Marketing Strategies of SBI -...

17

Chapter No. 04:

Marketing Strategies

of SBI

Introduction.Financial Services of the Indian Banks.Marketing Strategies of Foreign Banks and NewPrivate Sector Banks.Strategic Response of SBI to Reforms.Marketing strategy.Marketing Decisions Taken In Banking Services.E-Banking.E-Banking Services.Financial Product Advertising.Branding of Financial Services.Mass Media Advertising: Most Preferred mode formarketing of Banking Services.Personal Selling and Societal Marketing.Effective Sales Promotions.Electronic payment system.Confidence Level Of Consumers In The Use Of AnEPS.Products And Services Of State Bank of India.Online SBI.Marketing In Banking.Types of Customers.Marketing Strategy Used By SBI.SBI`S Marketing Strategies In The Current Scenario.CRM Initiatives in SBI.Marketing Research.New Marketing Challenges.Future Marketing Strategy of SBI.

Introduction:

The banking industry like many other financial service

industries is facing a rapidly changing market, new technologies,

economic uncertainties, fierce competition and more demanding

customers and the changing climate has presented an

unprecedented set of challenges. Banking is a customer oriented

services industry, therefore, the customer is the focus and

customer service is the differentiating factors. The banking

industry in India has undergone a sea change since post

independence. More recently, liberalization, the opening up of the

economy in the 1990s and the government's decision to

privatize banks by reduction in state ownership culminated in the

banking reforms based on the recommendations of Narasimhan

Committee.1

The prime mover for banks today is profit, with clear

indications from the government to perform or perish.2 Banks

have also started realizing that business depends on client service

and the satisfaction of the customer and this is compelling them to

improve customer service and build up relationship with

customers. With the current change in the functional orientation of

banks, the purpose of banking is redefined. The main driver of this

change is changing customer needs and expectations. Customers in

urban India no longer want to wait in long queues and spend hours

in banking transactions. This change in customer attitude has gone

hand in hand with the development of ATMs, phone and net

banking along with availability of service right at the customer's

doorstep. With the emergence of universal banking, banks aim to

provide all banking product and service offering under one roof

and their endeavor is to be customer centric. With the emergence

of economic reforms in world in general and in India in particular,

private banks have come up in a big way with prime emphasis on

technical and customer focused issues.3 In this Chapter the

researcher is to highlight the marketing strategies of SBI.

Financial Services of the Indian Banks:

In financial services, people are primarily bothered about

security of their funds and default risks. After the year 1969, the

deposits of banks increased more than 80 times as a result of the

nationalization of banks. It is the fact that financial service

providers are not perceived highly trusted, so that they might have

difficulty in selling risk-based products. The effort to promote

banking business is quite distinguished affair. At present, it has

become very tricky due to the changing trends of industry,

increasing competition and efficiency of regulatory environment,

and the financial system. The complexity in the banking services is

also an issue of vital importance.4 This is the time when banks are

offering new and innovative services, frequently in the market.

The content of promotional tools should help the customer in

making most valuable decision. This can be firmly said that well-

designed promotional strategies are very important to promote

banking services effectively. In marketing any product or service,

customer satisfaction has been given the prime importance. The

most frustrating aspect of bank marketing is lack of management

support, lack of inter-departmental cooperation, crisis

management, government intrusion and advertising & media

problems. Manpower in service organizations must work with the

focus of satisfying the customer.5 Banking should bring out the

areas requiring improvement and which further throw light on the

measures to improve the quality of services. Promotional packages

are very important for financial service industry. Thus the

orientation of banks should be with a much wider focus in relation

to consumer and market needs, and the consequent marketing

strategies. The challenges put forth by the changing environment

have to be effectively tackled to identify the consumer needs and

providing valuable services through product innovation.

In banking the temporal and spatial dimensions are

perceived as more important than traditional dimensions based on

outcome and process elements. The usage of marketing concepts &

techniques and recommended that a well-structured marketing

department in banks is essential for profitability & effectiveness.6

The promotional strategies should be designed as per the nature of

the services to be promoted. The advertisers should seek a

narrative approach to communicate the service experience rather

than a logical, argumentative approach. Narrative approach

involves storytelling methodology using sequence of events.

Location convenience, speed of service, competence and

friendliness of bank personnel are also the most important points

with maximum value in banking services.

The study revealed that maximum respondents banked at the

branch nearest to their home place and place of work.

Convenience, in terms of location, was also found to be the single

most important factor for selecting a branch. It has been

generalized in the studies that services marketing advertisement is

more challenging than the advertising of tangible products.

Winning new customers costs 10 times more than simply holding

onto existing ones. While formulating marketing strategy, a bank

should focus attention on

Consumer sovereignty,

Attitude,

Responsiveness and personal skills of bank staff,

Revitalizing the marketing department,

Top management support to the marketing department,

Participation of marketing personnel in key bank decisions.

