Marketing in Banking Services Final Doc.br

8/8/2019 Marketing in Banking Services Final Doc.br

1/84

Marketing In Banking ServicesMarketing In Banking Services

EXECUTIVE SUMMARY

In todays business there are multi dimensional problems &

opportunities. The subject matter of marketing is drawing more & more

attention from companies, institutions & nation. Business has recognised

the main difference between selling & marketing & they are now

convinced to give more attention & importance to marketing. Pricing,

advertising & marketing research are being used to win over consumer

resistance.

The concept of bank marketing assumes new weights &

dimensions. It consist of identifying the most profitable markets now & in

future, assessing the present & future needs of the customer, setting

business development goals, making plans to meet them & managing the

various services & promoting them to achieve the plans.

Marketing of banking services is concerned with Product, Place,

Contribution, Pricing & Promotion decisions in the changing, socio-

economic & business environment. It means organizing right activities &

programmes at the right place, at the right time, at the right price with right

communication & promotion.

Banking is one Industry where there is no middlemen serving the

customer. The bank deals with customer directly. However with

liberalization & globalization of the economy, middlemen are graduallyemerging in the banking industry. Foreign bank & new private bank like

City bank, Global Trust Bank & ICICI Bank are offering their franchise in

Page 1


2/84


the marketing their services. This has introduced the middlemen in

marketing of banking services.

In banking services, the marketing strategies starts with developing

customer profiles by which the bank can collect & analyse all relevant

information on customers. The preference & prejudices of the customer

are identified with the help of these profiles & this enables the bank to

enhance its marketing activities. In order to satisfy customer needs new

service may be introduced or the existing services of the bank may be

modified. Customer satisfaction plays an important role in bankingservices.

Page 2


3/84


1.1. EVOLUTION OF THE MARKETING CONCEPTEVOLUTION OF THE MARKETING CONCEPT

The Role of marketing in the banking industry continues to change.

For many years the primary focus of bank marketing was public relations.Then the focus shifted to advertising and sales promotion. That was

followed by focus on the development of a sales culture.

Although all the elements of the marketing concept customer

satisfaction, profit integrated framework and social responsibility will

remain important, customer satisfaction must receive the greatest

emphasis in the years ahead. The chief concerns of most bank executives

still focus on legal and regulatory issues, according to most surveys.Community banks are particularly concerned with eliminating barriers that

give unfair advantages to financial services competitors, such as credit

unions. However, another concern pertains to technology: keeping

nonblank competitors out of the payment system.

1.1. Bankers Identify Near-Team and Long Term Concerns

1991 2015

Maintaining profitabilityCredit Portfolio Management

Service Quality

Regional Economy

Cost Management / Expense

reduction

Declining Earnings/ more failures

Market / customer focus

Capital adequacy

Stock market value

Industry Overcapacity

Service quality

Maintaining profitability

Market / customer focus

Operations/systems/technology

Credit portfolio management

Productivity improvement

Investment to stay competitive

Stock market valueAsset/liability management

Electronic Banking

Page 3


4/84


2.2. BANK MARKETINGBANK MARKETING

Bank marketing is the aggregate of functions, directed at providing

services to satisfy customers financial (and other related) needs and

wants, more effectively and efficiently that the competitors keeping in view

the organizational objectives of the bank. Bank marketing is an activity.

This aggregate of functions is the sum total of all individual activities

consisting of an integrated effort to discover, create, arouse and satisfy

customer needs. This means, without exception, that each individual

working in the bank is a marketing person who contributes to the totalsatisfaction to customers and the bank should ultimately develop customer

orientation among all the personnel of the bank. Different banks offer

different benefits by offering various schemes which can take care of the

wants of the customers.

Marketing helps in achieving the organizational objectives of the

bank. Indian banks have duel organizational objective commercial

objective to make profit and social objective which is a developmental role,

particularly in the rural area.

Marketing concept is essentially about the following few thing which

contribute towards banks success:

1) The bank cannot exist without the customers.

2) The purpose of the bank is to create, win, and keep a customer.

3) The customer is and should be the central focus of everything the

banks does.

4) It is also a way of organizing the bank. The starting point for

organizational design should be the customer and the bank should

ensure that the services are performed and delivered in the most

Page 4


5/84


effective way. Service facilities also should be designed for

customers convenience.

5) Ultimate aim of a bank is to deliver total satisfaction to the

customer.

6) Customer satisfaction is affected by the performance of all the

personal of the bank.

All the techniques and strategies of marketing are used so that

ultimately they induce the people to do business with a particular bank.

Marketing is an organizational philosophy. This philosophy demands thesatisfaction of customers needs as the pre-requisite for the existence and

survival of the bank. The first and most important step in applying the

marketing concept is to have a whole hearted commitment to customer

orientation by all the employees. Marketing is an attitude of mind. This

means that the central focus of all the activities of a bank is customer.

Marketing is not a separate function for banks. The marketing function in

Indian Bank is required to be integrated with operation.

Marketing is much more than just advertising and promotion; it is a

basic part of total business operation. What is required for the bank is the

market orientation and customer consciousness among all the personal of

the bank. For developing marketing philosophy and marketing culture, a

bank may require a marketing coordinator or integrator at the head office

reporting directly to the Chief Executive for effective coordination of

different functions, such as marketed research, training, public relations,advertising, and business development, to ensure customer satisfaction.

The Executive Director is the most suitable person to do this coordination

Page 5


6/84


work effectively in the Indian public sector banks, though ultimately the

Chief Executive is responsible for the total marketing function.

Hence, the total marketing function involves the following:

a) Market research i.e. identification of customers financial

needs and wants and forecasting and

researching future financial market

needs and competitors activities.

b) Product Development i.e. appropriate products to meet

consumers financial needs.c) Pricing of the service i.e., promotional activities and

distribution system in accordance with

the guidelines and rules of the Reserve

Bank of India and at the same time

looking for opportunities to satisfy the

customers better.

d) Developing market i.e., marketing culture among all the

customer-consciousness Personnel of

the bank through training.

Thus, it is important to recognize the fundamentally different

functions that bank marketing has to perform. Since the banks have to

attract deposits and attract users of funds and other services, marketing

problems are more complex in banks than in other commercial concerns.

Page 6


7/84


3. MARKET RESEARCH IN INDIAN BANKS

After enquiring with all the public and 14 private sector banks

whether they had undertaken any market research studies. The following

board areas of market research were considered for the study:

(a) New service development,

(b) New service product acceptance,

(c) Research and development of existing financial service,

(d) Bank images study,

(e) Measuring banks advertising effectiveness,(f) Measurement of market potentials,

(g) Market research of competitive service products,

(h) Customers opinion study,

(i) Customer profile study, and

(j) Market share analysis.

In response to the inquiry information was received from 17 banks.

Out of these banks, 14 are public sector banks and 3 are private sector

banks. Two nationalized banks and two private sector banks informed that

they have not conducted any markets research studies.

Page 7


8/84


9/84


This involves dividing the market into major market segments,

targeting one or more of this segments, and developing products and

marketing programs tailor-made for these segments.

In the first segmentation, the market is divided from a unitary whole,

to groups of buyers who might require separate products and marketing

mix. The marketer typically tries to identify different segments in the

market and develop profiles of resulting market segments. The second

step is market targeting in which each segments attractiveness is

measured and a target segment is chosen based on its attractiveness.

The third step is product positioning which is the act of establishing aviable competitive position of the firm and its offer in the target segment

chosen.

