When analyzing the strengths of Wells Fargo Company we noticed that Wells Fargo’s overall size is their biggest strength. As noted under the company section, they are physically the largest bank in America. We identify the banking industry as a still expanding and growing market; therefore we see Wells Fargo’s banking services to be a star instead of a cash cow when using the BCG matrix. When our team analyzed the advertising and marketing measures that Wells Fargo uses, we noticed that they are a highly recognizable brand, and therefore their marketing recognition is a strength..
Weaknesses include the fact that they are not international when many of their competitors are, as well as general banking weaknesses such as security, policies, regulation, and problems with our current economy that banks face.
Opportunities that our group points out are easily brought down from our weaknesses, but also from our research. When doing research we found that US Bank helps with customer’s tax returns, perhaps Wells Fargo could follow the same type of idea. Maybe a merger with a company like H&R Block could gain customers.
Finally, threats that we noted are mostly self-explanatory. One thing our team would like to talk about though is the problem with brand loyalty. In the banking business the biggest threat is that of brand loyalty. How does a company keep its customers loyal, and what if a new competitor’s promotions exceed the company’s? A big threat is that of losing customer loyalty through such measures.
The objective of this marketing campaign is to create a new service for Well’s Fargo’s customer base to create more brand loyalty, reinforce brand image, and extend customer base in home loans. The campaign will start in a specific area, which was chosen by general population of the target market in the area. This area is the San Fernando Valley, which includes Northridge, Canoga Park, Tarzana, Woodland Hills, and many other smaller communities. This community contains a great diversity of classes, from upper lower class to upper middle class, all of which are targets in the marketing strategy.
The campaign is going to focus on implementing a new tax service to existing customers and new customers, particularly those who have or are trying to get home loans. An appropriate time given for this project is from June, 2007 to May, 2008. These dates were chosen because the campaign needs to have the attention of the consumers and the consumers need to understand that Wells Fargo will be offering this service before the consumers begin looking for this service. That way they have Wells Fargo in their mind when they think of their taxes next season. June was chosen because it is an appropriate time frame for Wells Fargo to prepare to implement this service. They will need time to gather information, hire any new employees, make mergers, or any other actions required to carry out such services. May was decided because it would be the appropriate time to decide whether or not Well’s Fargo gained an appropriate customer base to the amount of costs which it incurred, mainly because this is the month after tax season. Therefore, it would be the best time to review the performance of this project.
In May, 2008, Wells Fargo will measure the effectiveness of the marketing plan on their home loans and general profits. To measure, first they will calculate new costs given to them by this marketing campaign, such as new job salaries and any increased marketing or advertising costs from last year. There is an expected increase in home loans by this project. Home loans are where Well’s Fargo makes the majority of its profits, especially their margins. So to measure how effective this campaign is, they will use the following steps:
They will calculate the % increase in home loans, profit, and profit margins over the past 5 years to figure out an effective average increase.
They will calculate the % increase in home loans, profit, and profit margins from last year and this current year; where the new service was implemented.
They will compare the % increases in step 1 to step 2 to see if there was a significant difference between average increase and increase from the year of implementation.
The customer base was divided into different segmentations based on age and income for individuals, and then size and income for businesses. The reason that the customer base was divided into these various sections was because these are how a bank would identify and treat them different. Age and income reveal large differences’ in the amount of money a customer can qualify for a loan as well as the length of the loan. A young person would likely have a short term car or school loan, while an older person or business owner would be likely to qualify for a larger, longer term loan. Also, individuals and businesses would take completely different types of loans.
The target market for this campaign is lower to upper middle class individuals between the ages of 26 to 60. The younger market share and lower middle class would be more likely to be taking out home loans, which is where Well’s Fargo makes a great deal of money, and the older upper middle class customers would be likely to refinance their existing loans into one large loan, which would constitute as a new loan at Well’s Fargo, as discussed in the customer section in the situation analysis.
