TABLE OF CONTENTS
Chapter One: Introduction
1.1 Aims and Objectives
1.2 Significance of the Research
1.3 Structure of Research
Chapter Two: Literature Review
2.1 Emergence of Financial Services in Britain
2.2 Features of Financial Services Marketing
2.3 Credit Card as a Payment System
2.3.1 Advantages of Using Credit Cards
2.3.2 Disadvantages of Credit Cards
2.4 Need for Marketing Credit Cards in UK Universities
2.5 Attitudes of Students on Credit Cards
2.6 Strategies of Optimizing Credit Card Usage
2.6.1 Protecting University Students from Bad Usage of Credit Cards
Chapter Three: Methodology
3.2 Ethical Consideration
3.3. Sample Design
3.3.1 Sample Size
3.3.2 Sampling Method
3.4 Institutions Targeted
3.5 Method of Data Collection
3.5.1 Advantages of Questionnaires
3.5.2 Limitations of Questionnaires
3.5.3 Questionnaire Design and Conduct
Chapter Four: Findings
4.1 Presentation of Data and Analysis
4.1.1 Analysis of Questionnaire
Chapter Five: Discussion
Chapter Six: Conclusion
6.1 Limitation of Study
5.2 Implication for Further Research
LIST OF TABLES
Table 4.1: Distribution of Questionnaire
Table 4.2: Students with credit cards
Table 4.3: Frequency of using credit cards
Table 4.4: Reason for owning a credit card
Table 4.5: Loyalty to bank
Table 4.6: Direct Marketing
Table 4.7: University-bank collaboration
Table 4.8: Communication method…
Table 4.9: Service delivery…
Credit cards have become popular payment system used in many UK universities. Students in universities are turning to credit card companies for financial assistance with the aim of boosting their income and building credit history. This dissertation delves into the issue of marketing financial services of credit cards receptive to university students in UK. Chapter 1 presents the background of research, aims and objectives, and justification of study. The main aim of this research is to investigate the attitudes of students towards credit card services, and present student friendly promotional strategies expected from financial institutions. Chapter 2 provides an analysis of literature on the emergence of marketing financial services in UK and major aspects of credit card services in universities. This research integrates questionnaires with secondary sources, as discussed in chapter 3. The major findings in chapter 4 indicate that many students are not satisfied with credit card services because they lack financial knowledge. Further analysis in chapter 5 indicates that banks need to focus on financial education, personal selling, and internet marketing when promoting credit cards. Banks should collaborate with universities to promote credit card services and establish a long time relationship with students.
Over the years, UK’s banks have strengthened their marketing strategies to the importance of becoming more competitive in the provision of financial services products such as credit cards, loans, mortgages, investments, pensions, and bank accounts (Ennew & Waite, 2007). Besides, financial services sector experiences rapid changes in developed western economies because of innovation and adaptation of credit cards. This dynamism has evolved since 1990s when financial institutions integrated their services with new technologies such as information technology (Ornstein, 2009). Moreover, financial institutions diversified their credit card services into middle-class markets and university students (Allen & Jover, 1997). Gradually, banks in the UK are expanding their marketing strategies in financial services towards the insistent differentiation approach. With competition and unpredicted behaviors of university students, it has become consistently difficult to devise strategies to properly market credit card services in UK universities. This chapter provides an insight on the research topic by presenting the basics of credit cards and its usage in UK universities and students in general, and thus helping us to focus on how banks can improve credit card services for the young customers.
Credit cards are small plastic cards offered to purchasers by financial institutions or credit unions with an aim of assisting users in performing payments (Hayhoe, 2002). The person holding a credit card normally uses it for purchasing purposes with the promise to pay for commodities or services acquired. According to Grady (1992), businesses accept different types of credit cards with regards to the issuers’ ability to make payments. Some merchants reject credit cards as means of payment because of lack of consent from the card issuer or the government. In recent times, there has been an increasing tendency of students being targeted as credit card users. UK’s banks such as NatWest, Citibank, Barclays, HSBC, and Nationwide are now turning to university students as their potential customers for credit card services (Ennew & Waite, 2007). The banks advertise credit cards near or within university premises because students are potential loyal customers in future. Besides, students have the tendency of impulsive buying and thus credit cards serve a better option. However, there are still problems when it comes to marketing credit cards. Many banks are not willing to provide students with explicit information about managing credit card debts or even spending and budgets – this has made credit cards to lose popularity among students in managing finances (Student Finance UK, 2010).
