Chapter No.

Evolution of Bank Marketing In India

& Maharashtra

3.1 Introduction.
3.2 Top 10 Banks in India.
3.3 Evolution of Bank Marketing.
3.4 Traditional Banking.
3.5 Bank Marketing Period.
3.6 Marketing Approach to Banking.
3.7 Product and Service of Bank.
3.8 Segmentation of the Banking Organization.
3.9 Effective Segmentation.
3.10 Service Marketing Mix of Bank.
3.11 Digital Marketing.
3.12 Channels of Digital Marketing.
3.13 Banks in Social Media.
3.14 Challenges of Bank Marketing.
3.15 Strategies for the enhancement of bank marketing.

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 Chapter No.3
Evolution of Bank Marketing In India &
Maharashtra

3.1 Introduction:

The banking industry at the global level is rapidly changing. The

banking organizations are continuously working in improving service
quality to enhance customer satisfaction that leads to higher profitability.

The service quality has an impact on customer defection and retention,

and improvement in service quality enhances customer loyalty, moreover
it also gives opportunity to cross sell and enhances corporate image. After
the financial meltdown, banking institutions again trying to gain the
confidence of customers. Therefore, banks have to formulate sustainable
service strategies not only to provide better service deliveries and

improve corporate images well as profitability.1

The key objective of banking and financial market development is

to aid economic growth and development, with stability and equity across
sections of society, so that the gains of development are shared equally
such that social and political stability is maintained on a sustainable basis.
The primary role of banks is to intermediate resources from the savers to
the investors, and allocates them in an efficient manner among competing
uses in the economy, thereby contributing to growth both through
increased investment and through enhanced efficiency in usage of
resources. As the financial markets developed due to liberalization
measures initiated since economic reforms began in early 1990‟s, the
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pace and sequencing of reforms has been calibrated and marked by great
degree of pragmatism, to ensure that these serve our specific needs in the
context of socio-cultural, political and economic realities followed in the
post-independence period.2

Banking is a personalized service oriented industry and hence

should provide services which satisfy the customer's needs. To meet these
needs, bankers are expected to provide satisfactory benefits through
provision of form, place, time, and ownership utilities. The marketing

approach involves anticipating, identifying, reciprocating (through

designing and delivering customer-oriented service), and satisfying the
customer's needs and wants effectively, efficiently, and profitably. There
is a need for professionalism and market oriented banking in our country.
Market-oriented banking will require a new culture: a disciplined,
professional, and committed manpower; employees trained for
specialized services; specialized branches; strong marketing organization
in different banks; aggressive selling; meeting new customer's
expectations; and cost-effective and efficient services.

3.2 Top 10 Banks in India:

The Indian banking space is an exciting and dynamic one. Here is a

list of the top 10 banking companies in the country, going by market

capitalization.3

1. HDFC Bank: Going by market capitalization, HDFC Bank is the

largest bank in India. Its market cap is pegged at about INR

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 261,226.94 crore. As of end 2014, the bank boasted of a strong
network of 4,101 branches in 2,287 cities. To facilitate NRI
banking, the bank also has overseas branches in Bahrain, Hong
Kong, Abu Dhabi, Kenya and Dubai. HDFC Bank has over 13,269
ATMs and a customer base of over 28 million. It is also ranked
45th among the top 50 banks of the world. Employing over 69,401
employees, HDFC Bank is one of the strongest contenders in the
private banking space.

2. State Bank of India: With a market capitalization of about INR

216,128.73 crore, SBI is the second most-valued bank in India. It
and is perhaps the most trusted one, being a state-owned bank. The
bank has a strong network of over 15,054 branches spread across
the nation and has about 190 foreign offices in 36 countries. Along
with HDFC Bank, SBI also features among the top 50 global
banks. It is also one of the largest employers in the country and
provides employment to over 2,28,000 personnel.

3. ICICI Bank Limited: ICICI Bank is the third largest entity in the
Indian banking space, with a market capitalization of INR
184,547.26 crore. ICICI Bank has a customer base of over 2.5
million and boasts of an extensive network of 4070 branches across

the country. With 13,269 ATMs and assets worth USD 99 billion,
the bank is currently celebrating 60 years of existence. ICICI was
formed as a World Bank initiative in 1955.The bank is
headquartered in Vadodara, Gujarat and has an international

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 presence in 19 countries. The bank‟s employee strength was
estimated at over 72,000 last year when it overtook HDFC Bank in
terms of people employed.

4. Axis Bank:With a market capitalization of about INR 134,685.68

crore, Axis Bank takes its place at the fourth position among Indian

banks. Founded in 1994 as UTI Bank, Axis Bank now has a

network of 2402 domestic branches and 12922 ATMs spread
across the nation. The bank also has seven international offices

including the ones in Hong Kong, Singapore, Colombo, Dubai,

Abu Dhabi, and Shanghai.Axis Bank employs over 37,901
employees and is reported to have net assets worth about USD 53
billion. Apart from retail banking, Axis Bank also operates in NRI
Services, Investment banking and treasury operations and
corporate banking.

