Marketing Strategies of Banks(4 Office 2007)

8/8/2019 Marketing Strategies of Banks(4 Office 2007)

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MARKETING STRATEGIES OF BANKS

BY :

KARAN MODI

ROLL NO .32


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Background of the Banking Industry

Performance of the banking sector is considered as a proxy for the economy as a whole, due to

banks' wide spectrum of exposure across industries. Unfortunately for India, the banking sector

has historically remained under the impact of non-competitiveness, poor technology

integration, high NPAs and grossly under productive manpower.

Banking sector in India has a wide mix, comprising of joint sector (scheduled and non-scheduled

banks), nationalized sector (Reserve Bank of India, State Bank of India and all other nationalized

commercial banks and post office savings bank), specialized corporate financial institutions

(specific industrial finance corporations and state finance corporations), co-operative sector (co-

operative banks and land development banks) and foreign sector (foreign commercial banks

and exchange banks).

All large private banks were nationalized in two stages:

The first in 1969 and the second in 1980. Subsequently, quantitative loan targets were imposed

on these banks to expand their networks in rural areas and they were directed to extend credit

to priority sectors. These nationalized banks were then increasingly used to finance fiscal

deficits. Although non-nationalized private banks and foreign banks were allowed to coexist

with public-sector banks at that time, their activities were highly restricted through entry

regulations and strict branch licensing policies. Thus, their activities remained negligible.

During mid-1969, 14 major Indian commercial banks were nationalized. One of the major

criticism against nationalization of commercial banks was with respect to efficiency. And the

critics were right.

Since nationalization, the operational efficiency of the commercial banks have come down,

thanks to the public-sector working attitude of the bank work force. Since, their pay is not

linked to performance, there is no inducement for the banking staff to perform well. This has

been further, deteriorated by the poor quality to manpower planning which is linked to

selection of inefficient staff on the basis of social reservations .


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In the period 1969-1991, the number of banks increased slightly, but savings were successfully

mobilized in part because relatively low inflation kept negative real interest rates at a mild level

and in part because the number of branches was encouraged to expand rapidly. Nevertheless,many banks remained unprofitable, inefficient, and unsound owing to their poor lending

strategy and lack of internal risk management under government ownership. Joshi and Little

(1996) have reported that the average return on assets in the second half of the 1980s was only

about 0.15 per cent, while capital and reserves averaged about 1.5 per cent of assets. Given that

global accounting standards were not applied, even these indicators are likely to have

exaggerated the banks true performance. Further, in 1992/93, non-performing assets (NPAs) of

27 public-sector banks amounted to 24 per cent of total credit, only 15 public-sector banks

achieved a net profit, and half of the public-sector banks faced negative net worth.

The major factors that contributed to deteriorating bank performance included

(a) To stringent regulatory requirements (i.e., a cash reserve requirement [CRR] and

statutory liquidity requirement [SLR] that required banks to hold a certain amount of

government and eligible securities);

(b) low interest rates charged on government bonds(as compared with those on

commercial advances);

(c) directed and concessional lending;

(d) administered interest rates; and

(e) lack of competition.

These factors not only reduced incentives to operate properly, but also undermined regulators

incentives to prevent banks from taking risks via incentive-compatible prudential regulations

and protect depositors with a well-designed deposit insurance system. While government

involvement in the financial sector can be justified at the initial stage of economic development,

the prolonged presence of excessively large public-sector banks often results in inefficient

resource allocation and concentration of power in a few banks.


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Further, once entry deregulation takes place, it will put newly established private banks as well

as foreign banks in an extremely disadvantageous position.

Against this background, the first wave of financial liberalization took place in the second half of

the 1980s, mainly taking the form of interest rate deregulation. Prior to this period, almost all

interest rates were administered and influenced by budgetary concerns and the degree of

concessionality of directed loans. To preserve some profitability, interest rate margins were kept

sufficiently large by keeping deposit rates low and non-concessional lending rates high. Based

on the 1985 report of the Chakravarty Committee, coupon rates on government bonds were

gradually increased to reflect demand and supply conditions.

Following the 1991 report of the Narasimham Committee, more comprehensive reforms took

place that same year. The reforms consisted of (a) a shift of banking sector supervision from

intrusive micro-level intervention over credit decisions toward prudential regulations and

supervision; (b) a reduction of the CRR and SLR; (c) interest rate and entry deregulation; and (d)

adoption of prudential norms. Further, in 1992, the Reserve Bank of India issued guidelines for

income recognition, asset classification and provisioning, and also adopted the Basle Accord

capital adequacy standards. The government also established the Board of Financial Supervision

in the Reserve Bank of India and recapitalized public-sector banks in order to give banks

sufficient financial strength and to enable them to gain access to capital markets. In 1993, the

Reserve

Bank of India permitted private entry into the banking sector, provided that new banks were

well capitalized and technologically advanced, and at the same time prohibited cross-holding

practices with industrial groups. The Reserve Bank of India also imposed some restrictions on

new banks with respect to opening branches, with a view to maintaining the franchise value of

existing banks.

As a result of the reforms, the number of banks increased rapidly. In 1991, there were 27 public-

sector banks and 26 domestic private banks with 60,000 branches, 24 foreign banks with 140

branches, and 20 foreign banks with a representative office.


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Between January 1993 and March 1998, 24 new private banks (nine domestic and 15 foreign)

entered the market; the total number of scheduled commercial banks, excluding specialized

banks such as the Regional Rural Banks rose from 75 in 1991/92 to 99 in 1997/98. Entry

deregulation was accompanied by progressive deregulation of interest rates on deposits and

advances. From October 1994, interest rates were deregulated in a phased manner and by

October 1997, banks were allowed to set interest rates on all term deposits of maturity of more

than 30 days and on all advances exceeding Rs 200,000. While the CRR and SLR, interest rate

policy, and prudential norms have always been applied uniformly to all commercial banks, the

Reserve Bank of India treated foreign banks differently with respect to the regulation that

requires a portion of credit to be allocated to priority sectors.

Since 1991, India has been engaged in banking sector reforms aimed at increasing the

profitability and efficiency of the then 27 public-sector banks that controlled about 90 per cent

of all deposits, assets and credit. Prior to the reforms, Indias financial sector had long been

characterized as highly regulated and financially repressed. The prevalence of reserve

requirements, interest rate controls, and allocation of financial resources to priority sectors

increased the degree of financial repression and adversely affected the countrys financial

resource mobilization and allocation.


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Functions Of Banks

Functioning of a Bank is among the more complicated of corporate operations. Since

Banking involves dealing directly with money, governments in most countries regulate

this sector rather stringently. In India, the regulation traditionally has been very strict

and in the opinion of certain quarters, responsible for the present condition of banks,

where NPAs are of a very high order. The process of financial reforms, which started in

1991 has cleared the cobwebs somewhat but a lot remains to be done. The multiplicity

of policy and regulations that a Bank has to work with , makes its operations even more

complicated, sometimes bordering on illogical. This section, which is also intended for

banking professional, attempts to give an overview of the functions in as simple manner

as possible.

Banking Regulation Act of India, 1949 defines Banking as "accepting, for the purpose of

lending or investment of deposits of money from the public, repayable on demand or

otherwise and withdrawal by cheques , draft, order or otherwise."

Deriving from this definition and viewed solely from the point of view of the customers,

banks essentially perform the following functions :

1) Accepting deposits from public/others(Deposits)

2) Lending money to public(Loans)

3) Transferring money from one place to another( remittanes)

4) Acting as trustees

5) Keeping valuables in safe custody

6) Government business

But do these functions constitute banking? The answer must be a no. There are so many

intricacies involved in the activities that a bank performs today, that the above list must

sound very simple to a seasoned banker.

