SERVICE MARKETING IN BANKS

Bachelor of Commerce

Banking & Insurance

Semester V

(2010-2011)

Submitted by:

KHILJI SHAHNAZ

Roll No: 16

SMT. PARMESHWARIDEVI DURGADUTT TIBREWALA LIONS,

JUHU COLLEGE OF ARTS, COMMERCE & SCIENCE.

J.B.Nagar Andheri (East), Mumbai –

400059.

SERVICE MARKETING IN BANKS

Bachelor of Commerce

Banking & Insurance

Semester V

In Partial Fulfillment of the requirements for the Award of

Degree of Bachelor of Commerce - Banking & Insurance.

By

KHILJI SHAHNAZ

Roll No: 16

SMT. PARMESHWARIDEVI DURGADUTT TIBREWALA LIONS,

JUHU COLLEGE OF ARTS, COMMERCE & SCIENCE.

J.B.Nagar Andheri (East), Mumbai –

400059.

SMT. PARMESHWARIDEVI DURGADUTT TIBREWALA LIONS,

JUHU COLLEGE OF ARTS, COMMERCE & SCIENCE.

J.B.Nagar Andheri (East), Mumbai –

400059.

CERTIFICATE

This is to certify that Ms. KHILJI SHAHNAZ of B.Com.

Banking & Insurance Semester V (2010-11) has

successfully completed the project on SERVICE

MARKETING IN BANKS under the Guidance of Prof.

Ms. SHIBHU SINGH.

Course Co-ordinator Principal

Project Guide / Internal Examiner

External Examiner

DECLARATION

I, Ms. KHILJI SHAHNAZ, student of B.Com (Banking

& Insurance), Semester V (2010-11), hereby declare that I

have completed the Project on “SERVICE

MARKETING IN BANKS”.

The information submitted is true and original to the best

of my knowledge.

Signature of Student

KHILJI SHAHNAZ

Roll No: 16

ACKNOWLEDGEMENT

I would like to thank the teaching faculty of “SMT. PARMESHWARIDEVI DURGADUTT TIBREWALA LIONS, JUHU COLLEGE OF

ARTS, COMMERCE & SCIENCE”.

Affiliated to the University of Mumbai for their excellent

suggestion.

A special thank to Miss. Nanda Indulkar, Coordinator for her

constant encouragement and guideline from the beginning to the

end with never ending patience. Her constant support and efforts

helped me to complete my project on time.

I would also like to take an opportunity to thank all friends

for co-operating with me and to all the people who are directly or

indirectly connected to the project above . All thanks to our

Principal Mrs. Trishala Mehta and Vice Principal Mr. Vinod

Tibrewala for her/his co-operation during the time of completion of

the project.

I would also like to thank our respected Professors like, Ms.

Bhavana Naik, Miss. Nanda Indulkar, Mr. Mahendra Mishra, Mrs.

Shibu Singh and our Librarian Kawade Subhash, without whom the

project would have not come to an end.

KHILJI SHAHNAZ

Roll No.16

Place:

Date:

INDEX

Chapter

No.

Topic Page

No.

1 INTRODUCTION 1

2 IMPORTANCE AND

SIGNIFICANCE OF

SERVICE

6

MARKETING

3 CHARACTERISTICS OF SERVICES

13

4 MARKET SEGMENTATION FOR BANKS

16

5 MARKETING OF

BANKING

SERVICES

21

6 BANKING SERVICE MARKETING MIX

23

7 ROLE OF TECHNOLOGY IN BANKING

32

8 MARKETING OF BANKING SERVICES IN THE GLOBALISED SCENARIO - EMERGING CHALLENGES

37

9 EMERGING CHALLENGES FOR SERVICE MARKETING BANKS

42

10 CONCLUSIONS 47

BIBLIOGRAPHY

CHAPTER 1

INTRODUCTION

As India moves towards a services economy, marketers need to

know more about managing and marketing service products.

During the past decade, services have increasingly assumed an

important role in the Indian economy. Services have gained

dominance ever since this trend was set in the nineties. The

competition in the service organization is becoming more

professional approach to manage their business.

In the 21st century, the business environment conditions are likely

to be more volatile. The inventions and innovations have been

paving avenues for a qualitative transformation in every area. The

globalization and liberalization has opened new vistas for the

development of service generating organization.

Marketing a function, by which a marketer plans, promotes and

delivers goods and services to the customers or clients. In the

marketing of services, the providers are supposed to influence and

satisfy the customers or users. An institution or an individual may

act as a provides who requires professional excellence to influence

the impulse of prospects and to transform them into actual

customers. When we buy services offered by a service generating

organization in a true sense we buy the time, knowledge, skill or

resources. The application of marketing principles in the services

sector is the main thing in the services marketing.

The perception of service marketing focuses on selling the services

in the best interest of users/customers. It is concerned with a

scientific and planned management of services which makes

possible a fair synchronization of the interests of providers as well

as the users. With a change in the perception of management, we

witnessed multi-faceted changes which necessitated an analogous

change in the concept of services marketing. The services

generating organizations realized the interests of customers and

thereafter they were compelled to assign due weight age to the

interests of society in the face of the holistic concept of

management.

1.1 DEFINITION AND MEANING

Definition:

According to American Marketing Association, “Services are the

activities, benefits or satisfactions which are offered for sale or are

provided in connection with the sales of goods.”

Meaning:

A service is an act or performance offered by one party to another.

They are economic activities that create value and provide benefits

for customers at specific times and places as a result of bringing

about a desired change in or on behalf of the recipient of the

service.

The term service is not limited to personal service like medical

services, beauty parlours, legal services, etc. According to

marketing experts and management thinkers the concept of services

is a wider one. The term services are defined in a number of ways

but not a single one is universally accepted.