5. Kotak Mahindra Bank: Kotak Mahindra Bank, with a market

capitalisation of INR 109,631.60 crore comes next. Kotak
Mahindra Bank is currently poised for a spectacular growth due to
an all-stock merger with ING Vysya Bank. Kotak Mahindra shall
now become the fourth largest private bank in the country in terms
of the business done. The combined banking company will now

have a network of 1,214 branches across the country. The bank is

likely to have employee strength of about 30,000 after the merger.
The combined market capitalisation is estimated to be about INR
1.25 lakh crore.

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6. IndusInd Bank: Founded in 1994, Hinduja Group owned IndusInd
Bank has a market capitalisation of about INR 50,100.41 crore.
The bank employs over 15,500 employees and has a network of
638 branches and 1238 ATMs across the country. With
international offices in London and Dubai, IndusInd Bank is
known for its strong remittances business. The bank has an
exceptionally strong business base in Mumbai, Delhi, and Chennai.

7. Bank of Baroda: Bank of Baroda is another large PSU banking

company in India with a market capitalization of about INR

38601.08 crore. The bank is estimated to have over 5193 branches
and 38,737 employees. With a significant presence in about 25
countries, the Bank of Baroda balances out NRI services with rural
and agricultural finance. The bank is one of the major banking
operators in India‟s rural sectors.

8. Yes Bank: Yes Bank was incorporated in the year 2004 by

Mr.Rana Kapoor and Mr. Ashok Kapoor, and currently has a
market capitalisation of about INR 35,169.20 crore. With a strong
network of about over 630 branches in 375 cities, and with over
1150 ATMs spread across the country, Yes Bank is among the
fastest growing banks of India. The bank employs about 12000

employees and has high ambitions for the years to come.

9. Punjab National Bank: Founded in 1894, Punjab National bank is

one of the oldest banks in India. Unlike most Indian banks that
have their headquarters in Mumbai or Gujarat, the Punjab National

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 Bank has its headquarters in Delhi and has a market capitalization
of about INR 30312.73 crore. Like other PSU banks, the bank has a
major focus on agricultural and rural financing but also has a
widespread international presence.The bank has 8.9 crore
customers, 6081 branches in India and abroad and a network of
6940 ATMs spread across the country.

10. Canara Bank: Canara Bank is another PSU that has made its mark
in the Indian banking sector with a market capitalization of about

INR 18630.10 crore. Nationalised in 1976, the bank has a network

of about 3600 branches spread across the country. With 7599
ATMs, the bank is among the first PSUs in the country to
emphasise on e-banking and online services. Apart from
commercial banking, Canara Bank has also become a strong
provider of corporate banking services in India.

3.3 Evolution of Bank Marketing:

The concept of bank marketing is a means of attracting funds for

lending and the banks were acting as institutions where cash could be

deposited and loans procured. For the first time the possible application
of the marketing concept was mentioned in the American Banking
Association Conference held in the U.S.A. in 1958. A survey was

conducted in banking but they were not in favour of the application and
discouraged the introduction of such a concept in banks. There were
many factors which stood in the way of the application of the marketing
concept to banking. Their task was to sell an ever-increasing number of
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customer services. In 1980, again a survey was conducted in London for
the successful application of the concept of marketing. The survey proved
that the application of marketing to the product oriented industries alone
was a misconception. It could successfully be extended to the area of
service industries, as it attracted sufficient resources which could be
converted into services. Under such circumstances, the bankers realized
the importance of marketing which would enable them to redesign
banking activities so as to bring marketing concepts into it.4

Historically marketing in banking in India emerged in late 50s. In

70s the bank marketing scene started changing dramatically when
marketing positions were created in certain banks to meet the demand for
restructuring banking services. First major step in this field was taken by
SBI in 1972 by reorganizing itself on the basis of major market segments
dividing borrowing customers on the basis of activities. Canara Bank,
Bank of Baroda, Corporation Bank are a pointer about how banks of
Indian origin could be market innovative and can manage and respond to
the change so quickly and efficiently Indian braches of foreign banks and
the newly established private sector banks also used these techniques
successfully in funds mobilization and consumer credit
activities.5Similarly the financial institutions to tap vast potential of bank

and non-bank saver used marketing concept by introducing attractive

schemes. Mutual funds have also brought innovative products to suit
customer‟s fancy and have been successful in mobilizing huge funds. It
needs to be understood that marketing is just not the deposit mobilization

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and the concept has to be applied in line with organizational objectives
and meeting the challenges being faced.

Importance of Bank marketing:

• Awareness among Customers.

• Quality as a Key Factor.

• Growing Competition.

• Technological Advances.

Special Features of Bank Marketing:

• Banking product cannot be seen or touched like manufactured

products.
• In marketing banking products, the product and the seller are in

separable; they together define the banking product.

• Banking products are products and delivered at the same time; they
cannot be stored and inspected before delivering‟.
• Standardization of banking product is difficult.