Wells Fargo is currently the market leader in southern California for home loans with lower to upper middle class customers. These consumers choose Wells Fargo because of the brand image and because they are well known to be helpful and friendly. Wells Fargo’s main competition includes Bank of America and Chase Mortgage. Because these banks generally deal with larger corporations and not individuals, they are often viewed by those who are trying to take out home loans to be too business-oriented to care about small families. They also intimidate small families with their complexity and cold nature, where Wells Fargo tries to be as friendly and warm to the consumer while explaining things in detail to make them less complex and easier to understand.
The Marketing Mix consists of 4 factors; Product, Price, Place, and Promotion Mix. These factors are taken into account to describe the benefits of the new product, if it will be profitable, and if it will add to the company’s overall product line in a positive way. The marketing mix is also used to decide how the product would best be suited for placement and promotion, and how to implement such strategies.
The new service proposed to Wells Fargo is an extension of its current financial services provided to its customers. Currently, Wells Fargo has several branches for financial consulting and mortgage consulting. The goal of this campaign is to make the company more accessible and add an accounting division to bring more customers into offices. This would include in-house consulting or free tax software called FastTAX (much like TurboTax), to help costumers with their taxes.
Benefits to Consumer
The target market, middle class Californians, often uses services such as H&R Block to process their taxes. Many also use TurboTax or other products. By bundling these services into home loans and bank accounts, Wells Fargo can increase brand and product equity at very little cost. The company wants to help customers in all financial situations, that way they know they can depend on us.
When surveyed, 57% of those who were surveyed said that they would be interested in a bank doing taxes, and 57% said they would be interested if the bank offered free tax services (appendix k). While this may seem like a small percentage at first look, it is actually quite large, if 57% of those with home loans switched to our bank because of our service that would be a ridiculously large growth. Realistically, probably only a small fraction of these customers would change, but hopefully 57% of people would think it’s a great deal.
There will be two different ways this product will be given to the consumers. The first is in-house consulting. These services would be given at already available financial branches of Wells Fargo. These services will be confidential, and in no way affect any accounts or transactions the customer has with Wells Fargo. This service can be made by either procuring a joint venture with H&R Block, or by creating our own firms inside of our existing financial services departments. We analyzed costs and found that the most cost effective plan would be to hire our own professional tax consultants, and to train current employees to assist them during tax season.
The second way is a take home accounting product such as TurboTax. This is valuable to the consumer because it is versatile and can be used easily by the customers themselves. Also, Wells Fargo would have a weekly two hour lecture on how to use this product, where customers can come in and find out how. Personal help could also be provided. The product might use either a pre-existing product, such as TurboTax or H&R Block’s TaxCut program, or the IT department could create its own at a costly price. Therefore it has been decided that the strategy that should be used is to use a pre-existing tax program, either through procuring a company or a joint venture. The most cost effective at this time would be to try a joint venture with a company such as TurboTax. Either way the packaging would look the same, just with a different product name. In this example, this product line would be called FastTAX, and would be packaged as below.
When considering making a new product or service such as this, the company must take into account any impact that associating its current brand name with this new product might have. These issues include how the product will impact the current brand name and how this product will impact pre-existing product lines. The company must analyze if these impacts will be negative, and to what degree, in order to realize if this will be a profitable decision.
Potential Impact of New Product Using Wells Fargo’s Name
Issues that Wells Fargo might have to consider when creating this product is that if there is a fault in the product, the company would not want its brand name associated with it. It could also make customers think that the company is going too broad with its services and no longer specializing in specific fields, making them less likely to count on us when it comes to those specific needs.
This product would not steal business from any other sections of our company already in development, due to the fact that accounting services are not already in place. However, the company could consider that there is a potential for loss in our financial division if customers end up finding that they do not need financial advice after speaking with our accountants. Also some customers might find a conflict of interest between our accounting confidentiality and the fact we have home loans with them. If someone is unable to pay their taxes because of loss of income, a customer might get frightened and move their loan to a different bank when afraid that we might foreclose on their loan.