1.2 HISTORY

The Evolution of Marketing:

Marketing's origins can be traced to people's earliest use of the

exchange process: barter (trading one resource for another-for

example, food for animal pelts). To accommodate the exchange

process, trading posts, traveling salespeople, general stores, and

cities evolved along with a standardized monetary system. The

Industrial Revolution, in the late 1800s, marked the beginning of

the modern system of marketing. Until that time, exchanges were

limited because people did not have surplus items to trade. With the

onset of mass production, better transportation, and more efficient

technology, products could be manufactured in greater quantities

and sold at lower prices. People began to turn away from self-

sufficiency (such as making all of their own clothes) to purchases

(such as buying a new suit or dress). Improved mobility, densely

populated cities, and specialization also enabled more people to

participate in the exchange process.

The marketing concept, a marketing philosophy, and customer

service are the underpinnings of the marketing company era.

In the initial stages of the Industrial Revolution, output was limited

and marketing was devoted to the physical distribution of products.

Because demand was high and competition was low, firms

typically did not have to conduct consumer research, modify

products, or otherwise adapt to consumer needs. Their goal was to

increase Production to keep up with demand. This was known as

the production era of marketing. Once a firm was able to maximize

its production capabilities, it hired a sales force and sometimes

used advertising to sell its inventory. But, when the firm developed.

New products, consumer tastes or needs received little

consideration. The role for advertising and the sales force was to

make the desires of consumers fit the attributes of the products

being manufactured.

Over the past 35 to 40 years, marketing's central role has been

recognized by a growing number of firms, and the marketing

department has become the equal of others in those companies. At

those firms, major decisions are made on the basis of thorough

consumer analysis. Competition is intense and sophisticated.

Consumers must be drawn and kept to the firm's brands. Company

efforts are integrated and frequently re-evaluated.

CHAPTER 2

IMPORTANCE AND SIGNIFICANCE OF SERVICE MARKETING

The developed as well as the developing countries have been found

making multi-dimensional efforts to market services in a right

fashion. The public as well as the private sector organizations has

been making innovation efforts to market services. The services

sector has been found contributing substantially to development

process. The multi-faceted developments in the services sector and

the mounting intensity of competition generated by the well

established multinational corporations have been engineering a

strong foundation for the application of modern marketing

principles in the service generating organizations so that they only

not survive and thrive but in addition to these things also make a

significant contribution to the process of socio-economic

emancipating. It is in this context that we find it pertinent to think

in favour of practicing marketing principles in the services sector.

The following facts make it clear that application of modern

marketing principles by the service generating organizations would

pave avenues for qualitative-cum-quantitative transformation.

1. Upward trend in the disposable income : We can’t

negate that of late the disposable income of masses has been found

moving upward. This trend is found even in the developing

countries like ours where the development-oriented sector has

opened new vistas for development. The development of corporate

sector makes ways for then transformation of industrial economy.

The positive developments in the development sector thus open

doors for an increase in the disposable income. The moment we

find an increase in the disposable income, the process of demand

generation gains a rapid momentum provided the pressure of

inflation and the economic depression are not to slow down the

tempo. These facts are mute testimony to the proposition that even

in the Indian economy we find positive developments which have

been creating new opportunities for the development of services

sector. The intensity of competition is found at its peak and this

necessitates application of marketing principles.

2. Increase specialization: We are living in as age of

specialization in which only perfection is to be rewarded suitably.

More and more sophistication in the process of economic

transformation is due mainly to the increasing specialization. In the

industrial economy, the magnitude of technology sophistication is

found increasing. Of course, this is due to the growing importance

of specialization. The organizations have now no option but to the

promote specialization since this helps them in making possible

cost effectiveness. Increasing importance of specialization would

activate the demand cycle which would make ways for the

development of banking services, insurance services, transportation

services, communication services many other services would be

motivated.

3. Growing fashion: With the development of corporate

culture and the emergence of a well established services sector,

there would be a basic change in the lifestyles. Since the

information technologies would show their influence in almost all

the areas, it is natural that fashion would take shape of an industry.

The hair dressing, beauty parlours, jogging and gym centers would

flourish since the masses would be found more conscious to their

physical health. The westernization of culture, craze for western

living conditions, the tidal wave of pop culture, the dresses and hair

styles would throw a big impact on the society. This makes it clear

that there would be a conducive environment for the development

of beauty parlours, modeling centers, dry-cleaning centers, studios,

hair dressing, tailoring or almost all the centers directly or

indirectly helping us in looking smart, handsome and attractive.

This makes if essential that we think in favour of practicing modern

marketing principles in all the select areas.

4. Professionalism in Education : The development of

human resources would be given a transcendental priority by

almost all the organization either production goods or generating

services. Of course, the corporate culture makes an advocacy in

favour of performance-orientation but it is not possible unless we

assign due weight age to employee-orientation. The professional

excellence thus would get a new priority and the masses would be

temped to the professional education. Excellence, perfection,

professionalism would be the attraction which would require

development of world class educational institutions for almost all

the disciplines. The Tourism services, Hotel services, Banking

services, Insurance services, Medicare services, Consultancy

services, personal care services thus would be professionalized in

which only the world class human resources would get place. The

application of marketing principles would make the task easier.

5. Information Explosion: Of late, the developed countries

have been found making sincere efforts to build a superhighway for

communication have been found fuelling information explosion. It

is in this context that we now find globe like a village. To be more

specific after the development of satellite communication facilities.

The tremendous opportunities generated by communications would

influence almost all the sector. The entertainment industry, the

advertising industry, the fashion industry and many others would

be influence by the latest developments that we find in the world of

communications. It is in this context that we find it essential to

practice the modern marketing principles so that the marketing

information system plays a positive role in improving the quality of

decisions. The decision-making, decision-supporting systems

would have a new look; the microcomputers would assist decision

makers in many ways.

6. Sophistication in Market: With the development of

communication services, it is natural that we find sophistication in

the market where customers’ expectations would be found high.

The westernized life styles would change the hierarchy of needs

and requirements and fashion-orientated, comforts-generating

household items would have a profitable market. The living

conditions would be changed, the food habits would be changed,

the dresses and hair styles would be changed, the drinks would be

changed, the vehicles would be changed and the style of homes and

apartments would be changed and so on and so forth. The

supermarket culture, the departmental store culture, the fast food

culture, the Tele-marketing culture, the Tele-education culture

would influence masses.

