from those on the domestic market, and if adaptation is necessary.

Brassington & Pettitt (2000) further state that promotional mixes often have to beadjusted 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 mediachoice and content, into account. Sales promotion is also affected by local regulations;therefore the choice of activities must respect these regulations and consider thepreferences of the customers. (ibid)

Brassington & Pettitt (2000) also indicate that marketing communication might have tobe adapted, due to consumer readiness stage. A product that is mature in one marketmight be totally unknown in another market, and therefore the promotional mix will haveto be adapted. Cavusgil et al.(1993) claim that adaptation of the promotion includes thecosts 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 firms international experience, technology orientation of theindustry, product exclusivity and the competitive intensity of the market. (ibid)

Cavusgil et al. (1993) further state that both reactive and proactive approaches ofpromotional adaptation exist. Proactive harmonizing with the characteristics of the

market includes modification of positioning, packaging/labeling, and promotionalapproach. Firms may also choose to reactively adapt their products in order to improvetheir competitive position, especially if competition in the market is intense, the industryis technology intensive, or the product is unique. (ibid)

There are three basic conditions, stated by De Mooij (1994), that have to be fulfilled inorder to use a standardized approach, and if these are not realized adaptation should beconsidered.

1. A brands advertising cannot be universal if different national markets are indiverse stages of maturity.

2. A brands advertising cannot be universal if the idea depends on a large budgetwhich is unsupported in some markets3. A brands 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 promotionstrategy:

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 carefullyinvestigated in emerging market economies, where the consumers are more likely to beinterested in rational advertising that has a clear message. They see advertising asinformation, which they can use in order to sort out between the numerous and sometimesconfusing offers. This has led to the fact that many consumers tend to preferadvertisements in newspapers to those on television, particularly if they are wellorganized and informative. (ibid)

StandardizationCavusgil et al. (1993) state that the development in communication and transportationtechnologies, together with the increased travel contributes to the globalization ofmarkets, has resulted in emerging global customer groups. Therefore, in a market whereneeds 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 tobe able to deliver high-quality products at a competitive price. Standardization ofmarketing 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 whyadvertisers should focus on the similarities of the consumers in the internationalmarketplace rather than the differences (ibid).

De Mooij (1994) claims that the following nine arguments are a reason for choosing astandardized 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 ODonnell & Jeong (2000) the main characteristic of global marketingtends to be to standardize the elements of the marketing mix as much as possible. Theadvantages are economies of scale within the three elements product, place andpromotion, which are captured in the marketing mix (ibid).

ODonnell & Jeong (2000) further claim that the amount of standardization neededdepends on the type of product. Industrial products are seen to be more suitable thanconsumer products for standardization, since industrial buyers tend to be more rational intheir purchasing behavior and demand for industrial products is more homogenous acrossmarkets. (ibid) Furthermore, Cavusgil et al.(1993) state that in a captive market, wherethe product already has achieved a leader position, a higher degree of standardizationsmay be advantageous.

The Contingency TheoryODonnell & Jeong (2000) indicate that it is not possible to use either totalstandardization or complete adaptation. The degree to which these are used depends on anumber of internal factors, for example organizational structure and managerialorientation, and external factors, such as target market and environment. (ibid) Cavusgilet 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 REFERENCEBased on the theoretical framework presented in the previous chapter, this chapter willshow 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, eitherthrough graphics or text, the main things that will be studied. Because of theextensiveness of the literature review, parts of each theory has been chosen andconceptualized. Our conceptualization will be presented accordingly with the order andcontent of our research questions stated below:

RQ1: How can the promotion mix for banking services in the Baltic States bedescribed?

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 bankingservices 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 promotionof financial services. We will use the five general promotional tools, which according toBrassington & Pettit (2000) are advertising, sales promotion, public relations, personal

selling and direct marketing. For the characterization of each tool, we will use thedefinitions provided by these authors. The theories we will rely on for describing the fivetools are theories concerning promotion of financial services, presented mainly byMeidan (1996), but also by Julian & Ramaseshan (1994), Peatti & Peatti (1994),Verhallen et al. (1997) and Lee (2002). We believe that with these theories as afoundation, the comparison with our research findings will be facilitated and moreaccurate, and that we will be able to describe the promotion mix of a banks services.

Concerning advertising, we will look at institutional and brand advertising, whichaccording to Meidan (1996) covers advertising of the company image as a whole versusadvertising 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-lineadvertising as a discreet but significant part of a financial services organizationspromotion. These two communication approaches will also be considered.

Meidan (1996) also presents a number ways to use sales promotion, such as throughcoupons, special offers and other forms of price manipulation. This will also be ofrelevance for our research. Moreover, he describes to what extent sales promotion can beused 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 Meidans (1996) statementregarding the importance for financial institutions to appear in financial magazines.

