Understanding of Islamic Marketing Strategy

Islamic Marketing Strategy

As the population of Muslims is increasing over time, there is also an increased demand of the introduction of Islamic principles in different sectors. One of these sectors that have seen a great deal of Islamization lately is the marketing sector. Muslims now want a marketing system that is in accordance with the laws of Shariah. One of the most projected examples of this is the introduction of Islamic banking to provide alternate products and services to the Muslim customers. Many researches and studies have been carried out to see what the response of the Islamic marketing strategies has been over the years. In this paper, we shall first look at in detail what is actually meant by the Islamic marketing strategy and how the Islamic laws pertaining to business differ from the conventional laws. We shall then look at how these strategies have been adopted by banks to introduce Islamic Banking. Towards the end of the paper, we will also take a look at the other markets that can be tailored according to the Islamic laws.

1.1 Introduction

1.1.1 What is the Islamic Marketing Strategy?

The major difference in Islamic and conventional banking and marketing comes out when talking about interest or riba how it is put in Arabic. (Hassan, Chachi and Latiff, 2008 p.27) Islamic Banking takes part in an equity-participation system, however the rate of return is not pre-determined or guaranteed. However, when conventional banking is when the rate of return is determined and all the systems of debt and equity are driven by interest. (Hassan et.al, 2008 p 27) This difference merely stems from the idea of interest being prohibited in Islam. The concept of Interest in strictly forbidden in Islam, and any person who takes or participates in taking or giving of interest will be punished severely. Marketing stems out from this that no unfair purchase or selling is allowed in Islamic markets. Further details and explanation of the marketing strategy will be discussed below.

1.1.2 For Better or for Worse?

The mere idea of doing something different provides for Muslim or Islamic Bankers ways to differentiate their services from the rest of the banks. Even though this idea of banking only came forward like 2 decades ago, it has caused investors to look more closely into it and even prefer it. Even though this form of banking can have a negative side, the mere idea of being a new kid on the block can go on to attract more and more customers in the long run. This idea can go on to augment the number of shares Islamic banks have in the market today. Banks like Dubai Islamic Bank in the UAE and Bank Shariya Madiri Indonesia have gone to expand and make many branches in their respective companies.

There is a down side however. The downside in this entire scenario is that there would be more competition among the national and multinational conventional banks. The Banks will face more and more competition not only from the Islamic windows from the traditional banks but also amongst each other. Even though the facility that the new strategy is offering in the long run is new and attractive, it's become very common now. Thus, in order to make their strategy of Islamic banking work, the Islamic Banks must be able to secure a competitive advantage and maintain a strong position. (Hassan et.al, 2008 p.28)

1.1.3 Why Research on it?

The marketing ethics that come out forward in the Islamic banking world are under-researched. Even though many have researched the banking systems, the marketing morals linked to this are not as well studied. Even though this discipline is found all over the world, there is no proper definition of it anywhere. (Husssnain, 2011) This system has the possibility of providing a good means to of marketing to the 1.7 billion Muslims all over the world. Furthermore, the effect of this marketing is not well documented. As mentioned earlier, many countries have prominent Islamic banking systems but none of them have been looked at in detail. It should be studied how these ethics go on to benefit the customers and the consumers in the long run.

2. 1 Explaining the Islamic Marketing Strategy

2.1.1 What is marketing?

Marketing is a subject that is completely evolving over the years and is changing as the needs of the customer changes as well. The major focus that is being created in marketing all over the world is the need to make a better relationship with the customers. (Husssnain, 2011 p 2) The need for a better relationship steams from the profit and the benefits attached to being faithful with the customer. Gone are the days when things were made with a little quantity and sold instantaneously. However, with things being made on a large scale, there needs to be a strategy or a plan to attract customers and thus have your product sold. A marketing strategy is not only a tool to organize the plan with which vending will take place but a lot more now. The organization also uses marketing to look over the benefits of other stakeholders in the process of selling. This process is basically composed of systems in which the object is to make products, interact with the customers and provide them with the product or services they want. (Husssnain, 2011 p.2)

