MARKETING ANALYSIS FOR Marketing 5000 Marketing Analysis for Wells Fargo Company Background Wells Fargo is the fourth largest bank in the United States by assets and the largest bank by market cap. Headquartered in San Francisco, CA, it is a diversified financial services company with worldwide presence. Presently, Wells Fargo is the only AAA-rated bank in the U. S. Based on long-term foreign currency ratings from S & P and Fitch Ratings and the long-term bank deposit ratings from Moody’s Investors Service, Wells Fargo was named “The World’s Safest U. S. Bank” for the year 2007.
In 1998, Wells Fargo merged with Norwest Corporation. Because of the nationally recognized Wells Fargo name and trademark, the Wells Fargo name was kept to capitalize on its long history. Now headquartered in San Francisco, CA, Wells Fargo has over 5900 retail branches, more than 3300 banking branches, 160,000+ employees and over 23 million customers. On October 3, 2008, Wells Fargo announced it would be acquiring Wachovia. Even though there had been negotiation between Wachovia and Citicorp, Wachovia preferred the Wells Fargo acquisition to keep the brokerage and banking businesses together.
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They felt is would benefit their shareholders and did not require Federal assistance as the Citicorp acquisition would have required. Citicorp believed they had an exclusivity agreement with Wachovia and demanded discussions between Wachovia and Wells Fargo be discontinued. However, on October 9, 2008, Wells Fargo purchased all of Wachovia when Citicorp announced they would discontinue their attempt to block the merger. The merger is set to be complete by the end of December 2008. Product or Service to be Presented
Fixed Rate Mortgages: Fixed Rate Mortgages (FRM), as the name implies, are mortgages that have a fixed interest rate for the term of the mortgage. Therefore, the interest rate will remain the same throughout the life of the mortgage, even if there is a fluctuation of interest rate in the mortgage market. The advantage of the FRM is that you know exactly how much your mortgage payment will be and makes budgeting much easier. This loan is the most popular of home financing loans. Adjustable Rate Mortgages: Adjustable Rate Mortgages are mortgages where the interest rate will fluctuate over the life of the mortgage.
Most ARMs begin with a fixed low interest rate for a short period of time and then they become adjustable. This is very helpful for individuals who may not have a large amount of assets when purchasing the home. However, they anticipate making more money when the rates become adjustable. This is also a good loan if you only plan on staying in your home for a short period of time, say 5 ??? 6 years. You can acquire an ARM with a low fixed interest rate for the first 3 years and sell your home when the rates become adjustable.
These loans normally have a cap in the amount of interest the loan can be adjusted during an adjustment period. These rates are dependent upon the prime rate. On an ARM, the rate and payment will remain the same for the first three years. After the initial three years, the rate is subject to change every six months. The first adjustment in the interest ate can increase or decrease a maximum of 3% from the initial interest rate. Subsequent adjustments in the interest rate can increase or decrease a maximum of 1% from the existing interest rate. Overall, the interest rate can increase a maximum of 6% from the initial rate.
The Market The market for home mortgages includes any individual or couple who is capable of financially qualifying for the purchase. They can be first time homeowners, current homeowners purchasing a new home, or current homeowners who presently own a home and choose to refinance their existing mortgage. Our service is marketed to individuals who are fiscally responsible. However, it is segmented by credit grade. A borrower with a high credit score receives a higher grade and thereby obtains a lower interest rate. A borrower with a low credit score receives a lower grade and thereby obtains a higher interest rate.