Marketing Strategies of Foreign Banks and New Private

Sector Banks:

Though the new private sector banks and foreign banks have

a lower share in customer deposits (8.2 per cent and 4.9 per cent

respectively), they command a higher share of the net profit (9.8

per cent and 10.4 per cent respectively).7 Due to restrictions on

branch expansion, foreign banks traditionally focused their

operations on the top cities of the country. However, they

differentiated their operations by focusing on premier customers

and set superior standards in productivity, customer service and

operating efficiencies by using state-of-the-art technology. Global

best practices were introduced and practiced. More importantly,

they built durable competencies by attracting the best manpower,

building proprietary technologies and processes and by building

strong brand image. The new private sector banks modeled their

marketing strategies after the foreign banks. They built much

larger branch networks than foreign banks, though small by

comparison to public sector banks and pose, by far, the greatest

challenge to the dominance of SBI.

Strategic Response of SBI to Reforms:

The State Bank group had to face a tough challenge when the

new private sector banks made their entry in early nineties. The

new banks had the benefit of starting on a clean slate and had

started with state-of-the-art technology which in turn helped them

save on man power costs and provide better services. On the other

hand, the older banks had not kept up-to-date with technology and

were facing competition of this kind for the first time. SBI

launched an array of products and services, especially on the retail

front, to match the competition. Some of the new products include

Debit cards, Credit cards, International cards, Special deposits,

Sweep-in accounts, Demat accounts and Any-where-banking.

Some of the new services include round-the-clock phone-banking,

Automated Teller Machines (ATMs), inter-city, inter-branch

banking, net-banking and bill payment services. The bank has even

launched their own asset management companies to offer mutual

fund services to their customers.8 The following marketing

strategies implemented by SBI.

Computerization and networking of branches: SBI

invested aggressively in computerization and networking of

branches. The bank had computerized number of branches.

Many of these branches were also networked so that their

customers could be offered ‘any-time, any-where’ banking

services. The other public sector banks too embarked on a

similar computerization drive.

Installation of ATM networks: All banks have made heavy

investments in the installation of large networks of ATMs.

ATMs proved a tremendous success by reducing the load on

branches significantly as, apart from carrying out routine

transactions such as cash withdrawal etc, customers can avail

such services as transfer of funds and payment of utility bills by

visiting any of the ATMs located conveniently.

Risk Management and Capital Adequacy: Many public

sector banks were saddled with large non-performing assets

(NPAs) and suffered from low capital adequacy. Banks have

since put in place stringent Risk Management Systems to

address not only credit risk, but also market risk and other

operational risks. There have been attempts to systematically

recover from defaulting customers and make adequate

provisions for NPAs. Many Banks have raised capital either on

their own strengths or with the help of government’s infusion

of capital to raise the capital adequacy levels to meet prudential

norms. All these measures resulted in a much better financial

structure for the SBI compared to the position a decade back.

If the above strategies are merely measures to improve

operational effectiveness, then what strategies should banks follow

to gain a sustainable competitive advantage? The current thinking

in Strategy Research advocates those strategies that generate

valuable resources to the firm. Every bank has a collection of

physical and intangible assets and capabilities that it has developed

over a period of time. These can be broadly termed as ‘resources’

and each bank’s unique stock of resources is the basis for its

competitive advantage. Possessing such valuable resources lends a

bank a sustainable competitive advantage because it becomes very

hard or sometimes impossible for competing banks to acquire

similar resources. Hence successful marketing strategies are those

that enable banks to acquire such valuable resources which cannot

be competed away.

In a customer surveys, the brand recollection and positive

image of SBI has come out to be so strong that it is comparable to

many well-known consumer brands. This is a valuable resource

that SBI could continuously nurture and build into a strong

competitive advantage.9 Many other older banks such as Bank of

Baroda, Bank of India, Indian Bank etc., which are currently bigger

than many private sector banks may find themselves rapidly losing

market share if they do not invest in building strong brands.

Another resource that is potentially valuable is the wide network of

branches that public sector banks possess. A winning strategy has

to be unique and different. SBI can find its own set of valuable

resources that can be the foundation for winning strategies.

Marketing Strategy:

It is a process that can allow an organization to concentrate

its limited resources on the greatest opportunities to increase sales

and achieve a sustainable competitive advantage. A marketing

strategy should be centered around the key concept that customer

satisfaction is the main goal.10 Marketing strategy is a method of

focusing an organization's energies and resources on a course of

action which can lead to increased sales and dominance of a

targeted market niche. A marketing strategy combines product

development, promotion, distribution, pricing, relationship

management and other elements; identifies the firm's marketing

goals, and explains how they will be achieved, ideally within a

stated timeframe. Marketing strategy determines the choice of

target market segments, positioning, marketing mix, and

allocation of resources. It is most effective when it is an integral

component of overall firm strategy, defining how the organization

will successfully engage customers, prospects, and competitors in

the market arena. Corporate strategies, corporate missions, and

corporate goals. As the customer constitutes the source of a

company's revenue, marketing strategy is closely linked with sales.

A key component of marketing strategy is often to keep marketing

in line with a company's overarching mission statement.