3.4 Traditional Banking:

This period is also known as „Pre-nationalisation period‟. The

basic symbol of this period was strong accounting orientation of bankers
down the time. In other words, meticulous maintenance of accounts
books and an inward-looking approach in transacting business with the
customer. Investment of banks is based on liquidity principles. In loaning,
the quality of security is more important and the requirement of the
customer gets least importance. The customer was presented with

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readymade banking products with an option to take it or leave it. Due to
the limited banking network then available, the customer had little
alternatives. So the banking business kept prospering even with a limited
clientele base and a set of inflexible rules and regulations meticulously
observation both in letter and spirit. During the period there was strong
banker customer relationship but the customers were selected the few in a
society. This period is popularly known as period of class banking.

3.5 Bank Marketing Period:

It is also known as modern period. The frantic pace of branch

expansion and credit disbursement during the development banking
period has direct impact on the health of public sector banks. The real
outcome was the proliferation of loss-making branches. The problem of
communication and transport network in the countryside, rising customer
dissatisfaction with banking services, and resultant apathy of bank staff

towards developmental work are the basic reasons for this. The RBI
urged commercial banks to take stock of the state of affairs, to
consolidate their gains and go slow on branch expansion, thus ushering in

the period of consolidation.6The bank visualises the risk inherent in

continuing to do business as before. So there is a growing awareness that
marketing was an essential tool in the hands of the banker, an inescapable

necessity without which perhaps survival itself might become difficult in

future. The most important factors which have given a momentum to the
bank marketing in the country are Financial Disintermediation. The basic
job of a banker is to accept deposits from investors and or depositors and
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after providing funds for statutory obligation like SLR and CRR bank
extend loan to borrowers. The difference between deposit interest rate
and the loan interest rate is the banker's 'spread'. Thus the bank acts as an
interlinking factor and this is called financial intermediation.

3.6 Marketing Approach to Banking:

The commercial banks mainly purvey financial services and

therefore, they have to keep in view the service orientation while taking
any management decision. In all management decisions, the commercial
banks have to place an overriding emphasis on the interests of their
customers. What the business thinks it produces is not of first importance
especially not to the future of the business and its success. In developing
countries like India, the importance and role of the service sector has
been rapidly increasing in recent years. The share of the tertiary sector in
the Net Domestic Product (NDP) was 39.7 per cent in 1987-88 which was

higher than not only that of the secondary sector (26%) but of the primary
sector as well (34.0%). Percentage increase in the share of the tertiary
sector between 1950-51 and 1987-88 is 49.2 per cent. Customer service is

not only a critical function but is also becoming a key posture for the
business.7It is the next most important business strategy. Improved
customer service will definitely increase the profitability. A bank can be

said to be customer oriented if its various organizational activities like

organizational restructuring staffing, and coordination are geared up to
fulfil customer needs.

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 After the banking sector reforms, marketing has developed as a
more integrated function within financial service organizations like banks
largely as a result of rapid changes in the operating environment. Bank
Marketing is defined as an aggregate of functions directed at providing
services to satisfy customers‟ financial needs and wants, more
effectively than the competition, keeping in view the organizational
objectives of the bank.

Bank marketing has become a very complex yet interesting subject

as it requires the knowledge of economics, sociology, psychology,

banking and also core marketing concept. In marketing, it is the customer
who has the upper hand. The mantra of effectively marketing bank
products lies in the systematic and professional approach towards
satisfying customers‟ needs.

3.7 Product and Service of Bank:

Product and service are the words used interchangeably in banking

parlance. The bank products are deposit, borrowing or other
products like credit cards or foreign exchange transactions which are

tangible and measurable whereas service can be such products

plus the way / manner in which they are offered that can be
expressed but cannot be measured i.e. intangibles. Better service is more

important than just a good product in the marketing of banking products,

so the focus should be on providing services related to each product.
Some of the products and services of banking sector are given below:

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• Deposits: Banks accept the deposits of the public. In order to attract
the savings of the people, the bank provides every sort of facility and
inspiration to them and collects the scattered savings of the society.
The bank opens an account of those people who deposit their savings
with the bank. These deposit accounts can mainly be of three types
and people can open any of these three types of accounts
according to their wish. These accounts are current account, saving
bank account, fixed deposit account.
• Loans: The bank just don‟t keep with themselves the deposited
amount of the people, rather they advance them in the form of loans
to the businessman and entrepreneurs, justto earn profits for their

partners. The loaner keeps some gold, silver, fixed and variable
assets in the form of security with the bank.
• Locker Facilities: For the safety of your valuables we offer
our customers safe deposit vault or locker facilities at a large number
of our branches. There is a nominal annual charge, which depends
on the size of the locker and the centre in which the branch is

located.
• Internet Banking : Internet banking enables retail banking
customers to operate their accounts from anywhere,

anytime, removing the restrictions imposed by geography and time.

It's a platform that enables the customers to carry out their banking
activities from their desktop, aided by the power and convenience of

the Internet.