7. Increasing Governmental activities: The expanding

governmental activities due mainly to the participation of state in

almost all sectors of the economy would also make ways for the

development of services sector. The trade and culture exchange

policies, the global partnership, the convention industry, the

hospitality industry etc. would have a profitable market.

SIGNIFICANCE OF SERVICE MARKETING:

The services sector if marketed in a right fashion contributes

substantially to the process of development. The speed of socio-

economic transformation can be increased sizably if the innovation

marketing principles are practiced. We can’t deny the fact that in

years to come the services sector would get a conducive

environment with profitable opportunities. If we market the

services in a right direction, the available opportunities can be

capitalized on optimally. It is against this background that we make

an advocacy in favour of services marketing.

1. Least possible dependence on technology : Our

dependence on sophisticated technology has increased. Developed

countries are technologically advanced and so they do not face any

problem while integrating the national development programme

with sophisticated technologies.

The best solution is to raise our dependence on service sector so

that the demand for advanced technologies is minimized.

The developing countries are technologically backward and so their

problems are more complicated. If they import technology, the

pressures on foreign exchange reserve increase. Thus, these

countries have to maximize their dependence on such sophisticated

technologies or they should develop their own technologies.

2.Raising the standard of living : For increasing the standard of

living we should increase the rate of capital formation, economic

transformation and national income. It is also important that the

masses are aware of living style and behavior.

3.Generation and expansion of job opportunities : Services

sector also creates and expands job opportunities. In USA, more

than 85% of jobs created come from the service sector. Of late,

every dollar that consumer spends in US, about half of it goes for

services. This confirms the growing global influence of this sector.

Generally in developing countries like India, condition where non-

optimal demographic structure has complicated the problem of

unemployment, it is pertinent that state policy makers revamp their

policies so that the tertiary sector contributes more to the national

economy. It is meant that we increase the contribution of services

to GNP and motivate organizations to participate.

4.Optimum utilization of untapped resources : Service

sector provides opportunity to make optimum utilization of

untapped resources. By marketing services, unutilized or

underutilized resources are properly utilized. The personal care

services, tourism, entertainment, hotel, etc. if not utilized are a

national waste.

It is more rational that we shift our priority in the best interest of

national resources. In an overpopulated country it is our

responsibility that conservation of resources gets an overriding

priority.

5.Paving avenues for capital formation : The contribution of

capital formation to the process of socio-economic transformation

is appreciable for transforming national economy, it is essential that

we activate our efforts for capital formation. It means our

investments are termed to be productive. Almost all the services

generated positive results if managed properly and effectively. For

accelerating the rate of services in the background of national

social-economic condition. In US economy, an economy spends

47cent of a dollar on services. This makes the environment

favorable particularly for service sector which encourages the

entrepreneurs for flowing their capital in service sector. But it is

unfortunate that the same trend is not following in Indian economy

or in developing countries.

CHAPTER 3

CHARACTERISTICS OF SERVICES

Characteristics of Services

1.Intangibility : Services are intangible we cannot touch them. They

are not physical objects. According to Carman and Uhl a consumer

feels that he has the right and opportunity to see, touch, hear, smell

or taste the goods before they buy them. This is not applicable to

services.

2.Perishability : Services too are perishable like labours. Services

have a high degree of Perishability. Here the element of time

assumes a significant position. If we do not use it today, it is lost

forever. If labour stops working, it is a complete waste. It cannot be

stored. Utilized or unutilized services are an economic waste. An

unoccupied building, an unemployed person, credit unutilized are

economic waste.

3.Inseperability : Services are generally created or supplied

simultaneously. They are inseparable. For e.g., the entertainment

industry, health experts and other professionals create and offer

their services at the same given time. Services and their providers

are associated closely and thus, not separable. Donald Cowell states

“good are produced, sold and then consumed whereas the services

are sold and then produced and consumed”.

4.Heterogenity : This character of service makes it difficult to set a

standard for any services. The quality of service cannot be

standardized. The price paid for the service may either too high or

too low as is seen in the case of entertainment industry and sports.

The same type of service cannot be sold to all the customers’ rate

this service in different ways. This due to the difference in

perception of individual at the level of provider and user.

Heterogenity makes it difficult to establish standard for the output

of service firms.

5.Ownership : In the sale of good after the completion of process, the

goods are transferred in the name of the buyer and he become the

owner of the good. But in the case of service, we do not find this.

The user have only an access to service. They cannot own the

services. For e.g., a consumer can use personal care service or

medical service or can use a hotel room or swimming pool,

However the ownership remains with the provider.

6.Simultaneity : - Services cannot move through channels of

distribution and cannot be delivered to potential customers and

users. Thus, either users are brought to the services or providers go

to the users. It is right to say that services have limited

geographical area.

7.Quality Measurement : - A services sector requires another tool

for measurement. We can measure it in terms of services level. It is

very difficult to rate or quantify total purchase. E.g. we can

quantify the food served in a hotel but way waiter serves the

customer or the behavior of the staff cannot be ignored while rating

the total process. Hence we can determine the level of satisfaction

at which users are satisfied. Thus the firm sells good atmosphere,

convenience of customers, consistent quality of services, etc.

8.Nature of Demand : Generally, the services are fluctuating in

nature. During the peak tourist season there is an abnormal increase

in the demand of services. Therefore, while identifying the salient

features of services one cannot ignore the nature of demand. For

e.g. tourists go to hill stations during summer season whereas

public transport utilities are used substantially. This indicates that

flexibility is the important feature of services.

CHAPTER 4

MARKET SEGMENTATION FOR BANKS

Market Segmentation

An organization is supposed to cater to the changing needs of

customers. It is natural that all customers have their own likes and

dislikes. They have some uniqueness which throw a big imprint on

their lifestyles. This makes the task of understanding the customer

a bit difficult. It is in the context that we go through the problem of

market segmentation in banking services.