Concerning personal selling, we will look at the importance of interaction andrelationships with customers, which according to Verhallen et al. (1997) is increasinglyimportant for banks due to the competition intensity.

Lastly, within direct marketing our concerns will mainly include measurable responseachieved through different tools such as the Internet, which according to Lee (2000) andMools (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 ofpromotion strategy. In order to answer this question we will mainly use selected partsfrom the theory of Cavusgils et al. (1993) and also some facts mentioned byPapavassiliou & Stathakopoulus (1997), which we believe covers most of the issues thatare 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, butalthough our chosen theories concern influences on promotional adaptation, we think thatthe theories provide a suitable framework for defining of the external factors that caninfluence 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 ofproduct, product uniqueness, technology orientation of the industry and culturalspecificity of the product. The export market influence will include two factors; similarityof legal regulation and competitiveness of export market. (ibid)

Most of the basic definitions of each subtitle have been applied, but the theory has beenadjusted with a number of authors statements regarding financial services and thegeneral conditions in the Baltic States. This has been done in order to make a relevantcomparison 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 factorsrelevant for manufactured products and does not consider services. Furthermore, we alsofound the theory limited, since it concerns a number of factors, which we believe are onlyrelevant for a market entry strategy. Those factors will not be of significance for ourresearch, since we will focus on current promotion strategies performed by an establishedbank operating in the Baltic States. The concerned factors are all three of the factorsregarding the company as an influencing factor, and also one of the export marketinfluences: product familiarity of export consumers.


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Due to the facts stated above, we have decided to construct our own adapted version ofthe theory by Cavusgil (1993). As mentioned before, all company factors have beenremoved, partially because we see those factors as internal factors which to a great extentwould have been the same as in the home market, and also since the factors focus on a

companys entry strategy. The export market influence called product familiarity ofexport consumers also felt irrelevant, since banks exist everywhere and people tend toknow to some extent what kind of function they have, and this factor would have beenmore relevant if we were looking at goods instead of services. Further adaptations havebeen made since the theory concerns manufactured goods that are being exported to anew country and our approach is to investigate promotion strategies of a foreign bankestablished in the Baltic States. The remaining factors describing the external influenceson the choice of promotion strategy will be utilized, however, with some adjustments oneither their names or their purpose, in order to suit the situation. The export market willbe renamed to the international market, the competitiveness of the export market will berenamed 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 andconsider 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 externalinfluences, which we consider to be relevant for our research. Papavassiliou &Stathakopoulus (1997), state that country of origin image, economic factors andadvertising infrastructure also can affect promotion decisions. These factors will also beconsidered and will help us to answer research question number two.

The new model used for our research will comprise the following factors: the type ofproduct, product uniqueness, technology orientation of the industry and cultural aspects(product and industry factors), similarity of legal regulation and competitiveness ofexport market (international market factors) and country of origin image, economicfactors and advertising infrastructure (other external factors).

The factors presented in figure 3.2 are the ones that have been selected and adapted toserve 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 oradapted. In order to answer it, theories regarding adaptation and standardization will beapplied. We believe that the theories mentioned in this section will enable us to describethe adaptation vs. standardization of an international banks promotion strategy in theBaltic 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 inorder to use a standardized approach, and if these are not realized adaptation should beconsidered.

1. A brands advertising cannot be universal if different national markets are indiverse stages of maturity.

OTHER EXTERNALFACTORS

PRODUCT & INDUSTRY

INTERNATIONALMARKET

Similarity of LegalRegulations

Competitiveness ofthe Market

Country of OriginImage

Economic Factors

Type of ProductTechnology

Orientation of

Industry

Product

Uniqueness

Cultural Aspects

AdvertisingInfrastructure

Promotion

Strategy


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2. A brands advertising cannot be universal if the idea depends on a large budgetwhich is unsupported in some markets

3. A brands advertising cannot be universal if it defies local customs andregulations and ignores the efforts of the competition.

De Mooij (1994) has stated eight arguments in favor for choosing an adaptive promotionstrategy:

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 standardizedpromotion 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 preferencesof the customers, which is relevant for our research questions. According to ODonnel &Jeong (2000) products or services directed to the industrial market are seen as moresuitable for standardization than consumer products or services. Moreover, Czinkota &Ronkainen (2001) claims that adaptation has to be carefully investigated in emergingmarket economies, where the people are interested in rational advertising and see it asinformation. Finally, Cavusgil et al.(1993) state that the development of communicationpossibilities 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 promotionstrategies 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 differentpromotion tools available for banking services. Research question number two willdescribe the external factors influencing why and how a specific promotion strategy ischosen. Finally, research question number three will clarify how the strategy will beimplemented 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 theoreticalparts that have been chosen, and which will aid the collection of data, and later alsofacilitate the data analysis.