2.1.2 What Islam says about it?

Fourteen hundred years ago when the book of Islam was revealed, it had directions on how deal with vendors and purchasers. Certain morals and set of etiquettes were set out forward that guided the Muslims in acting properly in the market. As mentioned above, the major way in which Islam does business is by ensuring that none of the parties gets hurt.(Husssnain,2011 p.2) A strong emphasis is laid on the fact that any person or part will not gain profit they are not worthy of. Similarly, any person or party will not be charged with a loss that he doesn't deserve. Islam is considered a way of life and thus it provides insights on how to deal with businesses as we. It is believed that once marketing ways get mixed with a proper ethical doctrine, then it is likely that this system would be a success. (Husssnain, 2011 p.3) The fact that the Islamic Marketing strategy hints on or actually picks up from religion makes it a very sensitive topic. Thus, it should be noted that people can agree with it but not go on to criticize or condemn it.

2.1.3 The rules on production and products

The products that the Islamic market or the bank makes are different as opposed to the western thinking. In banking, Islam takes in transcendental and moral factors into the decision making process. That is to say that the products that certain firms, business or organization make have to be guided and governed by the Islamic principles. (Al-Misri, 1991) The major principle in Islamic strategy as remarked by Ibn al-Ukhuwwah (1938) is that any product that is to made should be allowed and not cause intoxication or dullness of the mind in any way. Thus the sale of any unclean or firbindden object is considered wrong. The businesses who are therefore controlling marketing of gambling, alcohol, porn or other 'unclean' products would thus be banished by the Islamic Law.(Husssnain,2011 p.3) There comes the concept of Halal and Haram in Islam that make certain products allowed for the Muslim world and certain products prohibited.

Another important feature is that the product that is being sold must be backed by an asset. That is to say that any firm wishing to launch a product can't just go on and start selling. There has to be enough support. Whatever product that is being made by the company should be able to be brought to the customers. This is to reduce the work load of the buyer and thus make business a rather peaceful and pleasant venture for both of the parties. Any features that increase the cost of the product must be declared to the customer so that if they wish to change their decision they should change it right then and there. (Hassan et.al, 2008 p 32) This is important and quite contrasting from the hidden charges gimmick many of the conventional marketing experts use to increase their products. Telephone companies and many contracts don't mention certain costs which are later discovered when the bill is mailed. It should be noted here that fair dealings are quite thoroughly emphasized in Islamic marketing. The last aspect of product production needs to be that both the parties should rightly take responsibility of their obligation towards each other and should be therefore fair, just and equal to one another. (Hassan et.al, 2008 p 31) This is to say that neither the business nor the customer can trick or fool the other and all the dealings should be done fairly.

In conventional banking, unethical decision making is employed by the organization to make services that would eventually save the company better profit in the long run. (Miller, 1996) This is to differentiate the Islamic production process such that the Islamic process considers the impact the product would have on the whole society. Thus, more importance is given to the welfare of the society and satisfying human needs. (Al-Faruqi, 1992)

2.1.4 False advertisements prohibited.

The idea of propaganda through the media is prohibited in Islam. (Hassan et.al, 2008 p 32) That is to say that the supply and demand chain cannot be disrupted by flaunting one's products more than the other is. A major advertising technique that is out rightly declared wrong in Islam is to provide wrong proof for a product. (Hassan et.al, 2008 p 33) Thus, covering up any defects in a product or falsely flaunting the product is also considered wrong. The book of Muslims, al-Qur'an states that all types of false gestures, unproved assertions and false testimonies are not allowed. (Al-Qur'an, 43:19) When we take this law into marketing and the rules set down by Islam is that a sales person is not allowed to praise too much of the product. Any of the qualities that a product has should not be flaunted so much hat it goes on to give the customer a vision that is not true. The nutshell here is false impressions are not allowed and the product should be promoted just as the results they would give. The Islamic marketing ethics rules would thus be that sale tactics that mislead the person would not be allowed. Advertisements that fool people or market hem think that by using a certain brand their hair will go perfect will therefore will not be allowed. (Hassan et.al, 2008 p 32)

All the rules totally go against the rules that are being applied in the marketing strategies today. Almost none of the promotion ads today tell what the product does truthfully. False sweeping statements are made by experts that are not very credible. Models are chosen to portray the product that makes it seem like the product did all the magic and they are looking beautiful because they used a certain commodity. In Islamic marketing, the seller like all Muslims is known to be accountable to God. Thus, anything he or she asserts about the product has to be true or else he is fooling the customer into buying them. All the defects that a product has should be disclosed. Thus, for instance if a certain cream or shampoo has a side effect, it should be declared in public so everyone knows.

