Professional Documents
Culture Documents
INDEX
1
Bank Marketing
2
Bank Marketing
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According to some economists the word ‘Bank’ has been derived from the
German word BANC which means a Joint Stock Firm while others say that
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Bank Marketing
it has been derived from the Italian world ‘BANCO’ which means a heap or
mound.
There is still another group of people who believe that word bank has been
derived from the Greek work ‘BANQUE’ which means a bench. In the olden
days, Jews entered into money transactions sitting on benches in a marked
place. When a banker was not in a position to meat his obligations, the on
which he was carrying on the money business was broken into pieces and
the was taken as bankrupt. Thus both the words Bank or bankrupt are said
to have origin from the word ‘Banque’.
DEFINITION OF BANK
Banking Regulation Act, 1949 (Sec. 5(c)), has defined the banking
company as, “Banking Company means any company which transacts
business of banking in India”. According to Section 5B, “banking means the
accepting of deposit of money from the public for the purpose of leading or
investment, which are repayable on demand or otherwise and are
withdrawable by cheque, draft, order or otherwise.”
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Bank Marketing
Different economists, banking professionals and authorities explained their
viewpoint regarding bank or commercial bank. It has been rightly said by
A.K. Basu that a general definition of a bank or banking is by no means
easy, as the concepts of banking differ from age to age, and country to
country.
India is a vast country, Before 1947, undivided India was equal to Europe
excluding Russia in its area. It is situated in south of Asia. In spite of a part
of Asia, it is separated from it. It is separated by Himalayas in North India.
India has vast oceans in South, East and West. Due to its vastness it is
also called sub continent. That vast country has given different names in
different times. In Vedic period, it was called ‘Arya-V-arat’. In Bir period and
ancient period, it as called Bharatvarash’. Perhaps due to fame of king
Bharat, it was called ‘Bharatvarsh. Greek called it Indus on the name of
river Sindh. Iranians called it Hindu. Chinese travelers called it Tienchu and
Yintu. Ipsing called ‘Arya Desh’ and Brahmrashtra. Bible has called it
Hoddu. In medieval period, it was called ‘Hindustan’ and Hind. European
called it India. After Independence, it is return as Bharat Ganrajya or Indian
Republic in Indian Constitution.
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Bank Marketing
The Role of marketing in the banking industry continues to change. For
many years the primary focus of bank marketing was public relations. Then
the focus shifted to advertising and sales promotion. That was followed by
focus on the development of a sales culture.
The chief concerns of most bank executives still focus on legal and
regulatory issues, according to most surveys. Community banks are
particularly concerned with eliminating barriers that give unfair advantages
to financial services competitors, such as credit unions. However, another
concern pertains to technology: keeping nonblank competitors out of the
payment system.
When this gateway system was first proposed, access to the Internet was
very new and few banks had the resources and knowledge to set up their
own direct-access lines for customers. Customers have shown a growing
interest in online banking services, and banks have responded by quickly
putting in place proprietary sites on the World Wide Web and offering PC
banking.
When asked which technology holds the most potential for the future, bank
executives identified call centers first. As customers continue the transition
the transition into a high-tech world in which they want information and
answers more quickly and accurately than ever before, call centers offer
the ideal bridge. With 24-hour access to either automated information or
live operators, customers do everything from check their accounts to apply
for a loan. Bank executives also identified PC banking as having the most
promise for the future, followed by Interest access and broad function
kiosks.
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Bank Marketing
The nationalised banks must face competition from private banks, non-
banking financial institutions, foreign banks and others. The competition is
in the fields of deposits and credits, foreign trade, consumer credit and
miscellaneous banking activities. The competition will benefit customers
and force the banking system to raise its productivity, minimize expenses,
and remain sensitive to evolving issues. Narasimham Committee Reports
while recommending internal autonomy long with compliance with
prudential norms suggested rule-based credit policies, fiscal balance and a
gradual movement towards liberatlisation.
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Bank Marketing
To deal with the competition from foreign banks, the Indian banks should go
in for diversification and extension of services as well as expansion of
products and business. Economic freedom and innovative spirit have
contributed greatly to the success of the market-oriented financial sector in
the Western countries. Directed credit and investment has done just the
opposite. Interventionism is not necessarily bad provided it is associated
with a committed leadership. Indian financial sector had for more than four
decades, neither full economic freedom nor a well disciplined
interventionism so that it cost operational flexibility as well as functional
autonomy both of which were concerned with profitability performance and
related factors.