Banks are organized in a linear structure to perform these activities at the base of which

lies a Branch. The corporate office of a bank is normally called a head office


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Accepting deposits

Banks are also called custodians of public money. Basically, the money is accepted as

deposit for safe keeping. But since the banks use this money to earn interest from people

who need money, Banks share a part of this interest with the depositors. However,

accepting deposits and keeping track of the money involves a lot of book-keeping and

other operations. Let us see what the Banks must maintain to provide this service

y An effective branch network to reach the targeted customer base

y A system of Intra branch accounting with separate account(s) for each customer

y A system of reconciliation at the end of the day

y Availability of adequate funds at each branch

y Trained staff for effective customer service

y Infrastructural inputs like space, stationery, comfortable environment etc.

Lending moneytothepublic

Lending money is one of the two major activities of any bank. In a way, the bank acts as

an intermediary between the people who have the money to lend and those who have

the need for money to carry out business transactions.

This activity places its own requirements on the resources of the bank. For effective

functioning of this, a bank must possess:

y Sufficient deposits.

y Skills to appraise the potential borrowers and the activity.

y Legal skills for documentation.

y Legal skills for recovery of its dues through the courts.

y Skills to follow up and monitor the end-use of money lent by it.

y An effective credit delivery system.


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Transferof money

Apart from accepting deposits and lending money, banks also carry out, on behalf of

their customers the act of transfer of money - both domestic and foreign.- from one

place to another. This activity is known as "remittance business" . Banks issue Demand

Drafts, Banker's Cheques, and Money Orders etc. for transferring the money. Banks also

have the facility of quick transfer of money also know as Telegraphic Transfer or Tele

Cash Orders.

To deliver this service, a Bank must have:

y An effective branch network or correspondent relationships.

y A system of Inter branch reconciliation

y A system of reconciliation with the correspondents

y Availability of funds at all the centers

Trustee Business

Banks also act as trustees for various purposes. For example, whenever a company

wishes to issue secured debentures, it has to appoint a financial intermediary as trustee

who takes charge of the security for the debenture and looks after the interests of the

debenture holders. Such entity necessarily has to have expertise in financial matters and

also be of sufficient standing in the market/society to generate confidence in the minds

of potential subscribers to the debenture. While Banks are the natural choice for the

customers, Banks must possess the following to be effective and retain that:

y A track record of sufficient length.

y

Facilities for safe keeping.

y Legal skills to take necessary steps for the trusteeship


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Keeping Valuablesin Safe Custody

Bankers are in the business of providing security to the money and valuables of the

general public. While security of money is taken care of through offering various type of

deposit schemes, security of valuables is provided through making secured space

available to general public for keeping these valuables. These spaces are available in the

shape of LOCKERS. The latter are small compartments with dual locking facility built into

strong cupboards. These are stored in the Bank's Strong Room and are fully secure.

Lockers can neither be opened by the hirer or the Bank individually. Both must come

together and use their respective keys to open the locker. To make this facility available

to its customers, the Bank must provide:

y Physical structures to house the lockers

y Locker cabinets

y Security arrangements

y Record of access to lockers

Government Business

Earlier Government business used to be exclusively carried out by Government

Treasuries where all type of transactions took place. However, now Banks act on behalf

of the Government to accept its tax and non tax receipts. Most of the Government

disbursements like pension payments and tax refunds also take place through banks.

While the Banks carry out this business for a fee to be paid by the Government, providing

this service requires a lot of effort and organization. The banks must provide:

y Interface with the public

y Liaison with local government departments and government treasury

y Arrangement for reconciliation with the Government Accounts Department

y Necessary infrastructure, stationery etc. to cater to the numbers


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MARKETING APPROACH

Banking industry is essentially a service industry which provides various types of banking and

allied services to its clients. Bank customers are such persons and organizations that have

surplus or shortage of funds and those who need various types of financial and related services

provided by the banking sector. These customers belong to different strata of economy,

different geographical locations and different professions and businesses. Naturally, the need of

each individual group of customers is distinct from the needs of other groups. It is, therefore,

necessary to identify different homogenous groups and even sub-groups of customers, and then

with utmost precision determine their needs, design schemes to suit their exact needs, and

deliver them most efficiently.

Banks, generally, have been working out various services and products at the level of the Head

Office and these are traded through their retail outlets (branches) to different customers at the

grass-roots level. This is the so called 'Top to Bottom' approach. However, bank marketingrequires a change in this traditional outlook. It should be 'bottom to top' approach with

customers at the grass-roots level as the focal point for working out various products / schemes

to suit the needs of different homogenous groups of customers. Thus, bank marketing

approach, in general, is a group or "Collective" approach.

Customers Relationship Management, on the other hand, is an individualistic approach which

concentrates on certain select customers from the homogeneous groups, and develops

sustainable relationships with them for adding value to the bank. This may be termed as a

"Selective" approach.

Thus, bank marketing concept, whether "collective" approach or "selective" approach, is afundamental recognition of the fact that banks need customer oriented approach. In other

words, bank marketing is the design and delivery of customer needed services worked out by

keeping in view the corporate objectives of the bank and environmental constraints.


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The following chart gives an overview of the Two Pronged

Approach to Bank Marketing


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PRINCIPAL ASPECTS OF BANK MARKETING

1 CUSTOMER ORIENTED SERVICES - Services offered by the banks are to be worked out in such

a manner that they fulfil the needs of the customers.

Traditionally, bankers have been accustomed to think in terms of what banks can offer and not

what customers want. However, bank marketing concept requires them to change this

orientation, and start working out schemes and services by keeping changing customer needs as

the focus of their new and novel products. In order to design and deliver customer needed

services, the banks must learn to seek information about the existing and potential customers,

and their perceived and latent needs on a regular and systematic basis.

2 DESIGN AND DELIVERY OF SUCH SERVICES - The word design implies that good marketing

services need to be properly designed and painstakingly crafted so as to suit a particular well-defined group of clients. They do not just emerge effortlessly. Moreover, such properly designed

services must be properly traded. In fact, poor delivery of smartly designed services is just as

bad as smart delivery of poorly designed services. The quality of delivery is to be ensured not

only through focussed advertisement, but also through proper customer services offered at the

bank's retail outlets. Customer satisfaction is a dynamic process and it is necessary to keep pace

with rising expectations of the customers. Further, the development of IT and spread of Internet

are opening up newer mechanisms of customer contact and services.

3 CORPORATE OBJECIVES OF BANK - The corporate objectives of the bank are to be worked out

within the broad framework of the national policy. The corporate objectives are of two types,

Short Term and Long Term.

The ShortTerm Objectives could be of the type: -

a) Increasing profitability of the bank next year.

b) Widening customer base by offering new services,

c) increasing growth rate of credit next year, etc.

The LongTerm Objectives could be: -

a) To rise to number one position in five years,

b) To become the universal bank over the period of next 3 years, etc.

Once the corporate objectives are clearly spelt out, various schemes can be designed to

fulfill the needs of the customers within the framework of the chosen corporate objectives.

Further, the resources made available for systematic marketing efforts are also constrained

by policies, vision and attitudes of the management.


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4 ENVIRONMENTAL AND OTHER CONSTRAINTS - Environmental and other constraints play an

important role in bank marketing decisions. Generally, the environmental constraints fall into

four categories: Economic, Cultural, Legal and Political.

A thorough understanding of local and national economy is essential for taking effective

decisions about what product to be offered, where it is to be offered, at what price it is to be

offered, and how it is to be offered?

Banking schemes which are suitable for a developed economy might not be suitable for a

developing economy. It is essential to have intimate knowledge of income pattern of potential

customers, population growth, nature of industrial and trading activities, extent of agricultural

development, employment levels, wage structures, and other relevant factors, in order to make

decisions about services to be offered.

The cultural environment in which the bank operates also has a bearing on bank marketing

decisions. This includes attitude of local people about saving, borrowing and spending, and also

their traditions and values. The schemes suited for urban sector would be different from those

suited for rural sector.