A study of the needs of customers invites a plethora of problems

since in addition to other aspects, the regional consideration also

influence the hierarchy of needs. To be more specific in the

banking services, the banking organizations are supposed to satisfy

different types of customers living in different segments. The

segmentation of market makes the task of bank professionals

easier. If the market segmentation is done in a right fashion, the

task of satisfying customers is simplified considerably. The modern

marketing theories advocate the formulation of market policies and

strategies for each segment which an organization plans to solicit.

The market segmentation is based on the principle of divide and

rule. If we divide market in to different segments, the size of the

market is made small and the process of study is found convenient.

We find market segmentation division and subdivision of a market

based on certain considerations. It is against this background that

E.R.Reidenback and R.E.Pits opine that market segmentation is the

recognition that market is composed of different buyers who have

different responses to market offerings. No one approach to the

market will satisfy all buyers. Each segment represents a somewhat

different opportunities for the organization. In its most fundamental

form, market segmentation recognizes that the company or its

product/service offerings can’t be all things to everyone. The

definitions presented by the marketing experts clarify that market

segmentation is the grouping of customers or strategy of dividing

market in order to conquer them. It helps in making and innovating

the marketing decisions. It is against this background that the

market segmentation assumes a place of outstanding significance

particularly in the banking organizations.

The bank professionals have to segment the market in such a way

that the expectations of all the potential customers are studied in a

right perspective and the marketing resources are developed to

fulfill the same. The marketing efforts can be made more proactive

if the process and bases of segmentation are right. It is essential

that the bank professionals assign due weightage to the difference

that we find in market behaviour due to geographical, age, sex,

nationality, educational background, income classes, occupation,

social and other consideration. If they overlook or underestimate

key bases while segmenting, the study result can’t be proactive to

the formulation of creative marketing decisions. This makes it

essential that the bank professionals are aware of the criteria for

market segmentation. This would make the segmentation process

right vis-à-vis the result proactive. The agricultural sector,

industrial sector, service sector, household sector are found

important in the very context. The gender segment is found

important no doubt but we can’t underestimate institutional and

professional segments. Since the banking organizations serve

different sectors and segments the segmentation should be done

carefully.

IMPORTANCE OF SEGMENTATION TO THE

BANKING ORGANISATION

Like other goods manufacturing and services generating

organizations, we find segmentation important even to the banking

organizations. The following facts testify it.

1. Instrumental in exploring opportunities: We find

segmentation very much effective in exploring the profitable

opportunities. It is well known to us that while segmenting, the

market is divided into different groups and sub-groups and this

simplifies the process of studying and understanding the customers

in a right perspective. If we known about the rural segment, the

opportunities are explored in the rural areas. If we known about the

low income group, the opportunities are explored in that group.

Thus the segmentation helps bank professionals in exploring the

profit opportunities.

2. Instrumental in designing a sound marketing strategy : We

can’t deny that market segmentation makes it easier to formulate a

sound strategy. Since the bank professionals are aware of the

changing needs and requirements of a segment, the marketing

resources can be developed in tune with needs and requirements of a

segment. The formulation of a package is found significant and the

bank professional measures can do it successfully on the basis of

market segmentation. The promotional measures can be sensitized in

the face of the receiving capacity of a particular segment. The

pricing strategy can be made operational and the sales promotion

measures can be made productive.

3. Helpful to the policy planners: In addition, the policy makers

also find segmentation important since they are well aware of the

emerging trends in the business environment. They get detailed

information about the changing needs and requirements of a

segment. The planning is an on going process. The bank

professionals transmit necessary information to the policy planners

which simplify the process of making a sound policy.

4. A sound management of budget is possible: Formulation of a

pragmatic plan and an optimal budget has a far reaching effect on

the rate of success. As and when we talk about planning, the

budgetary provision, allocation in the face of changing

requirements, optimal distribution of funds to different heads,

monitoring of expenses became important. If we known about a

segment, we also known about the requirement of that segment .At

branch level, the segmentation provides necessary information to a

branch manager that help him in studying the requirements of the

command area in which the study is undertaken.

5. Enriching the marketing resources: In addition to other

aspects, we find segmentation instrumental in enriching the

markets potentials. If we known about the preference, needs,

requirements, attitudes, lifestyles; it is found easier for us to

develop the marketing resources accordingly. This in a natural way

makes it convenient to develop the marketing resources. The

process of innovation can be activated. The services, the

promotional measures, the pricing tool and the process of offering

can be made more competitive. The development of world class

marketing resources thus makes it convenient to influence the

impulse of prospects. The bank professionals find it easier to get

the positive results for their productive marketing efforts.

CHAPTER 5

MARKETING OF BANKING SERVICES

Marketing of banking services is concerned with product, place,

distribution, and pricing and promotion decisions in the changing,

socio-economic and business environment. It means organizing

right activities and programmes at the right place, at the right time,

at a right price with right communication and promotion.

The causes of Bank Marketing can be seen as:

Rising customer needs and expectations

Due to improvements in general standard of living.

Entry of foreign and private sector banks in India.

Economic liberalization of Indian economy.

Phenomenal growth of competition due to economic

liberalization.

Rise in the Indian middle class with considerable resources.

Government intervention in protecting the interests of

consumers.

The users of banking services or the prospects play a very

significant role in the formulation of overall marketing strategies.

The bank marketing activities are concerned with the designing of

product strategies keeping in view the needs and requirement of

prospects. It is also related with the place decisions i.e. location of

a bank at suitable points.

It has the following unique features:

(a) Intangibility

(b) Inseparability

(c) Variability and

(d) Perishability

CHAPTER 6

BANKING SERVICE MARKETING MIX

SERVICE MARKETING MIX ELEMENT

The service marketing mix comprises off the 7’p’s. These include:

•Product

•Price

•Place

•Promotion

•People

•Process

• Physical evidence.

PRODUCT PRICE PLACE PROMOTION PEOPLE PROCESS Physical Evidence

PRODUCT:

BANK PRODUCTS

(A)DEPOSITS:

savings, current, fixed etc.