These concepts can be applied in personal banking by an Indian

Bank. Traditionally, Indian Banks have not had any conscious strategy for

selecting customers from the personal banking area, apart from some

banks which have a geographic concentration strategy such as

concentrating on a particular region or state. These banks will have to

segment the market on certain basis, and identify market segments or

niches which they want to cater to. For example, a bank like SBI may not

be able to cater high income groups (say, managers, professional, NRIs,

etc. who earn above Rs. 4,00,000 p.a. and who want a higher quality of

products / services and who are willing to pay for them), as the services

required by such a profile of customers are entirely different from the kind

of products / services SBI can offer.

Page 9


10/84


11/84

Marketing In Banking ServicesMarketing In Banking Services5.1 Initiation of Segmentation in India

Station Bank of India was the first Indian Bank to adopt the concept

of market segmentation. In 1972, it reorganized itself on the basis of major

market segments dividing customers on the basis of activity and carved

out 4 major market segments, viz. Commercial and Institutional, Small

Industries and Small Business Segment, Agriculture, Personal and

Services Banking. The objectives of this scheme were: Deeper penetration and coverage of market by looking outwards.

Adequate flexibility of organization to accommodate growth and

rapid change,

Delegation of work for releasing senior management for morefuturistic tasks.

5.2 Criteria for Segmentation

Segmentation in a right fashion makes the ways for profitable

marketing. This helps policy planner in formulating and innovating the

policies and at the same time also simplifies the task of bank professionals

while formulating an innovating the strategic decisions. The following

criteria make possible rig segmentation.

An important criterion for market segmentation the economic

system in which we find agricultural sector, industrial sector, services

sector, household sector, institutional sector and rural sector requiring of

weightage while segmenting.

5.3 Agricultural Sector:-

In the agricultural sector, there are four category rise since the

needs of all the categories cants be identical.

Page 11


12/84


The mechanization of agriculture, the improved or scientific system

of activation, the help of nature, the magnitude of risk, the availability

infrastructural facilities influence the level of expectations vis--vis the

needs and requirements. The banking organization are supposed to knowand understand the changing requirements of different categories of

farmers.

5.4 Industrial Sector:

The banking organizations subserve the interests of the industrial

sector. The large-sized, small-sized co-operative and tiny industries use

the services of banks. The expectations of all the categories cants be

uniform.

Page 12


13/84

Marketing In Banking ServicesMarketing In Banking ServicesThe banking organizations are supposed to have indepth

knowledge of the changing needs and requirements of the industrial

segment.

5.5 Services sector:

It is an important sector of the economy where the banking

organizations get profitable business. The two categories of organizations

such as profit-making and not-for-profit making are found important in the

very context.

The banking organizations need to identify the changing needs and

requirements of the services sector. With the frequent use of information

technologist and with the mounting pressure of inflation and competition,

we find a change in the hierarchy of needs.

Page 13


14/84

Marketing In Banking ServicesMarketing In Banking Services5.6 Household Sector:

This is also constitutes an important sector where different income

group have different needs and requirements. in below figure we find the

different segments of the household sector.

5.7 Household Segment:

The high income group, middle income group, low income group,

substance level group and marginal income group have different hierarchy

of need which influence the level of their expectations.

5.8 Gender Segment:

In the gender segments, we find male and female having different

needs and requirements. The banking organizations are supposed to

identify the level expectations of both sexes.

Page 14


15/84


Some of the women are housewives and therefore they have

different need and requirements whereas some of them are working ladies

having different needs and requirements.

In the profession segments, find different categories of professions

and therefore find a change in their needs and requirements.

The technocrats, bureaucrats, corporate executives, intellects,

white and blue collar employees have different needs and requirements

and therefore the banking organizations should know their expectations.

Some of the organizations are known as cultural organizations,

some of them are not for profit making, some of them are philanthropic

and some of them are related to trade and commerce. The emerging

Page 15


16/84

Marketing In Banking ServicesMarketing In Banking Servicestrends in the social transformation process determine the hierarchy of

needs.

Markets segmentation thus simplifies the task of understanding the

customers/prospects. The bank professional find it convenient to formulate

and innovate the marketing mix of world class which simplify the process

of excelling competition.

In the Indian perspective where we find agrarian economycontributing substantially to the transformation of national economy, it is

pertinent that the banking organizations assign due weightage to the rural

sector of the economy where we find tremendous opportunities.

The urbanization is likely to gain the momentum and villages,

outskirts of big towns and cities are to be developed on a priority basis.

Almost all the organizations are to get tremendous opportunities there.

The marketing resources if of innovative nature would make the ways for

capitalizing on the same profitably.

Page 16


17/84


6. MARKETING MIX FOR BANKING

SERVICES

The formulation of marketing mix for the banking services is the

prime responsibility of the bank professional who based on their expertise

and excellence attempt to market the services and schemes profitably.

The bank professionals having world class excellence make

possible frequency in the innovation process which simplifies their task of

selling more but spending less. The four submixes of the marketing mix,

such as the product mix, the promotion mix, the price mix and the place

mix, no doubt, are found significant even to the banking organizations but

in addition to the traditional combination of receipts, the marketing experts

have also been talking about some more mixes for getting the best result.

The People as a submix is now found getting a new place in the

management of marketing mix. It is right to mention that the quality of

people/employees serving an organization assumes a place of

outstanding significance. This requires a strong emphasis on the

development of personally-committed, value-based, efficient employees

who contribute substantially to the process of making the efforts cost

effective.

In addition, we also find some of the marketing experts talking

about a new mix, i.e. physical appearance. In the corporate world, the

personal care dimension thus becomes important. The employees are

supposed to be well dressed, smart and active. Besides, we also find

emphasis on Process which gravitates our attention on the way of offering the services. It is only not sufficient that you promise quality

services. It is much more impact generating that your promises reach to

the ultimate users without any distortion. The banking organizations, of

Page 17


18/84

Marketing In Banking ServicesMarketing In Banking Serviceslate, face a number of challenges and the organizations assigning an

overriding priority to the formulation processes get a success. The

formulation of marketing mix is just like the combination of ingredients,

spices in the cooking process.

6.1 THE PRODUCT MIX:-

The banks primarily deal in services and therefore, the formulation

of product mix is required to be in the face of changing business

environmental conditions. Of course the public sector commercial banks

have launched a number of polices and programmers for the development

of backward regions and welfare of the weaker sections of the society butat the same it is also right to mention that their development-oriented

welfare programmes are not optimal to the national socio-economic

requirements. The changing psychology, the increasing expectations, the

rising income, the changing lifestyles, the increasing domination of foreign

banks and the changing needs and requirements of customers at large

make it essential that they innovate their service mix and make them of

world class. Against this background, we find it significant that the banking

organizations minify, magnify combine and modify their service mix.

It is essential that ever product is measured up to the accepted

technical standards. This is due to the fact that no consumer would buy a

product which contains technical faults. Technical perfection in service is

meant prompt delivery, quick disposal, presentation of right facts and

figures, right filing proper documentation or so. If computers starts

disobeying the command and the customers get wrong facts, the use of

technology would be a minus point, and you dont have any excuse for

your faults.