Marketing Objectives and Target Market Needs
The company’s marketing objectives are to increase home loan rate, brand loyalty, and overall profit of the company. The product is expected to do all of these things. Our current target market, lower to upper middle class individuals, have to file taxes every year. This can be a burden on individuals that do not understand how to manage their finances. According to our survey, 65% of individuals in our target market pay for some program or service to file their taxes (appendix k). That is a very large percentage, if we can help these individuals in our target market with their taxes while getting new loans, it would be a win-win situation. Wells Fargo already helps many of their current customers with financing, if they were able to bundle in a product that would lure a larger customer base than they would be at a great advantage. The individuals targeted specifically want to have more money to spend, and they want their bank to help them. If Wells Fargo offers them refinancing along with a package that would include free taxes, than they would have even more of a reason to switch to Wells Fargo for all of their banking and mortgage needs.
The basic pricing strategy for this product will be a competitive customer-perceived value approach. The product will be free to those who refinance with Wells Fargo; this is a customer-perceived approach. Those who actually refinance under the agreements that allow them to have the free tax service have a minimum refinance or loan amount required for them to get the service. This amount is decided upon by the financial analyst in charge of their case. The analyst will also take into consideration the interest rate allowed to by the customer, then from there tells the customer which of our tax services he or she qualifies for. Those who have lower loans with lower percentages will give Wells Fargo a low rate of return on those loans, meaning that these customers would only be eligible for the less costly software, FastTAX. This product is also available to other customers of ours for only $30 if they do not have loans (a competitive price based on TurboTax pricing).
Those with higher loans, such as home loans, and those with high interest which we are expecting a large rate of return; can qualify for full tax service in-house. While these services may sound like they are free, in all actuality our financial analysts will be negotiating the terms of the loan with this in mind, and explain to the customers how this is a bonus. This will draw customers to higher interest rates and larger loans, actually bringing in more profit than to the customers that pay for the services.
Pricing the Products
As previously mentioned, our take home software will be a program that is used on a computer that allows individuals to do their taxes at the convenience of their home. This software will be $30, the same price as competing products (TurboTax Pricing). The products will actually be our business affiliates product, and because of this the majority of the profits on this software will go straight to them, leaving us just the amount of money it costs us to distribute and sell the products.
The in-house tax services will be offered for free from our financial analysts, but those who do not have loans with us but still want to use our product, will have to pay prices according to service rendered. Many of our pre-existing customers who have bank accounts with us are expected to want to try our service. During this first year of operation we will be conducting a trial price that is competitive to H&R Block’s pricing. Our tax services are only offered to individual customers and not to businesses, so the pricing will be between $25 to $300, depending on the time needed to file the taxes (H&R Block Pricing). Our tax preparers and consultants will be trained to be able to quote on the spot when a customer displays his tax information. Ranging from $25 for those whose taxes can be filed quickly; such as college students that use 1040EZ forms, to $300 for those whose taxes take a long time to file, such as people that have their own business.
Price vs. Cost
While determining price, one must always compare costs. The advertisements that our company will be spending money on will cost quite a bit, but we will only be advertising our in-house consulting. The TaxFAST software will be advertised only in-store and online in small sections to show that we provide the service as an added bonus to customers everywhere in our company. This software will actually be a joint project with another company, where they will be incurring most of the costs of the project while making most of the profit; we will merely take a small amount of profit by providing them with the ability to put the product in our stores and on our website.
The cost of our in-house consulting will be great, an over $1 million start up cost for our 15 branches in the San Fernando Valley. While the initial cost is high, we expect to generate much more revenue from the expected increase in loans and refinancing from this project. Even if the company had a first year loss, it is expected that the customer base will grow, giving the company a larger amount of income over the next several years due to the long terms associated with loans.