(B)ADVANCES:

(1) FUND ORIENTED:

a. Term loan,

b. Clean loan,

c. Bill discounting,

d. Advances,

e. Pre-shipment finance,

f. Post-shipment finance,

g. Secured and unsecured lines of credit.

2. NON-FUND ORIENTED:

a. Guarantees, and

b. Letter of credit

C) INTERNATIONAL BANKING:

a. Letter of credit, and

b) Foreign Currency.

D) CONSULTANCY:

a. Investment Counseling,

b. Project Counseling,

c. Merchant Banking, and

d) Tax Consultancy.

(E)MISCELLANEOUS:

a. Traveller Cheques,

b. Credit Card,

c. Remittances,

d. Collections,

e. Sale of Draft,

f. Standing instructions, and

g. Trusteeship.

In banking the products are services. Services cannot be seen or

protected like goods. The potential buyer of the services can form

an opinion about the services offered. The product should suit the

market needs. Bank services are viewed in terms of the satisfaction

they deliver and not just the things that are created with value. The

banks primarily deal in services and therefore, the formulation of

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

environment conditions. The changing psychology, the increasing

expectation, the rising income, the changing lifestyles, the

increasing dominations of foreign banks and the changing needs

and requirements of the customers at large make it essential that

they innovate their service mix and make them of worked class.

In the formulation of service mix, the banks can follow two

guidelines, first is related to the processing of product to market

needs and the second is concerned with the processing of market

needs to product.

Marketing aims not only offering but also at creating/innovating

the services/schemes found new to the competitors vis-à-vis- to the

customers. The additional attraction, the product attractiveness

would be a plus point, which would be of great help in many ways.

Thus, the formulation of product mix is found to be difficult task

that requires world-class professionalism.

PRICE:

Pricing in banking relates to the interest rates paid by the bankers

on deposits, interest charged by the banker on loans and demand

draft, charges for various types of transactions and fees for certain

services. In India deposit and lending rates are prescribed by RBI.

Pricing policy of a bank is considered important for raising the

number of actual customer.

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

place of outstanding significance. The pricing decision include the

decisions related to interest and fee or commission charged by

bank. Keeping in view the level of satisfaction of a particular

segment, the bank have to frame the pricing strategies.

The banks are required to frame two-fold strategies. Strategies

concerned with interest and commissions to be paid to the customer

and interest and commissions to be paid by the customers for

different types of services.

PLACE:

The place decision mainly deals with selection of a suitable

location for the branch. Sound location decisions help in activating

the business. The location should have adequate availability of

transportation, communication, electricity and other necessary

facilities for the smooth functioning of the banks. Technological

development, increased customer satisfaction, inadequacy of the

traditional challenge to serve all customer segments have brought

about ATM, telebanking, home banking, Internet banking and now

SMS Banking. Another significant development is a strategic

alliance set up by the private banks to overcome the handicap of

limited branch network. In such alliance the branch network of one

branch will be used by the other for selected transaction like bill

collection, cheque collection, etc.

PROMOTION:

The object of a promotion programme are to inform about the new

service product, to persuade the customer, to remind the customer,

build image of the bank, etc. Banking services can be promoted in

two ways:

1. Personal Promotion: The bank marketer gets opportunity to

tangibilise the product through personal selling; persuasion is more

effective with direct contact. It helps in creating impulse buying.

2. Impersonal Promotion: i.e. Advertising, Publicity and Sales

Promotion measures. An advertisement in banking is a promotion

measures. An advertisement in banking is a promise- a promise of

satisfaction to prospectus who buy the service offered by the bank.

Banks use all types of advertisement such as newspaper, radio,

television, magazines and hoardings. Also, sales promotion device

such as Point of Purchase material, brochures and advertisement

specialties like ball pens, calendars, diaries, etc. Publicity is a major

strength as a promotion tool than advertising as customers tend to

believe a news item rather than an advertisement. Word of

promotion is yet another important promotion tool as it is a better

persuader and convincer than advertising and personal selling, as

banking services are narrated by customer themselves. Besides, as

Social welfare and Corporate Social Responsibility are considered

to be an important part of banking services, the publicity measures

need due care.

PEOPLE:

Banking products cannot be separated from the person (banker)

who markets them. The product and the seller together constitute

the banking product. Banks should adopt internal marketing in

order to make the whole business customer-oriented. The bank

products should be marketed to the employees first before they are

marketed to customer. The corporate mission should be

communicated repeatedly and effectively to all employees by the

top management. The placement policy should emphasize that the

recruits should not only be conversant with all aspects of banking

businesses but also have the skill for social interaction and

tolerance for interpersonal contact. The quality for banking sector

is an aggregation of all the properties, which are found essential for

generating the efficiency and projecting a fair image. Even

efficiency essentially is supported by ethical dimension, humanity

and humanism.

The development of human resources makes the way for the

formation of human capital. Human resource can be developed

through education, training and by psychological tests. Even

incentives can inject efficiency and can motivate people for

productive and qualitative work.

PROCESS:

It involves all activities right from the product conception stage, to

product designing and development down to its marketing at the

branch level.

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.

a) 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.

b) 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 the steps are usually specified and a

specific pattern is followed to minimize time taken.

Simplicity: in 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.

PHYSICAL EVIDENCE:

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

tangibles, employee’s dress code etc. The company’s 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.

Punch lines: punch lines or the corporate statement depict the

philosophy and attitude of the bank. Banks have influential punch

lines to attract the customers.

Banking marketing consists of identifying the most profitable

markets now and in future, assessing the present future needs of the

customers, setting business development goals, services marketing.

Most private and foreign banks like ICICI, Citibank and HDFC

bank portray a new look to the customers rather than drudgery

banking counters. Attractive brand names, logos, symbols, etc. add

to the customer’s perception of service quality.

