Marketing Financial Products


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Small Savings and Retirement Planning - Chapter 9

The objective of savings is to cater to future needs. The small savings schemes introduced by the Government of India help people develop the habit of savings to finance their future needs. The concept of retirement planning in India is still at a nascent stage. This could be attributed to the low income levels and the lack of awareness about the importance of retirement planning early in life. There are different types of small savings schemes and they differ from one another on parameters like investment limits, maturity period, liquidity and returns, interest rates offered to the depositors and tax concessions, if any.

When individuals have small amounts of money at their disposal, the best option for investment is the small savings schemes. The pension plans can be categorized under compulsory, voluntary, and social assistance schemes. The compulsory schemes include the employee provident fund, employee pension fund, civil service pension scheme, group superannuation plan, etc. Pensions under the voluntary category include products offered by private banks, the post office, insurance, and mutual fund companies.

The targeted social assistance programs are meant for a specific target group, usually from the economically weaker sections of the society. They include the National Old Age Pension Scheme (NOAPS) and National Family Benefit Scheme (NFBS) under the center. Pricing of the small savings schemes is not rational in the sense that different savings schemes have differing interest rates, maturity terms, liquidity, and returns. Most of the savings schemes were launched by the government as a social security measure and to mop up funds for social development. The determination of the cost of a retirement plan is a difficult task.

The cost of a retirement plan is the difference of the assets (the sum of investment returns and the contributions made to the pension plan) and liabilities (benefits to be paid as per the pension plan and the administration expenses) possessed by the retirement solutions marketer.

These components of the cost system are measured and estimated by the complex process of actuarial valuation. Promotions are very important in marketing small savings schemes and retirement products. They are used by both the public as well as the private sector. Advertising in the small savings category makes effective use of radio and print ads. The media strategy of retirement solution providers includes greater emphasis on television advertising supported by radio (FM radio) and print advertising.

Various appeals used by marketers for advertising include emotional, fear-evoking, and zealous appeals. The sales promotion activities with regard to the small savings are managed by the National Savings Institute (NSI). These promotional activities include contests, special campaigns, and sweepstake offers. Sales promotions are restricted in retirement products, especially pension plans of insurance marketers as there are certain restrictions imposed on offering gifts and conducting contests.

The public relation activities of small savings marketers include distribution of pamphlets, hoardings, conducting dramas in villages, exhibition, handbills, seminars, press release, etc. The PR activities of marketers of retirement products primarily focus on two objectives - increasing consumer awareness and improving brand receptivity among customers. Increasing awareness is preferred by the government and branding is the focus of private players. The PR activities include conducting seminars on retirement solutions, distributing retirement planners, and providing retirement calculators.

Distribution for small savings as well as retirement products is through direct and indirect channels. The direct distribution is through the personal selling. Personal selling is done by the agents who are categorized based on the type of the scheme and the target group. The agents are crucial in the mobilization of savings. There are generally three types of agents, viz., Standard Agency System, Mahila Pradhan Kshetriya Bachat Yojana (MPKBY), and the Public Provident Fund Agency. Indirect distribution makes use of channels like post offices, and the branch network of public and private banks. The distribution of retirement products is also done through the direct sales force and agents (direct distribution) and through the bancasssurance route and Direct Selling Agents (indirect distribution).

Chapter 9 : Overview

Types of Products
Savings Schemes
Retirement Schemes

Small Savings Schemes
Retirement Plans

Advertising, Sales Promotion, and Public Relations

Media Strategy
Advertisement Appeals for Retirement Solutions
Sales Promotion
Public Relations

Distribution of Small Savings Schemes
Distribution of Retirement Products

The Changing Scenario