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Transcript of Service Marketing in Banks
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