CHAPTER 7

ROLE OF TECHNOLOGY IN BANKING

Technology has a major impact on many industries including

financial services and banking in particular. ATM services which

not only provide cash but also allow for bill payments, deposits and

instant statements are widely used. From the customers’ viewpoint,

technology has played a major role in the development of the

process whereby the service is delivered. Automated queuing

systems have made visits to the bank easier and more convenient.

Telephone Banking and insurance services are now being used in

place of the traditional branch-based service process. Technology

has also played a major role within organizations, bringing about

far greater efficiency through computerized records and transaction

systems and also in business development, through the setting up of

detailed customer databases for effective segmentation and

targeting.

The main technological developments fall within these categories;

• Process developments

• Information storage and handling

• Database system

ROLE OF TECHNOLOGY IN BANKING

1.AUTOMATED TELLER MACHINES (ATMs):

The trend in banking has evolved from a cash economy to cheque

economy and there on to the plastic card economy. One of the

channels of banking service delivery is the ATM or the Automated

Teller Machines, whose traditional and primary use is to dispense

cash upon insertion of a plastic card and its unique PIN.

Current and saving account holders of a bank who hold a certain

minimum balance in the account are issued an ATM card. The card

is a plastic card with a magnetic strip with the account number of

the individual. When the card is inserted into ATM, the machines

sensing equipment identifies the account holder and asks for his or

her identification code number. Usually this is referred to, as the

PIN and is issued by the bank's computers. This number is not

known to the bank's staff and is secret and unique to that

individual. When the person uses the ATM card is asked for the

PIN, that the cardholder identifies himself or herself by pressing

the relevant number buttons.

The machines then verify the account number on the ATM card

along with the secret code number stored in the ATM. When the

match is found, the ATM pops up a menu screen which allows the

user to transact almost all types of bank transactions. A typical

transaction would be that of cash withdrawal. The bank generally

restricts the maximum amount and the frequency with which one

can withdraw cash. The amount withdrawn is immediately debited

to the concerned account through accounting entries pre -

programmed on the ATM.

Similarly, cash or cheques can be deposited through the ATM for

credit to an account. When the menu screen appears one should

indicate that he or she wants to deposit money. The ATM dispenses

an envelope which is to be filled with the cheque or cash. The

account number to be credited is registered on the envelope and

stored. Later the bank staff collects the envelope to credit the

account.

Account balance queries, fixed deposit details, debits and credits to

the account etc. can all be queried at the ATM.

The advantages of an ATM over personal teller are as follows:

(1) ATM's can be accessed round-the-clock.

(2) No employee interface is necessary.

(3) Cash and cheques can be deposited and statement of accounts

requirement, transfer of funds etc. can be effected.

(4) It offers a cost-effective solution alternative to labour costs.

(5) Automatic and instantaneous accounting is possible.

(6) It eliminates the need for customers to travel to the branch

where his or her account is maintained, if the ATMs are

conveniently located and networked.

(7) To depositors who do not have a credit card, ATM offers cash

availability when necessary.

(8) Scope for frauds, robberies and misappropriation is reduced

considerably if the PIN is maintained.

2. TELEBANKING AND ELECTRONIC BANKING: -

A customer can access information about his/her account through a

telephone call and by giving the coded Personal Identification

Number (PIN) to the bank by Telebanking. Some banks like SBI,

Andhra Bank, etc. have made this facility available to some

branches.

Automatic withdrawals and transmission of cash balance data and

other information about an account is another facility that is offered

by banks in a consolidated form through fax or telex. Some banks

have also adopted the use of E-mail service for data and

information transmission. Banks have also started with the

Electronic display of information through Satellite Communication

System and transfer of funds through the same channel for inter

branch and inter-bank adjustment and clearance of cheques, drafts,

etc.

3. CELL PHONE BANKING AND INERNET BANKING: -

Through Inter-net banking one can visit the web-site of each bank

by entering his password and know the account balance and even

pass his own credit and debit entries.

This means that we can do our banking through our personal

computer sitting at home. Banks may soon allow zero balance

savings accounts through Internet facility only.

Customers can now make balance enquiries, download statements

and open fixed deposits over the net. They will soon be able to

carry out all their transactions over the net. So visiting a bank

would become needless.

Time to come; Mobile phones will drive banking transactions.

These mobile phones will be equipped with smart cards that are

embedded with banking and other information. This mobile phone

banking facility is yet to come but the mechanics of linking the

banking with the cell phone is being sorted out.

Teller machines are being installed in the banks for the Electronic

banking facility. The use of e-mail for banking will open up new

avenues for Internet banking. Banking will be on wheels and

mobile by the use of smart banking.

CHAPTER 8

MARKETING OF BANKING SERVICES IN THE GLOBALISED SCENARIO -

EMERGING CHALLENGES

"Change" is a continuous process and banking industry is no

exception to this law which is natural. Due to the implementation

of the financial sector reforms and policies for the country change

in the banking industry is inevitable.

The main aim of the financial sector reforms is to promote an

efficient, competitive and diversified financial system in the

country. After liberalization and globalization process that was

initiated in 1991, the Indian banking industry has undergone

tremendous transformation. These changes have forced the Indian

banking industry to adjust the product mix and to remain

competitive in the globalised environment.

In order to accommodate the changes and challenges that are taking

place in the present globalization scenario, the Indian banking

industry has to re-orient its strategy towards marketing of banking

services. New ways and means have to be found to compete in the

future and to survive with profit and business growth.

The following are some of the vital challenges that threaten the

Indian banking industry.

(1) Competition from foreign banks and now new private sector

banks: The competition in the Indian banking industry have

intensified with the entry of more and more foreign banks and now

private sector banks, with better technology, market orientation and

cost-effective measures. Financial institutions have also stated

entering into the domain of banks. The share of business of public

sector banks has considerably declined. Hence there is a

compelling need for the Indian banking Industry to either change or

modify its marketing strategy in order to attract the customers and

also to withstand the stiff competition from foreign banks and new

private sector banks.