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 • Real Time Gross Settlement System (RTGS):
An electronic payment system in which payment instructions
between banks are processed and settled individually and
continuously, on a real time basis, throughout the day.
• Debit Card: An electronic card issued by a bank which allows bank
clients access to their account to withdraw cash or pay for goods and
services. This removes the need for bank clients to go to the bank to
remove cash from their account as they can now just go to an ATM
or pay electronically at merchant locations.

3.8 Segmentation of the Banking Organization:

Segmentation of market important to the development of business

in the banking organizations. If the segmentation is done in a right way,
the bank professionals find it easier to formulate a strategic marketing
plan. This simplifies professional task of increasing the market share vis-

à-vis excelling competition. The following facts testify the

instrumentality of segmentation in the banking services.8

1. Instrumental in exploring opportunities: It is right to mention that

we find segmentation very much effective in exploring profitable

and untapped or non-optimally tapped opportunities.
2. Active in formulating a sound marketing strategy: The market

segmentation helps banks professionals in formulating a sound

marketing strategy. Since they know about the changing needs and
requirements of customers/ prospects and they also know about the

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 level of income and intensity of expectations, the sensitive
strategies related to the different mixes can be formulated.
3. Helpful to the policy planners: Whatever the policies are
formulated should have a close link with the emerging trends in the
business environment. The policy makers need sufficient
information about the different segments so that they succeed in
formulating a strategic plan for future marketing.
4. A sound management of budget is possible: Formulation of
scientific strategic plan simplifies the task of formulating a
pragmatic annual plan. As and when we talk about planning, the
budgetary provisions, allocation in the face estimated requirements,

optimal distribution of funds to different heads, monitoring of

expenses etc. are found easier.
5. Enriching the marketing resources: The marketing resources are
the available instruments in the hands of bank professionals who
bear the responsibility of translating the plan in to action. The
inputs that we use for making goods/ services are the resources in

our hands to touch the target.

6. Segmentation strategy: A strategy for segmenting the market is
found significant to make the segmentation process more effective.

The banking organization need to select a strategy which is found

helpful to them in marketing successfully.
7. Mass marketing or undifferentiated marketing: If we find sale of

one product/ service to the entire market, we call it mass marketing

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 or undifferentiated marketing. Such a segmentation strategy is
found suitable to the organizations having a mass market. In the
process, an organization goes after the whole market with one
market offer. It focuses on what is common in the needs of buyer
rather than on what is different. The strategy relies on mass
distribution and mass advertising. An organization practicing
undifferentiated marketing typically develops an offer aimed at the
largest segments in the market.
8. Selective marketing or Differentiated marketing: This is adopted
by the organizations where a number of products or services are
sold to selected market segments in order to increase overall sales.

In differentiated strategy, the costs are however higher than in mass

marketing. The banking services are found differentiated into
segments.
9. Concentrated or Niche marketing: We find concentrated
marketing segmentation where organizations are found
concentrating on selling to a small market segment or niche. The

costs can be kept low since the specialization makes it possible to

make the entire process exceptionally cost effective. It is a strategy
commonly adopted by smaller companies who are not in a position

to complete with the well established companies and therefore

concentrate their limited resources on establishing a strong image
and dominate in the chosen niche. Niche marketers also benefit

from the absence of large firm as competitors.

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3.9 Effective Segmentation:

In processing the marketing activities, of course there are a number

of steps and stages but of all, we find segmentation significant since right
segmentation simplifies the task of policy planner‟s vis-à-vis makes the
marketing efforts sensitive. An important task before the bank policy

planners is to have effective segmentation which makes ways for an

optimal utilization of the marketing resources. Kotler says that any
worthwhile effort for market segmentation must satisfy the following four

conditions:9

1. Measurability: By measurability in the market segmentation, we

mean the degree to which the size and purchasing power of the

segments can be measured. In a true sense, this refers to the extent

to which the size and purchasing power of a segment can be fair to
a point that is measured. If we fail in measuring the size and
purchasing power of a segment, it is natural that we also fall in
assessing the business potential of that segment.
2. Substantiality: This refers to the degree to which the segments are
large and profitable. It is essential that a segment belongs to the
largest homogeneous group. If the size is very small even we find it
full of potentials, market would hardly be profitable. In the banking

business we find some of the small segment with tremendous

potentials.
3. Accessibility: This is related to the degree to which the segments
can effectively or smoothly be reached and served. Of course, we

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 find it an essential consideration for effective segmentation since
even if market is profitable and we can‟t reach to that market
smoothly, the bank professionals are found helpless to capitalize on
the opportunities.
4. Actionability: This is meant the degree to which effective
programmes can be formulated for attracting and servicing the
customers. Here our emphasis is on the potential of the banking
organizations in quick expedition of the formulation process. If the
bank organizations face the problem of under-staffing, the
actionability would be affected adversely.