MARKETING CONCEPTS
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Bank Marketing
BANK MARKETING
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Bank Marketing
1) The bank cannot exist without the customers.
2) The purpose of the bank is to create, win, and keep a customer.
3) The customer is and should be the central focus of everything the
banks does.
4) It is also a way of organizing the bank. The starting point for
organizational design should be the customer and the bank should
ensure that the services are performed and delivered in the most
effective way. Service facilities also should be designed for
customers’ convenience.
5) Ultimate aim of a bank is to deliver total satisfaction to the customer.
6) Customer satisfaction is affected by the performance of all the
personal of the bank.
All the techniques and strategies of marketing are used so that ultimately
they induce the people to do business with a particular bank. Marketing is
an organizational philosophy. This philosophy demands the satisfaction of
customers needs as the pre-requisite for the existence and survival of the
bank. The first and most important step in applying the marketing concept
is to have a whole hearted commitment to customer orientation by all the
employees. Marketing is an attitude of mind. This means that the central
focus of all the activities of a bank is customer. Marketing is not a separate
function for banks. The marketing function in Indian Bank is required to be
integrated with operation.
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Bank Marketing
Thus, it is important to recognize the fundamentally different functions that
bank marketing has to perform. Since the banks have to attract deposits
and attract users of funds and other services, marketing problems are more
complex in banks than in other commercial concerns.
After enquiring with all the public and 14 private sector banks whether they
had undertaken any market research studies. The following board areas of
market research were considered for the study:
(a) New service development,
(b) New service product acceptance,
(c) Research and development of existing financial service,
(d) Bank images study,
(e) Measuring bank’s advertising effectiveness,
(f) Measurement of market potentials,
(g) Market research of competitive service products,
(h) Customer’s opinion study,
(i) Customer profile study, and
(j) Market share analysis.
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Bank Marketing
Two nationalized banks and two private sector banks informed that they
have not conducted any markets research studies.
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Bank Marketing
5. Indian a. Potential areas For internal
Overseas for future use only
Bank business
expansion
6. Oriental Bank a. Study of R Upendran
of Commerce customer MBP Thesis
service in OBC
with special
reference to
metropolitan
branches (1989)
7. Punjab a. Sample survey For internal
National Bank on customer’s use only
responses For internal
(1987) use only
b. Sample survey Formal Report
on customer
service (1988)
c. Study on
deposit linked
housing loan
scheme (1982)
8. Punjab and a. Study on For internal
Sind Bank customer use only
turnover (mail
questionnaire
based study of J S Kalra:
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Bank Marketing
customers who BMP Thesis
have closed
their accounts)
(1989)
b. Changing Profile
of Punjab and
Sind Bank’s
Customers and
their
expectorations,
a survey based
study (1988)
9. State Bank of a. A survey on For internal
Bikaner customer use only
service, level of
customer
satisfaction and
customer
expectations
(1998)
10.Syndicate a. Evaluation For internal
Bank Study on the use only
quality of
customer K M Kanath
service (1989) BMP Thesis
b. Marketing of
bank service
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Bank Marketing
with special
reference to
branches in
Bombay city of
Syndicate Bank-
customer
service (1979)
11.Union Bank of a. Customer For internal
India responses use only
(Opinion) survey
(1988)
12.UCO Bank a. Customers’ For internal
opinion study use only
(1989)
13.United Bank of a. Report of the For internal
India survey on use only
customer K P Ramesh
opinion (1987) Rao
b. Improvement of BNP Thesis
customer
service in a
metropolitan
branch (1979)
14.Vijay Bank a. Report of the Formal Report
customer
service survey
(1988)
15. Karur Vysya a. Study on the Undertaken by
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Bank Marketing
Bank image of the a Consultant
bank (1989)
Most of these market research studies were conducted for internal use and
no formal reports were prepared. It is important to note the subject or issue
researched by the bank. The most important subject for market research in
terms of the number of studies conducted, is the customer service /
customer’ profile opinion studies. Few banks have conducted even more
than one customer service / opinion studies.