Page 18


19/84


20/84

Marketing In Banking ServicesMarketing In Banking ServicesThe composition of a family sound, if members of all the age

groups are given due place. Like this, the composition or blending of a

service mix is considered to be sound, if well established and likely to be

profitable schemes are included in the mix. It is against this background

that a study and analysis of product portfolio is found significant. The bank

professionals are supposed to perform the responsibility of composing the

same. A sound product portfolio is essential but its process of constitution

is difficult. An organization with a sound product portfolio gets a conducive

environment and successes in increasing the sensitivity of marketing

decisions. The banking organizations need a sound product portfolio and

the bank professionals bear the responsibility of getting it done suitablyand effectively.

If the banks rely solely on their established services and schemes,

the multidimensional problems would crop up in the long run because

when the well established services/schemes would start saturating or

generating losses, the commercial viability of banks would of course, be

questioned. The banking organizations relying substantially on a profitable

scheme and ding nothing for new scheme likely to get a profitable market

in the future is to face is to face a crisis like situation. It is in this context,

that we find designing of a sound product portfolio essential to an

organsation. We cant deny that the product portfolio of the foreign banks

is found sound since they keep their eyes moving. The innovation,

diffusion, adoption and elimination processes are taken due care. The

public sector commercial banks need to innovate their service and this

makes a strong advocacy in favour of analyzing the product portfolio.

Page 20


21/84


6.1.2. DESIGNIGN AN ATTRACTIVE PACKAGE

In the formulation of product mix for the banking organization, the

designing of package is found important. In this context, packaging

decision related to the formulation of a mix of different schemes and

services. Developing an attractive package required professional

excellence and therefore, the bank professionals are required to be aware

of the different key issues influencing the formulation process. What the

package should basically be or do for the particular target. We are aware

of the fact that a number of schemes and services are included in the

service mix of bank product and all the services or schemes cant be

preferred by all. Of course we find some of the public sector commercial

banks now evincing stage. This makes it essential that a bank manager

thinks in favour of developing a package. The importance of packaging

cant be underestimated considering the functions it performs and the

effects which we witness in the process of attracting and satisfying the

customers. In addition to other aspects, it is also pertinent that a bank

manager is familiar with the package developed by the leading competitivebanks since this would help them in innovating the package. It is an

important component of the product mix and a bank manager while

formulating or designing a package needs to assign due weightage to the

formulation process. While developing a package, it is essential that the

packages offered are efficacious in establishing an edge over the

packages of competitors. Thus needs and preferences of the target

market in addition to the packages offered by the competitors need due

weightage while designing a package.

Page 21


22/84


6.1.3. PRODUCT DEVELOPEMNT:

In almost all the services, the development of a product is an

ongoing process. The banking organizations also need to develop new

services and schemes. We cant deny that the development of product

specially in the banking services is found difficult since they dont have

any discretion, however they can do it, of course in a limited way. By

minifying, combining, modifying and magnifying, the banking organizations

can give to the services or scheme a new look. The regulations of the

Reserve Bank of India, no doubt stand as a barrier but professionally

sound marketers make it possible even without violating the rules and

regulations. The banking organizations in general have been found

developing product by including some new properties or features.

Generally we find two process for the development of product. The first

process is found proactive since the needs of the target market are

anticipated and highlighted. The second process is reactive and in this

context the banks respond to the expressed needs of the target.

6.2. PROMOTION MIX

In the formulation of marketing mix the bank professionals are also

supposed to blend the promotion mix in which different components of

promotion such as advertising, publicity, sales promotion, word-of-mouth

promotion, personal selling and telemarketing are given due weightage.

The different components of promotion help bank professionals in

promotion the banking business.

Page 22


23/84


6.2.1. Advertising:

Like other organizations, the banking organizations also us this

component of the promotion mix with the motto of informing, sensing and

persuading the customers. While advertising, it is essential that we know

about the key decision making areas so that its instrumentality helps bank

organization both at micro and macro levels.

6.2.2. Finalising the Budget:

This is related to the formulation of a budget for advertisement. The

bank professionals, senior executives and even the police planners are

found involved in the process. The formulation of a sound budget is

essential to remove the financial constraint in the process. The business

of a bank determines the scale of advertisement budget.

6.2.3. Selecting a Suitable vehicle:

There are a number of devices to advertise, such as broadcast

media, telecast media and the print media. In the face of budgetary

provisions, we need to select a suitable vehicle. The latest developments

in the print technology have made print media effective. The messages,

appeals can be presented in a very effective way.

6.2.4. Making Possible creativity:

The advertising professionals bear the responsibility of making the

appeals, slogans, messages more creative. The banking organizations

should seek the cooperation of leading advertising professionals for that

very purpose.

Page 23


24/84


6.2.5. Instrumentality of branch managers:

At micro level, a branch manager bears the responsibility of

advertising locally in his / her command area so that the messages,

appeals reach to the target customers of the command area. Of course we

find a budget for advertisement at the apex level but the business of a

particular branch is considerably influenced by the local advertisements. If

we talk about the cause-related marketing, it is the instrumentality of a

branch manager that makes possible the identification of local events,

moments and make advertisements condition-oriented.

6.2.6. Public Relations:

Almost all the organization need to develop and strengthen the

public relations activities to promote their business. We find this

component of the promotion mix effective even in the banking

organizations. We cant deny that in the banking services, the

effectiveness of public relations is found of high magnitude. It is in this

context that we find a bit difference in the designing of the mix of

promoting the banking services. Of course in the consumer goods

manufacturing industries, we find advertisements occupying a place of

outstanding significance but when we talk about the service generating

organizations in general and the banking organizations in particular, we

find public relations and personal selling bearing high degree of

importance. It is not meant that the banking organizations are not required

to advertise but it is meant that the bank executives unlike the executivesof other consumer goods manufacturing organizations focus on public

relations and personal.

Page 24


25/84


6.2.7. Personal Selling:

The personal selling is found instrumental in promoting the banking

business. It is just a process of communication in which an individual

exercise his/her personal potentials, tact, skill and ability to influence the

impulse buying of the customers. Since we get in immediate feedback, the

personal selling activities energies the process of communication very

effectively.

The personal selling in an art of persuasion. It is a highly distinctive

form of promoting sale. In personal selling, we find inter-personal or two-

way communication that makes the ways for a feed back. There is no

doubt in it that the goods or services are found half sold when the

outstanding properties are well told. This are of telling and selling is known

as personal selling in which an individual based on his/her expertise

attempts to transform the prospects into customers.

6.2.8. Dynamics of Personals Selling

The dynamics of personal selling are found instrumental in

activating the selling activities. Sales preparations are considered most

crucial for the actual sales. Pre-sale activities and post-sale services cant

be left neglected to improve the marketing activities. The customers may

be interested in knowing the main features of the services, how a

particular service would help them, rationale behind the technical services

and proof in regard to its uses. The pre-sale activities would bring the

positive results, if preparations are adequate.

Some of the customers are found highly aware of the

developments, they are found well informed. On the other hand, we also

Page 25


26/84

Marketing In Banking ServicesMarketing In Banking Servicesfind other category of customers who are in dark. Here, the branch

managers are expected to match the level of awareness of customers. As

for instance, Mr. A goes up the matrix but Mr. B has not enough time for

the branch managers. The branch managers are supposed to prepare a

synopsis of their sales talk. Not surprisingly the highly aware customers

are found in opposition to make independent decisions and know all

about. While selling to the less aware customers, the managers should

stress on the main features of the services and the expected benefits of

these services.