Furthermore, credit cards are essential in managing payments, particularly university fees. Baum and O’Malley (2002) suggest that students use credit cards to pay their education fees or other expenses by getting loans from issuing banks. This is a flexible way of managing transactions as many universities in the UK accept payment through credit services. However, given that many students start using credit cards when they are in university, it is difficult for them to manage their debts properly. This is a major issue that banks should consider when promoting credit card services. Rewardscards.com (2011) provides some good advice to students holding such cards; this implies that banks are yet to realize the full potential of financial services marketing of credit cards. Likewise, several studies (Xiao, Noring, & Anderson, 1995; Allen & Jover, 1997; Hayhoe, 2002; Heystudents.com, 2010; The UK CreditCards.com, 2011; Ornstein, 2011) argue that many university students have bad credit card history. These studies analyzed credit card usage in universities including types of cards in use, the amount of dept accumulated, and attitudes of students to credit cards. The studies, however, provide no specific promotional strategies suitable for banks and categories of students and the institutions surveyed in that context.
1.1 Aims and Objectives
Researchers have provided a framework on the usage of credit cards in universities by analyzing students buying behavior and their general understanding of credit card services (Baum & O’Malley, 2002; Lyons, 2004). Similarly, studies provide an insight on the risk associated with credit cards, including excessive debts, bad credit card history, and lack of financial knowledge among university students (Xiao, Noring, & Anderson, 1995; Allen & Jover, 1997; Hayhoe, 2002; Heystudents.com, 2010). The major issue in the studies provided is whether financial institutions are doing their best to provide financial education about credit cards to students; this is also related to the approaches of promoting financial services of credit cards in the university market segment.
As a guiding principle for this dissertation and to make relevant findings and discussion, the main aim of this study is to develop marketing strategies that can enable UK banks to improve their credit card services to students, and in turn explain the attitudes of students on banks promotions. Specifically, this research seeks to answer following questions:
1. Why financial services marketing of credit cards are important in universities?
2. Why university students own credit cards?
3. What are the approaches that can be used to launch the financial services marketing of credit cards in UK universities?
4. What are the attitudes of students towards credit card services?
1.2 Significance of the Research
This research targets UK’s banks because credit cards have become popular means of performing transactions within the university population – banks need to understand students’ perceptions in order to formulate feasible marketing strategies. In addition, there are currently many students joining universities and would like to start managing their own funds. This requires good financial education to maintain students’ loyalty towards the issuing bank. Having an upper hand in students’ means of payment is a way of setting long-term relationships and increasing customer base. Students may also experience flexible financial services when banks genuinely promote credit cards. Moreover, regulatory bodies can benefit from this research on the implications of credit card usage generated from students’ attitudes towards promotions.
1.3 Structure of Research
The structure of this research is as follows:
Chapter 1: Introduction
This chapter introduces the research topic: “Financial services marketing of credit card receptive to university students in UK, and what the banks should do to improve their services”. The first section provides the background of the research, followed by aims and objectives, significant of the research, and the outline of the research paper.
Chapter 2: Literature Review
This section contains various studies that were used in supporting the research aims and objectives. The materials used in literature review are from journal articles, books, and online databases. The various sections of literature review include: emergence of financial services sector; features of financial services marketing; credit card as a payment system; need for marketing credit cards in UK universities; attitudes of students towards credit cards; and strategies of optimizing credit card usage.
Chapter 3: Methodology
This chapter depicts how the research was conducted. There is a comprehensive explanation of the methods chosen, ethical considerations, and various sampling techniques incorporated in the research design.