Marketing Decisions Taken In Banking Services:

The following chart will tell about the all marketing decisions

taken in banking services. These all are essential decisions which

are concerned are essential ingredients of services marketing mix.

The analysis has been done in the context of banking services.

(Source: Mittal Arun, Advertising and Sales Promotion,

Wisdom Publication, New Delhi, Edition -2008, p-225)

When customer is treated as the king of the market, the study of

consumer behaviour becomes more important for marketing

decisions. There is no doubt that the behaviour is the base of

marketing decisions. Banks are defined as the Organizations,

which accepts deposits from public and give loans from the general

public. In the present time they are over and above this definition.

Banks are providing innovative services with innovates styles.

ATMs, Credit cards and Internet banking have changed the quality

of delivery of services of banks. Banking services are growing with

many new additions such as money transfers, Bank assurance, NRI

services and so on. Promotion of service has been a challenging

task. Banking services being of a sophisticated nature should be

promoted carefully, clearly and innovatively.

E-Banking:

The E-banking is changing the banking industry and is

having major effect on banking relationship. E-banking involves

use of internet for delivery of banking products and services. The

banking industry in India is facing unprecedented competition

from non traditional banking institutions, which now offer banking

and financial services over the internet.11 The deregulation of the

banking industry coupled with the emergence of new technologies,

is enabling new competitors to enter the financial services market

quickly and efficiently. Commercial banks offer a wide range of e-

banking services to the customer. Banking services are delivered to

a customer at his office or home by using electronic technology.

Customer need not necessarily visit banks to carry out their

banking transactions and can meet their requirements through the

means of electronic banking facility.

8

E-banking is becoming immensely popular globally, and

India is not exception to it. The declining internet rates, falling PC

prices, broad bandwidth access through cable and digital

subscriber lines, accessing the Net through cable TV etc. Would

definitely encourage the boom in E-banking in India.12 Electronic

devices are helping the banks to reduce transaction cost and

improve efficiency. E-banking is reducing the transaction costs and

is winning the trust of customers and roving to be an appropriate

model for customer service of commercial banks in India. So the E-

banking has a greater role in customer service of commercial banks

in India.

E-Banking Services:

The following services through E-Banking are available:

Net Banking, Phone Banking, Credit/Debit Cards: This

is an online banking facility available for savings account

holders as well as current account holders. Some of the special

Net banking services are - Demat accounts for sale/purchase of

stocks and shares, Foreign Exchange services, Direct/Instant

payment of bills on the account-holder’s behalf, Financial

Planning & advice, Electronic Funds Transfer, Loans to

account-holders. Banks facilitate E-commerce by providing the

most vital trade instrument, namely the Credit or Debit Card,

without which E-commerce would be impossible.

Automated Teller Machine (ATM) Services: The

Automatic Teller Machine (ATM) was first commercially

introduced in 1960. By 2005, there were over 1.5 million ATMs

installed worldwide. The introduction of the ATM proved to be

an important technological development that enabled financial

institutions to provide services to their customers in a 24*7

environment. The ATM has enhanced the convenience of

customers’ by enabling them to access their cash wherever

required from the nearest ATM.13 ATM have gained

prominence as a delivery channel for banking transactions in

India. Banks have been deploying ATMs to increase their reach.

While ATMs facilitate a variety of banking transactions for

customers, their main utility has been for cash withdrawal, and

balance enquiry. More banks prefer to deploy ATMs at locations

where they have a large customer base or expect considerable

use.

ATM has today secured a comfortable place in the customer’s

mindscape, which few other innovations can replace. In the past

couple of years ATMs have changed the face of banking services.

SBI provides easy access to money to its customers through

more than 8,500 ATMs in India. The Bank also facilitates the

free transaction of money at the ATMs of State Bank Group,

which includes the ATMs of State Bank of India as well as the

Associate Banks – State Bank of Bikaner & Jaipur, State Bank of

Hyderabad, State Bank of Indore, etc. You may also transact

money through SBI Commercial and International Bank Ltd. by

using the State Bank ATM-cum-Debit (Cash Plus) card.14 The

banks are looking at bringing in advanced technologies. As they

go forward, multifunctional, ATMs will hold the key in the

immediate future. ATMs that are capable of offering e-

commerce activities, interactive features, or identification of

customers through fingerprints or eye scans, may not be a

distant reality.

Funds Transfer: E-banking allows the possibility of improved

quality and an enlarged range of services being made available

to customers.15 You can transfer any amount from one account

to another of the same or any another bank. Customers can send

money anywhere in India. Once you log in to your account, you

need to mention the payee’s account number, his bank and the

branch. The transfer will take place in a day or so, whereas in a

traditional method, it takes about three working days. Banks

can also offer many cash management products. Instant credit,

one day credit, immediate payment of utility bills, instant

transfer of funds etc. is possible under E-banking.

Internet Advertising: In present time the most popular tool

for promotion of banking services has become Internet

Marketing of services. E-Advertising is being very much

popular. In city areas of India, people use internet so frequently.

Studies tell that they use internet mostly for checking their

mails, finding results and educations and research purposes.