As mentioned above, most of the promotion advertisements made today is the ones that wouldn't be allowed in Islamic marketing. Use of emotional appeal, fear and sexual appeal is not allowed. Anything that would go on to exploit the basic instincts like looking pretty or getting rich is not allowed in marketing. Similarly, the use of fantasy or stereotyping of women is prohibited in marketing for products. (Hassan et.al, 2008 p 34) Excessive fantasy could be like if you smoke a certain cigarette then you get the best looking girl or get to live in a mansion or have an amazing car. Surely, everyone knows that all the luxuries in life are not available to a person just because he or she smokes a certain brand of cigarettes. Using certain behavior or language to attract the customers is not allowed in advertisements either. The basic concept being here is that products should be portrayed in an attractive manner and showed by showed as they are. This in essence removes the entire need for media because media does make everything look more amazing and dramatic.

2.1.5 Setting the price

Even the simplest rule dictating marketing states that the policy of pricing a product involves a lot of manipulation and thinking by the marketing strategists. The product is priced in such a way that the retail price is shown way more than what the retailers are actually charging. It is tactics like these that cause a customer to think he or she is getting a good deal and thus they eventually buy the product. (Shaw, 1996) Similar tactics are used in sales when the prices of products are increased before a certain sale is supposed to take place. All these tactics go on to affect the customer at a psychological level and thus it convinces them to buy the product.

The aforementioned tactics and clever tricks as one might say are not allowed in Islamic law. The religion forbids a person or a firm in this matter for getting something that they didn't do the labor for. In other words, if their labor allows them a lower profit, then it is reduced profit that the person or the organization should attain. (Shaw, 1996) Another important thing is that in marketing for goods under Islamic law, a product's price should not be changed without fixing the quantity or quality of the product. These methods also lead to unfair gain by the organization and is thus not allowed. (Ibn Taymiyah, 1982). Here it should be argued that controlling or changing the price in order to meet the requirements of the market is allowed. (Hassan et.al, 2008 p 31) The conventional rule of supply and demand is also allowed in Islam. Thus, when a certain commodity is decreasing, it is allowed to increase the prices and thus provide better opportunities for the sellers. However, it is not permitted to decrease the prices so that the competitors are left in loss. One time, the second Caliph Umar Ibn Al-Khattab was passing by and noticed that one of the vendors was selling raisins at a decrease price only to put rivals at loss. The Caliph told him himself to increase the price or leave the market right this instant. (Malik, 1989) Even though competition in a healthy way is allowed in Islamic market, there shouldn't be any unfair dealings. Thus competition is allowed if a certain vendor doesn't collect all the products, doesn't make corner products, manipulates the price such that he sells products at a much lower rate and if trade isn't restricted. (Niazi, 1996)

2.1.6 Distribution of a product.

In the Islamic marketing strategy it is noted that allotting the sale of products in a certain area should be done to exploit the so. Many a times, there is distribution of a product in ways that would go on to damage the society in the long run. For instance, there is utilization of packaging designs without enough security. Toxic products like petrol and gasoline are transferred over public highways. These can pose a great risk for the public. The distribution channels that are made so the product is delivered to the customer should be fair and easy to access. Delivery of the product was an important aspect mentioned earlier. Thus, delays in the delivery that causes the customer to come again and again would be unethical. The basic trend seen is that firms and organizations should make it easy for the customer to gain access to their products. This rule of Islamic marketing is still developed in the conventional techniques and is applied in most places around the world.