Currently none of the competition in the area has been using this type of idea. If Wells Fargo initiates this project, consumer perception of the idea of a bank doing your taxes will be a brand new subject. Current consumer perception of Wells Fargo is that they are a farmer and family oriented bank that is considered helpful and friendly. These perceptions are rarely used in the tax preparation industry; usually companies like H&R Block focus more on being a business and giving off an aura of professionalism. Wells Fargo can bring together a consumer perception that is all of the above. Customers already know how helpful and friendly our financial teams can be, and it is natural that those in the banking industry are considered professionals. Therefore, if we can show customers we are capable of handling their taxes just as good as other companies, Wells Fargo will have a competitive edge with consumer perception in the years after they prove their abilities.
Currently, competitors price their products at rates that are scaled. Lower prices for individuals that are doing personal income taxes for state and federal; with higher prices for those who do business and major tax write-offs. To compete with these firms Wells Fargo will develop a similar strategy, while focusing on the lower priced customers. It seems that most competition focus on higher priced customers, if Wells Fargo were to concentrate on these as their target market, as they are, they might be able to gain easy entry into this market.
Price Effects on Brand Equity
Wells Fargo has always comparatively priced its products based on how it would like to be viewed by the consumers. If we overprice this product it could reflect negatively upon us. Normally we would price economically that way our prices give a welcome image to our consumers, giving off a view that is friendly and honest. If this product were to be more expensive than other companies, perhaps our brand would be viewed as trying to take advantage of people and then it could build negative brand equity. Therefore, we have decided to price our product comparatively to other companies.
The objective of this project is to increase our market share of home loans. Pricing this product at normal levels instead of under the price of other companies gives the product an image of worth, that way when we offer the products for free with substantial loans; it gives our loans a competitive edge. Hopefully this strategy will meet with these objectives and increase market share accordingly.
The main new product proposed to Wells Fargo is not actually a physical product, but a new product service. Because this is a direct service there will be no distribution channels between the manufacturers and the consumers. Therefore the distribution strategy proposed will be simply a direct to consumer approach, where the service is offered in our pre-existing branches of Wells Fargo banks.
For our FastTAX program mentioned, the distribution strategy will be a slightly different strategy. Because we will purchase this software from another company, we will actually be the intermediary. After we purchase the goods we will ship them directly to our various Wells Fargo locations for customers to purchase there.
As previously mentioned, our service will be a direct from manufacturer to consumer system, meaning that no channels will be needed. We will however post tax guides, and electronic tax programs on our website that customers will login to. The main point of this tax service will revolve around having a ready to work tax specialist at all valley locations in time of need.
As for the FastTAX program, there will only be one channel of distribution, which is actually Wells Fargo itself. Since we are not the direct manufacturer, we will be purchasing this product then shipping it to our stores and selling it to consumers.
The individual consumers will be coming to our already existing Wells Fargo branch locations. The branches chosen are those that are placed accordingly, such as those in areas that are mainly visited by lower to upper middle class customers. This placement will make it consistent with our target market for this new product. The objective of this is to make our product easily accessible and within the reach of our consumers by being in branches that they already visit. These branches will have a large booth in the middle of the larger branches for tax sign ups, and in the smaller branches sign up sheets near the doors. If the customers decide to purchase tax software that they can take home, they can purchase it at our store locations, or they can download it from our store website.
For our FastTAX program, we will be making two transportation methods of the product available. The main will be transportation from our manufacturer straight to our Wells Fargo branch locations, and the second will be transportation via UPS to any customer’s houses that order it online. These customers would be paying the charges on UPS delivery personally; therefore we will not include these rates into our costs analysis.
Wells Fargo offers financial services of many kinds. But since we don’t sell products our services, it can only be measured based on the customer satisfaction of the transaction experience. Wells Fargo currently strives to give the best customer financial experience. Now, we want to add tax services into that equation. Remember, our goal is to increase the number of home loans by offering free tax services to people who have home loans with us. How can tax services be any better than free to qualifying customers? That’s right. Free. We will advertise this simple and to the point message, “Customers with home loans have free tax services”. Our message will be posted with signs in all San Fernando Valley Wells Fargo locations. The new message will also be posted on the website of Wells Fargo after a customer signs into their account.