Legal and political environment mainly constrains the decisions about the price of product to be

offered and the place for offering the product. For example, price of deposits and various types

of advances is constrained by the interest rate policies of the regulator

Thus, the knowledge of environmental constraints is an essential factor in the designing

and delivery of various types of customer-oriented schemes and services


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MARKETING STRATEGY

The marketing strategy consists of a very clear definition of prospective customers and their

needs and the creation of marketing mix to satisfy them. A recent development in

This regard is Customer Relationship Management (CRM). It is a business strategy to learn more

and more about customer behavior in order to create long term and sustainable relationship

with them. It is a comprehensive process of acquiring and retaining selective customers to

generate value for the bank and its customers.

Under CRM, acquisition of customers is done through personal visits, media advertisement or

word of mouth from existing customers. Customer retention is carried out through data

warehousing and mining tools, customer service and call services, and improved customer value

is obtained through cross-selling and up selling to the retained customers.

A IDENTIFICATION OFTARGETING CUSTOMER AND THEIR NEEDS

This is an important area in formulation of a marketing strategy. Unless the bank has clear idea

about the customers it wants to serve, it is not possible to work out products to satisfy their

needs. This identification process involves: -

> Finding out profile of present customers in terms of their education, occupation, income,

geographical location, population group, age, sex, marital status, products and services they

purchase, their habits, tastes and preferences, their businesses and future prospects, etc.

> Finding out opinions of existing customers about the services provided by the bank and their

suggestions for improvement in present services and introduction of new services.

> collecting such information from the persons who are not currently customers of the bank.

All this can be done by conducting a survey of customers and non-customers of the bank.

Moreover, this process of seeking information about the market must form an integral part of

the system and must be done on a regular basis. The survey would give valuable information

about profiles and opinions of customers and non-customers of the bank, and it can be analysed

to find out the target group of the customers and their felt and latent needs.

The concept of data warehousing and data mining used in CRM helps in seeking information

about individual customers and their needs on a regular and systematic basis. Data warehousing

builds customer wise data by mapping it from various services.

And products used by the customers such as deposits, credits, foreign exchange, e-business,

safe custody, lockers, bill collection, etc.


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Data mining carries out various types of analysis on collected data to determine customer

behaviour with respect to product, price and distribution channels, and offers a holistic view of

every customer at a given point of time. The customer information gathered by the bank in their

day-to-day banking operations is often sufficient for effective data storage. However, many

times, it needs to be supported by data collected from outside sources and agencies.

Further, the Customer Relations Management focuses on customer classification by classifying

the customers into: a high value (a more profitable) customer and a low value (a less profitable)

customer. Once bank differentiates the customers in terms of their profitability and other traits,

it becomes easy for the banks to customize their services and products to maximize overall

value of their customer portfolio.

B MARKETINGMIX - The second element in formulation of marketing strategy is development

of proper marketing mix, so as to satisfy the needs of the target group of customers. This would

involve decisions regarding product, place, price and promotion. Decisions about product would

answer questions about the design of the services offered to suit customer needs, the desirablehours for offering such services, the attractive names of such services and so on. Various

alternative ways to provide the basic services might have to be worked out depending on the

needs of the various target groups.

Decisions about place should answer questions about location of the prospective customers

and, therefore, location for offering such services.

Decisions about price should answer questions about right price for services offered, worked out

by taking into consideration the cost of such services, competitor's charges and other factors.

Decision about promotion answers questions about communication with the customer. Aftergetting information on needs and location of the prospective customer and after designing

schemes to suit their needs, it is necessary to take decisions on making

Schemes known to the prospective customers through proper communication media and

through proper words, so as to bring out the salient features of the scheme. Actual delivery of

the schemes at the counters and at the manager's desk also plays a vital role in determining the

success of the scheme. Expectations of the customers in post-reforms period have been

changing very fast and customers have started shifting loyalty to better banks. It is, therefore, all

the more necessary to ensure that not only the felt needs but also the latent needs of the

customers are foreseen and satisfied.

A very good example of formulation of a market strategy under the "collective" approach is

development of the product, "Kisan Credit Cards". The target groups identified for this were

farmers with the purpose of dispensation of agricultural and rural credit to them. Agricultural

credit cards and cash credit facilities which were niche-marketed and were exclusively preserved

for the privileged class of farmers were, thus, extended to the small and marginal farmers since

1999


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The 7 Ps of Marketing

Once you've developed your marketing strategy, there is a "Seven P Formula" you should use to

continually evaluate and reevaluate your business activities. These seven are: product, price,

promotion, place, packaging, positioning and people. As products, markets, customers andneeds change rapidly, you must continually revisit these seven Ps to make sure you're on track

and achieving the maximum results possible for you in today's marketplace.

Product

To begin with, develop the habit of looking at your product as though you were an

outside marketing consultant brought in to help your company decide whether or not it's in the

right business at this time. Ask critical questions such as, "Is your current product or service, or

mix of products and services, appropriate and suitable for the market and the customers of

today?"

Whenever you're having difficulty selling as much of your products or services as you'd like, you

need to develop the habit of assessing your business honestly and asking, "Are these the right

products or services for our customers today?"

Is there any product or service you're offering today that, knowing what you now know, you

would not bring out again today? Compared to your competitors, is your product or service

superior in some significant way to anything else available? If so, what is it? If not, could you

develop an area of superiority? Should you be offering this product or service at all in the

current marketplace?

Prices

The second P in the formula is price. Develop the habit of continually examining and

reexamining the prices of the products and services you sell to make sure they're still

appropriate to the realities of the current market. Sometimes you need to lower your prices. At

other times, it may be appropriate to raise your prices. Many companies have found that the

profitability of certain products or services doesn't justify the amount of effort and resources

that go into producing them. By raising their prices, they may lose a percentage of their

customers, but the remaining percentage generates a profit on every sale. Could this be

appropriate for you?

Sometimes you need to change your terms and conditions of sale. Sometimes, by spreading

your price over a series of months or years, you can sell far more than you are today, and the

interest you can charge will more than make up for the delay in cash receipts. Sometimes you

can combine products and services together with special offers and special promotions.Sometimes you can include free additional items that cost you very little to produce but make

your prices appear far more attractive to your customers.

In business, as in nature, whenever you experience resistance or frustration in any part of

your sales or marketing activities, be open to revisiting that area. Be open to the possibility that

your current pricing structure is not ideal for the current market. Be open to the need to revise


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your prices, if necessary, to remain competitive, to survive and thrive in a fast-changing

marketplace.

Promotion

The third habit in marketing and sales is to think in terms of promotion all the time. Promotion

includes all the ways you tell your customers about your products or services and how you then

market and sell to them.

Small changes in the way you promote and sell your products can lead to dramatic changes in

your results. Even small changes in your advertising can lead immediately to higher sales.

Experienced copywriters can often increase the response rate from advertising by 500 percent

by simply changing the headline on an advertisement.

Large and small companies in every industry continually experiment with different ways of

advertising, promoting, and selling their products and services. And here is the rule: Whatever

method of marketing and sales you're using today will, sooner or later, stop working. Sometimes

it will stop working for reasons you know, and sometimes it will be for reasons you don't know.

In either case, your methods of marketing and sales will eventually stop working, and you'll have

to develop new sales, marketing and advertising approaches, offerings, and strategies.

Place

The fourth P in the marketing mix is the place where your product or service is actually sold.

Develop the habit of reviewing and reflecting upon the exact location where

the customer meets the salesperson. Sometimes a change in place can lead to a rapid increase

in sales.

You can sell your product in many different places. Some companies use direct selling, sending

their salespeople out to personally meet and talk with the prospect. Some sell by telemarketing.

Some sell through catalogs or mail order. Some sell at trade shows or in retail establishments.

Some sell in joint ventures with other similar products or services. Some companies use

manufacturers' representatives or distributors. Many companies use a combination of one ormore of these methods.

In each case, the entrepreneur must make the right choice about the very best location or place

for the customer to receive essential buying information on the product or service needed to

make a buying decision. What is yours? In what way should you change it? Where else could you

offer your products or services?