The role of marketing strategies in the banking industry continues

to change. For many years the primary focus of bank marketing was
public returns. Then the focus shifted to advertising and sales promotion.
That was followed by a focus on the development of a sales culture. Now
a day‟s marketing strategies in banking are concentrating only those who
are gaining rich dividends from agriculture, industry and business sector
and neglecting rural masses regarding banking products which are
beneficial to the working class who are really creating the wealth and
contribution to the national income. So in this democratic Indian nation
the marketing strategies in banking are framed on the basis of majority
people not for minority people for benefiting the all the levels of the
people in the nation with social marketing strategies. If the segmentation
is done in a right way, the bank professionals find it easier to formulate a

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strategic marketing plan. This simplifies professional task of increasing
the market share vis- à-vis excelling competition.

3.10 Service Marketing Mix of Bank:

Bank marketing deals with providing services to satisfy customers'

financial needs and wants. To satisfy these financial needs, customers
want specific services. All the techniques and strategies of marketing are
used so that ultimately they induce the people to do business with a
particular bank. This requires satisfaction of customers. Traditional
marketing mix cannot be responsible for the total marketing function of a
service organization like banks. It requires all elements of service
marketing mix. Service marketing mix plays an important role in bank
marketing. It consists of the various elements of a marketing programme
which need to be considered in order to successfully implement the
marketing strategy and positioning in the markets. It helps in

differentiating services of a particular bank from its competitors.10

1. Product: Core product is core benefit that a customer is buying

while purchasing a product. The core product is a vital constituent

of the services offering and basically addresses two questions; first,

what do the buyers get when they purchase the product and what
business are we in? Schneider and Bowen (1995)argued that fancy

facilities, modern equipment, stylish uniforms and terrific signs can

never countervail for bad/mediocre food, poor financial advice, an
inappropriate will, or lousy music. Hauser and Clausing (1988)
also demonstrated the influence of diverse product (or service)
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 attributes on customers' perceptions. The quality of this core
product largely influences and sometimes may be the ultimate
determinant of the overall service quality from the viewpoint of the
customers. In the banking sector, the core products are 'deposits'
and 'advances'. All the banks have these two main products and
differentiation of banking services with reference to core product is
difficult to achieve. Banks differentiate their services on the basis
of value added services which mainly cover information
technology based services. And, customer has to be tech-savvy for
availing these value added services. Some example of value added
services are: mobile banking, mobile and „Direct to Home’

recharge through internet banking, electronic fund transfer, etc.

2. Price: Zeithaml (1988) has defined price as “what is given up or
sacrificed to obtain a product”. Jacoby & Olson (1977) defined
objective price as the actual price of a product/ service. Perceived
price was defined according to Zeithaml (1988) as the price that is
encoded by the consumer. Chang and Wildt (1994)defined

perceived price as the consumers' perceptual representation or

subjective perception of the objective price of the product / service.
Price perceptions are formed in relation to internal reference prices;

the theoretical justification for which can be found in prospect

theory, that explains that losses or sacrifices are encoded by
consumers with respect to internal reference points. According to

Biswas and Blair (1991) consumers recognize prices as high or

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 low, depending on their internal reference points, which are
established either by exposure to competitive prices or past prices.
Price in banking sector means interest rate and service charges.
Prices are being controlled by RBI in banking sector but limited
deregulation has allowed banks to differentiate their services on the
basis of differential interest rates. Due to complexity of pricing
structure in loans, maintaining transparency without hidden
charges is an essential prerequisite for differentiating bank
services. For Indian banking services evaluation, there is not much
differentiation in the price (due to regulations by RBI). Therefore,
the main differentiator for banking service evaluation would be

Serv-Qual dimensions, systematization of services, servicescape

and social responsibility. It implies that price is not important in
Indian banking industry. In Indian banking industry where
differentiation is not much in terms of prices, it is required to be
fair and transparent without hidden charges.
3. Place: Place in banking services means providing banking services

at right time in convenient way. Inseparability of production and

consumption is the most intriguing characteristic of services.
Service provider's physical connection to the service, the

customer's involvement in the service production process and

involvement of other customers in the service production process
create challenges for service provider. As income of people is

rising, there is inclination towards convenience related services.

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 When customers can't go to service provider to buy services due to
time or location, they are provided services through home delivery.
While reserving a seat in advance, customer may expect
convenience from the reservation service provider. Similarly bank
customer may expect proximity of ATM or bank branch while
withdrawing money or 24x7 hrs. facility for electronic transactions.
Banking services delivered via the Internet, mobile phone
interface, voice response system, call centre, automatic teller
machines and via face to face in a branch or visit at customer's
home not only have various cost implications for bank but also
drastically affects the nature of service experience for the

customer. If more complexity is associated with a service purchase,

customers prefer face to face interaction with service provider. For
availing loan service, customers have to rely on personal channels.
Therefore convenience of location plays important role on
customer perception regarding banking services. Customers with
higher knowledge about a service are more likely to use self-

service channels like ATM and internet banking. But, convenience

is a key driver of channel choice for the majority of consumers.
Milligan (1997) suggests that banks with an extensive branch