The e-advertising of banking services not only promote the

services by giving offers but it also interacts with the person and

a potential customer can purchase the product with the help of

this. However internet advertising in pop ups irritates the

internet users but advertisements done on home page of any

website such as email service provider is useful and customers

get knowledge about the new banking services and

promotions.16 When they see something in front of their eyes

they can remember it much. In brief, consumer behaviour is the

base of all marketing activities and promotional strategies are

also the part of marketing so they are also designed by

considering all the aspects of consumer's behaviour.

E-commerce has impacted many areas of our society as it has

grown. Its future is very promising, considering the new

technologies that have been implemented and created to make E-

commerce successful and worthwhile. As the world is changing and

enters the new millennium, E-commerce is becoming a product of

the future where via a click of a button we will be able to carry out

our transactions. This makes E-commerce a necessity for the

future. In the new millennium, people will be able to do their entire

banking over the net without even going to the bank. Also, people

will be able to pay their bills online, thus lessening ordinary mail.

Security methods, such as encryption, authenticating, digital

signatures, digital certificates, and so on are enabling us to accept

E-commerce as a prominent tool.17 E-commerce undoubtedly has

changed our lives by convenience and ease in our day to day

activities, so without associating with it, we would be handicapped.

Financial Product Advertising:

Financial advertising is a very useful tool for promotion of

financial products to persuade the new breed of investor to bring

his money into the market.18 Financial advertising can distinguish

the financial products of the company from those of its

competitors. It has to be noted that financial market displays

trends two types of advertising. Competitor may use the same and

take the advantage. Hence the marketing information should be

processed instantly and implemented quickly. The reliability of the

marketing information should always be cautiously looked into at

every stage while implementing. Advertising specific features,

benefits, and other relevant information or a particular product to

induce the investor. In India, as the investor is still new to the

gamut of many new financial products and services being offered

to him, the task promotion thus, became much more challenging

and exciting.

Branding of Financial Services:

Brand identities are an important marketing factor, which

facilitates product identification at the market place brand is a

broad term that includes practically all means of identifying a

product by way of ‘logo’ or ‘punch lines’ or product names. Brand

name is that part of the brand which can be verbalized whereas

Brand mark is that part of brand which can be recognized. A brand

commands customer loyalty for the product. Financial products

aim to attract the investor to bring his savings into the market.

Most of the financial products available in the market are very

similar in nature. This is where the advantages of branding can be

exploited. Branding can help in creating product differentiation

and also create a distinctive product identity. Developing a brand

require a great deal of long term investment especially advertising,

promotion etc.

Mass Media Advertising: Most Preferred mode for

marketing of Banking Services:

Mass media advertising includes TV commercials and

advertising in national level newspapers which have a wide

coverage. Advertising in these has made maximum people aware

about the offerings of the banks and established most of the bank

names as big brands. In a recent survey ICICI Bank has been

considered as the most popular banks in private sector. The use of

umbrella branding works well in promotion of banking services.

Different types of advertisement campaigns have been seen in form

of TV commercials and as print ads in newspapers. Print ads

mainly focus on corporate image advertising of banks as well as a

new offering of the bank such as increase in interest rate on

deposits or decrease in the interest rates in loans and so on. TV

commercials mainly focused on corporate advertising, where

banking service is promoted as a whole rather than a particular

product of banks.19

Advertising appeal is the method used to draw the attention

of consumers and to influence their feelings toward the product,

service, or cause. There are hundreds of different appeals that can

be used as the foundation for advertising messages. These are the

central idea of advertise which has been used to catch the

attraction of customer by heart. The theme of a commercial strikes

a person in depth and forces him/her to act in the desired manner.

Generally advertising appeals are broken into two categories:

rational appeals and emotional appeals.20

Personal Selling and Societal Marketing:

Personal Selling is being very much popular and effective for

private banks in India.21 It is concerned with face to face meeting

with the customer and making the presentation of the service

offering to the prospect and making the person customer of the

bank. This process has its own advantages and disadvantages.

Banks may have some complex service offer which may include so

many charges and facilities of different types. The biggest

advantage of personal selling in banking services is that the

salesperson can make the prospect well understood about the

product. Further customers may prefer it because they need not to

go anywhere the sales person comes to them. But there is certain

limitation also people usually do not give their time to meet and

talk on issue. It also does not become cost effective if the sales are

not closed in a handsome number. Banks are going to be societal

now and taking care of environment the plantation Bank of Baroda

and Punjab National Bank is the examples of the same. Consumers

are always emotional about the Brands doing social and national

services. Banks wants to win the faith of the customers and also

wants to come out from their typical financial image. Societal

marketing really helps to attain this objective.