Chapter 4: Findings
This chapter presents results of the questionnaires administered to university students using tables. The chapter focuses on university students in UK and their perceptions.
Chapter 5: Discussion
This chapter provides a detailed analysis of the literature review and compares with students’ perceptions. Further, analytical and critical thinking are applied towards the specific research objectives.
Chapter 6: Conclusion
This is the final chapter in this project – it presents the scope that the research has met its purpose, and the general concepts of promoting credit card services in UK universities.
This chapter provides an analysis of the literature related to the study of marketing financial services of credit cards to UK’s university students. It also acts as a basis of answering the research questions.
In Britain, there is stiff competition in the banking sector, which is spearheaded by high street banks such as Barclays, HSBC, Cooperative, NatWest, and Woolwich among others (Brooking, 1997; Lovelock & Wright, 1999; Ennew & Waite, 2007). This chapter will mainly focus on the strategies that UK banks employ or should implement to attract student bankers. Moreover, it is important to understand the history of credit cards from the gone decades to this date. This is meant to enhance our understanding of the evolutions that credit cards have gone through. Therefore, this chapter constitutes the following themes: emergence of financial services sector in Britain; features of financial services; credit card as a payment system; need for marketing credit cards in UK universities; attitudes of students to credit cards; and strategies of optimizing credit card usage. The last section provides a summary of major findings and the objectives met.
2.1 Emergence of Financial Services in Britain
Glyn (2002) argues that financial services in Britain are old as the Roman Empire because the emperors used them to compensate their soldiers. Banks were initially established with the aim of keeping cash for people and allow them to withdraw their funds whenever they wished to. As time moved by, the banking sector in Britain was split into two: formal and non-formal. People who had close ties with the Queen’s family used to manage the non-formal sector (Ornstein, 2011).
King Charles 1 introduced the non-formal banks by following his confiscation of gold that was kept in the tower of London (Glyn, 2002). Besides, Ennew and Sekhon (2011) reported that the English civil war influenced the development of these banks because wealthy people used them to keep their money and expensive assets safely. Perhaps if the English civil war would not have taken place (Brooking, 1997), the banking sector would have remained dormant because people would not need to deposit their cash in the banks.
By around 1600, most banks had only one office because there was no reliable transport and communication system and thus the banks could not open other branches (Glyn, 2002). However, according to Dale and Wolfe (2003), few banks had several branches, but then they were less than eight. This meant that people had to cover long distances in pursuit of banking services, and due to poor transport system, the safety of money in transit was not certain. Further, this implies that few banks were able to overcome the hurdles, and even if they did, they were not able to expand their marketing operations. Ornstein (2011) explains that this hurdle was comprised of laws put in place by the authorities to hinder the growth of small non-formal banks. In other words, the laws were meant to reserve the sovereignty of big banks.
Later on, in around 1820s the UK legislators froze the laws that were previously used to dictate the ownership of financial institutions (Ornstein, 2011). Leybourne (2009) argues that this meant that people could own a bank collectively as evidenced in the case of National Westminster bank. As time moved, the demand of banking services continued to increase, especially with the emergence of industrialization. This is because the upcoming industries needed personalized banking services that were tailored to their needs (Glyn, 2002).
Furthermore, the Second World War facilitated the growth of banking industry in Britain (Ennew & Waite, 2007), and by the time the war was over there were many private financial institutions than ever before. However, the banks’ services were still limited to lending money to borrowers and accepting cash deposits and withdrawals (Brooking, 1997). Ornstein (2011) outlines that more reforms were introduced into the banking sector from 1950s onwards, which enabled banks to increase their services. In fact, some of the services that were introduced during this period included credit cards, mortgage loans, and automated teller machines (Ennew & Sekohn, 2011).