6.2.9. Sales Promotion:

It is natural that like other organisations, the banking organizations

also think in favour of promotional incentives both to the bankers as well

as the customers. The banking organizations make provisions for

incentives to the bankers and call this bakers promotion. Like this, the

Page 26


27/84

Marketing In Banking ServicesMarketing In Banking Servicesincentives offered to the customers are known as customers promotion.

There are a number of tools generally used in the different categories of

organizations in the face of the nature of goods and services sold by them.

The gift, contests, fairs and shows, discount and commission,

entertainment and traveling plans for bankers, additional allowances, low

interest financing and retalitary are to mention a few found instrumental in

promoting the banking business.

As and when the banking organizations offer new services and

schemes, the tools of sales promotion are required to be innovated. This

is with the motto of stimulating the new and old customers. An importantthing in the very context is the changing needs and requirements of

customers/prospects. The bank professionals bean outstanding task of

studying the competitors strategies which would he them in initiating the

process of innovation. Here it is important to mention the promotional

incentives to the customers would focus on decisions related to the

selection of a tool. There are a number of considerations to streamline the

process. The bank professionals are supposed to study the market

conditions and make necessary suggestions, especially regarding the

incentives.

It is a blending process and bank professional have to be sure the

whatever the provisions, they make are fulfilled on priority basis. More

incentives more efficiency or a vice-versa conditions more efficiency,

more-incentives motivate bankers substantially.

Page 27


28/84

Marketing In Banking ServicesMarketing In Banking Services6.2.10. Word-of-Mouth Promotion:

Much communication about the banking services actually take

place by word-of-mouth information which is also known as word-of-mouth

promotion. In the banking industry, we find use of different components of

promotion and in the context it is essential that we also talk about word-of-

mouth communication which makes the process of influencing the

prospects effective by sensitizing the word-of-mouth recommendations.

The persons engaged in communication, the hidden salesforce who play

an incremental role in increasing the demand. An important question

regarding the word-of-mouth communication is related to its intensity of

sensitizing the persuasion process.

The problem before the bank professionals is to identify the

persons to be included in the list of word-of-mouth promoters. It is

supposed that a bank manager is well aware of the social composition of

his/her command area. The oral publicity plays an important role in

eliminating the negative comments and improving the services. This helps

you know the feedback which may simplify the task of improving thequality of services.

It is important that a branch manager has an in-depth knowledge of

his/ her command area and a list of word-of-mouth promoters is prepared.

Organizing dinner, offering to them a gift and seeking their cooperation are

the process to use this tool of promotion. A satisfied group of customers is

considered to be the most successful hidden promoters. A branch

manager showing his/her excellence in improving the quality of services in

his/ her command area, establishing an edge over the services of the

competing banks, promoting LGD marketing (lunch, golf, dinner

Page 28


29/84

Marketing In Banking ServicesMarketing In Banking Servicesmarketing) successds in instrumentalising the word-of-mouth promotion. It

is against this background that this component of the promotion mix is

found getting due place.

In this component of the promotion mix, we find two important

considerations, first the bank professionals are required to make it sure

that the promised services reach to the ultimate users and second, the

word-of-mouth promoters are offered small but new incentives which have

not been offered by their competitors. The list of word-of-mouth promoters

is to be based on a survey result or on the personal experiences of a

branch manager. A revision in the list is made possible as and whencircumstances necessitate so. The innovative peripheral services offered

by the banks are well publicized and the word-of-mouth promoters focus

on the same intelligently.

6.3. THE PRICE MIX

In the formulation of product mix, the pricing decisions occupy a

place of outstanding significance. The pricing decisions or the decisionsrelated to interest and fee or commission charged by banks are found

instrumental in motivating or influencing the target market. The Reserve

Bank of India and the Indian Banking Association are concerned with the

regulations. The rate of interest is regulated by the RBI and other charges

are controlled by the Indian Banking Association. To be more specific in

the Indian setting, we find this component of the marketing mix significant

because the banking organizations are also supposed to subserve theinterests of weaker sections and the backward regions. The public sector

commercial banks in particular are supposed to play developmental role

Page 29


30/84

Marketing In Banking ServicesMarketing In Banking Serviceswith societal approach. It is natural that this specific role of the public

sector commercial banks complicate the problem of pricing.

Pricing policy of a bank is considered important for raising the

number of customers vis--vis the accretion of deposits. Of course, there

are a number of factors to influence the process but it is also right to

mention that the key role in the entire process is played by the Reserve

Bank of India. A National Consumer Survey Conducted by the L.H.

Associates reveals that the quality of Consumer service was one of the

three top issues and the consumers ranked the quality of their bank

relationships as even more important than the fees charged for theservices. To be more specific when we find a number of domestic and

foreign banks working in the Indian economy, the Reserve Bank of India

bears the responsibility of making the business environment conductive.

The non-banking organizations and foreign banks have been found

attracting customers by offering to them a number of incentives. The

potential customers or investors frame their investment plans in the face of

pricing decisions made by the banking organizations. While formulating

the pricing strategies, the banks have also to take the value satisfaction

variable into consideration. The value and satisfaction cant be quantified

in terms of money since it differs from person to person, keeping in view

the level of satisfaction of a particular segment, the banks have to frame

their pricing strategies. The policy makers are required to be sure that the

service offered by them are providing satisfaction to the customers

concerned. The pricing decisions may be to bit liberal, if the potential

customers are found shifting to the non-banking investments. In thiscontext, it is pertinent that pricing is used as motivational tool.

Page 30


31/84

Marketing In Banking ServicesMarketing In Banking ServicesThe banking organizations are required to frame two-fold

strategies. First, the strategy is concerned with interest and fee charged

and second, the strategy is related to the interest paid. Since both the

strategies throw a vice-versa impact, it is pertinent that banks attempt to

establish a correlation between the two. It is essential that both the buyers

as well as the sellers have a feeling of winning.

The banks have to take the value satisfaction variable into

consideration while designing the pricing strategies. McIver and Naylor

opine that a marketing manager has to regard price as a variable to be

traded off against product quality and promotion rather that as an absolutewhere the lowest price is not desirable.

The RBI has to be more liberal so that the public sector commercial

banks make decisions in the face of changing business conditions. There

is no doubt in it that the commercial banks bear the responsibility of

energizing the social marketing, they are also supposed to bear the social

costs. It is also right that the foreign banks have been found making the

Page 31


32/84

Marketing In Banking ServicesMarketing In Banking Servicesbusiness environment more competitive. These emerging trends

necessitate a close look on the pricing problem. The policy makers find it

difficult to bring a change since the regulations of the RBI make things

more critical. The expenses are not regulated by the RBI and the banking

organizations are forced to increase the budgetary provisions. The

sources of revenue are regulated which complicates the task of bank

professionals. This makes it essential that the Reserve Bank of India, the

Government of India and the banking organizations thing over this

complicated issue with a new vision.

6.4. THE PLACE MIX

This component of the marketing mix is related to the offering of

services. The two important decision making areas are making available

the promised services to the ultimate users and selecting a suitable place

for bank branches.

The selection of a suitable place for the establishment of a branch

is significant with the viewpoint of making the place accessible and inaddition, the safety and security provisions are also found important. The

banking organizations are not free to open a branch since the Reserve

Bank of India regulates the subject of branch expansion but so far as the

management of branch is concerned, the branch managers have option to

select a place which is convenient to both the parties, such as the users

and the bankers. In the Indian perspective, the protection to the banks

assets and safety to the users and bankers need due weightage. Thevulnerable area or regions need adequate provisions to make the branch

safe. The management of office is also found significant with the viewpoint

Page 32


33/84

Marketing In Banking ServicesMarketing In Banking Servicesof making the services attractive. The furnishing, civic amenities and

parking facilities cant be overlooked.