(2) Technological advancement: The methodology of banking

business has drastically altered due to the advent of technology

both in terms of computers and communication. It has opened new

vistas in the banking sector and in turn has brought new

possibilities for doing the same work differently and in a most cost-

effective manner. With the help of technology it is now possible to

have 24 hours day banking and all seven days in a week. New

business potentials and opportunities which have remained

unexplored have not opened up with Tele banking, Internet banking

and E-banking.

(3) Innovation: Innovation is another important force of change in the

Indian banking sector. Now-a-days banks have become innovative

and pro-active and offer top-class service to the customers. They

play a dynamic role not only as a finance provider but also as a

departmental store of finance. Due to this new instruments and new

products like factoring, leasing, merchant banking, forfeiting

venture capital, corporate advisory services are emerging. These

innovative services may increase the revenue with cost effective

measures.

(4) Diversified Activities: There is a universal trend towards banks'

diversification normally through insurance depository participant

services, investment banking etc. Furthermore banks have

diversified their activities by rendering various services like

depositing gold, sale of gold, paying tax liability and telephone

bills and collecting interest on securities on behalf of the

customers.

All these diversified activities have made the banks to develop and

offer consultancy counseling and customer designed packages for

efficient management of funds. The banks traditional roles as

financial intermediaries are gradually assuming lesser importance

in their overall business as the banks diversify their activities and

redefine their roles. It is important to note that the percentage of

non-interest income is increasing and the interest income of the

banks is decreasing. This shows that the income through service

exceeds the income through lending’s.

(5) Customer Awareness and Satisfaction: In the Urban and

metropolitan sector customers demand more facilities than offered

since they are more knowledgeable. They look for services that are

cheaper, faster and better in quality. IDBI is offering 110% loan of

the cost of the project in case of construction of the building. Such

type of loan is given to meet the documentation expenses.

Now-a-days customer can know the status of their accounts,

request for a cheque book or a financial statement, transfer funds or

"Stop-payment" of cheques from his desktop.

(6) Development of skills of Banks Personnel: In order to meet the

new challenges, banks have to develop novel ways of meeting the

customers' demands. To get sufficient knowledge and exposure to

technology, suitable packages relating to hardware and software

applications are to be provided. Furthermore a separate marketing

wing may be created in every bank to market their banking

services. They must be suitably trained to keep pace with ever-

changing environment. For meeting the challenges the human

resource departments in banks have to prepare a proper manpower

plans and strategies.

(7) Profitability Nature: Profit is a barometer for a judging the

performance of any bank Profits are needed to meet the

expectations of the stake holders, benefit of employees and also for

building capital. Banks have to pay attention to the following

emerging areas order to protect and enhance their profitability.

• Product development and management skill.

• Skills for operating in electronic environment.

• Modern credit management skills.

• New risk management practices.

• New focus on customer and his needs.

• New internal audit skills in a changing business environment.

8) Corporate Governance: Corporate Governance plays a highly

significant role in corporate governance. It is seen that though the

corporate governance revolves around enhancing shareholders

value, it has also the responsibility of marketing the banking

services by introducing and producing new products and services.

Accountability at all levels; transparency and enhancing the image

of the organization would be the major ingredients of good

corporate governance. After the globalization and financial sector

reforms, corporate governance has been receiving a lot of-attention

in banking sector.

To conclude we say that the recent trend of globalization and

liberalization has posed serious problems to the domestic banks.

The public sector banks have been pushed to a tight corner because

of the aggressive marketing strategies from their foreign

counterparts. Potential customers have started moving towards the

private sector banks and foreign banks.

The business prospects of our public sector banks have gradually

started shrinking as such they are forced to revise their strategy of

banking operations so that they can meet the threats posed by the

foreign banks.

Lastly in order to survive and succeed the domestic banks must

identify their marketing areas, develop adequate resources, convert

these resources into efficient services and distribute them

effectively so that the customers are satisfied.

CHAPTER 9

EMERGING CHALLENGES FOR SERVICE MARKETING BANKS

Emerging Challenges for Service Marketing Banks:

"Change" is a continuous process and banking industry is no

exception to this law which is natural Due to the implementation of

the financial sector reforms and policies for the country change in

the banking industry are inevitable. The main aim of the financial

sector reforms is to promote an efficient, competitive and

diversified financial system in the country. After liberalization and

globalization process that was initiated in 1991, the Indian banking

industry has undergone tremendous transformation. These changes

have forced the Indian banking industry to adjust the product mix

and to remain competitive in the globalize environment.

In order to accommodate the changes and challenges that are taking

place in the present globalization scenario, the Indian banking

industry has to re-orient its strategy towards marketing of banking

services. New ways and means have to be found to compete in the

future and to survive with profit and business growth.

The following are some of the vital challenges that threaten the

Indian banking industry.

1. Competition from foreign banks and now new

private sector banks: The competition in the Indian banking

industry have intensified with the entry of more and more foreign

banks and now private sector banks, with better technology, market

orientation and cost-effective measures. Financial institutions have

also stated entering into the domain of banks. The share of business

of public sector banks has considerably declined. Hence there is a

compelling need for the Indian banking Industry to either change or

modify its marketing strategy in order to attract the customers and

also to withstand the stiff competition from foreign banks and new

private sector banks.

2. Technological advancement: The methodology of banking

business has drastically altered due to the advent of technology

both in terms of computers and communication. It has opened new

vistas in the banking sector and in turn has brought new

possibilities for doing the same work differently, and in a most

cost-effective manner. With the help of technology it is now

possible to have 24 hours day banking and all seven days in a

week. New business potentials and opportunities which have

remained unexplored have not opened up with Tele banking,

Internet banking and E-banking.

3. Innovation: Innovation is another important force of change

in the Indian banking sector. Now-a-days banks have become

innovative and pro-active and offer top-class service to the

customers. They play dynamic role not only as a finance provider

but also as a departmental store of finance. Due to this new

instruments and new products like factoring, leasing, merchant

banking, forfeiting venture capital, corporate advisory services are

emerging. These innovative services may increase the revenue with

cost effective measures.