The various other factors which have led to the increasing importance of
marketing in the banking industry are categorized as follows:
Government Initiatives
The Indian economy embarked on the process of economic reform and
various policy measures initiated by the government resulted in the
increasing competition in the banking industry, thereby highlighting the
importance of effective marketing. The Narasimhan Committee Report
evidence of the Government’s desire to ‘re-regulate’ the banking industry
so as to encourage efficiency through competition. The Government
initiatives include:
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Bank Marketing
Deregulation of Interest Rates
The bank may reduce their Minimum Lending Rates so as to attract
customers (individual and corporate). Such reduction in lending rates
reduce the spread between the deposit rates and lending rates, i.e. the
banks margins would decline and they would have to increase their
volumes or provide attractive services so as to maintain profits. This calls
for bank marketing.
Foreign Banks
Foreign banks offer stiff competition to the Indian Banks and with their
superior services and technology offer them a competitive advantage. Thus
Indian Banks have to effectively apply marketing concepts to attract
customers.
Social Environment
Increasing Urbanization, Education and Awareness: The higher literacy
level, migration to urban areas and higher awareness due to the boom in
the mass media have important implications for the retail banker. He needs
to be conscious of the fact the increasing proportion of people are aware of
financial service and are, therefore demanding and expecting higher quality
services.
Technology Development
Modernization of Technology has facilitated the introduction of new banking
services as to attract new customers. An example of this is the ‘Automated
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Bank Marketing
Teller Machines’ or the facility of ‘Any Time Money’. Also in foreign
countries, banks are experimenting with money transmission at Point of
sale, e.g., petrol station linked with banking network.
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Bank Marketing
iii. Planning for each of the ‘source’ markets and each of the ‘user’
markets (A bank needs to be doubly market – oriented – its has to
attract funds as well as users of funds and services).
iv. Organization and Administration.
“How the seller determines which buyer’s characteristics produce the best
partitioning of a particular market? The seller does not want to treat all
customers alike nor does he want to treat them all differently”.
Banks deal with individuals, group of persons and corporates, all of whom
have their likes and dislikes. No bank can afford to assess the needs of
each and every individual buyer (actual or potential).
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Bank Marketing
In the first segmentation, the market is divided from a unitary whole, to
groups of buyers who might require separate products and marketing mix.
The marketer typically tries to identify different segments in the market and
develop profiles of resulting market segments.
The third step is product positioning which is the act of establishing a viable
competitive position of the firm and its offer in the target segment chosen.
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Bank Marketing
formulating an innovating the strategic decisions. The following criteria
make possible rig segmentation.
Agricultural Sector: In the agricultural sector, there are four category rise
since the needs of all the categories cant’s be identical.
Household Segment: The high income group, middle income group, low
income group, substance level group and marginal income group have
different hierarchy of need which influence the level of their expectations.
Gender Segment: In the gender segments, we find male and female
having different needs and requirements. The banking organizations are
supposed to identify the level expectations of both sexes.
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Bank Marketing
Some of the women are housewives and therefore they have different need
and requirements whereas some of them are working ladies having
different needs and requirements.
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Bank Marketing
The formulation of marketing mix for the banking services is the prime
responsibility of the bank professional who based on their expertise and
excellence attempt to market the services and schemes profitably.
THE PRODUCT MIX: The banks primarily deal in services and therefore,
the formulation of product mix is required to be in the face of changing
business environmental conditions. Of course the public sector commercial
banks have launched a number of polices and programmers for the
development of backward regions and welfare of the weaker sections of the
society but at the same it is also right to mention that their development-
oriented welfare programmes are not optimal to the national socio-
economic requirements. The changing psychology, the increasing
expectations, the rising income, the changing lifestyles, the increasing
domination of foreign banks and the changing needs and requirements of
customers at large make it essential that they innovate their service mix
and make them of world class. Against this background, we find it
significant that the banking organizations minify, magnify combine and
modify their service mix.
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Bank Marketing
PRODUCT PORTFOLIO: The bank professional while formulating the
product mix need to assign due weightage to the product portfolio. By the
concept product portfolio, emphasis is on including the different types of
services/ schemes found at the different stages of the product life cycle.
The portfolio denotes a combination or an assortment of different types of
products generating more or less in proportion to their demand. The quality
of product portfolio determines the magnitude of success. It is excellence of
bank professionals that help them in having a sound product portfolio.
We find the composition of a family sound, if members of all the age groups
are given due place. Like this, the composition or blending of a service mix
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Bank Marketing
is considered to be sound, if well established and likely to be profitable
schemes are included in the mix. It is against this background that a study
and analysis of product portfolio is found significant. The bank
professionals are supposed to perform the responsibility of composing the
same. A sound product portfolio is essential but its process of constitution is
difficult. An organization with a sound product portfolio gets a conducive
environment and successes in increasing the sensitivity of marketing
decisions. The banking organizations need a sound product portfolio and
the bank professionals bear the responsibility of getting it done suitably and
effectively.