There are other variables involved, i. e. debt to income ratio or loan to value appraisal, that factor into the decision making of a qualified market. Competitive Analysis SWOT Analysis Strengths ???A ‘super-regional’ bank with a national presence and leading positions in core geographical markets ???Acquisitive/growth oriented ???A successful performer financially – market confidence in its capability for continued revenue growth ???Rated as an attractive buy above average return performance Weaknesses ???Difficulty in penetrating certain geographical markets due to fiscal and regulatory restraints ???Stock price has been very variable Heavily regulated in comparison to competition Opportunities ???Can continue acquisition strategy based on regional banks in high-growth areas ???Large corporate banking a significant potential growth area ???Expansion of national coverage Threats ???Increasing competition in already highly competitive sector especially Bank of America and entry of foreign banks ???Increasing popular criticism of practices, especially lending activities negative potential with respect to customer relations/growth. The following companies are the major competitors of Wells Fargo: Bank of America Corporation Citigroup Inc. JP Morgan Chase & Co
Environmental Factors Wells Fargo believes in being responsible when considering the environment. We promote economic prosperity and, to protect our natural resources now and for the future, we promote a clean environment. With that in mind, we run our company as efficiently as possible by conserving energy and reducing the use of paper in all of our operations. In 2005, Wells Fargo committed to integrate environmental responsibility into our business by lending to environmentally beneficial business opportunities; we assist corporate customers to ensure they do business in an environmentally responsible way.
Other way we assist is by financing green buildings, provide credit to renewable energy companies and provide banking solutions to reduce and possibly eliminate the use of paper. We were selected as the EPA’s Green Partner of the year. Being one of the largest buyers of renewable energy in the United State and administering a comprehensive recycling program, we are indeed an environmentally friendly company. Social The American Dream has always been to own a home. During the past 15 years, there has been a 5% increase in home ownership. However, the median wage has been stagnant since 1999.
This has resulted in household indebtedness to rise and mortgage debt constitutes the largest amount of this debt. The income of lower income persons has also decreased during this timeframe. Wells Fargo motto is “we are in business for the customer “. Our goal is to have every prospective consumer in a home. However, due to risk assessments, our company has to be prudent with our funds and ensure our clients will have proper payback abilities. We have a responsibility to our customers and our customers have a responsibility to Wells Fargo. Political
Lawmakers were concerned that mortgage credit was not being provided to low income and inner city neighborhoods. In 1975, the Home Mortgage Disclosure Act was enacted requiring disclosure of home lending activity. Over the years, amendments have been made to this Act. The most significant change was made in 1996 with President Clinton, to provide incentives for self testing by lenders to avoid discrimination in lending practices. Overzealous lenders saw an opportunity for sizeable profits and overextended their companies’ ability to lend risking their financial stability.
Monies were loaned to many individuals, who would not have normally qualified for mortgage loans. Many of these transactions were not completely ethical which culminated in sub-prime lending practices that have factored into our current financial woes. Even though Wells Fargo does issue sub-prime mortgages, we are very prudent to ensure the borrower is fiscally responsible. Economic The most influential factor that affects our business and products is the economy. Currently, with the economy in a financial turmoil, only those who have very good credit histories and available assets are considered for home mortgage loans.
This is not to say that others are excluded. Again, there are many considerations given when qualifying a client for a mortgage loan. The state of the economy will determine the available market. Technological Today’s technology has changed the flavor of the mortgage industry. The Internet, e-commerce, customer profiling, risk management tools, asset securitization and derivative products has caused the convergence of the financial services industry. Team members of Wells Fargo now have the tools, training and abilities to earn the business of every customer contacted.
The creativity and speed with which technology is used helps to give Wells Fargo an advantage over its competitors. Research and development of new technology is on-going within the company and we have many proprietary systems that have proven to be very effective. Wells Fargo also works with our competitors to develop cost-effective technology and products that are used industry-wide. Using the above technology, our clients are initially qualified financially with the best product that will fit their needs. Final determination of mortgage qualifications is made by professional underwriters employed by Wells Fargo.