4. Diversified Activities: There is a universal trend towards

banks' diversification normally through insurance depository

participant services, investment banking etc. Further more banks

have diversified their activities by rendering various services like

depositing gold, sale of gold, paying tax liability and telephone

bills and collecting interest on securities on behalf of the

customers. All these diversified activities have made the banks to

develop and offer consultancy counseling and customer designed

packages for efficient management of funds. The banks traditional

roles as financial intermediaries are gradually assuming lesser

importance in their overall business as the banks diversify their

activities and redefine their roles. It is important to note that the

percentage of non-interest income is increasing and the interest

income of the banks is decreasing. This shows that the income

through services exceeds the income through landings.

5. Customer Awareness and Satisfaction: In the Urban and

metropolitan sector. Customers demand more facilities than offered

since they are more knowledgeable. They look for services that are

cheaper, faster and better in quality. IDBI is offering 110% loan of

the cost of the project in case of construction of the building. Such

type of loan is given to meet the documentation expenses. Now-a-

days customer can know the status of their accounts, request for a

cheque book or a financial statement, transfer funds or "Stop-

payment" of cheques from his desktop.

6. Development of skills of Banks Personnel: In order to

meet the new challenges, banks have to develop novel ways of

meeting the customers' demands. To get sufficient knowledge and

exposure to technology, suitable packages relating to hardware and

software applications are to be provided. Further more a separate

marketing wing may be created in every bank to market their

banking services. For meeting the challenges the human resource

departments in banks have to prepare a proper manpower plans and

strategies.

7.Profitability Nature: Profit is a barometer Jar a judging the

performance of any bank. Profits are needed to meet the

expectations of the stake holders, benefit of employees and also for

building capital. Banks have to pay attention to the following

emerging areas in order to protect and enhance their profitability.

o Product development and management skill.

o Skills for operating in electronic environment.

o Modern credit management skills

o New risk management practices

o New focus on customer and his needs.

8. Corporate Governance: Corporate Governance plays a

highly significant role in corporate governance. It is seen that

though the corporate governance revolves around enhancing

shareholders value, it has also the responsibility of marketing the

banking services by introducing and producing new products and

services. Accountability at all levels; transparency and enhancing

the image of the organization would be the major ingredients of

good corporate governance. After the globalization and financial

sector reforms, corporate governance has been receiving a lot of

attention in the banking sector. The recent trend of globalization

and liberalization has posed serious problems to the domestic

banks. Lastly in order to survive and succeed the domestic banks

must identify their marketing areas, develop adequate resources,

and convert these resources into efficient services. And distribute

them effectively so that the customers are satisfied.

CHAPTER 10

CONCLUSION

According to data collected by observation and interview to some

customer and bank employees in HSBC BANK, AXIS BANK,

ICICI BANK, SBI BANK AND SARASWAT CO-OPERATIVE

BANK. The following conclusion can be derived like,

HSBC Bank pays the lowest interest on deposits as compared to all

the above banks. While the interest rate on fixed deposit is

generally identical. The interest rate on fixed deposit ranges from

11- 13 %.

Interest charged on Personal Loan by HSBC Bank is 16% while

AXIS bank, ICICI Bank, SBI Bank and SARASWAT CO-

OPERATIVE Bank charges on Personal Loan are 11.50 %, 12 %,

11.75 %, and 14 % respectively.

SBI gives a strong lead to all the other banks it has 16000 branches

scattered throughout the country. While HSBC lead with the

maximum number of ATM’s installed all over the country.

HSBC, AXIS ICICI, SBI operates on a large scale thus mostly uses

advertisement as a mode of promoting there numerous services

while SARASWAT Bank having a small paid up capital using

personal selling and publicity for promotion. All the banks provide

training at all level.

As per the sample collected HSBC and ICICI process of providing

service is quick, AXIS and SARASWAT bank have average

process of providing services, while the customers are unsatisfied

with the kind the service SBI provides.

The physical evidence of all the private bank is attractive,

comfortable.

ANNEXURE

QUESTIONNAIRE

Name of the Bank: __________________________________________

Address (Branch): ___________________________________________ ___________________________________________ MARKETING MIX IN BANK:

PRODUCT'S AND PRICING OF THE BANK

Product's: Pricing

_________________ __________________________________ __________________________________ __________________________________ __________________________________ _________________

Place:

a) Number of Branches in India? ________

b) Number of ATM's in India ? ________

Promotion mix of Bank:

Advertising

Personal Selling

Publicity

People:Is training provided?

Yes No

Manager Level

Staff Level

Process of Bank

Quick Average Slow

Comments: ________________________________________

____________________________________________________

Physical Evidence

Ambience Good levels of lighting

Space Ease of access Good visibility

Comfortable Uncomfortable

Décor Parking Entrance and exit

Artifact Cheerful and expensive Attractive painting

Promotion mix of Bank:

Advertising

Personal Selling

Publicity People:Is training provided?

Yes No

Manager Level

Staff Level

Process of Bank

Quick Average Slow

Comments: ________________________________________

____________________________________________________

Physical Evidence

Ambience Good levels of lighting

Space Ease of access Good visibility

Comfortable Uncomfortable

Décor Parking Entrance and exit

Artifact Cheerful and expensive Attractive painting

BIBLIOGRAPHY

BOOKS:

AJGAONKAR DR.PARAG “MARKETING AND FINANCE”, Fourth

Edition, Sheth Publishers, Mumbai.

MASCRENAS ROMEO, “MARKETING IN BANKING AND

INSURANCE”, Second Edition, Vipul Prakashan, Mumbai.

M KRISHNAN, “MARKETING IN BANKING SECTOR”, First Edition,

Navneet Publications, Mumbai.

MAGAZINES:

Article by KUMAR SURESH, “DATA BASE OF INDIAN BANKING”,

IBA Bulletin Special Issue Jan. 04.

Article by RAY PARTHA Shri & SENGUPTA INDRANI, “SYSTEMATIC

RESTRUCTURING OF BANKS” IIBF Journal - Oct. Dec. 2003.

WEB SITES:

www.learnmarketing.net

www.wikipedia.com