Currently, the banking sector in UK has experienced many changes that have worked to its advantage (Ennew & Waite, 2007): this is because the customers are more satisfied compared to several decades when they had to take what was available for their survival. Now, the banking industry in UK, despite the recession threats (Conway, 2008), has been integrated with the Internet to enable customers to conduct their transactions at the click of a button through a concept popularly known as Internet banking (Ornstein, 2011). The services offered by banks also target university students, who are seen as loyal customers in future (Xiao, Noring, & Anderson, 1995; Hayhoe, 2002)
In fact, Barclays bank is one the banks that has made Internet banking available to its customers; other services include mobile banking, electronic fund transfers and commercial loans (Ennew & Waite, 2007). These reforms have made people to appreciate banking services because they are able to get the services that suits them best. For instance if a client needs a loan, he/she has three options to choose: personal, commercial, or mortgage (Howell, 2000). In essence, more developments are yet to be realized.
2.2 Features of Financial Services Marketing
Ennew and Waite (2007) reckon that the marketing of financial services is very different from that of marketing goods because the product is not physical. This is referred to as intangibility because the customer cannot touch or smell the product (Arthur & Sheffrin, 2003). This is where the challenge comes in because the marketer has to explain to the potential client how he/she is going to benefit from the financial product. Piercy (2001) points out that it would be easier if the product were tangible because the client would have an opportunity to put it to test and decide whether it is worth the purchase value.
In this regard, when it comes to marketing credit cards to students, the bankers in UK have to be very careful because students represent the elite members of the society (Brooking, 1997). According to Vinten (2005), this implies that the banks have to emphasize on the importance of owning a credit card because if the students do not understand this, then they will not sign up for any credit card.
Additionally, financial services and the entities involved exist as one component that is comprised of several elements dependent on each other: this aspect is called inseparability (Ennew & Waite, 2007). This means that financial services cannot be sold unless the buyer and the seller are physically present. Piercy (2001) explains that lack of tangibility has made it necessary for financial institutions to ensure that the products are customized to the needs of the students in UK and this is because the needs of a student varies from that of an ordinary citizen.
The employees who work in the banks are taken through regular orientation sessions that are intended to familiarize them with the services that are offered by their banks irrespective of their position (Brooking, 1997). According to Howell (2000), this was found to be necessary because the employees may interact randomly with the students without their knowledge. During such non-formal meetings, they are expected to explain the importance of financial services to the students. From a nonprofessional’s understanding, this argument may sound unrealistic, but then the world we live in today has been integrated into one global village through the Internet (Elliot & Starkings, 1998).
Vinten (2005) argues that the banks are also holding workshops in most learning institutions because that is the surest way of moving closer to their intended target. According to Conway (2008), cohesion of banking services is being enhanced in UK by making other goods and services that are sold to students to be compatible with credit cards such that the students can purchase items using their credit cards.
Another common feature of financial services is that they lack standardization (Ennew & Waite, 2007). This is because banks offer almost the same services but under different terms and conditions. For instance, students can access personal loans from the banks in UK, but then each bank has its own specified interest rates (Heystudents.com, 2010). This implies that it is up to the student to choose the bank that suits him/her best. Another example is that most banks allow their customers to make deposits/withdrawals using ATM cards (Baum & O’Malley, 2002). However, Piercy (2001) agrees that there are banks that charge a small amount for every transaction completed via ATM card while others do not charge anything for the same transactions.
2.3 Credit Card as a Payment System
As a financial service, a credit card is a plastic card that banks or credit organizations offer to their customers to enable them pay for goods and services they wish to obtain (Brooking, 1997). According to Arthur and Sheffrin (2003), this is to say that credit cards are used as a mode of payment, and just like their names suggests, the cardholder has to pay the incurring debts for him/her to continue using it.
For one to own a credit card, he/she needs to open a bank account with the bank that provides it (Brooking, 1997). Martin (2010) explains that after the bank account has been verified, the client is issued with the card and is expected to use it to buy goods and services in outlets and service providers who accept payment via credit cards. However, Dicker (2008) advices that the cardholder has to be on the look out because there are quite a number of outlets and service providers that do not accept payments made through credit cards. Fortunately, the outlets that accept credit cards have the logo of acceptable credit cards displayed on their signboards (Martin, 2010).