Effective Sales Promotions:

Sales promotional has become popular due to the popularity

of the usage of debit and credit cards. The offers are also given to

the customers for registering and transacting with internet

banking. For example recently HDFC bank has come with the offer

where a flip book light is free on opening an account and a DVD of

famous movie on shopping with Debit Card. Further there are lots

of other schemes also giving discount and other gifts on different

types of purchase on debit and credit card of the bank. The

corporation/Brands such as Indiatimes shopping, Barista, Mudra

Pure Gold, Ayush Therapy Center, VLCC Slimming Beauty

Fitness, Well-home, Dr. Batra's Multispecialty Hospitals, Javed

Habib, Gini & Jony, Vishal Mega mart, Dominos and Book my

Show have clubbed with the bank to provide this promotion to the

customers.22 However the sales promotion has its nature that it is

always for a particular time being. The purpose of sales promotion

is to enhance the sales in particular time duration. The sales

promotion offers are redesigned frequently for effective promotion

in sales. Consumers feel happy when they get something extra then

the regular utility. Sales promotion offers really attract customers.

Electronic payment system:

An electronic payment system (EPS) is a system of financial

exchange between buyers and sellers in the online environment

that is facilitated by a digital financial instrument (such as

encrypted credit card numbers, electronic checks, or digital cash)

backed by a bank, an intermediary, or by legal tender. EPS plays

an important role in e-commerce because it closes the e-

commerce loop. In developing countries, the underdeveloped

electronic payments system is a serious impediment to the growth

of e-commerce. In these countries, entrepreneurs are not able to

accept credit card payments over the Internet due to legal and

business concerns. The primary issue is transaction security. The

absence of inadequacy of legal infrastructures governing the

operation of e-payments is also a concern. Hence, banks with e-

banking operations employ service agreements between

themselves and their clients.23 The relatively undeveloped credit

card industry is also a barrier to e-commerce. Only a small

segment of the population can buy goods and services over the

Internet due to the small credit card market base. There is also the

problem of the requirement of a signature by a card owner. The

payment schemes available for online transactions are the

following:

Traditional Payment Methods:

● Cash-on-delivery: Many online transactions only involve

submitting purchase orders online. Payment is by cash upon

the delivery of the physical goods.

● Through Bank payments: After ordering goods online,

payment is made by depositing cash into the bank account of

the company from which the goods were ordered. Delivery is

likewise done the conventional way.

Electronic Payment Methods:

● Innovations affecting consumers: It includes credit and

debit cards, ATMs, stored value cards, and e-banking.

● Innovations enabling online commerce: Innovations

enabling online commerce are e-cash, e-checks, smart cards,

and encrypted credit cards. These payment methods are not

too popular in developing countries. They are employed by a

few large companies in specific secured channels on a

transaction basis.

● Innovations affecting companies: Innovations affecting

companies pertain to payment mechanisms that banks

provide their clients, including inter-bank transfers through

automated clearing houses allowing

Confidence Level Of Consumers In The Use Of An EPS:

Many developing countries are still cash-based economies.

Cash is the preferred mode of payment not only on account of

security but also because of anonymity, which is useful for tax

evasion purposes or keeping secret what one’s money is being

spent on. For other countries, security concerns have a lot to do

with a lack of a legal framework for adjudicating fraud and the

uncertainty of the legal limit on the liability associated with a lost

or stolen credit card. In sum, among the relevant issues that need

to be resolved with respect to EPS are: consumer protection from

fraud through efficiency in record-keeping; transaction privacy and

safety, competitive payment services to ensure equal access to all

consumers, and the right to choice of institutions and payment

methods.24 Legal frameworks in developing countries should also

begin to recognize electronic transactions and payment schemes.

Products And Services Of State Bank of India:

Customers are the most important part of a bank and provide

the raw materials of deposits and the demand for loans. They are

valuable to a bank in terms of revenue generations. The success of

a bank depends upon its ability to attract and retain its customers

and the business it attracts. The following products and services

are offered by State Bank of India to its customer.

Personal Banking:

SBI Term Deposits.

SBI Loan for Pensioners.

SBI Recurring Deposits.

Loan Against Mortgage Of Property.

SBI Housing Loan.

Loans Against Shares & Debentures.

SBI Car Loan.

Rent Plus Scheme.

SBI Educational Loan.

Medi-Plus Scheme

Other Services

Agriculture/Rural Banking.

NRI Services.

ATM Services.

Demat Services.

Corporate Banking.

Internet Banking.

Mobile Banking.

International Banking.

Safe Deposit Locker.

RBIEFT.

E-Pay.

E-Rail.

SBI Vishwa Yatra Foreign Travel Card.

Broking Services.

Gift Cheques

Online SBI:

State Bank of India is India's largest bank with a branch

network of over 11,000 branches and 7 associate banks located

even in the remotest parts of India. Online SBI is the Internet

banking portal for State Bank of India. The portal provides

anywhere, anytime, online access to accounts for State Bank's

Retail and Corporate customers. The application is developed

using the latest cutting edge technology and tools. The

infrastructure supports unified, secure access to banking services

for accounts in over 11,000 branches across India. The Retail

banking application is an integration of several functional areas,

and enables customers to:25

Issue Demand Drafts online.

Transfer funds to own and third party accounts.

Credit beneficiary accounts using the VISA Money Transfer,

RTGS/NEFT feature

Generate account statements.