office system and ATM network would have the opportunity to

attract customers who are in convenience segment.
4. Promotion: Marketing communication helps in differentiating the

services when there is no perceptible difference available. Aclear

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focus on the interplay between customers and promotion is an
unavoidable aspect of bank marketing. Through promotion, banks
communicate their brand messages and their offers to customers.
Allahabad Bank, State Bank of Hyderabad and Union bank are
providing education loan but Allahabad bank focuses on a better
career; State Bank of Hyderabad focuses on right support and
Union bank talks about the good future. In a service setting,
marketing communication tools are especially important because
they help create powerful images and a sense of credibility,
confidence and reassurance. Without effective communications,
prospects may never learn of a service firm's existence, what it has

to offer them or how to use its products to best advantage. In the

emerging competitive markets, marketers are using promotional
tools in aggressive way to differentiate their services from their
competitors. Promotion is actually communication with customers.
In banking services, it helps in communicating with customers
regarding offering new products, change in interest rate, festival

season offers, opening new branches etc. effective media used by

banks to communicate about its services at right time helps in
satisfying its customers. Due to complexity of prices involved,

customers are left with little choice but to interact with employees
to get more clarity. Choosing the right advertising medium by
banks for communicating its services helps to satisfy its customers.

In Indian banking sector, aggressive and attractive promotional

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 strategies are not visualized. Most often, important schemes are
verbally communicated to customers by employees. Decision to
buy particular banking services largely depends on decision
convenience provided by employees. Notice boards at branches
also play significant role in providing information to customers.
5. People (Customers and Employees): Customers and employees
both participate in service delivery. Their participation is
unavoidable in service delivery. So, both are responsible for
effective service delivery. Customers can't be separated from the
production process of service firms and can contribute to their own
satisfaction. But, the level of participation may be different across

different service firms. If consumers' presence is required during

service delivery, it is termed as low participation. Payment may be
considered the required input from customers. If consumers' inputs
are required for service creation, it is termed as moderate
participation. These inputs may be in the form of information,
personal effort or physical possession. A customer has to give all

relevant information and physical documentation to an accountant

for preparing tax return. In case of high participation, customer co-
creates the service product. Here customers have to actively work

with service provider to co-produce the service. In weight

reduction program customer has to actively follow all the
instructions given by instructor to reduce weight. Mills and

Moberg (1982) highlighted that in service transactions, the raw

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 material to be converted to service output depends, to a great
extent, on the facts and information furnished by the customer.
Also, clients play a crucial role in influencing the outcome of the
transformation process as well. In banking services, customers'
inputs are required for producing services like opening account,
granting loan or other services. So customer participation is
considered as moderate. If customers believe they are partially or
totally to blame for the failure, they will be less dissatisfied with
the service provider than when they believe the provider is
responsible and could have avoided the problem. If bank customers
are giving all required information to employees which is required

for producing services like opening account, granting loan or other

services then services may be produced without delay. So customer
role is important in banking sector. Banking customers may enjoy
using the computer to obtain airline tickets, or they may like to do
all of their banking via ATMs and automated phone systems.
Customer education plays an important role in making them learn

regarding their role.

Successful service providers can satisfy customer's banking

requirements through human element, particularly 'face-to-face'

interaction with the customer. It is worthwhile to mention that employees'

behaviour plays an important role in differentiating banking services.
Welcoming the customer with smiling face, friendliness, politeness,
understanding customers' problems, etc. have positive impact on

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customer perception. Jones and Dent (1994) found that a smiling face has
a valuable effect on customer behaviour. In India people rely more on
social bonding than individualistic approach. Business transactions in a
collectivistic culture like India emphasizing social bonding are different
from those of individualistic cultures emphasizing structural bonding.
Therefore, employees' behavior plays a dominant role in differentiating
banking services.

All the above service marketing mix elements revolve around

customers. Differentiating the services from competitors is the principal

requirement of every service organization. Knowing customers'
perceptions regarding services offered to them will help to know their
feeling about service marketing mix and relationship of these factors with
satisfaction will help marketers to decide marketing strategies for their
customers. In banking services price fairness and transparency,
distributing banking services in convenient way, behavior of employees,
customers' education, tangibility and process through technology play
important role in differentiating services from competitors.

The following diagram will tell about the all marketing decisions
taken in banking services. These all are essential decisions which are
concerned are essential ingredients of services marketing mix. The

analysis has been done in the context of banking services.