Another important decision making area is related to the offering of

services. This draws our attention on the behavioural profile of bankers.

The bankers in general and the front-line-staff in particular bear the

responsibility of making available the services-promised to the ultimate

users without any distortion often a gap is found generated by front-line-

staff that makes an invasion on the image of bank. The bank professionals

or a branch manager is required to be sure that whatever the promise

have been made regarding the quality of services are not distorted. TheRBI and the different public sector commercial banks are required to

manage the distribution process intelligently and professionally. Thus, the

place mix is found to be an important decision making area which requires

due attention, both at macro and micro levels. If the banking organizations

sell the promises it is essential that the end users get the same without

any distortion.

6.5. THE PEOPLE MIX

Generation of efficiency is substantially influenced by the quality of

human resources. It is against this background that a majority of the

management experts make a strong advocacy in favour of developing

quality people and late, the people management has been include dint he

marketing mix of organizations is general and the service generating

organizations in particular.

Not only the public sector commercial banks but almost all the

public sector organization and albeit other government departments, of

Page 33


34/84

Marketing In Banking ServicesMarketing In Banking Serviceslate, have been facing the problem of quality people resulting into

inefficiency, deceleration in the rate of overall productivity and profitability

or so. The front-line staff are rough and indecent, the branch managers

are helpless and even the bankers have been found involved in the unfair

practices. The public sector commercial banks need to assign on

overriding priority to the development of quality people majority of the

management of the experts have realized the significance of quality

people in the development of an organization and the boardrooms are

also found changing their attitudes.

The foreign banks and the private sector commercial banks reward

for efficiency and at the same time also demotivate the inefficient bankers.This helps them in improving the efficiency of even the inefficient people.

The development of human resources makes the ways for the formation of

human capital. Incentives, of course, inject efficiency and the

organizations offering more incentives succeed in motivating the people. Having better and cost-effective control over operations. Enriching the job content of employees at all level (by reducing the

drudgery of mundane operations and increasing the analytical

content of their work). Improving the quality of decision-making, a must in the fast

changing environment.

6.5.1. Thus, the key focus areas in which information technology can

be employed are:-

Automated processing of back-office operations like processing of

forms, policy customerization and product selection, pricing and

preparation of quotations, etc.

Page 34


35/84

Marketing In Banking ServicesMarketing In Banking Services Computer assisted telephone and intelligent voice processing for

customer call handling, new business marketing or handling after

office hours enquires. Image processing for documents storage and retrieval, folder

management (or all documents related to a customer), and

workflow management for the movement of documents with the

bank. Artificial intelligence and expert systems for complex decision-

making like the appraisal of the creditworthiness of clients,

designing of innovative instruments and strategy formulation.

Relational Database Management System (RDBMS) for thesystematic use of information which would facilitate the cross-

selling of products. Electronic Data Interchange (EDI) for company-wise

communication and inter-connection of systems for the benefit of

both the banks MIS and the customer. Office Management Systems for accounting and administrative

support.

All the above systems should be client-based systems and not

line-of-business systems since these would provide better marketing and

service to clients, facilitate cross-selling and customerization of schemes

and hence, a better packaging for the product. This would help Indian

banks thing customer.

All these would, thus, help in the effective management of time.

Recourse to mechanized systems like ledger posting machine, cash

counting machine and cheque sorting machine would result in reduction in

Page 35


36/84

Marketing In Banking ServicesMarketing In Banking Servicesthe number of tedious and routine jobs to be handled manually saving

time for the people to focus on the customer.

6.6. THE PROCESS MIX

Flow of activities:

All the major activities of banks follow RBI guidelines. There has to

be adherence to certain rules and principles in the banking operations.

The activities have been segregated into various departments accordingly.

Standardization:

Banks have got standardized procedures got typical transactions.

In fact not only all the branches of a single-bank, but all the banks have

some standardization in them. This is because of the rules they are

subject to. Besides this, each of the banks has its standard forms,

documentations etc. Standardization saves a lot of time behind individual

transaction.

Customization:

There are specialty counters at each branch to deal with customers

of a particular scheme. Besides this the customers can select their deposit

period among the available alternatives.

Number of stores:

Numbers of steps are usually specified and a specific pattern is

followed to minimize time taken. Simplicity:

Page 36


37/84

Marketing In Banking ServicesMarketing In Banking ServicesIn banks various functions are segregated. Separate counters exist

with clear indication. Thus a customer wanting to deposit money goes to

deposits counter and does not mingle elsewhere. This makes procedures

not only simple but consume less time. Besides instruction boards in

national boards in national and regional language help the customers

further.

Customer involvement:

ATM does not involve any bank employees. Besides, during usual

bank transactions, there is definite customer involvement at some or the

other place because of the money matters and signature requires.

6.7. THE PHYSICAL EVIDENCE MIX

The physical evidences include signage, reports, punch lines, other

tangibles, employees dress code etc. The companys financial reports are

issued to the customers to emphasis or credibility. Even some of the

banks follow a dress code for their internal customers. This helps the

customers to feel the ease and comfort.

Signage:

Each and every bank has its logo by which a person can identify

the company. Thus such signages are significant for creating visualization

and corporate identity.

Tangibles:

Banks give pens, writing pads to the internal customers. Even the

passbooks, chequebooks, etc reduce the inherent intangibility of services.

Page 37


38/84


7. STRATEGIES FOR EFFECTIVE BANK

MARKETING IN INDIA

Since the inception of globalization in India, banking sector has

undergone various changes. Introduction of asset classification and

prudential accounting norms, deregulation of interest rate and opening up

of the financial sector made Indian banking sector competitive.

Encouragement to foreign banks and private sector banks increased

competition for all operators in banking sector. The protective regime by

the authority is over. Indian banks are exposed to global competition.Even competition within the country has increased manifold. The almost

monopoly position enjoyed by the public sector banks of India is no more

existence. Under this development Indian banks needs to reinvent the

marketing strategy for growth.

The spread of the bank in Indian rural and semi urban areas are

highly different from state to state and region to region. Many states have

fewer networks of bank branches in the rural areas. Under such scenariodifferent marketing approach for different areas is required. If the bank

follows the same marketing strategy for all areas the success would be

difficult.

Page 38


39/84


Marketing approach for urban area:

The urban areas of India are developed taking into account allparameters of development. The level of income of the people, the literacy

rate and level of education as well as awareness of the people about

rights of the customer are higher than that of the rural and even semi

urban areas. Thus here for effective bank marketing different approach is

necessary than that of rural areas.

The marketing strategy should be based on customer service and

the use of modern technology in banking. Under competitive environment

for the success of the business, better customers and retaining existing

customers is possible only with customer service. Use of modern

technology in urban areas will also go long way for marketing of banking

services. Technology based service like credit card, debit card, ATM,

anywhere banking, internet banking, and mobile banking are necessary

for urban areas. This is because it enables customers to perform banking

transactions at their convenience. Business hours of a bank are also an

important factor for urban banking. India many private sector banks,

especially co-operative banks and now even some of the public sector

banks have also started this practice and they find it successful. To attract

business and wholesale customers, banks need to adopt technology

based product and service which is suitable to such class of customer. For

instance RTGS, collection of out station cheques, issuing the cheques at

par at any branch in the country, cash management facility, DD butiques

etc. are necessary.Another strategy for effective marketing is bank need to change the

focus from the traditional banking to universal banking. In urban areas the

extend and variety of economic activities demands that one institution

Page 39


40/84

Marketing In Banking ServicesMarketing In Banking Servicesshould meet all financial need of a customer. Under such an expectation

of people universal banking would prove successful approach for bank

marketing. The term universal banking in general refers to the

combination of commercial banking and investment banking, i.e., issuing,

underwriting, investing and trading in securities.