Packaging

The fifth element in the marketing mix is the packaging. Develop the habit of standing back and

looking at every visual element in the packaging of your product or service through the eyes of a

critical prospect. Remember, people form their first impression about you within the first 30

seconds of seeing you or some element of your company. Small improvements in the packaging

or external appearance of your product or service can often lead to completely different

reactions from your customers.

With regard to the packaging of your company, your product or service, you should think in

terms of everything that the customer sees from the first moment of contact with your

company all the way through the purchasing process.


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Packaging refers to the way your product or service appears from the outside. Packaging also

refers to your people and how they dress and groom. It refers to your offices, your waiting

rooms, your brochures, your correspondence and every single visual element about your

company. Everything counts. Everything helps or hurts. Everything affects your customer's

confidence about dealing with you.

When IBM started under the guidance of Thomas J. Watson, Sr., he very early concluded thatfully 99 percent of the visual contact a customer would have with his company, at least initially,

would be represented by IBM salespeople. Because IBM was selling relatively sophisticated

high-tech equipment, Watson knew customers would have to have a high level of confidence in

the credibility of the salesperson. He therefore instituted a dress and grooming code that

became an inflexible set of rules and regulations within IBM.

As a result, every salesperson was required to look like a professional in every respect. Every

element of their clothing-including dark suits, dark ties, white shirts, conservative hairstyles,

shined shoes, clean fingernails-and every other feature gave off the message of professionalism

and competence. One of the highest compliments a person could receive was, "You look like

someone from IBM."

Positioning

The next P is positioning. You should develop the habit of thinking continually about how you

are positioned in the hearts and minds of your customers. How do people think and talk about

you when you're not present? How do people think and talk about your company? What

positioning do you have in your market, in terms of the specific words people use when they

describe you and your offerings to others?

In the famous book by Al Reis and Jack Trout, Positioning, the authors point out that how you

are seen and thought about by your customers is the critical determinant of your success in a

competitive marketplace. Attribution theory says that most customers think of you in terms of a

single attribute, either positive or negative. Sometimes it's "service." Sometimes it's"excellence." Sometimes it's "quality engineering," as with Mercedes Benz. Sometimes it's "the

ultimate driving machine," as with BMW. In every case, how deeply entrenched that attribute is

in the minds of your customers and prospective customers determines how readily they'll buy

your product or service and how much they'll pay.

Develop the habit of thinking about how you could improve your positioning. Begin by

determining the position you'd like to have. If you could create the ideal impression in the

hearts and minds of your customers, what would it be? What would you have to do in every

customer interaction to get your customers to think and talk about in that specific way? What

changes do you need to make in the way interact with customers today in order to be seen as

the very best choice for your customers of tomorrow?


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People

The final P of the marketing mix is people. Develop the habit of thinking in terms of the people

inside and outside of your business who are responsible for every element of your sales and

marketing strategy and activities.

It's amazing how many entrepreneurs and businesspeople will work extremely hard to think

through every element of the marketing strategy and the marketing mix, and then pay little

attention to the fact that every single decision and policy has to be carried out by a specific

person, in a specific way. Your ability to select, recruit, hire and retain the proper people, with

the skills and abilities to do the job you need to have done, is more important than everything

else put together.

In his best-selling book, Good to Great, Jim Collins discovered the most important factor applied

by the best companies was that they first of all "got the right people on the bus, and the wrong

people off the bus." Once these companies had hired the right people, the second step was to

"get the right people in the right seats on the bus."

To be successful in business, you must develop the habit of thinking in terms of exactly

who is going to carry out each task and responsibility. In many cases, it's not possible to

move forward until you can attract and put the right person into the right position. Many

of the best business plans ever developed sit on shelves today because the [people who

created them] could not find the key people who could execute those plans.


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PROMOTIONAL STRATEGY OF BANK MARKETING

Even if a scheme is properly developed and designed to suit customer needs, it will not pick up,

unless it is properly marketed at all levels. Some of the strategies which would help banks in

their promotional efforts are given below: -

To promote "Personal Selling", whether performed by counter clerk, bank officer or customer

service representatives of the bank.

To ensure "Proper Knowledge and Awareness" of various schemes of the bank among the

employees of the bank.

To impart "Sales and Product Training" including tele-banking and net-banking concepts to

employees of the bank. One of the ways of doing this is to organise periodical in-branch

departmental meetings of the employees addressed by Branch Managers / Departmental

Heads.

To develop incentive programmes which reward good-customer oriented selling behavior. The

incentives need not be necessarily in terms of a cash payment but several other alternatives can

also be thought of, e.g., if a particular employee brings certain minimum amount of business to

the bank, he/she should be eligible for certain special leave or they can be made members of a

special club called "Chairman's Club" for a particular period. Several other such ways giving

cashless incentives to the employees can be worked out.

To ensure conversion of the entire employees organization of the bank into a well-informed,

disciplined and professional force committed to the corporate values and objectives.

To make effective use of the large network of the retail outlets of the bank visited by a large

number of customers every day. A typical bank customer visits his/her branch two or more

times a month so one can imagine how many customer visits each branch will have per year.

The use of "In-bank Advertising" would, therefore, help a lot in marketing bank services e

worked out.

In this connection the bank may have to think of retail shopkeepers' strategy of exhibiting their

products in an attractive manner. This would include: -

a) Careful physical layout of the branch and creation of inviting environment.

(b) Exhibition windows as found in many departmental stores displaying various products of the

bank in an attractive manner.

(c) Attractive table with glass box on top exhibiting literature on various products offered by the

bank to be kept at an appropriate location on the branch floor.


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(d) Creative ideas to exhibit "intangible products" in "tangible manner", e.g., visual images, small

models / photographs of life style, customer could achieve with the help of proper financial

planning done through bank schemes.

(e) Creation and updating of literature on various schemes and services offered by the bank and

ensuring its availability at each branch.

(f) Specially designed in-branch video visuals exhibiting various products and services of the

bank.

Public sector banks with a large network of branches have an excellent opportunity to expand

customer relationships and provide them with additional complementary services. Personal

contacts in any case are much better as compared to contacts through phones or Internet.

In Customer Relationship Management (CRM), results of data warehousing and mining must be

made available to all the concerned employees so that they have complete knowledge about

the value / profit each individual customer adds to the bank, their future needs and ways and

means to satisfy them.


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New Trends In Banking

Internetbanking:Internet technology has invaded the portals of our banking institutions and as the clich goes

everything will just be a click away. With net banking the customer will be able to transact with

the help of a mouse and his visits to the neighbourhood bank will become a thing of the past.

Though a modest start has been made in India, net banking has still a long way to go. This

development has been acknowledged by the latestOnline Banking Report, which features a

listing for ICICI Bank. Some others like Citibank, HDFC Bank and GlobalTrust Bank also have

also endeavoured to make real time banking a reality before this century closes. Net banking

makes it easy to transfer ones money from one branch in a particular city to any other branch in

another city.

Types of Internet Banking

Currently, there are three basic kinds of Internet banking that are being employed in the marketplace:

Information

This is the most basic level of Internet banking.The bank has marketing information about its products and

services on a stand-alone server.This level of Internet banking service can be provided by the bank itself o

by sourcing it out.Since the server or Web site may be vulnerable to alteration, appropriate controls must

therefore be in place to prevent unauthorized alterations to data in the server or web site.

Communication

This type of Internet banking allows interaction between the banks systems and the customer. It may be

limited to electronic mail, account inquiry, loan applications, or static file updates. The risk is higher with this

configuration than with the earlier system and therefore appropriate controls need to be in place to

prevent, monitor, and alert management of any unauthorized attempt to access banks internal network and

computer systems. Under this system the client makes a request to which the bank subsequently responds.


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Transaction

Under this system of Internet banking customers are allowed to execute transactions. Relative to the

information and communication types of Internet banking, this system possesses the highest level of risk

architecture and must have the strongest controls. Customer transactions can include accessing accounts,

paying bills, transferring funds, etc. These possibilities demand very stringent security.