Our state of the art technology along with excellent customer service enables Wells Fargo to be a leading mortgage lender. Stage of Life Cycle Wells Fargo is consistently researching market trends, government policies, and product development to maintain a high level of credibility and success. By identifying industry challenges, Wells Fargo has made every effort to offer reliable, consistent service to its clients. An emphasis has been placed on recruiting, operations and accounting systems. Adding software systems and infrastructure that are continually upgraded have allowed Wells
Fargo to set a higher standard than many other lending institutions. Wells Fargo identifies the industry challenges, reassesses, reinvents and restructures to be one of the safest banks in the world. Wells Fargo has evolved along with the changing mortgage industry and has taken an aggressive position to identify and pursue the opportunities that have presented themselves. Distribution Structure Wells Fargo has “the best, most extensive, multichannel distribution system in our industry. Our goal is to use it to offer value-added, integrated, multichannel solutions to build relationships with households and businesses.
Our customers can use any channel they want, any time they want. We have one of our industry’s largest network of stores, 6,000, and 6,900 ATMs. We have the most supermarket banking stores. Our customers call our Phone Banks over 250 million times a year. We’re the first, the oldest and the best internet online financial services provider in the U. S. with more services to a broader group of consumers and businesses than any competitor. We have a full line of products available online to meet all the financial needs of every one of our customers including consumers, investors, small business, middle market, and larger corporations.
We have 10 million active internet banking customers. We want wellsfargo. com to be known as the best, integrated “trusted gateway” for all our customers’ financial services. ” Pricing Pricing for mortgages is based on rates and fees. All costs incurred are then worked into the loan so there are no out-of-pocket costs for the customer. Most all of the costs related to the mortgage are fixed such as appraisal fees, title charges, and recording fees. Rates are in direct correlation to the credit grade of the customer. Rates are comprised of the Interest and the APR (Annual Percent Rate).
The APR reflects the impact of the points and any other prepaid finance charges associated with the loan. The customer can choose to have more points in the loan to have a lower interest rate. All points are disclosed early on in the process and points are reflected in the APR. Customers should be aware of the total cost impact that points have. Selecting higher points provides the customer with the lowest payment options, and selecting a lower point option may reduce the total payback amount. Promotional Wells Fargo utilizes technology and research to develop promotional offerings to best capture the market share of potential borrowers.
Advertising and market awareness are made possible through a sophisticated webpage, mass mailers, referrals, and telemarketing. Probably, the name recognition of Wells Fargo with its long history of helping people realize their dreams is our most effective promotional tool. Having over 23 million customers using the services of 80+ Wells Fargo financial subsidiaries, each branch is educated in promoting all products available. This continuous customer service results in more business with our existing customer base. This satisfied customer base provides a steady flow of new referrals to Wells Fargo.
General Observations and Comments As stated earlier, Wells Fargo is the fourth largest bank in the United States providing a multitude of financial services to many consumers. Even though our market was originally in the western portion of the United States, we are expanding and continue to market to new geographical locations. Wells Fargo provides banking, insurance, investments, mortgage and consumer finance to the United States and abroad. We are a consumer-based financial service targeting prospective real estate buyers, individuals wishing to refinance, and those wishing to consolidate debt into a real estate secured loan.
The market for potential customers is selected using several criteria. First, the credit rating of the customer is determined. The borrower’s ability to pay liabilities on a timely basis determines his/her credit score. This score establishes the amount a client is eligible to borrow along with the rate of interest. Next, we review the debt to income ratio to evaluate the customer’s expenses to ensure the payments will fit into their monthly budget and not overextend the borrower which could result in possible default. If a person is applying for a refinancing or debt consolidation secured by real estate, we then turn to he loan to value ratio, which is given to Wells Fargo through a preliminary underwriter evaluation. The loan amount that will be available is a percentage of the home’s assessed value. Our target base is consumers who wish to purchase a home and those having an existing home mortgage. Within this market, there are multiple segments of eligible customers. For each segment of the market, there is a specific product that is marketed to the group, whether it is a first-time home buyer or a homeowner wishing to change the terms of their existing loan or a homeowner wishing to consolidate high interest credit cards balances to a lower rate.
The majority of the customers that utilize our services are obtained through telemarketers providing lists of people that may be interested in our products. Another segment of our clients is interested parties who have been researching financing options and believe we have the services that will best meet their needs. Lastly, we have return and existing clients of Wells Fargo. The buying decision involves extensive research and knowledge on the part of the consumer. With the availability of the Internet, consumers are more knowledgeable of the companies and services that each provide.