If the banks rely solely on their established services and schemes, the
multidimensional problems would crop up in the long run because when the
well established services/schemes would start saturating or generating
losses, the commercial viability of banks would of course, be questioned.
The banking organizations relying substantially on a profitable scheme and
ding nothing for new scheme likely to get a profitable market in the future is
to face is to face a crisis like situation. It is in this context, that we find
designing of a sound product portfolio essential to an organsition. We can’t
deny that the product portfolio of the foreign banks is found sound since
they keep their eyes moving. The innovation, diffusion, adoption and
elimination processes are taken due care. The public sector commercial
banks need to innovate their service and this makes a strong advocacy in
favour of analyzing the product portfolio.
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Bank Marketing
In the formulation of product mix for the banking organization, the designing
of package is found important. In this context, we find packaging decision
related to the formulation of a mix of different schemes and services.
Developing an attractive package required professional excellence and
therefore, the bank professionals are required to be aware of the different
key issues influencing the formulation process. What the package should
basically be or do for the particular target. We re aware of the fact that a
number of schemes and services are included in the service mix of bank
product and all the services or schemes can’t be preferred by all. Of course
we find some of the public sector commercial banks now evincing stage.
This makes it essential that a bank manager thinks in favour of developing
a package. The importance of packaging can’t be underestimated
considering the functions it performs and the effects which we witness in
the process of attracting and satisfying the customers. In addition to other
aspects, it is also pertinent that a bank manager is familiar with the
package developed by the leading competitive banks since this would help
them in innovating the package. It is an important component of the product
mix and a bank manager while formulating or designing a package needs
to assign due weightage to the formulation process. While developing a
package, it is essential that the packages offered are efficacious in
establishing an edge over the packages of competitors. Thus needs and
preferences of the target market in addition to the packages offered by the
competitors need due weightage while designing a package.
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Bank Marketing
and final commercial launching. The bank professionals have to be careful
at all the stages so that whatever the services or schemes are developed
are found instrumental in getting a positive response. The customers and
competitors help bank professional substantially in generating a new idea.
The screening of the product concept focuses on the process of narrowing
down the list of the ideas generated to a small number of concepts.
The fourth stage draws our attention on analyzing the cost on the basis of a
cost-benefit analysis and the fifth stage before launching is test marketing
which is found instrumental in minimizing the risk element. And finally, we
find commercial launching. The Reserve Bank of India is also required to
make the regulations liberal so that the pubic sector commercial banks get
an opportunity to make their services or schemes internationally
competitive. The unfair practices, illegitimate steps should be checked but
fair practice should essentially be promoted to make the business
environment conductive.
PROMOTION MIX
In the formulation of marketing mix the bank professionals are also
supposed to blend the promotion mix in which different components of
promotion such as advertising, publicity, sales promotion, word-of-mouth
promotion, personal selling and telemarketing are given due weightage.
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Bank Marketing
The different components of promotion help bank professionals in
promotion the banking business.
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Bank Marketing
Instrumentality of branch managers: At micro level, a branch manager
bears the responsibility of advertising locally in his / her command area so
that the messages, appeals reach to the target customers of the command
area. Of course we find a budget for advertisement at the apex level but the
business of a particular branch is considerably influenced by the local
advertisements. If we talk about the cause-related marketing, it is the
instrumentality of a branch manager that makes possible the identification
of local events, moments and make advertisements condition-oriented.
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Bank Marketing
individual exercise his/her personal potentials, tact, skill and ability to
influence the impulse buying of the customers. Since we get in immediate
feed back, the personal selling activities energies the process of
communication very effectively.
Some of the customers are found highly aware of the developments, they
are found well informed. On the other hand, we also find other category of
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Bank Marketing
customers who are in dark. Here, the branch managers are expected to
match the level of awareness of customers. As for instance, Mr. A goes up
the matrix but Mr. B has not enough time for the branch managers. The
branch managers are supposed to prepare a synopsis of their sales talk.
Not surprisingly the highly aware customers are found in apposition to
make independent decisions and know all about. While selling to the less
aware customers, the managers should stress on the main features of the
services and the expected benefits of these services.
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Bank Marketing
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