Figure 3.2 A Conceptual Frame of Reference

RQ 2:External Factors Influencing

the Choice of PromotionStrategy

1. Product and Industry2. The International

Market3. Other External Factors

RQ1:The Promotion Mix forBanking Services

1. Advertising2. Sales Promotion3. Public Relations

4. Personal Selling5. Direct Marketing

RQ 3:Adaptation vs.Standardization of the

Promotion Strategy1. Standardization of the

Promotion Strategy

2. Adaptation of thePromotion Strategy

Promotion Strategy forBanking Services in the

Baltic States


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4 METHODOLOGYThis fourth chapter will discuss and motivate the methodological issues connected to thisstudy. 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 inthis 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 beexploratory, 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 intophenomena, to ask questions and to assess phenomena in a new light (Saunders et al.,2003). Furthermore, it is useful for clarifying ambiguous problems. Usually, exploratorystudies are an initial research conducted with the expectation that subsequent researchwill be required. (Zikmund, 2000) An advantage with exploratory research is that it isflexible and adaptable to changes. The focus tends to initially be wide and then narrowsdown as the research develops. (Saunders et al., 2003)

Descriptive studies are designed to describe characteristics of a population or aphenomenon. 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 Walln (1996), descriptive research is suitable when the problem is clearlystructured 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 tostudy a situation or a problem in order to explain the cause and effect relationshipbetween given variables. In order to accomplish that, well-defined research problems hasto be done and hypotheses need to be stated (Eriksson & Wiedersheim-Paul, 2001).Explanatory research is mostly used within areas where extensive research has alreadybeen done (Walln, 1996).

As mentioned, the purpose of this thesis is to gain a better understanding of internationalbanks promotion strategies. In order to attain this better understanding we are describingthe different tools in the promotion mix used by financial services, external factorsinfluencing the choice of promotion mix and adaptation and standardization theories.Thus, the thesis can be explained as mostly descriptive. However, since we have not beenable to find studies that focus on the exact same problem as we have chosen to study inthis thesis,the topic area will also be explored. Finally, towards the end of the thesis ourown 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 mainlydescriptive 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 orquantitative approach. Whether the research should be qualitative or quantitative dependson 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 thoroughunderstanding, and to describe a holistic view (Saunders et al., 2003). It involvesgathering, 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 andperceptions regarding of the investigated area. Therefore, the researcher strives to obtaina complete understanding and overview of the problem rather than just focusing oncertain specific variables. (ibid)

Quantitative research, on the other hand, is a research approach that is formalized andhighly structured. Through the study of some specific variables on a great number ofobjects of investigation, this approach enables the researcher to make universalgeneralizations. All variables are measured by statistical methods, since the informationis transformed into numerical data and thus easy presentable in figures. Finally, aquantitative 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 togain a better understanding of our purpose, we have chosen a qualitative approach thatenables 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 bylooking at three different conditions. These conditions are:

1. The type of research question posed2. The extent of control an investigator has over actual behavioral events3. 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 researchstrategies.


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Table 4. 1 Relevant Situations for Different Research Strategies

StrategyForm of research

question

Requires controlover behavioral

events?

Focuses oncontemporary

events?

Experiment how, why yes yes

Surveywho, what, where,how many, how much

no yes

Archival analysiswho, 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 bankspromotion strategies in the Baltic States. In order to obtain this purpose, all three researchquestions have been stated as openly as possible. The intention with this strategy whenstating the research questions was to avoid questions that would not cover the broadunderstanding sought in our purpose. This is also the reason why all our researchquestions were stated in the form of how.

An experiment is done when an investigator can manipulate behavior directly andprecisely. This can occur in a laboratory and focus on isolated variables. (Yin, 1994) Inour 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 gatheringof information from respondents, generally in the form of a questionnaire. It oftenanswers questions of what, where and who. (ibid) With this strategy, we could haveinvestigated a few variables, but we would not have been able to cover all the aspects offinancial promotion that we believe are necessary to obtain the understanding sought afterin 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 isto describe the incidence or prevalence of a specific occurrence. Since our purpose is togain an understanding, archival records were excluded. Yin (1994) further presents ahistorical strategy as dealing with the dead past. That is, when no relevant persons arealive 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 oncontemporary events, which occur at the present moment, the historical strategy waseliminated. 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 isthe preferred strategy when how and why questions are posed, when the investigatorhas 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 anempirical inquiry that investigates a contemporary phenomenon within its real-lifecontext, especially when the boundaries between phenomenon and context are not clearlyevident (ibid). Since the research questions that we base this thesis on are of howcharacter 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-casestudy. The single-case study investigates one case thoroughly whereas a multiple-casestudy investigates several cases. Furthermore, in a single-case study, the research iscompared with existing theory. (ibid) Due to the time limitations we have chosen to do asingle-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 highlycomplementary and a good case study should include as many sources as possible. Theauthor calls this use of multiple sources triangulation, which gives the researcher anopportunity to obtain multiple measures of the same phenomenon. This will in turnincrease the validity when performing any scientific study (ibid). The six sources ofevidence are presented below.