2.1.7 Importance of People

Islamic law gives importance to the people and to the concept of fair treatment. Thus, it becomes false practice to fool the customer into believing something that is not true. Similarly, it is also wrong to make them think or believe that they want something. A much clearer example of this is when people see slim super models acting in advertisements; subconsciously they are affected by it. They want to look like that person and thus be attractive. Along with stereotyping, these sort of advertisements mess with the intellect and the subconscious mind of the person. Along with making them feel bad about themselves, these sorts of promotion ads also cause the person to change their decision. Impairment of the decision making process is prohibited in Islam. Conventional marketing strategies take over the freedom of intellect of the person. They force the person into believing that they want a certain commodity. Consequently, their decision making power is taken over. Another important concept is that the person who does hard labor to earn money, he should spend it with proper consent and freedom. He or she shouldn't not be a victim of stereotypes by the media that force him to purchase a certain service.

3.1 Researches and Reviews

Needless to say the Islamic marketing strategies are now being applied in the banking sector more than ever. The Islamic banking system is gaining popularity among the economists as well as bankers. Many international banks have now opened their special branches that are in accordance with the Islamic Shariah principles pertaining to banking and marketing strategies. It is expected that the Islamic banking system will have to face intense competition from the Islamic banks as well as the other international conventional banks that have launched their Islamic products and services for its customers (Naser, Jamal and Al-Khatib, 1999). Many studies have been carried out analyze the satisfaction and awareness of the customers with respect to Islamic banking in different countries of the world. The number of correspondents that took place in these studies was different from one study to another. When some of these responses were analyzed, it was found out that most of the respondents were satisfied with most of the products and services offered by the Islamic banks or Islamic banking. However, there were some areas in which these respondents showed their dissatisfaction. When the awareness of these respondents was analyzed, it was concluded that the respondents were aware of many Islamic financial products including Musharaka, Murabaha and Mudabara; meanwhile they also showed that they do not deal with aforementioned products.

Moreover, many studies have also been conducted to determine the main patterns and characteristics of the use of Islamic banking services. A detailed profile analysis and a couple of chi-square tests were carried out to determine these. It was found out that most of the people who were using Islamic banking services belonged to a well-educated background. Almost 80% of these people were 25-50 years of age. On the other hand, more than 50% of the customers who took part in the survey were involved with the Islamic banking services for about more than six years. When these customers were analyzed for usage and awareness, it was found out that these people were well aware of this system and most of them were using current accounts, savings account, automated teller machines and investment accounts. When questioned about their satisfaction with the banking services, the customers expressed most of their satisfaction for the particular service or product that they had bought. However, the highest degree of satisfaction was shown in the investment accounts. On the other hand, the employees of the Islamic banking system claimed that they are most satisfied with the delivery system. The key criterion that was used for the selection of banks (that were included in the studies) was the strict following of the Islamic principles and their rate of return (Metawa and Almossawi, 1998).

Even though Islamic banking is starting to gain momentum in many countries of the world, we can learn a lot about the Islamic marketing strategies by doing a case study in Malaysia. Many research papers have been written about how the strategies worked so well in Malaysia and the response of the customers was also recorded.

3.1.1 General marketing strategy with respect to banking

When we talk about marketing strategy in general, we define it as the strategy that is used by a company in order to achieve its marketing goals, which determine the business objectives of that firm. To put it in other words, the action plans and marketing goals are referred to as the marketing strategy. This strategy is devised with respect to the matters of service or product price, communication, distribution and the process that involves the new product development.

There are many factors that influence the adaptation of a new strategy at the firm level; in this case that is the Islamic banking system. Some of these factors are the experience and style of management, the economic environment of the bank, the age of the institution and regulations. Normally it is not difficult to identify the bank that is a market leader and a challenger for the rest of the banks. Therefore, it might be useful to study the vision, objectives, mission and marketing strategies of the banks that are doing a good job in the field of Islamic banking.

