Page 29 - Flip Banks TG
P. 29
Threat of Substitute Products
When a new product or service meets similar customer
needs in different ways, industry profitability suffers. The
threat of a substitute product or service is high if it offers a
value proposition that is uniquely different from present
offerings of the industry. The banking sector is large in term
of products and services and is included in the financial
industry.
Barclays’ response to the Treat of Substitute Products /
Services:
• By being service oriented rather than just product
oriented.
• By understanding the core need of the customer rather
than what the customer is buying.
• By increasing the switching cost for the customers.
The variety of financial products and services, and the
possibility of substitute products is high in the financial
industry e.g. investing in a savings account or bonds, or
deposit account with interest. In addition, many financial
institutions, apart from banks, also provide a variety of
products that are similar to banks in terms of service to
customers. However, many products and services are only
provided by banks. Therefore, the threat of substitutes is
moderate.