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 Chart No. 3.01:

Service Marketing Mix of Bank

3.11 Digital Marketing:

Digital marketing is offshoot of advances in digital technology,

which occasioned the birth of Internet, the World Wide Web and the

interactive media. It is more complicated and challenging than offline

marketing; however if handled well it can be far more rewarding. Digital
marketing is defined as the promotion of products and services or brands

via one or more forms of electronic media by Business Dictionary. It

extends beyond internet marketing to include channels that do not require

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the use of the internet. It includes mobile phones, social media marketing,
display advertising, search engine marketing, and any other form of
digital media but not including those forms that do not offer an instant
feedback and return.11

A few important terms to be noted are Noise and Buzz. Noise, as

the name suggests is the disturbance that prevents the message from
reaching the consumers effectively. It could be due to advertising clutter,
customer in attention or negative publicity. Buzz is a type of noise, which

was created by web, where social conversations are about the product.
There are two different approaches in digital marketing that people can
opt to use for their business. The first one is pull digital marketing which
involves the consumer looking for information on a product through the
internet, usually via various search engines. The other approach is push
digital marketing which involves the marketer sending emails and other
campaigns to the consumer containing information on their product or
service offering. In order to succeed in digital marketing the website
content must be developed using the search engine optimization skills
such as the use keywords and inclusion of links in the content.

3.12 Channels of Digital Marketing:

There are plethora of digital marketing tools and many of them are

evolving day-by-day. Those channels which are searching marketing, e-

commerce and e-branding, advertising on the web, online applications
and mobile marketing, affiliate marketing, the social web are briefly
explained below.
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Search Marketing – Search marketing, uses search engines to
drive traffic to one‟s website. There are three types of search
marketing, namely pay per click, natural search and contextual
search.
Pay per Click is online advertising where searchers are directed to
a website after clicking on an advertisement within a search engine.
Natural Search is the section of search engines where the results
are purely based on an algorithm to help improve relevancy for the
searcher.
Contextual Search is advertisement in the form of text and image
ads within the content of a site.

E-Commerce and E-Branding – E-Branding is the creation and

development of communications strategies specifically for brands
to have meaning and content on the web. A brand needs a face, a
representative, a personality to which people can connect with and
recognize the brand. A step further is E-commerce which operates
are an online market. The buyer and seller interact online after the

former sees the display of products. Money is paid either on

delivery, or by credit card or debit card, net transfers.
Advertising on the web – It refers to the graphical advertisement

that appears next to content on websites, instant messaging (IM)

applications, emails & other digital formats. They are called as
banners and they include text, images, audio, animations, and video

and sometimes even interactive content. Display advertising also

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 facilitates tracking. It gives details about how many persons have
visited the website, how many clicked on the advertisements, and
their journey to the website and what was viewed on their page.
This helps to ascertain Return on Investment (ROI) which has not
been possible in other media.
Online applications and mobile marketing – Ever since the advent
of Apple App store and Android Google Play store and other apps
store, advertising has become easy. The developers who allow their
app to be free usually make space for advertisers so that they are
able to earn an income from their free applications too. Mobile
marketing is the easiest and the fastest way to reach a customer,

cookies are set to understand what kind of pages the user browses
and user specific advertisements are made available when he uses
the phone.

3.13 Banks in Social Media:

Social media offers the next generation of marketing, which is

more personalized and direct, answering the customers‟ needs. Almost 43

per cent of adults who were active online users wanted to connect with
their banks and avail its services. The services they are interested to avail
are receiving alerts about promotions and specials, offering customer

service, to be able to read reviews of other customers, offering current

and relevant financial advice are a few to name. This shows that there is
demand for such services. Given the perks for this media, the monetary
investment required is also very less. Banks spend around 2-10 per cent
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of their marketing budget.12However social media requires investment of
time and knowledge; and if both these elements are not properly
administered, then results might not be favorable. Social media requires
time – it indicates the time require to manage the content, and answering
queries; time also denotes the return on investment, which in case of
social media takes time to pay off. The next important factor is
knowledge, without adequate knowledge on how social media works a
firm cannot establish itself. However, caution must be exercised because
social media is a vast, dynamic and confusing area of competence and
poorly conceived initiatives squander time, resources, and leadership
support if not executed properly.

A bank must have an effective strategy to adapt social media in a

bank. They need to re-structure their frame-work by aligning their
business goals with their social media. A bank must have a clear and
specific strategy which allows the banker to capitalize the moment. They
must also ensure that there is a smooth flow of information between chief
marketing officer and chief information officer to reap higher success.
When a banker offers social media, they shift and become customer-
centric organization, which is exceedingly beneficial to a bank, which is
predominantly client based industry. There are many benefits that bankers

reap out of social media, they are explained as under:13

Enhancing its brand – The American Express created an online

forum to open, which connected business with each other and
provided valuable content with which they wanted to have a

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 relationship. Today their monthly traffic is as high as 1.5 million
visits. This enhanced brand loyalty and helped the bank to be a part
of important conversations.

Reducing costs – Social media can be viewed as a major

contributor to cost reduction efforts, especially when it comes to

sales, marketing and service. Bank of America was the world‟s

first and largest bank in the world to use Twitter to help its
customer solve issues. Information is disseminated faster and easier

via twitter which drives the customer costs down and also creating
brand impressions on a social network.

Creating and improving innovation – Banks can create more

customized and tailor made products to reflect real-time demand.

Chase Bank created a community of mass affluent consumers and
they in turn designed their own credit-card to their specific needs,
it was called Chase Priority Club Reward card. This kind of
initiatives gives customers upper hand of decision making.