As Wells Fargo offers a service that is a “shopping product”, the consumer is willing to expend considerable effort in planning and making the purchase. Therefore, the characteristics of our service must be aggressively competitive to meet all the demands and needs of the customer. Through their research, they make an educated decision to utilize the services provided by Wells Fargo. Our company has many options that will fit the many variables when applying for a home mortgage. Therefore, our success rate in meeting the needs of our customers is very high.
The mortgages offered by Wells Fargo are usually ones that result in the consumer using all or part of the funds to make another purchase, i. e. , home purchase, home improvement, debt consolidation, etc. Even though all loans are regulated by industry and government policies, Wells Fargo can be creative when issuing mortgage loans by offering its customers different variations of points and interest rate combinations, thus making Wells Fargo very competitive in the market. Financial institutions are normally not considered to be a brand, like Nike or Ford or Lays.
However, because of our long and reputable history in the financial industry, Wells Fargo’s name recognition is definitely a factor in the decision making process. We also strive to maintain one of the best customer service programs in the industry. By servicing our mortgage loans opposed to selling them to a secondary market, we ensure a higher level of customer satisfaction which results in repeat business, interest in other products offered by Wells Fargo, and customer referrals. Since we are in a maturity stage of our life cycle, Wells Fargo has a variety of competitors in the market.
Although we have a significant market share, we continually strive to increase that share while maintaining our existing clients. This is accomplished by continued research and development of our mortgage products to provide the customer with the best possible type of loan to fit their needs. As we are a supplier to the consumer, we do not have intermediaries. Wells Fargo is a direct channel from the supplier to the consumer. The majority of our clients are obtained through a database; however, we look at all aspects of the market to obtain potential customers.
The state of the economy will determine the availability of our future customers. While we are in an economic turmoil, there are still opportunities where our mortgage products will benefit clients, for example, debt consolidation improving cash flow. Name recognition of Wells Fargo is its most effective promotional tool. To add to that asset, a sophisticated webpage, mass mailers, referrals and telemarketing promote our mortgage product and services. People are our competitive advantage. Wells Fargo believes their primary focus should be a portfolio of people skills.
Its first priority is to attract, develop, retain and motivate a diverse group of people to work as a team. Secondly, we are continually selling and cross-selling. Next, we know that service is very important. We can sell a product and give advice but, if we do not have great customer service, we really have no sale. We also must be the very best at managing risk. And, lastly, we must have an environment where our employees have fun and have an enjoyable work environment. Employees who enjoy their work and their workplace will bring unlimited success to Wells Fargo.
Wells Fargo has a marketing department who ensures all promotional items are compliant legally and ethically. The marketing department is an entity of its own within Wells Fargo and they have completed their mission successfully each time we have a potential customer meeting with our sales people. The customer relations management is a competitive advantage for Wells Fargo and is the most successful aspect of the marketing department. Utilizing a well-maintained and up-to-date database, the potential leads are very well validated.
This tool allows the salesperson to have success on a daily basis. In contrast, the promotion of Wells Fargo services is very restrictive within the organization. Sales people are limited to the confines of our marketing department. If a sales person would have a great idea for a marketing tool, he cannot produce that tool and use it to gain business. He is restricted to only the approved marketing materials provided by the Marketing Department. Any ideas a sales person may develop must be submitted to the Marketing Department.
This restricts the creativity a salesperson has in order to gain more business and to be more successful. Wells Fargo is a leader in the financial industry. The well-trained workforce is knowledgeable of all aspects of the financial market. In addition, our strong customer service philosophy ensures the success of the company and the satisfaction of over 23 million clients. Works Cited: www. wellsfargo. com Company pamphlets (The Vision & Values of Wells Fargo) Mortgage Pamphlets (Fixed & Adjustable Rate Mortgages)