If the customer’s area code used for the account is within Los Angeles County, they will see a banner ad in the form of “Free Tax Services to San Fernando Valley Residents”. Putting the message on our website will educate all of our current customers in the area that use the Wells Fargo account homepages to view and edit their bank accounts. We figure many wells Fargo customers have home loans with someone other than us. Hopefully informing customers of free taxes with a home loan will make people transfer their loan to us. As with any promotion we want customer feedback. The feedback we receive from advertising on our website and in-store will be analyzed and used to tailor the next message we send out to the general public of the valley. A month later, we will extend the message to be received anyone who sees our billboards around the valley. We will not purchase any new billboards because we are planning on keeping advertising cost at a minimum. We however, will redesign all current Valley billboards to mention our new tax service.
We may also incorporate this new message into current Wells Fargo commercials and radio ads. Our tax service will be available to only Wells Fargo customers. Customers in Wells Fargo that do not have home loans with us are still eligible for the tax service but will be charged a competitive rate. The duration of this advertising will be until the end of the tax season of the following year. At the end of tax season of the following year, we will analyze how much extra money we made from additional home loans brought in by our tax promotion. If it’s successful we will promote worldwide.
Our goal is to use the Los Angeles area as a test market. The below applies to all branches in the Los Angeles area. Making Los Angeles conservatively aware of our new free tax services with the purchase of a home loan will begin immediately. Thoughtful signs will be placed in all branches of our banks in the greater Los Angeles area. Posters and signs on the inside will catch any customer’s eye that walks through the line, and will be consistently displayed year round. The deadline for developing and implementing the signs will be June 31st. We choose this form of advertising for its simplicity, and low cost. Wells Fargo will immediately look to hire a one tax service expert per branch. Currently all we need is one tax expert because the demand for tax services is extremely low right now. The tax service expert will be trained in other areas as well so that in the downtime of taxes, he/she can pitch in around the bank and help customers. Our goal is to be conservative and let Wells Fargo customers know what we are up to. We understand that people will not worry about taxes until the tax season so we will not make any intense advertising campaigns until tax season.
When the demand for tax services kicks in from the end of the year to mid April, we will hire more tax workers to satisfy the extra workload. We will then consistently advertise our tax service deal in 25% of current Wells Fargo Los Angeles area broadcast TV commercials. At that time our target market will be anyone 25 to 55 years of age within the Los Angeles area. That means 25% of Wells Fargo’s current TV commercials will be replaced with new ones. Throughout the year, we will be monitoring feedback from customers and we will make necessary changes to continue to improve advertising and customer awareness.
Our budget will be minimal before tax season consisting of setup costs and one tax expert salary. From June 31st to December 31st our budget will consist of equipping 15 branches with tax services. The costs per branch are:
One tax expert full-time salary of $68,000 per year (Business and Financial Operations Occupations)
$300 initial setup
$339 tax books (QuickBooks premier accountant editions)
$100 store signs “Free Tax Service per Home Loan, or Competitive Rates”
In tax season we will pay $3 million in T.V. commercials. From Jan 1st to April 15th our budget will consist of, on top of prior balances already established:
Two part-time tax specialists at each branch $25,000
Worker training $1,000
- Los Angeles Advertisements $1 million
- TV commercials $700,000
- 15 second advertisements on cable networks
- Newspaper ads in L.A. Times $100,000
- Several mall ads and two large ones
- Billboard ads $200,000
- Across San Fernando Valley
This leads to the total budget at $2,421,085. A good portion of this budget though, will just be a substitute of funds we would have already spent. All advertising costs will come out of normal advertisement costs that Wells Fargo would have spent advertising their brand name originally. Since the advertisements for the tax services will be a substitute and those prices already accounted for, our additional budget compared to our normal budget will only be $1,421,085.