Increasing revenue – while there are no apparent examples to

show a direct bearing of social media over increasing a bank‟s

revenue, there result is pretty obvious in other fields.

3.14 Challenges of Bank Marketing:

The improvement of operational and distribution efficiency of

banks has always been an issue for Government of India in consultation
with RBI. However, the economic rise of 1990s gave birth to the

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new economic macro level thinking to improve the economic health of
the Indian economy.14 Financial sector reforms, particularly banking
sector, gave new sound and healthy direction to the Indian economy.
Various challenge shave taken place to tackle the problem are:

• Competitive Environment: The Foreign Banks and New Private

Sector Banks have witnessed a significant growth but

on the other side, Public Sector Banks are at the edge
of survival among them with huge capital base, latest technology,

innovative and globally tested products/services are

fetching the consumer‟s attention. To make Indian banks
competitively strong, they should follow latest technology,
innovative and globally accepted products/services followed by
appointment of experienced, skilled and tech-friendly
professionals.
• Technology: Another important challenge is that Indian public
sector banks should have used innovative technology to facilitate
financial inclusion for the unbanked population of India
through use of biometric techniques and rapidly growing mobile ne
twork.However, this customer experience and tailored offerings are
increasingly becoming key to bank profitability. Further, the

operation by computer is delayed by the fact that some operating

staff is not very skilled and thus it takes more time. An
inexperienced person means more time and more delays in
providing services of the customers.

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• Transformation of Human Capital: Another important challenge
is the transformation of human capital. There is the need to
develop and manage the human resources to make them
adaptable to the changing environment. It is a challenge for banks
that how to manage their human capital to make it productive.
However, banks should provide on-the-job training to the efficient
staff to make them capable to understand and work with latest
technology and its application.
• Rural Marketing: This is a big challenge before the Indian banks
to enhance rural marketing to increase their customers. Banks
should open their branches not only in the urban and semi-urban

areas but also in the rural areas.

• Customer Focus & Awareness: The banks require improving on
providing services and profitability efficiency of services. The
banks have to explore out fastest and efficient means of providing
services with the use of IT applications, tele-banking, internet
banking and improving delivery system by improving the attitude

and behavior of the staff also. Customer awareness is also a

challenge before the banks. Bank can market their products and
services by giving the proper knowledge about the product to

customer or by awarding the customer about the products.

Bank should literate the customers.

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3.15 Strategies for the enhancement of bank marketing:

In the fierce competitive market, needs of customer keep changing.

Hence, marketing strategy must be dynamic and flexible to meet the
changing scenario.15Here are steps that form successful and effective
marketing strategy for bank products.

• Marketing Strategies: The banks are required to devise suitable

market strategies to augment the volume of business level. So, the
banks should research on the vast knowledge they have about the
consumer, devise about specific products for specific
segments, differentiate according to consumer potentials and its
expectations, and focus on few potential customers with customized
products and services rather than serving all customers with
universal products. Using Customer Relationship Management (CR
M), appointment of youngemployees with fresh and creative minds
with expertise in latest technology, as a matter of choice is desirable
to survive in the globalised market.
• Effective Branding :Man is a bundle of sentiments and emotions.
This can effectively be helpful in branding our products. Considering
the features of products and target group of customers, the product
can be effectively branded so as to sound it catchy and appealing.
The branding should be done in such a way that the brand name
must attract the attention of the target group and the salient feature of
the product should resemble brand name. All the promotional
campaigns should refer the product by its brand name only so that to
strike the same in the customer‟s mind.

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• Image building: The PSBs should start on massive scale the image-
building exercise. The banks should focus their attention on creation
of such an outward look that it feels like anything entering the bank.
The regent of the bank should be user-friendly with good quality
furniture and other attractive infrastructure.
• Products for Women: The national perspective plan for women
states that most of women workers are engaged in the agriculture
and allied activities like dairy, animal husbandry, sericulture,
handloom, handcrafts and forestry. Banks should do something to
improve their access to credit which they require.
• Advertisement: Advertisement is an eminent part of marketing of

bank products. Advertisement should be such that appeals to people.

It should not follow the orthodox pattern of narrating a product.
For effective advertisement, bank should understand people‟s tastes
and choices.
• Product Innovation: The present era of competition has witnessed
various large multinational banks like American Bank, Hong Kong

Bank, Swiss Bank, City Bank, etc. and other multinational banks
coming very aggressively. They have set the tone and to an extent
also the standard for technological improvements with

product innovations, which dominated the traditional public sector

banks. So, these banks have to run in a market which has no
geographical barriers and will have to develop abilities of product

innovation as well as delivery comparable to the best in the world.

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• Customer Adoption: Nowadays the public sector banks are
presenting various products and services to their customers
online, that they will have to be work hard to attract
more number of customers. This is possible only when they
assure security of online transactions. Moreover, banks that
have created a distinctive online offering could attract
more number of customers when compared to those banks which
are using almost similar products and services.

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