Various transactions that can be done by internet banking are:

y Net banking makes it easy to transfer ones money from one branch in a particular city

to any other branch in an another city

y One can open a FD account via the net. One needs to provide data regarding the

amount and term of the deposit and also the branch in which the account is to be

opened.

y One can order for an issue of a demand draft or a bankers cheque. However, the draft

can be delivered only to the customers address and not to any other third party.

y One can inquire on the balance in ones savings, current and FD account and also on the

tax deducted at source on ones FD account for the current and previous financial year.

y One can give instructions over the net for stopping payment on a cheques/s.

y

You can request for a cheque book via the internet, which will take three days to come.

y One can view all the transactions completed on an account for a specified period and

get a copy via e-mail.

ICICI Bank with its net banking service called Infinity goes a step forward by allowing the

account holder to transfer funds into another persons account within the bank. Also one can

intimate about the loss of an ATM Card over the net when using Infinity. Moreover, corporate

can issue of letters of credit and make enquirys regarding bills sent for collection via this

service. A special feature on Infinity is the facility for nicknaming all accounts to avoid

remembering lengthy account numbers. In terms of safety, HDFC Bank allows one to have three

login attempts after which a new password is given while ICICI Bank will disable the password

after five login attempts. Considering the fact that these services are offered without charging a


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fee, the effort is commendable. The potential for net banking in India is immense considering

the rising penetration levels of the World Wide Web in Indian homes and offices.

The reasons why Internet banking has not taken off in India at a very fast pace are:

1) Slowness in adoption of the Internet by the 40+ age group,

2) Lack of a strong trust environment prevents rapid move of corporate into adopting Internet,

3) Lack of a critical mass of early adopters of security and trust technology among bankers

operating in India to drive the transition from bricks and mortar to e-banking

Internet Banking Advantages:

Reduced Transaction cost - It has been repeated shown that as a delivery or distribution

channel, the Internet could bring a substantial cost advantage for banks. The frequently quoted

Booz-Allen and Hamilton study showed that the cost of a customer walking into the branch and

using a teller is USD1.01, where as the cost of conducting the same transaction on the Internet is

only a tenth of the cost. No doubt the ATM is considerably cheaper than a teller, but even so,

the Internet is nearly 3 times cheaper than the ATM usage. In short, replacing a teller with an

Internet channel should in theory, show a 10 fold increase in the distribution revenue for the

bank. This reason alone should be sufficient for banks to encourage this form of distribution

channel.

Internetbanking Disadvantages:

y Need an account with an Internet Service Provider (ISP)

y Security concerns, like "hackers" accessing your bank accounts

y Original setup for bill paying time is time-consuming but will ultimately be a time-saver

ySwitching banks can be more cumbersome online than in person

y Must have basic computer skills and Internet knowledge

y Must be comfortable using a computer


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Mobile banking:

Mobile Banking is a service that allows you to do banking transactions on your mobile phone

without making a call, using the SMS facility. Mobile Banking works on the 'Text Messaging

Facility' also called the SMS that is available on mobile phones. This facility allows you to send a

short text message from your mobile phone instead of making a phone call.

All you need to do is type out a short text message on your mobile phone and send it out to a

pre-designated number. The response is sent to you as an SMS message, all in the matter of a

few seconds. This message travels from your mobile phone to the SMS Centre of the Cellular

Service Provider, and from there it travels to the Bank's systems. The information is retrieved

and sent back to your mobile phone via the SMS Centre, all in a matter of a few seconds.

You can access your bank account and conduct a host of banking transactions and inquiries

through the Mobile Banking services. You can check your balance, stop a cheque payment, or

even pay your utility bills. The Mobile Banking service gives you account information and real-

time transaction capabilities from the mobile phones at a true "anywhere, anytime, anyhow"

convenience. All this is through SMS or WAP.

You can access the following transactions using mobile banking:

Get your balance details, obtain your last 3 transaction details, request a cheque book ,stop a

cheque payment ,enquire cheque status ,request an account statement ,get Fixed Deposit

details ,Bill payment details for electricity, mobile phone and telephone services

Automated Teller Machines

Automated Teller Machines are a means of convenience for customers. So much so that mostof the people have changed the acronym to Any Time Money. HSBC Bank was the first bank to

introduce the ATM concept in India way back in 1987. Now, most of the banks have their ATM

outlets in India. Private sector banks have taken the lead in this regard. ICICI, UTI, HDFC and IDBI

together account for more than 50% of the total ATMs in India. ICICI Bank was the first bank to

cross the 1,000 mark in India.


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The system works as follows: a switch routes all information and transactions among member

institutions. It transmits the information and/or data to the card-issuing bank or its processor,

which approves or declines the transaction request and notifies the switch. The card-issuing

bank's decision is then routed by the switch to the processor of the ATM, which completes the

transaction. At the end of each day, accounts among members are settled and account balances

are transmitted to each member institution

The cost of setting up an ATM center is around Rs1mn. The maintenance cost per annum works

out to around Rs1.2-1.4mn per annum. To reach the break-even point within a year, there

should be around 250-300 transactions per day per ATM. The companies are telling customers

to use the ATMs more rather than visit the branches.

Phone banking

Your bank account is now just a phone call away. The advantages of phone banking are as

follows:

Security

When you use the Phone Banking facilities, your transactions are completely secure. When you

open an account with us, you are given a unique Telephone Identification Number (TIN), which

is completely confidential

Choose your language

You can choose between English and Hindi for guidance through the Interactive Voice Response

(IVR) menu of services, at the time of calling the bank.

Account details/balanceenquiry

You can get up-to-the-second details of your Savings or Current Accounts and your Fixed

Deposits. You can also get details of the last five transactions (on the IVR), which would be read

out to you at the touch of a button. You can even have a mini account statement of the last 9

transactions faxed to you


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Chequestatusinquiries

You can use Phone Banking to check on the status of cheques issued or deposited from

anywhere in India.

Chequebook/ accountstatementrequests

Register a request for a new cheque book using Phone Banking. It will be couriered within 3

working days in India.

Stoppaymentrequests

Stop payment of a cheque, 24 hours a day. You have the facility to stop a single cheque or a

series of cheques

Fixed Deposits

You can easily open a Fixed Deposit over the phone, by simply authorizing a transfer of funds

from your Savings Account. The deposits can be opened in the names of the account holders in

the funding account. You may also book the Fixed Deposit in your name alone and maintain a

sweep-in facility. You can also enquire about the details of your Fixed Deposit, or Tax Deducted

at Source, if any using the Phone Banking service.

This facility is available only during Phone Banking hours (i.e. when phone bankers are

available).

Reportingoflost ATM / Debit Card

If you happen to lose your ATM/Debit card, call your local Phone Banking number right away.

This facility is available 24 hours a day, 7 days a week.

Demand Drafts

You can now place a request for a Demand Draft or Manager's Cheque worth up to Rs. 50,000/-

per Customer ID per day, on the phone. For Preferred clients the limit is above that amount per

day. The draft or cheque will be sent to the address on our records by courier on the next

working day.


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Fund transfers

If you hold multiple accounts with us, all you have to do is call in to transfer funds between

accounts, provided the same are linked to the same Cust ID number. There is no fund transfer

limit.

This facility is available only during Phone Banking hours (i.e. when Phone Bankers are

available).

Bill Pay

Pay your Utility and Bank Credit Card bills through Phone Banking

Using Phonebanking

When you dial in to Phone Banking, a voice prompt will guide you through your

transactions. Also, for those who prefer the human touch, some Phone Banking service

comes with the option of talking to a Phone Banker, who will provide you with the

required assistance


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Reserve Bank of India- Regulatory Authority

India's Central Bank - the RBI - was established on1 A

pr

il1935

and was nationalized on1

January 1949.

The Preamble prescribes the objective as:

"to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary

stability in India and generally to operate the currency and credit system of the country to its

advantage."

Functionsof RBI

Monetary Authority:

y Formulates, implements and monitors the monetary policy.

y Objective: maintaining price stability and ensuring adequate flow of credit to productive

sectors.