A universal bank is a supermarket for financial products. Under one

roof, corporate can get loans and avail of other handy services, while

individuals can bank and borrow.

For increasing customer base and retention of the existing cliental

universal banking approach is effective strategy. Universal banking offersnumber of benefits to customers as well s the banks. For instance,

economies of scale arise in multi-product firms because costs of offering

various activities by different units are greater than the costs when they

are offered together.

Universal banking with focus on retail customers made the ICICI

banks to acquire first position in Indian banking sector. Universal banking

approach is beneficial to bank also. For banks economies of scale relate

to cost-savings through sharing of overheads and improving technology by

jointly providing generically similar groups of services. Since universal

banking basically provides financial services the inputs like manpower,

infrastructure is more or less same. Necessary changes in the inputs can

be made easily. For instance training can be given to staff for providing

different financial services to customers. Moreover the most important

benefit for the bank is that it is useful to increase the fee based income of

the bank. Financial sector passing from lower interest rate regime atpresent and added to this the process of disintermediation is affecting the

main and the traditional source of income for the banks i.e. interest

income. All banks are striving hard to increase their fee based income to

Page 40


41/84

Marketing In Banking ServicesMarketing In Banking Servicesimprove their bottom line. Universal banking can help the banks here

positively.

Marketing approach for rural areas:-

Prior to nationalization of banks in 1969, the rural areas were

virtually without banking facility. At that time unorganized sector was

dominating in the rural finance. After nationalization of banks in 1969

branches of the banks were started gradually in the rural areas also.Today more than 50 percent branches of the banks are found in the rural

areas. However, the distribution of banks in the rural areas is highly

uneven. Here banks have to face competition with the unorganized sector.

Moreover the rural banking is highly regularized activity by the

Government in India. Lending as well as interest rate is regularized. Thus

under such environment different marketing approach is required. For

effective rural marketing product development, promotion andcommunication is important. All these parameters banks have to balance

with socio-economic factors prevailing in the rural areas. Bank need to

innovate product that could attract the depositors. Various loan schemes

that are suitable for them for getting funds at right time and also they find

convenient to repay. For instance traditional saving bank account may be

given fixed deposit concept that once a particular limit of balance is

reached the funds from saving account is automatically coveted into fixed

deposit attracting higher interest rate.

Banks need t develop some scheme which would attract them to

bank with. For loans and advances products which are suitable to tarmers,

Page 41


42/84

Marketing In Banking ServicesMarketing In Banking Servicessmall traders, small scale agro based rural industries are already in

existence. Banks need to see the how value addition can be mad to these

existing scheme. Banks also needs to tie up with Non Government

Organisations and various Self Help Group for different types of loans,

micro financing etc. This will help the bank for building good image and

reputation in the rural areas over and above the business. Another

potential area which can be explored by the banks in the rural area is retail

banking. With the steady increase in the income of the rural people there

is ample scope for retail loan products like housing loans and loan for

consumer durables.

Marketing through customer services in rural areas is different fromthat of urban areas. Here personalized banking is the success mantra for

banks. Because of high level of illiteracy people prefer to undertake

banking transaction themselves. They hesitate to depend upon technology

based service. For effective marketing in rural areas bank should have

staff with right soft skill like concern for customers problem, positive

attitude, good communication and negotiation skill. At every level of

dealing with the customer bank need to educate them for banking

activates and process. To attract the customers from the unorganized

sector most important factor is to provide. The borrower the required

finance of right amount at right time.

Page 42


43/84


TECHNOLOGY IN BANKING

Technology is proving to be a vital tool in enhancing banking

activities around the globe. The advent of ATMs, and Internet Banking are

key pointers to this. The role of an information system can in no way be

underestimated. The expanding role of information systems have aidedbanks achieving Anytime, Anywhere and Anyhow banking. The

improvement in telecommunication infrastructure is redefining the was

banking is being conducted.

Information Technology made its presence felt in banks in India a

few decades ago. However, it is still being used as a support systems.

Most of the software packages used in bank work on stand-alone systems

and are not integrated.Banks in India need to have an integrated systems that takes care

of all the front-office and back-office operations. However, Indian banks

should not be content with the integration of their activities. Banks in

advanced countries are planning to have global electronic banking.

Electronic banking or e-Banking is a generic name for a range of

technologies that allow the electronic exchange of information related to

banking transactions.

As Electronic Networks become more robust and widespread, they

are beginning to attract the attention of retail banks like ATMs and

phone banking. However they tend to be viewed merely as one more

Page 43


44/84

Marketing In Banking ServicesMarketing In Banking Servicescheap distribution channel. Accordingly banks are replicating the branch

banking experience online, even to the extent of creating 3D virtual

branches for their customers to navigate through. Such an approach is

characteristic of early attempts to use new technology platform.

7.1. Indian Banks Cash in on Delivery Channels

From the staid over-the-counter delivery mode to ATMs, tele

banking, Net banking, and now mobile banking the number of delivery

channel deployed by banks has increased by leaps and bounds. Srikanth

R.P. & Chitra Padmanabhan look at the evolution and impact of various

delivery channels in the Indian banking scenario and forecast which

delivery channel could be the next killer app for banking players.

While today each and every bank touts The customer is King

mantra, it was a quite a different story not so long ago. Customers

patronizing PSU banks were greeted with the typical babu culture, where

getting even a cheque encashed used to take ages. Customers had to

adjust their schedule to the bank and very rarely was it the other wayaround. A person in a city like Bombay usually had to wait for a weekend

to deposit a cheque, because by the time he reached home, the bank

would have closed. Today, while the timings of banks have not changed

drastically banks have become more customer friendly. Now power

has shifted into the hand of the customer.

7.2. ATM (AUTOMATED TELLER MACHINES)

Traditionally, banking players relied extensively on their reach to

effectively put emerging banks out of competition. This forced new banks

develop strategies, that could help them reach out to end-customers cost

Page 44


45/84

Marketing In Banking ServicesMarketing In Banking Serviceseffectively. The solution came in the form of a delivery channel known as

Automated Teller Machines or ATMs. And when new private banks started

Installing ATMs across the length and breadth of the country, customers

started flocking in droves. A case in point is ICICI Bank. During the

liberalization of the banking sector, ICICI Bank which did not have a huge

national network, realized that it could use IT to enhance its value-added

offerings.

Says O.P. Srivastava, head of the retail channel infrastructure

group at ICICI Bank, When the banking sector was liberalized we knew

that to get a lead over the well entrenched PSU banks, we had to take the

help of delivery channels like ATMs. This was the only way to counter thereach of national players. ICICI Bank is the most aggressive deployer of

ATMs and has seen its base surge from 125 ATMs in January 2000 to

1,200 ATMs today. Such has been the impact of ATMs that ICICI Banks

customer base has grown from two million to five million in the last two

years. Srivastava attributes this increase to the increase in ATM outlets.

