Transcript Nadeem Firoz - AlHuda Centre of Islamic Banking & Economics

Is Islamic Banking Satisfying the Customer?
Marketing Model: E-N-T- G-A-M-I-K-R
By:
Nadeem M. Firoz
B.Com (Hons), M.Com (Univ
of Peshawar); MBA, Ph.D
(USA)
School of Bus (AACSB)
Montclair State University,
New Jersey
Introduction







Experts in Islamic Financing
Easiest way to understand the Islamic financing concept
Easiest way to understand the non Islamic financing concept
Is Interest free is free?
Importance of Marketing
Marketing for non Marketing Executives
Easy lay man model of Marketing: ENTGAMIKR
So What?


Customer satisfaction requires total Marketing
Integration
Satisfying customer at what cost?
Sellers Market of Islamic
Financing






Lack of competition
Lack of knowhow
Analogy to MNC’s Sweat Shop & Child Labor
Abusing of Orthodox Islamic Believers
Exploitation of interest free idea and loan
sharking
Charging more than conventional interest
A case of House Building Finance
Corporation (HBFC)- WAPDA Town.
Nov 1, 2010
Islamic Finance








House value at the time of loan Rs: 60,00,000
Loan of Rs. 3,10,000
Life of the loan 17 years
Paid in last six years Rs. 5,000 a month
5X12X6= Rs 3,60,000
Principal reduced only Rs. 34,000
Principal remaining: Rs. 2,76,000
If paid today loan remaining with interest
Rs.4,73,000
If paid in 17 years may be equal to 10,00,000
A Case of IMF. Conventional Finance


Interest only loans
IMF/World Bank on December 21, 2005
–
–
–


19 countries loans down to zero
for countries with per capita income of less than $380/year
[This was due to the historic Multilateral Debt Relief Initiative (MDRI)]
Rich nations (G-8) write off $40 BN in debt - Heavily Indebted Poor Countries
(HIPC)
62 countries were paying $10 BN each year in debt servicing
Example:
Time
Loan
Paid Interest
Principal remaining
30 years
$40 BN
$120 BN
$40 BN – Finally to Zero after making 80 BN
So What?





Making a case for a case
All the same
Nothing is F R E E
No money no Honey
Lets try to Satisfy the customer (KING)
anyway
Environment
SWOT
------ Analysis
strength
weaknesses
internal
micro
opportunity
threats
external
macro
Marketing Internal & External
C-king
4P’scontl
8
uncontl
So What?
CHANGING THE DISADVANTAGE
TO AN ADVANTAGE


Change weakness of the non Islamic banking
system to an strength of Islamic finance.
In a debtor economy there is an opportunity to make
partnerships using profit & Loss concept
Needs & Wants
Maslow's hierarchy of needs:
Needs cannot be created
Satisfaction of the needs and wants of the customer
5.
4.
3.
2.
1.
Self-actualization
Self-esteem
Social
Safety
Physiological
So What?
PHYSIOLOGICAL


House, Education, Car, Etc.
Through Equity loan: Safest loan in
the world
Case of HBFC/WAPDA 3 Lakhs loan on
60 Lakhs property
Targeting






Bases of Segmentations
Multiple segments
Demographic- age income, sex, education
Behavioristic- Product use- consumer or B2B markets
Geographic- north east, southwest, east, west, Midwest,
Psychographic- life style- social class, personality
Strategies
1. Mass marketing
4. Undifferentiated
Marketing
3. Product
differentiated
marketing-
5. Market
differentiated
Marketing
5. Target marketing
One defined markt
6. Target marketing Concentrated
markt
So What?
1. Mass 4.
Marketing Undifferen
tiated
Marketing
Goods - Products



Goods
Services - intangible
Products – tangible






4 -- Problems/Nature/Issues/Concerns of Services
1. Intangibility
2. Variability
3. Perishability
4. Inseparability
So What?
Intangibles
Converting Intangibility to
Tangibility

Build on a relationship
So What?
Tangibles
Tangibles: No problem
here
o Getting into a house
o Getting a car
o Getting education
Customer & Financing fit
Seeking Customer Satisfaction
So what?

Conduct Market Research
–
–
–
–

Create Consumer Oriented Marketing Program
–
–

Study consumer behavior to identify consumer’s wants and needs
Target and segment the Muslim market by demographics and geography. Find
communities with devout Muslims who are most likely to purchase Islamic financing
products
Align consumers’ wants and needs with the organizations objectives
Materialize wants and needs into differentiated Islamic financing products
Engage in a grassroots marketing program where banks reach out directly to local
Muslim residents in the surrounding community.
Develop a comprehensive website which details all aspects of your bank’s Islamic
financing products, BUT focus on direct sales, as a Majority of mortgage products are
purchased face-to-face
Offer Promotional Discounts
–
To encourage Word-of-Mouth advertising offer “refer a friend” discounts on your next
mortgage payments
?

Integrating Islamic financing into your business
–

Obtaining approval from Shariah boards
–
–

body must have oversight of all significant business decisions
interpretations of Islamic law are constantly being debated among Islamic scholars,
not all Shariah boards are created equal
Cost of launching Islamic products
–
–

product design, training, processing, business structure, human resources policy and
employee relations management, and FDIC compliance - County specific
extensive MIS required to develop a product with little precedent in the United States
design and printing of new financial documents to support the new products, counsel
from Muslim and regulatory experts, and the training and hiring of staff members to
support the new products
Stereotypes
–
United States - felt to be hostile towards the concept after the 9/11 terrorist attacks
–
Muslim - wary of western institutions as the recent “War on Terror” policies
?

Regional banks are in best position
-focus on local Muslim community, conduct MIS, build up trust, focus on word
of mouth advertising

Control start-up costs
-dedicate only a few staff members to develop business
-service Muslim’s on an “as-needed” basis until business grows
-use simple proven Islamic financing products (quick approval by Shariah
boards)

Continue MIS
–
to determine consumer’s evolving wants and needs
?


Market to non believers to expand the
marketing pool:
Market Share
to
Market Size
Micro lending
Amount - Price


Profit & Loss
Cost of Capital
So What?

Partnership
Keep profit down to less than conventional
interest rates to attract customers form all
markets (believers and non believers)
Information - Promotion
Strategy
Media Tactics
 Print: Magazines - Newspapers

Out of home:

Broadcast:

Word of Mouth:
Billboards - Transit - Flyers
Radio
-
TV
So What?
Maximum information
Knowhow
Marketing Consultant
Integration
Matrix structure
So What?
Matrix
CEO
Mktg
banker banker banker
So What?
Existing markets
Existing Markets
Existing Products
New products
1.Marketi
penetration
3. Market
development
2. Product
development
4. Diversification
So What?
MGR
H
Star
?
L
Cash Cow
Dog
H
L
RMS
Recommendations
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Research your area
Advertise
Follow examples
Hire Consultants
Offer Alternatives to Mainstream Banking
Similar but Different
Major Markets
Market Potential
Multiple Designs
Medium of Exchange
Sharing the Risk
Based on Honesty
Belief that God is Watching out for you
Investing in Ethical Products or Markets
So What?
E-N-T- G-A-M-I-K-R
M-A-R-K-E-T-I-N-G
©2010 Firoz
Questions/ Comments