Setup Standing Instructions.

Configure profile settings.

Use e-Tax for online tax payment.

Use e-Pay for automatic bill payments.

Interface with merchants for railway and airline reservations.

Avail DEMAT and IPO services.

The Online SBI corporate banking application provides features to

administer and manage corporate accounts online. The corporate

module provides roles such as Regulator, Admin, Up-loader,

Transaction Maker, Authorizer, and Auditor. These roles have

access to the following functions:

Manage users, define rights and transaction rules on

corporate accounts

Access accounts in several branches with a single sign-on

mechanism

Upload files to make bulk transactions to third parties,

supplier, vendor and tax collection authorities.

Use online transactional features such as fund transfer to

own accounts, third party payments (both Inter and Intra

bank), and draft issues.

Make bill payments over the Internet.

Authorize, modify, reschedule and cancel transactions, based

on rights assigned to the user.

Generate account statement.

Enquire on transaction details or current balance.

In addition to the above the Internet banking application also

provides the following value added services:

Tax payments to central and state governments through site

to site integration.

Supply Chain Finance (Electronic Vendor Finance Scheme)

Direct Debit Facility.

E -Collection Facilities for:

o Core Banking Transactions.

o Inter Bank Transactions for incoming RTGS/NEFT

Transactions.

o Internet Banking Transactions for SBI & Associate Banks.

o Direct Debit facility where suppliers can directly debit

their customer’s account through Internet Banking Login

Marketing In Banking:

Marketing approach in banking sector had taken significance

after 1950 in western countries and then after 1980 in Turkey.26

New banking perceptiveness oriented toward market had

influenced banks to create new market. Banks had started to

perform marketing and planning techniques in banking in order to

be able to offer their new services efficiently. Marketing scope in

banking sector should be considered under the service marketing

framework. Performed marketing strategy is the case which is

determination of the place of financial institutions on customers’

mind. Bank marketing does not only include service selling of the

bank but also is the function which gets personality and image for

bank on its customers’ mind. On the other hand, financial

marketing is the function which relates un-congenitally,

differences and non similar applications between financial

institutions and judgment standards of their customers.

The reasons for marketing scope to have importance in

banking and for banks to interest in marketing subject can be

arranged as:27

Change in demographic structure: Differentiation of

population in the number and composition affect quality and

attribute of customer whom benefits from banking services.

Intense competition in financial service sector: The

competition became intense due to the growing international

banking perceptiveness and recently being non-limiting for

new enterprises in the sector. Increase in liberalization of

interest rates has intensified the competition.

Bank’s wish for increasing profit: Banks have to

increase their profits to create new markets, to protect and

develop their market shares and to survive on the basis of

intense competition and demographic chance levels. The

marketing comprehension that is performed by banks can be

shown as in following five stages:

o Promotion oriented marketing comprehension.

o Marketing comprehension based on having close

relations for customers.

o Reformist marketing comprehension.

o Marketing comprehension that focused on specializing

in certain areas.

o Research, planning and control oriented marketing

comprehension

Types of Customers:

There are two types of customers in the business of financial

services. They are-28

1. Individual customer for product such as Bank Deposits,

company fixed deposits, mutual fund units, insurance

policies, company shares & debentures, consumer durable

loans, credit card, depositors, housing, vehicle loans.

2. Consumer as Corporate Entity for term loans from

financial institution, working capital loan from commercial

banks, inter-corporate deposits, equity by way of shares /

debentures, etc.

In the first category, consumer has also been defined in terms of

social class i.e. NRI class, high net worth class, upper middle class,

middle class, lower middle class, working class, etc. The consumers

have been categorized to design marketing strategies to tap their

savings in a financial product.

Marketing Strategy Used By SBI:

Generic strategies adopted by State Bank of India:

Institution for advanced learning: to provide state of the art

training in financial products to middle level and senior level

executives.

Internal consultant/change agent: to act as a catalyst for

change in attitudes and orientation of banking staff and to

provide expertise and consultative support.

Feedback supplier: to capture and structure feedback from

trainees and from the market.

Think tank: to provide expert and inform suggestions, model

business strategies, analysis of market developments from a

banker perspective.

Research and development role: to carry out research on

contemporary subjects that is relevant to the banks short

term and medium term and operational needs and policy

formulation.

Overlapping staff training centers: to validate and closely

monitor the staff training centers in seven circles attached to

the academy.

The Restructuring:

To overcome the intense competition from private and

foreign banks, SBI planned a major organizational restructuring

exercise. The key aspects involved-

Redesigning of branches,

Providing alternate channels;

Focus on a lean structure and

Technological up gradation.

A business process reengineering (BPR) team was constituted in

June 2003 with McKinsey & Company as consultants. The BPR's

basic goal was to create an operating architecture that would

facilitate service.

New Products and Service:

Apart from restructuring, SBI launched several innovative,

value-added products and services to project a customer friendly

image. It launched a special service for corporate customers called

tele-banking and remote login' to support transactional requests.