The banks that have an established reputation as a market leader and have occupied a key position in the market can adopt the market leader strategy. Needless to say, when a bank is in a leading position in the market, it will occupy the largest portion of the market. On the other hand, the challenger banks are the ones that occupy the second, third and the following rank and are almost always devising new formulas and going for newer strategies so that they can increase their market share and displace the market leader. However, when the followers switch from one strategy to another, they do this to maintain their current customers and not displace the leader.

They have to do this win a reasonable amount of customers by providing them with distinctive advantages for using their products or services. As for the smaller banks, there are market nichers, who have a limited range of resources and they normally focus on specific customers. Banks that are a part of this category often focus on just a single segment of the market. Generally, just a single marketing strategy is used that is amended and modified according to the demands of a particular group that is the target-market.

3.1.2 Case Study Malaysia

The leader in the Islamic banking market in Malaysia is Bank Islam Malaysia Berhad. It is the leader of the market because it was the first bank to offer Islamic banking services and products to its customers. Another strategy that was adopted by BIMB was that it claims itself to be the "The Bank for All," instead of just labeling itself as the leader of the market. On the official website of this bank, we can see this more universal motto that has been adopted by the Bank. It also states that its main objective is to function as a commercial bank that provides Islamic banking services to the Muslims as well as the general population along with maintaining its growth in the whole process.

In order to meet the mission mentioned above, it was important for BIMB to change its banking strategies that were being used by other commercial banks. Therefore, the bank came up with a formula that was based on six corporate objectives so that it could provide its customers with high quality banking services that in accordance with the Islamic principles. BIMB projects itself as being a bank that is professional and friendly at the same time and yet very progressive. BIMB is the leader of the Islamic banking market in Malaysia, whereas the other bank that provides Islamic banking services is the Bank Muamalat Malaysia Berhad, which can be called the follower but not the challenger. However, BMMB should work harder to become the challenger for the leader of the market.

We shall now look at the vision and mission of BBMB in the following text of the paper.

Vision:

The vision of this bank is very promising for its customers. Its vision is to emerge as a bank that is progressive, strong and offers services and products that are in accordance with the Islamic principles, but at the same time they are competitive and modern.

Mission:

The mission of this bank is to develop a bank into a dynamic, modern and strong one based on the Islamic principles. Moreover, the mission is also to play in role in the provision of an alternative to the conventional banking system that the customers have been trying over the years. Furthermore, the ultimate mission of this bank is to contribute in the development of the economy of Malaysia through its contributions in the banking sector.

The third Islamic bank operating in Malaysia is the RHB Islamic Bank. This bank was started in Malaysia in March of the year 2005 and since then it has been doing some extensive advertising campaigns throughout the country. When this bank was launched, it was advertised in all the local newspapers in Malaysia to tell the public that this was the bank that was committed to provide its customers with the best quality services in accordance with Islamic banking principles. The three basic principles on which this bank based its commitment included partnership, trust and understanding. By analyzing the mission statement that was provided by the bank during its massive advertising campaign, it can be concluded that RHB Islamic bank has the goal to become the leader of the market and not just a follower or nicher in the market of Islamic banking.

It is very easy to identify the difference in the Islamic banks and the other commercial banks. It is not very usual to see the commercial banks providing their mission statements and vision to their customers, which is seen in Islamic banking. If we consider the example of Maybank Bhd, which is a commercial bank, we find out that only the general statement has been highlighted and that is related to the aspiration of the bank to become an intuition that contributes towards the development and promotion of the Islamic banking sector in the country.

The same approach has also been adopted by the Public Bank Islamic Banking Division. From the information that has been provided on the website of this bank, we can conclude that this bank only offers products and services that can be bought by customers as an alternate to the ones that offered by the conventional banks.

It has been more than 20 years since the commencement of BIMB. Since it was the first bank in this field, it became the pioneer as well as the leader of the Islamic banking market in the country. However, as the years have gone by, it can be seen that the dominating role that was being played by this bank has diminished over the years. For instance, in the year 2004, the total Islamic deposit that was there at the commercial banks increased by about 34.8%. Unfortunately a negative growth was recorded for BIMB as the total deposit in the year decreased by 8.86% (Haron and Azmi, 2005).