Regulator and supervisorofthe financialsystem:

y Prescribes broad parameters of banking operations within which the countrys banking

and financial system functions.

Objective: maintain public confidence in the system, protect depositors interest and

provide cost-effective banking services to the public.

Managerof Exchange Control:

y Manages the Foreign Exchange Management Act, 1999.

y Objective: to facilitate external trade and payment and promote orderly development

and maintenance of foreign exchange market in India.


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Issuerofcurrency:

y Issues and exchanges or destroys currency and coins not fit for circulation.

y Objective: to give the public adequate quantity of supplies of currency notes and coins

and in good quality.

Developmentalrole

y Performs a wide range of promotional functions to support national objectives.

Related Functions

y Banker to the Government: performs merchant banking function for the central and the

state governments; also acts as their banker.

y Banker to banks: maintains banking accounts of all scheduled banks.


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State Bank Of India

The State Bank of India is the largest commercial bank in India in terms of profits, assets,

deposits, branches and employees.

The origins of State Bank of India date back to 1806, when the Bank of Calcutta (later called the

Bank of Bengal) was established. In 1921, the Bank of Bengal and two other banks (Bank of

Madras and Bank of Bombay) were amalgamated to form the Imperial Bank of India. In 1955,

the controlling interests of the Imperial Bank of India were acquired by the Reserve Bank of

India and the State Bank of India was created by an act of Parliament to succeed the Imperial

Bank of India.

It has Rs. 318619 crore in deposits and average working funds of Rs. 375804 crore, the State

bank of India stands tall in the industry. The closest competitors are not a third as big as SBI.

Punjab National bank ranks # 2 in deposits, but has deposits of just Rs. 87816 crore. ICICI is the

second biggest as far as average working funds are concerned, but that stacks up to just Rs.

106593 crore. SBI , which accounts for 18% of all deposits with commercial banks in India , is

able to mop up such large amounts in low cost deposits because of its sheer reach ; it has 13635

branches spread all over the country. Last year, while SBIs deposits grew 7%, those of new

private banks swelled at 29.6%. Add to it the coming mergers and acquisitions, and SBIs

position will come under threat. SBI has a good size and excellent geography in India and are

interested in exploring acquisitions overseas .To keep its lead , the banking elephant will have to

learn to dance .


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SBIs Time Line

1955: Branch expansion

1960s: small scale industries and small businesses

1970s: entrepreneurial development and agriculture

1980s: International expansion

1990s: Technology information and corporate financing

2002: focus on retail banking

2003: Business Process Reengineering

2004: Full computerization and restructuring

ATMs

y Total ATMs of State Bank Group 5500 +; all networked -largest network in the country

y 6000+ ATMs for the Group by March 2007

y Card base of the Group 5.7 mn largest in the country (debit +credit cards)

y Customers have access over 34,000 POS through debit-cum-ATM card

Internet Banking

3, 50,000 + retail customers and value added services extended to all multi-distribution channel


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Challenges

y Increasing competition in Retail Banking

y Trading profit under pressure

y Training and redeployment of human resources

y Reduce gross NPAs

SBI strategy

y Leverage unparalleled network

y Leverage multi-product platform

y Enhance technology platform - virtual merger

y Focus on infrastructure and growth oriented industries

y Process re-engineering to enhance efficiency

y Low cost funding

y Expand fee income sources

y Prudent risk management practices stemming from historical extensive experience

y Reorientation of organization and training of human resources - sales focused ; customer

focused

y Use of recent regulatory changes in tackling NPAs

y Overseas expansion

Technology

y Universal computerization of all branches of SBI Group

y Centralized database system

y Single Window Services at branches

y Increased ATM coverage through tie ups with other banks


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Business process re engineering

y Creation of separate SBUs to focus marketing efforts

y Personal Banking

y Agricultural

y SMEs

y Government business

y Centralized credit management

y New credit delivery model aimed at Mid-Corporate segment lending

y Stressed Asset Management Group set up to address issue of sticky assets

y Focus on Project Finance SBU

People

y Training

y Lateral Recruitment

y Specialist recruitment for Agriculture Sector

In US$ billion SBI State Bank

Group

SBI State Bank

Group

FY 05-06 FY 06-07

Operating Profit 2.63 3.38 3.52 3.82

Net Profit 0.88 0.84 1.27 1.53

Balance Sheet Size 104.85 93.28 126.03 130.24


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ICICI bank

In 2006 the bank added 13,000 retail customers every single day of the year, or a mind boggling

3.4 million customers, taking the tally of its customers to 10 million. When the year began it had

presence in 600 cities across the country; before the year is rung out , it will be present in

1000.ICICI leads in every single retail segment it is present in , be it mortgages, auto loans ,

personal loans or credit cards. In mortgages it has a 28% share in auto loans it has 37%, in

personal and consumer 29% and so on. In the case of auto finance, it is growing faster than the

industry average, and in the credit cards it currently has 26 lakh customers and Citibank the

erstwhile market leader, is likely to drop way behind ICICI bank. Its share of total deposits grew

by 18.82 % last year. And with Rs. 106593 crore in average working funds, it is second only to

the public behemoth, the State bank of India. Earlier when a customer applied to open an

account, a three week waiting period was involved .In that time, his cheque book , ATM card

and pin number would arrive in separate envelopes, because the process was manual. Starting a

few months ago . Customers are now given a pre- printed welcome kit when they open an

account and the cards are activated the next day.

However it is yet to score significant improvement in areas such as quality of earnings and non

performing assets (NPAs) , a large part of which is historical and includes lending to the ill-

starred Dabhol power project. These are the reasons why despite its dazzling growth , it ranks a

distant #24 on the BT-KPMG survey of Indias best banks in 2006.The banks retail net NPA is

0.75 %.

Going forward , the banks strategy is to consolidate its presence in existing markets , accelerate

growth, sustain profitability and build a business model to withstand the pressures of a global

rollout

ICICI Bank currently has subsidiaries in the United Kingdom and Canada, branches in Singapore

and Bahrain and representative offices in the United States, China, United Arab Emirates and

Bangladesh.ICICI Bank's equity shares are listed in India on the Stock Exchange, Mumbai and the

National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed

on the New York Stock Exchange (NYSE).


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ICICI banks Distinct 4 C approach

CustomerFocus

Understanding and effectively meeting customer requirements

Crosssell

Maximize share of wallet

Offer comprehensive solutions

Containrisk

Effective risk management

Risk mitigating structure

Costcontrol

Centralized processes

Technology enabled solutions

Multi channel delivery

Internet Banking

y First Bank in India to launch website - 1996

y First Bank in India to launch Internet Banking - 1997

y First Bank in India to launch online bill payment-1999

y Only Bank in India with million online customers

y Monthly average transactions per online customer- 7


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SERVQUAL: A Proven Customer Needs Framework

Parasuraman Zeithaml and Berry (1985) list ten determinants of service quality that can be

generalized to any type of service. The ten dimensions include:

y Tangibles- the physical evidence of the service, physical facilities, appearance of personnel,

tools or equipment used to provide the service, other customers in the service facility;

y Reliability- consistency of performance and dependability;

y Responsiveness- willingness or readiness of staff to provide service;

y Competence- possession of the required skills and knowledge to perform the service by the

contact personnel as well as operational support personnel;

y

Access - approachability and ease of contact;

y Communication- keeping customers informed in language they can understand;

y Credibility - trustworthiness, believability, and honesty;

y Security- the freedom from danger, risk, or doubt. (e.g. physical safety and confidentiality);

y Understanding- making the effort to understand the customers needs.

These nine dimensions were regrouped in the well known five dimensions in the SERVQUAL

model (Parasuraman, Zeithaml and Berry 1990) which include tangible, reliability,

responsiveness, assurance, and empathy:

y Tangible - appearance of physical facilities, equipment, personnel, and communication

materials;

y Reliability- ability to perform the promised service dependably and accurately;

y Responsiveness - willingness to help customers and provide prompt service;

y Assurance - knowledge and courtesy of staff and their ability to convey trust and

confidence;

y Empathy caring and individualized attention to the customer.