This facility would be available at 593 branches, and remote login

at 269 branches. The banks trade finance solutions, called

EXIMBILLS, were intended to handle trade finance transactions

efficiently and enhance the range of services provided to corporate

and network branches. In March 2004, SBI announced that it

would introduce ‘anywhere banking’ facility for its customers over

all the branches across India in the 2005. All the branches in

Mumbai would provide this facility by 2004. SBI also launched

different customized loan programs to cater to various sections of

society depending on income levels and repayment capabilities.

Interest rates and repayment periods were tailor-made to suit the

customer groups.

Alliances and Tie-Ups: To boost its business, SBI entered

into several alliances and tie-ups with automobile, insurance,

mutual fund, project finance and medical equipment

companies.

Auto Finance: Unlike other competitors that relied on

reduced interest rates to get business, SBI extended the

tenure of car loans from five to seven years, thereby lowering

the monthly debt repayment burden of the loan seeker. SBI

entered into a tie-up with Maruti Udyog ltd., the largest

automobile manufacturer in India, to provide loans for

purchase of Maruti cars at the rate of 8.25, 9 & 10 per cent

for three years and above three years respectively. After the

scheme was introduced, SBI emerged as the largest financier

for Maruti cars in India.

The Marketing Initiatives For Enhancing Capacity:

SBI carried out various marketing initiatives to enhance its

reach. They included segregating and targeting existing high value

customers, cross sales of other products, setting up call centers and

outbound sales force to secure new customers. Plans were also

made to utilize database marketing to pursue large and medium

sized corporate, government and trade finance customers.

Database marketing was expected to draw increased revenue from

cross selling, lower costs and increased customer loyalty. SBI also

introduced various other ways of reaching out to customers like

extension of hours of work and aggressive marketing through print

and television media. SBI increased daily working hours by two

hours and Sunday banking was introduced and Aggressive

marketing through print and television media.29

SBI`S Marketing Strategies In The Current Scenario:

SBI have set up capacity in places where they are not very

strong. It’s time for them to follow overall SBI philosophy of

planning new branches, given the huge untapped potential.

Besides, this is also the best time to benefit from their past

expansion, since there is a lot of trust in SBI. Brand SBI is very

strong, while people may be generally cautious about some other

brands. They can not only tap the potential better but can also

provide a safe and transparent insurance alternative to the public.

The bank is entering into many new businesses with strategic tie

ups – Pension Funds, General Insurance, Custodial Services,

Private Equity, Mobile Banking, Point of Sale Merchant

Acquisition, Advisory Services, structured products etc – each one

of these initiatives having a huge potential for growth. Some of the

strategies to cope with the current scenario are listed below:30

It is the part of SBI`s philosophy to open new branches. The

Bank is forging ahead with cutting edge technology and

innovative new banking models, to expand its Rural Banking

base, looking at the vast untapped potential in the hinterland

and proposes to cover 1,00,000 villages in the next two years.

SBI is planning to hire 11,000 employees in the current fiscal.

The Bank is also in the process of providing complete payment

solution to its clientele with its over 8,500 ATMs, and other

electronic channels such as Internet banking, debit cards, mobile

banking, etc.

Country’s largest lender, State Bank of India has prepared a

blueprint to go retail in its international operations. Such

strategy would help the bank to promote its lead in syndication

of loans in the overseas market, at a cheaper cost. The bank’s

overseas operations have been instructed to thrust more on

promoting retail banking locally, SBI is assessing that by

opening more branches across foreign locations and promoting

retail services by mobilizing deposits at interest rates as low as 3-

3.5 per cent, the bank will be able to increase its operating

margins by 250-300 basis points in overseas markets where

syndication opportunities arise often.SBI is expected to open

seven new branches over next eight months in the United

Kingdom where it operates six branches currently.

In response to signals from the central bank, SBI have

progressively reduced their PLR from 13.75 per cent to 12.25 per

cent during the past few months in stages, and further softening

in interest rates cannot be ruled out. SBI is introducing loan

products at sub-PLR rates - in home loans at 8 per cent, auto

loans at 10 per cent, special products for SMEs and agriculture

sector at 8 per cent, but it may not be possible for them to reduce

the interest rate beyond a certain point.

SBI is working on infrastructure sector projects, which has seen

a growth of 26 per cent in the current year. For the year 2008 the

Rs 10,000 crores was sanctioned for the infrastructure projects

while in the current year from April 08 to February 09 the

amount sanctioned for the infrastructure project is Rs 13,000

crores, out of which project worth Rs 8,000 crore is in pipeline.

Despite of various viability issues the growth in this sector for

SBI is been intact.

With market-linked products finding fewer takers, insurance

companies are launching more guaranteed products to lure

investors. The latest to join the bandwagon is SBI Life insurance

with SBI Smart ULIP, a product that guarantees returns based

on the highest NAV recorded by the fund in the first seven years.