HDFC Bank, is the other big player from the banking industry which

has aggressively used ATMs to its advantage. Says Mudit Saxena, vice-

president for retail marketing and head of Net Banking at HDFC Bank,

The average per-day transaction at an HDFC Bank ATM is 350-400, with

some ATMs recoding as many as 700 transactions per day. Other tech

savvy banks like UTI Bank and ABN Amro Bank have also become

extremely aggressive in installing ATMs.

In the case of UTI Bank, the ATMs have added a fillip to the banks

customer base. Says V K Ramani, president for IT at UTI Bank, Form the

first year of ATM installation, we have seen a surge in our customer base.Currently, we have 647 ATMs servicing a base of 1.3 million customers.

Over 90 percent of cash withdrawals are done through ATMs. The number

of ATM transactions have also increased from one million in September

Page 45


46/84

Marketing In Banking ServicesMarketing In Banking Services2001 to over 2.5 million in September 2002. With growth figures like this,

its no wonder that every branch manager wants an ATM installed in his

area of operations.

Alok Shende, Industry manager for IT practice at Frost & Sullivan,

summarieses the evolution of the Indian banking industry perfectly when

he says, Banks followed two broad approaches when adopting

technology. The first approach was evolutionary. Banking players who had

large brick and mortar legacy particularly the public sector banks, kept the

banking channels intact and automated the bottleneck points. This

approach was adopted by around 80 percent of the industry. However,some banks adopted a revolutionary approach and changed the banking

scenario altogether. State Bank of India is a good example of the

evolutionary approach, whereas HDFC Bank and ICICI Bank, are good

examples of the revolutionary approach. Some banks have gone a step

ahead and share their ATMs with other banks. For instance, ABN Amro

Bank has a private ATM sharing agreement with UTI Bank.

Banks are also developing new strategies to leverage their ATM

outlets. For instance, rather than set up a branch in every suburb, ICICI

Bank has hit upon a ratio of 8 ATMs to one branch office, thus effectively

reaching out to a large customer base, at a substantially lower cost.

ABN Amro launched Royalties, Indias first banking rewards

programme. In the programme, the customer gets rewarded every time he

uses any of the banks electronic access channels. If the customer bites

the bait, it not only reduces the work load, but also translates into huge

cost savings.As PSU banks gear up to win back their customers through the

aggressive deployment of ATMs, the already vibrant ATM market has got

a further boost. In India, ATM manufacturers like NCR and HMA Diebold

Page 46


47/84

Marketing In Banking ServicesMarketing In Banking Servicesare extremely bullish, as India is the fastest growing market for ATMs

currently. India has close to 7,500 ATMs and analysts predict the market

to grow at a rate of 60-70 percent year-on-year. Looking at the boom in

ATMs NCR has decided to invest $6 million to set up its ATM

manufacturing plant in India.

Says Lars Nyberg, chairman and chief executive officer of NCR,

India is undoubtedly the hottest market for ATMs today. Our decision to

manufacturer in India is to accelerate supply to the local market. Initially,

the manufacturing facility in Bangalore will have a capacity of produce

8,000-10,000 ATMs per year. The potential of the Indian market has

prompted NCR to design at ATM specifically for the Indian market.

Total cost advantage

While ATMs do help banks to attract customers, there is also one

more critical aspect to consider the immense cost savings from which a

bank can benefit due to a transaction taking place over an ATM vis--vis a

branch. Typically, it costs a bank close to Rs. 50 per transaction if

conducted in a branch. The same if done an ATM costs about Rs. 15. A

look at the volume of ATM transactions conducted reflects the level of

success of this delivery channel.

7.3. Internet Banking

The other important delivery channel, from a banks perspective &

Internet banking. The adoption of Internet banking by the banks

customers is important since the costs per transaction are even lower thanthose of an ATM. A net-based transaction costs the bank only around Rs.

4. Thus, banks are trying to get customers to switch over to this mode of

Page 47


48/84

Marketing In Banking ServicesMarketing In Banking Servicesbanking registered users for Internet banking in India at over two million

currently.

It represent a significant opportunity for banks. In addition, as a

delivery channel, Internet banking does not require physical infrastructure,

thus saving on prohibitive real estate costs.

Private banks like ICICI Bank, HDFC Bank, UTI Bank and ABN

Amro Bank have seen a steady surge in the number of users registered

for Internet banking does not require physical infrastructure, thus saving

on prohibitive real estate costs.

Most banks today have facilities to enable internet bankingcustomers to pay insurance premiums and utility bills over the Net.

Though Internet banking as a concept has not caught the fancy of a

majority of customers as yet-even the small percentage that does use it,

makes a difference to the overall cost. Almost all leading banks in India

are hoping that just as ATMs saw a period of inaction before they were

accepted by Indian masses, Internet banking too would be adopted once

customers are comfortable with the technology. For instance, in 1998

India had just 500 ATMs today it has close to 7,500.

7.3 .1 . Roadblocks

While Internet banking is a potential and powerful delivery channel,

it has failed to make a significant impact due to a variety of reasons. RBI

in its report, Trend and progress of Banking in India, 2001-02, says

Internet banking has failed to take off due to a combination of psychological, technological and socio-economic factors. Further, the

report states that additional hurdles relating to legal and infrastructural

problems have also affected growth.

Page 48


49/84

Marketing In Banking ServicesMarketing In Banking ServicesAlthough the government has made considerable progress in

initiating a trust environment, with

some Public Certification

Authorities (PCA) already licensed

to operate, the adoption of trust

technology is still a daunting factor

for many users. What needs to be

developed is a simple way of

integrating trust into online banking

services.

The compelling restraint for the user is the fear of security

breaches. As long as the perceived

notion that the Internet is not a safe place to conduct financial transactions

prevails, large scale adoption will be challenging. In addition, the low

penetration of PCs and access to the Internet are crucial issues which act

as roadblocks in the adoption of Internet banking.

7.4. ATM 2.0 Video Teller Machine

In ISTANBUL Ziraat Bank, the oldest bank in Turkey, introduced

a new Video Teller Machine, or VTM, which enables clients to use private

banking services with a Ziraat Bank representative through a video link. It

is introduced in 18 th January 2009.

Page 49
http://dogangokhan.wordpress.com/2009/01/18/atm-20-video-teller-machine/http://dogangokhan.wordpress.com/2009/01/18/atm-20-video-teller-machine/


50/84


51/84


52/84


Better form of service

M-banking is no different from Net Banking, in fact it has many

limitation. You still cannot transfer fund from one bank to another and,

given the high air-time charges, it works out much more expensive than

Net Banking. And for the mobile phone to access a site, the contents must

be in Wireless Markup Language.

Once the mobile users population grows, access rates will fall,

allowing customers to use more air-time. By then, the Reserve Bank of

India would also have put its own gateway in place to do online what itdoes today on paper.

M-banking uses two kinds of communication technologies. One is

WAP (Wireless application Protocal) and the other is SMS (Short

Messaging Services). WAP is more user-friendly, as it allows download of

graphic information. SMS, in contrast, allows text-only access. But as the

time taken to download text is much less compared to graphics, SMS is

cheaper to use.

SMS Banking

Texting has become a common way to communicate between

people. Its easy. Its convenient. And, you can access text messaging

from just about any mobile phone. Now, with SMS Banking, customer can

use text messaging to communicate with every bank, conduct banking

transactions, and even pay bills.

SMS Banking is a core module of Mobile, mobile banking solution.