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Discussion of the SERVQUAL Model

Parasuraman, Zeithaml and Berry (1990) proposed to subjectively measure service quality by

finding out the extent of discrepancy between customers expectations or desires and their

perceptions of the actual quality of performed service. Good service quality exists when

customer expectations are met or exceeded and is studied in five dimensions as mentioned in

the last section: tangible, reliability, responsiveness, assurance, empathy. The methodology of

comparing customers expectation and perception in five dimensions is the popular SERVQUAL

(Danuta Ann Nitecki, 1996).

The discrepancy between customers expectations or desires and their perceptions of the actual

service performance was elaborated in the Discomfirmation of Expectations Paradigm

(Patterson 1993) which related satisfaction to customers pre-purchase expectations and

perceptions of service performance and identified any difference as Disconfirmation.

The comparison which forms the basis of the model are as follows:

Comparison Process Result

1. Perceived Performance > Expectation: High satisfaction (Delight)

2. Perceived Performance = Expectation: Merely Satisfied

3. Perceived Performance < Expectation: Dissatisfaction

The publication of the first results of the SERVQUAL instrument provoked a debate on how best

to measure service quality and in the subsequent decade there have been many attempts to

demonstrate the efficacy of the SERVQUAL instrument. It is generally agreed, however, that

SERVQUAL instrument is suitable for measurement of service quality because it measures key

aspects of service quality. Asubonteng (1996), moreover, claims that SERVQUAL is popular with

managers because it combines ease of application and flexibility. Managers know that results

obtained using the model are probably not objective truth but that they help identify the

direction in which the firm should move.


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The methodology of comparing the gap between expectation and perception has also attracted

criticism. Cronin and Taylor (1992; 1994) argued that SERVQUAL is paradigmatically flawed

because of its ill-judged adoption of the disconfirmation model. Babakus and Boller (1992)

found that the use of a gap approach to service quality measurement is intuitively

appealing, they suspected that the difference in scores does not provide any additional

information beyond that already contained in the perception component of the SERVQUAL

scale. They found that the dominant contributor to the gap score is the perception score.

Lewis (1993) criticized the use of a seven-point Likert scale for its lack of verbal labelling

for points two to six which may cause respondents to overuse the extreme ends of the scale.

Babakus and Mangold (1992) suggested using five- point Likert scale on the grounds that it

would reduce the frustration level of respondents and increase response rate and quality

The Servqual -model is a tool that measures quality along 5 service quality dimensions in a

survey-format. Each of the dimensions have several statements, which have to be answered on

a 7-point scale (strongly disagree=1 until strongly agree=7).

The advantages of the SQ-model are that it is easy and quick to use for respondents, its useful in

several service situations, its an accepted and valid standard. Furthermore its reliable because

respondents interpret the statements in the same way.

The Servqual model has been used by many different companies in many different industries

including:

y Libraries

y Telephone companies

y Restaurants

yHotels

y Hospitals

y IS providers


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Gap1:

The difference between the perceptions of management and the real customers needs

Gap2:

The discrepancy between managements perception of customers expectation and service

quality specifications

Gap 3:

The discrepancy between service quality specifications and the service delivered to the

customer

Gap 4:

The discrepancy between the service provided and the quality of service promised in

advertisements and other external ways of communication

Gap 5:

The discrepancy between customers expectations and perceptions


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Servqual Calculations

SBI

Expectation Perception Gap

E1 5.2 P1 3.9 -1.3

E2 5.3 P2 4.2 -1.1

E3 5.6 P3 3.7 -1.9

E4 5.2 P4 4.4 -0.8

E5 6.2 P5 5.1 -1.1

E6 6.3 P6 4.6 -1.7

E7 6.5 P7 5.1 -1.4

E8 6.8 P8 5.2 -1.6

E9 6.8 P9 5.7 -1.1

E10 6.5 P10 4.3 -2.2

E11 6.8 P11 4.2 -2.6

E12 6.4 P12 5.2 -1.2

E13 6.8 P13 3.7 -3.1

E14 5.3 P14 4.9 -0.4

E15 6.8 P15 4.9 -1.9

E16 6.1 P16 5.3 -0.8

E17 6.2 P17 4.4 -1.8

E18 5.9 P18 5.2 -0.7


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E19 5.1 P19 5.1 0

E20 5.9 P20 4.9 -1

E21 6.8 P21 3.8 -3

E22 6.4 P22 5.2 -1.2

ICICI

ICICI

Expectation Perception Gap

E1 5.6 P1 5.2 -0.4

E2 5.7 P2 4.4 -1.3

E3 6.8 P3 5.5 -1.3

E4 6.6 P4 5.5 -1.1

E5 6.4 P5 6.1 -0.3

E6 6.8 P6 6.2 -0.6

E7 6.7 P7 6.2 -0.5

E8 6.9 P8 5.9 -1

E9 6.9 P9 6.9 0

E10 6.6 P10 5.9 -0.7

E11 6.8 P11 5.8 -1

E12 6.5 P12 5.4 -1.1

E13 6.8 P13 5.2 -1.6

E14 6.3 P14 5.6 -0.7

E15 6.9 P15 5.8 -1.1


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E16 6.4 P16 6.3 -0.1

E17 6.8 P17 5.9 -0.9

E18 6.5 P18 5.2 -1.3

E19 6.3 P19 6.4 0.1

E20 6.7 P20 5.4 -1.3

E21 6.9 P21 4.9 -2

E22 6.8 P22 5.8 -1


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Fig.1

Fig .2

0

2

4

6

8

EXPECTATIONS

SBI

ICICI

0

2

4

6

8

PERCEPTIONS

SBI

ICICI


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Fig. 3

Fig.4

SBI SERVICE GAP

0

1

2

3

4

5

6

7

8

G1

G3

G5

G7

G9

G11

G13

G15

G17

G19

G21

Expectation

Perception

ICICI SERVICE GAP

0

1

2

3

4

5

6

7

8

G1

G3

G5

G7

G9

G11

G13

G15

G17

G19

G21

Expectation

Perception


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Fig.5

PSU bank- SBI

Table 2: Calculations to obtain unweighted Servqual score Expectation Perception Gap

Average Tangible Servqual score 21.3 16.2 -5.1

Average Reliability Servqual score 32.6 25.7 -6.9

Average ResponsivenessServqual score 26.5 17.4 -9.1

Average Assurance Servqual score 24.4 19.5 -4.9

Average EmpathyServqual score 30.1 24.2 -5.9

Total 31.9

Average (= total/5) Unweighted Servqual score -6.38

COMPARISON OF SERVICE QUALITY GAP BETWEEN

SBI AND ICICI

-6

-5

-4

-3

-2

-1

0

1

ICICI

SBI


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Fig.6

Table 3:

Listed below are five features pertaining to banks and services they offer . We would like to

know how much each of these features is important to the customers . please allocate 100

points among the five features according to how important it is to you. Make sure the points

add up to 100.