Table 4. 2 Six Sources of Evidence: Strengths and Weaknesses

Source of Evidence STRENGTHS WEAKNESSES

Documentation # Stable: can be reviewedrepeatedly# Unobtrusive: not created as a

result of the case# Exact: contains exact names,

references, and details of anevent

# Broad coverage: long spantime, many events, and manysettings

# 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 fordocumentation)

# Precise and quantitative

# (Same as above fordocumentation)

# Accessibility due to privacy

reasonsInterviews # Targeted: focuses directly on

case study topic# Insightful: provides perceived

causal inferences

# Bias due to poorly constructedquestionnaire.

# Response bias# Inaccuracies due to poor

recall# Reflexivity: interviewee gives

what interviewer wants tohear


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Direct Observations # Reality: covers event in realtime

# Contextual: covers context ofevent

# Time consuming# Selectivity:unless broad

coverage# Reflexivity: event may

proceed differently because itis being observed

# Cost: hours needed my humanobservers

Participant Observations # (Same as for directobservations)

# Insightful into interpersonalbehavior and motives

# (Same as for directobservations)

# Bias due to investigatorsmanipulation of events

Physical Artifacts # Insightful into culturalfeatures

# Insightful into technicaloperations

# Selectivity# Availability

Source: Yin, 1994, p.80

Archival records are produced for a specific purpose and a specific audience. When thoseconditions are not fully fulfilled the usefulness of an archival record cannot be assured. Inaddition to that, they have the same strengths as documentation, but are focusing on pastevents and will thus not be used in this study. Direct observations and participantobservations could have been used in this study, however they are ruled out as possiblesources of evidence, due to limitations regarding time and financial recourses. Physicalartifacts are described as insightful when it comes to cultural features and technologicaloperations, but since our study is concerned with perceptional questions, this type ofevidence is not relevant. In this research, the two sources of documentation andinterviews were used, allowing for multiple sources of evidence. (Yin, 1994)

According to Yin (1994) interviews are the most important source in case studies. Aninterview can be based on three different strategies:

1. Open-ended interviews2. Focused interviews3. Structured interviews

Case study interviews are mostly of an open-ended art, where the interview does notfollow any structured questions. The investigator can ask the respondent for the facts of amatter as well as for the respondents opinions about events. Sometimes, the investigatorcan ask the respondent to propose his or her own insights into certain occurrences andmight 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 maystill remain open-ended and assume a conversational manner, but the investigator is morelikely to follow a pre-determined structure derived from the case study protocol. Finally,astructured interviewfollows a set of strictly pre-determined questions and can thus becharacterized 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 interviewguide (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 toconfirm or dismiss certain facts, or in this case, theories. In general, a focused interviewcan be conducted by telephone or in person. Telephone interviews are less costly andtime consuming, which makes them useful when contacting a distant respondent(Lundahl & Skrvad, 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-faceinterview.

According to Yin (1994) the use of a tape recorder during the interview is essential toregister the empirical data with an absolute accuracy. We used a tape recorder and byregistering the data, we were provided with the possibility to transcribe the interviewword 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 differentwebsites of Nordea as well as their intra-websites. There, we found general informationabout 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 findrelevant and manageable samples to collect the empirical data from. The choice ofsampling technique is dependent on the feasibility and sensibility of collecting data toanswer the research questions and to address the objectives (Saunders et al., 2003). Inaccordance with Saunders et al. (2003), non-probability sampling was chosen since abetter 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 onesmall case purposively selected in accordance with Saunders et al.(2003).

We have chosen to conduct a single-case study on promotion strategies within theBanking sector, due to the fact that the banking sector is one of the most internationalizedservice sectors and has been influenced by the changes in the globalization process. TheEstonian 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 Nordeais 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 wrongpersons 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 tofulfill our purpose, it was essential to reach the person who possessed the mostknowledge and experience of our research area. The country manager of Nordea bankFinland plc Estonia branch was the most suitable person for our interview, since he hadthe knowledge relevant to answer the questions brought up in the interview guide.


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4.7 Quality Standards

When determining the quality standards of a case study research, Yin (1994) suggestsfour commonly used tests; construct validity, internal validity, external validity and

reliability. Since Yin (1994) claims that internal validity only is used for explanatory orcausal 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 makinggeneralizations of the case study. The aim of this study is mainly to gain a deeperunderstanding and not to make generalizations. However, some generalizations regardingthe 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 ValidityValidity is the extent to which the researcher is able to study what he or she had sought tostudy rath

banking promotion paper

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