SMS Banking utilizes the SMS (Short Messaging Service) already built

into most mobile phones. The user can pull or request information from

Page 52


53/84

Marketing In Banking ServicesMarketing In Banking Servicesthe bank such as account balance, bill payment details, etc., or can

receive alerts and/or notifications from the bank such as a notification

when a charge has been made on a credit card, when a bill is due to be

paid, etc.

8.BANK MARKETING IN THE INDIANPERSPECTIVE

The level of income, expectations, the rate of literacy, the

geographic and demographic considerations, the rural or urban

orientation, the changes in economic systems the frequent use of,

technologies are some of the key factors governing the development plan

of an organisation. To be more specific in a welfare country like ours, thepublic sector commercial banks are supposed to play a decisive role in

fuelling the processes of socio-economic emancipation. This makes it

clear that the banking organisation need a new vision, a new approach

and an innovative strategy. They are supposed to bring about greater

mobility in the financial resources to cater to the changing socio-economic

requirements. Willingly or unwillingly, they have also to bear the social

costs by advancing credit facilities to the weaker sections and thevulnerable regions. The foreign banks and a few of the private sector

commercial banks have been found making sincere efforts to improve the

quality of their services. The customers in general appreciate the

Page 53


54/84

Marketing In Banking ServicesMarketing In Banking Servicesfunctional style and service mix of foreign banks. This makes a strong

advocacy favour of practicing marketing principles in the public sector

commercial banks.

The nationalisation of the Reserve Bank of India is a landmark in

the development of Indian banking system which in a true sense paved

avenues for qualitative-cum quantitative improvements. Acquisition of

extensive powers of supervision and control by the Reserve Bank of India

under the Banking Regulations 1949 opened new vistas for the expansion

of banking facilities. The structure of public sector bank was further

strengthened in 1959. To curb concentration of economic power and

promote a judicious use of the financial resources for the economicdevelopment activities, the banking system was regulated and supervised

by the RBI subsequently in 1969 the Government acquired a direct control

over a substantial segment of the banking system signifying its

commitment to reshape the banking system so as to meet progressively

and serve better the needs of the development of economy in conformity

with the changing national policy and objective. The fruitfu11 results of

nationalisation of 14 commercial banks in 1969 encouraged. government

to nationalise more commercial banks in 1980. These developments

necessitated a fundamental change in the functional responsibilities of the

public sector commercial banks. Here it is pertinent to mention that

nationalisation was with the motto of improving the quality of services but

the public sector commercial banks started disappointing the masses. Of

late, the quality of services is so poor that customers in general are found

dissatisfied. This makes it essential that the Reserve Bank of India and the

policy makers of the public sector commercial banks think in favour of conceptualising modern marketing principles which would bring a radical

change in the process of quality upgradation.

The first task before the public sector commercial banks is to

Page 54


55/84

Marketing In Banking ServicesMarketing In Banking Servicesformulate the marketing mix which suits the national socio-economic

requirements. They need to synchronise the core and peripheral services

in such a way that product attractiveness is increased substantially. To be

more specific the peripheral services need frequent innovation, since this

would be helpful in excelling competition. The personal selling and public

relations activities need an intensive care. It is pertinent to mention that

the leading foreign banks have been found promoting telemarketing and

the public sector commercial banks need to make it possible. Since we

have world class communication technologies, the task is easier. The

word-of-mouth promotion also needs due care and for that we need to

improve the quality of services vis--vis the cooperation of opinionleaders. The Reserve Bank of India and the Indian Banking Association

need an attitudinal change. The gap between the services-promised and

services-offered is required to be bridged over. This requires professional

excellence. The professionals need to make possible a fair

synchronisation of performance-orientation and employee orientation. This

is not possible unless the banking regulations are made liberal. The

quality of people/employees serving the banking organizations needs an

overriding priority. The bankers need to know about the behavioural

management. The front-line-staff need empathy in their behaviour. This

requires intensive training facilities. The domination of trade unions is

required to be minimised. The contractual job system needs due attention.

The bank professionals need to assign due weightage to their physical

properties. They are supposed to look smart, active and attractive. Thus

we need multi-dimensional changes which make a strong advocacy in

favour of implementing the innovative marketing principles.In view of the above, it is right to mention that in the face of new

perception of quality developed by the foreign and private sector

commercial banks, the public sector commercial banks have no option but

Page 55


56/84

Marketing In Banking ServicesMarketing In Banking Servicesto improve the quality of services. The marketing principles bear the

efficacy of initiating qualitative improvements. It is against this background

that we go through the problem of bank marketing. Of late the foreign

banks have been found promoting the use of sophisticated information

technologies. This makes it essential that we realise gravity of the

situation and make possible a rational use of technologies which is not to

aggravate the problem of retrenchment. The marketing principles would

be helpful in making an assault on the multi-dimensional problems.

The first thing is that the future of bank marketing is going to be

fabulous. If customers are thinking to go for field than they must. In past,

bank were not in competition with each other in India but now they are andthats where bank marketing is coming up...e.g. In Ahmadabad ICICI rose

by 70% in terms of advancing loans to local public...Sales guys are doing

very well, This is going to rise until 80% of Indians are not having credit

cards.. Compare the banking to developed countries and customer will

find bank marketing in India to be great.

The bank of the future has to be essentially a marketing

organisation that also sells banking products. New distribution channels

are being used; more & more banks are outsourcing services like

disbursement and servicing of consumer loans, Credit card business.

Direct Selling Agents (DSAs) of various Banks go out and sell their

products. They make house calls to get the application form filled in

properly and also take their passport-sized photo. Home banking has

already become common, where customer an order a draft or cash over

phone/internet and have it delivered horn. ICICI bank was the first among

the new private banks to launch its net banking service, called Infinity. Itallows the user to access account information over a secure line, request

cheque books and stop payment, and even transfer funds between ICICI

Bank accounts. Citibank has been offering net banking to its Suvidha

Page 56


57/84

Marketing In Banking ServicesMarketing In Banking Servicesprogram to customers. Products like debit cards, flexi deposits, ATM

cards, personal loans including consumer loans, housing loans and

vehicle loans have been introduced by a number of banks.

Public Sector Banks like SBI have also started focusing on this

area. SBI plans to open 100 new branches called Personal Banking

Branches (PBB) this year. The PBBs will also market SBI's entire

spectrum of loan products: housing loans, car loans, personal loans,

consumer durable loans, education loans, loans against share, financing

against gold.

The bank of the future has to be essentially a marketing

organisation that also sells banking products. New distribution channelsare being used; more & more banks are outsourcing services. ICICI bank

was the first among the new private banks to launch its net banking

service, called Infinity.

Products like debit cards, flexi deposits, ATM cards, personal loans

including consumer loans, housing loans and vehicle loans have been

introduced by a number of banks.

Public Sector Banks like SBI have also started focusing on this

area. SBI plans to open 100 new branches called Personal Banking

Branches (PBB) this year. The PBBs will also market SBI's entire

spectrum of loan products: housing loans, car loans, personal loans,

consumer durable loans, education loans, loans against share, financing

against gold.

Page 57


58/84


9. INCREASING IMPORTANCE OF MARKETING IN

BANKING INDUSTRY

The various other factors which have led to the increasing

importance of marketing in the banking industry are categorized as

follows:

Government Initiatives:-

The Indian economy embarked on the process of economic reform

and various policy measures initiated by the government result

Marketing in Banking Services Final Doc.br

Documents

Transcript of Marketing in Banking Services Final Doc.br