When calculating a break even analysis one must compare pricing to costs. If the average home loan in the southern California area is $400,000, with an average rate of 7% (calculated from our survey, appendix L), than the return on investment would be $28,000 a year. If the costs are considered to be $1,421,085, then divide the total costs by the income per average loan and you would get an estimated 50 more home loans. Meaning that in order for this project to break even, Wells Fargo would need an additional 50 home loans on top of the expected loans for the year. If divided by the 15 locations, each of these locations would need to get an additional 5 to 6 loans on top of their estimated loans for the year.
We will use the past 5 year’s data to calculate our new marketing plan, such as loans, loan rates, and profit. We can use all the data to calculate the expected value and forecast. The expected value and forecast will reflect our company’s objective and goals. So we can use the result to check if that states our objective. For example, if our company has a total of 10,000 loans, which is 6 % of new loan. If the data shows a total of loans are increasing up to 11,000 loans and 10 % of new loans, then we can conclude that our new marketing plan is workable. In contrast, if we get negative results, all the loan and new loans are going down, and then it means our marketing plan is not workable.
Risks and Threats
This marketing plan has several risks and threats that could jeopardize our company. Whether our brand name could be hurt or we could lose customers to competition due to ineffective strategy, these risks and threats must be analyzed to understand whether this plan should be initiated or if it is too risky.
One such risk is that our plan could fail. One issue concerning this is that tax services are a specialty service that is not very popular. On the other hand, everyone needs to do their taxes. Also, customers might not think of Wells Fargo as an accounting service. Even though Wells Fargo does specialize in the financial industry, which is associated with accounting. Although it is prudent not to put too much emphasis on the tax services, because it might hurt Wells Fargo's image. Also, the tax season is only a few months which limits the amount of time to make profit. That is why Wells Fargo should advertise only Seasonally.
Other risks also include product backfire. If something happens and Wells Fargo files individual’s taxes wrong it could create a very poor image for us, making our brand equity drop substantially.
A threat to our company is that competitors could realize the profitability of our product and saturate competition in the accounting market. Banks like Bank of America and Washington Mutual could put a devastating counter operation. The only way to contain this is by developing the new product quickly, so the other banks will struggle getting a part of the action. While Wells Fargo will already have a customer base, there is a very large risk that another company might attempt to copy our idea and then end up getting more buzz about the subject, causing customers will flock towards them instead of us.
Upon analyzing these risks, none are prominent enough for a rejection of the marketing plan. They are all theoretical, and none of them very likely to happen. If they’re risk increased than there might be a change of plan, but at this time these risks and threats should just be watched over. It would be a good plan to re-evaluate these risks 1 year from the beginning of the implementation to reassess how risky and threatening they are.
Through examination of these findings, we have come to the conclusion that we would recommend this product for implementation. The expected costs would be under $1.5 million, which the company could make back just by procuring 84 new home loans or refinances. To implement this strategy we will have to start the project in June, 2007. The first part will end in May, 2008, then we will continue with the next part until tax season is finished in July 2008. The first part of the plan is to create product awareness, and the second is actually an attempt to sell this product to the customers. Once the period is ended we will analyze the performance by comparing the % increase in home mortgages compared to the past 5 years average % increase. Lower to upper middle class Californians between the ages of 26 and 60 are our target market. We will supply our product inside of our already pre-existing stores in which these customers already visit, creating easy access to this new product.
There will be 2 products specifically, in house consulting, and a program called FastTAX. FastTAX will be an outsourced program that we buy from a separate company then resale for a minimal profit, while the in house consulting will be sold for much more. We aren’t planning on selling this products that much though, our main plan is to bundle this with our home loan system, attracting new customers to open up new home loans or refinance current home loans with us. Once they refinance or open up a new loan, they will get this service free of charge.