The appearance of the banks facilities , equipment , personnel and communication

materials Tangibility

12

The banks ability to perform the promised service dependably and accurately-

Reliability

29

The banks willingness to help customers and provide prompt service

Responsiveness

23

The knowledge and courtesy of the banks employees and their ability to convey

trust and confidence Assurance

17

The caring, individual attention the bank provides its customers - Empathy 19

100

SERVICE GAP IN PUBLIC BANKS (SBI)

0

5

10

15

20

25

30

35

Tangibilit

y

Reliability

Respon

siven

ess

Assu

rance

Empa

thy

Expectation

Perception


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Fig.7

Servqual Weighted Scores

Table 4: Servqual Dimensions Score from

Table 1

Importance

Weight from

Table 2

Weighted Score

( table1*table2)

Average Tangibility Servqual score -5.1 12 -61.2

Average Reliabilty Servqual score -6.9 29 -200.1

Average Responsiveness Servqual score -9.1 23 -209.3

Average Empathy Servqual score -4.9 17 -83.3

Average Assurance Servqual score -5.9 19 -112.1

Total(/100 since given in %) -6.66

Average(=total/5)Weighted Servqual

score

-1.332

Servqual importance we ights(PSU banks- SBI)

Tangibility

12%Empathy

19%

rance

%

Responsiveness

23%

Reliability

29%

Tangibility

Reliability

Responsiveness

Assurance

Empathy


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Private bank-ICICI

Table 5:Calculations to obtain unweighted Sevqual score Expectation Perception Gap

Average Tangible Servqual score 24.7 20.6 -4.1

Average Reliability Servqual score 33.7 31.3 -2.4

Average Responsiveness Servqual score 26.7 22.3 -4.4

Average Assurance Servqual score 26.4 23.6 -2.8

Average Empathy Servqual score 33.2 27.7 -5.5

Total -19.2

Average( = total /5) unweighted Servqual score -3.84

Fig .8

SERVICE GAP IN PRIVATE BANKS - ICICI

0

5

10

15

20

25

30

35

40

Tangibilit

y

Reliability

Respon

siven

ess

Assu

rance

Empa

thy

Expectation

Perception


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Table 6.

Listed below are five features pertaining to banks and services they offer. We would like to

know how much of these features is important to the customers. Please allocate 100

points among the five features according to how important it is to you.make sure the

points add up to 100.

1. The appearance of the banks physical facilities, equipment , personnel and

communication materials

14

2. The banks ability to perform the promised service dependably and accurately 30

3. The banks willingness to help customers and provide prompt service 23

4. The knowledge and courtesy of the banks employees and their ability to convey

trust and confidence

17

5. The caring individual attention , the bak provides to its customers 16

100

Fig.9

SERVQUAL IMPORTANCE WEIGHTS(PRIVATE BANKS-ICICI)

Empathy

16%

Assurance

17%

Responsiveness

23%

Reliability

30%

Tangibility

14%

Servqual importance weights

Tangibility

Reliability

Responsiveness

Assurance

Empathy


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Weighted Servqualscore;

Table 7: Servqual Dimensions Score from

Table 1

Importance

Weight from

Table 2

Weighted Score

( table1*table2)

Average Tangibility Servqual score -4.1 14 -57.4

Average Reliabilty Servqual score -2.4 30 -72

Average Responsiveness Servqual score -4.4 23 -101.2

Average Empathy Servqual score -2.8 17 -47.6

Average Assurance Servqual score -5.5 16 -88

Total(/100 since given in %) -3.662

Average(=total/5)Weighted Servqual

score

-.7324

Findings/ Analysis

Expectation (SBI Vs ICICI )

The gap between the expectations of the SBI and ICICI customers can be seen in:

y E 3 ( Neat appearing employees) and E 4( materials visually appealing ) Tangibles

y E 14 ( behaviour of employees instils confidence in customers ) Assurance

y E 19 ( convenient operating hours to customers ) and E 20 ( employees give personal attention )

Empathy


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Perceptions ( SBI Vs ICICI)

We can see a clear difference in perception of customers of SBI and ICICI banks.

y High gap in perception is seen in P 4 ( materials are visually appealing )

y Gap in P 2 ( facilities visually appealing ) is less . This might be due to the profile of the

customers of the respective banks Tangibles

y High gap is seen in P 10 ( employees tell exactly when the service will be performed ) and P 11 (

prompt service ) Responsiveness

y Gap in P 12 (employees are willing to help customers) is minimal Responsiveness.This may be

due to the reason that some customers have been banking with these public banks for a long

time and share a good rapport.

SBI servicegap:

Here we can clearly see the differences between the expectations and perceptions of the SBI

customers in most of the concerned areas.

y The service gap is highest in Question 10 (employees will tell customers exactly when the

service will be performed ), Question 11 ( employees give prompt service) and high gap in

Question 13 ( employees are never too busy to respond to customers request )

Responsiveness.

y The gap is low in Question 14 (behavior of employees instills confidence in them ) Assurance.

y The gap is highest in Question 21 ( bank has your best interest at heart ) Empathy

ICICI servicegap:

y The service gap in Question 1 ( modern looking equipment ) is low Tangibles

y The gap is low in Question 5 (banks fulfill promises on time ) and Question 9 ( error free records

) Reliability . It means that if the bank promises to do something by a certain time, they do it

and the bank maintains error free records.

y The gap is also low in Question 19 ( convenient operating hours to customers ) Empathy

y The gap is highest in Question 21 ( banks have customers interest at heart ) Empathy


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Comparisonof Service Qualitygapbetween SBI and ICICI :

y ICICI has no gap in Question 9 (maintaining error free records) whereas SBI has a gap of -1.1

y ICICI customers are more than satisfied with the operating hours of the bank (Question 19)

with the score of + 0.1 as compared to SBI customers who are also satisfied but with a score of

0 . Here , ICICI is delivering more than the customers expectations

y ICICI bank employees are consistently courteous with customers (Question 16). The gap is a

minimal -0.1 as compared to 0.8 of SBI.

y In individual attention ( Question 18) SBI has scored over ICICI bank with a score of -0.7 as

compared to -1.3 of ICICI

y The SBI service gap is maximum in Question 13 ( employees are never too busy to respond to

customers request ) with a score of -3.1 as compared to -1.6 of ICICI

y The SBI customers are more satisfied with (Question 4 ) the materials associated with the

service and find them visually appealing. They scored over ICICI bank customers with a score of

-0.8 as compared to -1.1

y The SBI employees instill confidence in customers . They score over ICICI bank with a score of -

0.4 as compared to -0.7

y The SBI customers are also more satisfied than ICICI bank customers with employees giving

them personal attention ( Question 20 ) . SBI received a score of -1 in comparison to ICICI

getting a score of -1.3

Findings through the 5 parameters assigned to the Servqual questionnaire:

The service gap in public banks SBI is almost consistent through all 5 parameters . The expectation

and perception gap can be seen to be the highest in responsiveness factor . ( Table 1 of SBI)

But after assigning the importance weights to the parameters given by the customers , the scenario

changes for some service gap factors . The customers have given reliability the highest weightage.

The importance weights given by SBI ( PSU bank) customers to the 5 parameters are as follows:

1. Reliability 29%

2. Responsiveness 23%

3. Empathy 19%

4. Assurance 17%

5. Tangibility 12%


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The service gap before assigning importance weights was in the following order:

1. Responsiveness

2. Reliability

3. Empathy

4. Tangibility

5. Assurance

The service gap after assigning importance weights was in the following order:

1. Responsiveness

2. Reliability

3. Empathy

4. Assurance

5. Tangibility

Assurance went up to the fourth place and tangibility went down to the last position

The service gap in private banks represented by ICICU bank is more or less consistent I all the 5

parameters but is the highest in reliability factor.( Table 1 of ICICI).The expectation and perception

gap can be seen to be the highest in the Empathy factor . Although the customers of ICICI bank have

given highest importance weightage to reliability, the gap after assigning importance weights is the

highest in responsiveness since the gap score was much higher than reliability factor.

The importance weights given by ICICI (private bank) customers to the 5 parameters areas follows:

1.Reliability 30%

2.Responsiveness 23%

3. Assurance 17%

4. Empathy 16%

5.Tangibility 14%


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The service gap before assigning importance weights was in the following order:

1. Empathy

2. Responsiveness

3. Tangibility

4. Assurance

5. Reliability

The service gap after assigning importance weights was in the following order:

1. Responsiveness

2. Empathy

3. Reliability

4. Tangibility

5. Assurance

Here also we see a change in position of service gap in the 5 parameters . Responsiveness has

taken the first position in the service gap and other parameters also change places as shown

above.

Recommendations

For SBI ( Public banks)

1. Employees should give a true pict

Marketing Strategies of Banks(4 Office 2007)

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