Liberalization has really changed the banking industry. It is

no longer enough for banks to just manage money efficiently; they

also have to manage customers, who now have a wide choice of

alternatives.31 The future promises to be even more exciting,

interesting and challenging. No longer will banks, or any large

organization, treat customers as a group and segment the minto

just some demographic and psychographic profiles. The Internet

has enabled us to talk to each customer as an individual, with

different needs and requirements. Products will need to be

developed to meet those needs, and services will become the

crucial differentiators. For years, customers were part of the banks’

Fixed Assets; now they have moved into the Current Assets

category, and it will be a task keeping them there.

Understand the strategies adopted by SBI in the banking

industry to retain its market share.

Explore the reasons how a market leader can lose its market

share significantly.

Examine and analyze the key elements of the restructuring

exercise undertaken by SBI.

Study the marketing initiatives adopted by SBI to reposition

itself as a customer-oriented bank.

Examine the challenges that can be faced by a market leader

due to the changes in the industry structure.

Study and analyze the structure of the Indian banking

industry.

By adopting modern technology and offering superior

customer service, the SBI gained a significant share in urban

banking.

Liberalization and de-regulation process initiated by the

Indian Government in early nineties has completely changed the

face of the Indian banking industry. The entry of new private sector

banks with the state-of-the-art technology and lean structures has

forced the old private-sector and public-sector banks to respond to

the new challenges with aggressive restructuring measures. The

past five years have seen the public sector banks rapidly

introducing new products and services, computerizing and

networking key branches, rationalizing manpower and launch a

number of initiatives to improve operating efficiencies. Are they on

the right track? Are these strategies to become leaner and meaner

sufficient to gain a competitive advantage to survive and grow in

the long run? To survive and thrive in the long run, banks need to

pursue strategies that enable them to develop marketing strategies

that are inimitable, rare, durable and superior to bank

customers.32 SBI a leading public sector bank in Indian

commercial banking system has been braving a lot of challenges

thrown by information technology, acute market competition,

tightening regulation, serving effectively down trodden and other

categories of borrowers in the profit banking saga; continues to be

a leader in Indian banking system.

CRM Initiatives in SBI:

The new vision and mission statements of SBI also declare

the change of ideology of bank in terms of the customer services.

The SBI has identified specialized officer for the post of

Relationship Manager to serve the customer better identifying

their needs. SBI has also created special post of Customer Relation

Executive in 2007. SBI has understood the importance of high net

worth individual and could also sense that many of its long term

high net worth are shifting to other banks because of better

customized services other banks promised and delivered to some

extent. SBI has also created two more new posts customer relation

associate to further strengthen the customer relationship

management.33 These efforts of SBI clearly indicate the importance

SBI in giving to get identified as customer centric bank. A new era

has begun which will bring in CRM in new many more new colours

and the future of CRM looks more and more bright.

Marketing Research:

Marketing research should be a part of knowledge

management process as well as management information

systems.34 Marketing research needs enlightened people to

interpret and understand what customers and other respondents

are telling them. In the present scenario marketing research should

showed to be more concerned with short term and medium term

strategies as business cycles and product life cycles are getting

shorter. Marketing research has a wide scope of application to

banks function. Banks are required to perform a variety of business

activities and their area of operation is also large. Marketing

research in a bank is search for data which are relevant to

marketing problems in different functional areas of banks

business. Marketing research is about reducing uncertainties in

decision making.

New Marketing Challenges:

In this new competitive environment of globalized trading

practices, the marketing of commercial banks posed the following

challengers to the financial sector in the market.

Deregulation in the financial service sector gave rise to the

emergence of various spurious companies and may malpractices in

the stock and capital market. This has badly affected the marketing

activities of commercial banks. Increased competition from global

and domestic private players has threatened the survival of many

industries.35

Integration of global market and growing volumes of

financial transaction.

Coping with advances information technology in the

marketing functions.

High level of volatility of the financial market.

Increased customer demands and sophistication of markets

and customers.

Coping with fast growing rate of IT, communication,

multimedia etc.

Future Marketing Strategy of SBI:

Today’s banking services requires new strategies to survive

and continue to operate. They have to adopt new marketing

strategies and tactics which enable them to capture the maximum

opportunities with the lowest risks in order to enable them to

survive and meet the tough competition from global players of

domestic and foreign origin.36

The State Bank of India has decided to appoint a global

consultant to frame a modern marketing strategy for its products.

SBI official told that the management had also decided to set up an

exclusive marketing division, whose work will be to market the

various financial products offered by SBI as well as its subsidiaries.

According to him, SBI’s new strategy will be to send his own

marketing men to the doors of prospective customers rather than

waiting for the customers to come to its doors. He claimed that SBI

was the first ever PSU bank in India to have taken such an

initiative. The SBI official said that the global consultant would

frame the new marketing strategy for SBI and then the policy will

be implemented by the bank management. The new marketing

division will be appointed out of the officers and award staffs with

good communication and public relation skills. These officers will

be specially deployed in the marketing division, so that their public

image can be effectively utilized in marketing the products. The

SBI official officers and staff deployed in the marketing division

will be specially trained for the marketing job. The training

programme will be conducted internally with guidance from any

reputed consultant.37

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