Marketing Strategies and Customer Satisfaction in the Banking Sector

AWARENESS LEVEL, EXTENT OF USAGE AND SATISFACTION OF CUSTOMERS
MARKETING STRATEGIES OF COMMERCIAL BANKS–

CHAPTER- 3
THEORETICAL OVERVIEW
3.1 Introduction
3.2. Bank marketing
3.3. Marketing mix
3.4. Customer satisfaction
3.5. Analysis of performance of commercial banks.
3.6. Conclusion
3.1. Introduction
Since the inception of globalisation in India, banking sector has undergone
various changes. With the deregulation and liberalisation process in full swing,
the consequent policy changes introduced in the Indian financial system in
general and banking in particular are effecting unprecedented changes in its
functioning. Encouragement to foreign banks and private sector banks increased
competition for all operators in banking sector. There was an absolute shift from
sellers into buyers’ market, establishing the ‘customer’ as the key factor in the
market. The dictum “as the bank exists because of its customers, has become
more pronounced and relevant in the present context”. Thus, marketing
constitutes the key strategy for banks to retain good customers and also anticipate
their future demands.
During the last 40 years the changes made in the banking industry through
financial reforms, advancement of communication and information technologies,
globalisation of financial services and economic development is clearly evident
from the changes that have occurred in the financial markets, institutions and
products.These changes had a considerable effect on efficiency, productivity
change, market structure and performance in the banking industry.
Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 61

MARKETING STRATEGIES OF COMMERCIAL BANKS–THEORETICAL OVERVIEW
3.2. Bank Marketing

Bank marketing is defined as “aggregate of functions, directed at providing
services to satisfy customers’ financial (and other related) needs and wants, more
effectively and efficiently than the competitors keeping in view the organizational
objectives of the bank”.(Philip kotler) Thus without exception each individual
working in the bank is a marketing person who contributes to the total
satisfaction to customers and the bank should ultimately develop customer
orientation among all the personnel of the bank.
Modem marketing concept emerged in the 1950's as a new philosophy of

business management. It advocates that Customers are the focal points for all
decision making in the organization and all functional areas are geared to satisfy
targeted customer's wants. The marketing concept views customer orientation as
the means to the end of achieving the organization’s goal.
3.2.1 Evolution of bank marketing.

Late 1950s-Marketing came into Indian banks in the form of advertising and
promotion concept
Late 1960s- Idea of customer convenience and market segmentation developed.
1970s- Market segmentation implemented and marketing positions were created
in banks.
1980s-Large scale promotion of bank marketing, equipping staff with marketing
capabilities in terms of both skill and attitude
1990s- Efforts to satisfy customer needs by providing superior products and
services.
2000 onwards- Delighting customers, public relation philosophy for corporate
image projection.
Figure 3.1 shows the evolution of bank marketing in India.

Traditional Banking Period upto 1969 Accounting orientation

Bank
And Branch
expansion
Social Banking
nationalisation
Targets
Development Banking period 1969- mid Selling orientation
1980’s
Disintermediation
Consolidation
Rising needs
operations
Banking
Bank marketing period after mid 1980s Towards marketing orientation
Customer need
creating superior
deregulation
banking services
Liberalisation
satisfaction
Financial reform period 1990 onwards Towards aggressive marketing

markets, lasting
Financial super
Financial super
Diversification
Advancement
with customer
of business
relationship
in IT
markets
Post Reform Period – 21st century Image projection
Figure-3.1-Evolution of Bank marketing In India

3.2.2. Marketing strategy

A Marketing strategy can be defined as the outlines of broad marketing
logic by which the business units hopes to achieve its marketing objectives and
the specifics of target markets, positioning and marketing expenditure levels. It
outlines specific strategies for each marketing mix element and explains how
each responds to the threats, opportunities and critical issues spelled out in the
marketing plan.
While formulating marketing strategy, a bank should focus attention on;

consumer sovereignty, attitude, responsiveness and personal skills of bank staff,
revitalizing the marketing department, top management support to the marketing
department and participation of marketing personnel in key bank decisions
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 specialised
services; specialised branches; strong marketing organisation in different banks;
aggressive selling; meeting new customers' expectations; and cost-effective and
efficient services for gaining customer satisfaction and loyalty. Banks should
remember that, it is so tough to make a customer enter a bank, but it is a fraction
of second for a customer to move from one bank to another. Competition is
increasing at a regular basis and customers are enjoying it. The more the
competition, the better the services banks need to provide for business
retention.(bank quest)
3.2.3 Marketing Approach to Banking Services

Marketing of banking services is a device to maintain commercial viability
and an approach to market the services profitably. It is a managerial approach to
excel competition. The marketing approach in banking services consists of the
following elements:-
To understand customer’s financial needs-Understanding
customers and customer’s needs and requirements is the guiding

philosophy of marketing. A marketing orientation requires the

organization to view its business from the point of view of its customers.
This requires an insight into consumer psychology and behavior,
including what motivates consumers, their attitude and perceptions of the
bank and its products as well as an understanding of their decision
processes.
To develop suitable banking products and services to meet
customer requirements - The product is usually the basis on which
customer satisfaction is created. As such it is vital component of the
marketing mix. The financial institutions specially banks have become
increasingly concerned with a number of issues surrounding product
strategy, including, the process and procedure involved in the product
development, the factors to be considered for the successful adoption of
new product; how to manage the product over its life, to protect it from
competition; how to differentiate the product from similar alternatives;
when to withdraw an unprofitable product from the range; and how best
to implement the withdrawal process with minimal adverse effects for the
banks as well as customers.
To fix the fair and competitive prices for the

products/services developed-The price of a financial product may be the
interest rate of a loan, a fee charged for advice given, commission paid to
an intermediary such as a broker, the tax paid on interest earned on saving
etc.
Promoting the products through advertisement to present

and potential customers- Through advertisement the bank is
informing, persuading and educating individual and groups to enable the
acquisition of new customers, retention of existing customers, project the
company image and improve employee morale.
To set up suitable distribution channels and bank branches-

Distribution involves a wide variety of activities culminating in the

creation of three types of utility: time, place and possession. In terms of

time, distribution allows the customer to gain access to financial service
when it is convenient for them to buy. In terms of place, distribution
makes products and services available to customers in locations which are
accessible and convenient to them. With regard to possession, distribution
provides the customer with access to the product for consumption or
future use. In addition to this, distribution function also provides a means
of effectively communicating with the customers, and for customers to
communicate with the banks.
Conduct market research on an ongoing basis-Marketing

research is the key to understand customer expectations and perceptions
of service (Kotler 1999). The key task of the bank is not only to create
and win more and more customers but also to retain them through
effective customer service. Customers are attracted through promises and
are retained through satisfaction of expectations, needs and wants.
3.2.4. Increasing Importance of Marketing in the Banking Industry

Marketing to banking is an appropriate promise to a customer through a
range of services (products) and also to ensure effective delivery through
satisfaction. The actual satisfaction delivered to a customer depends upon how
the customer is interacted with. It goes on to emphasise that every employee from
the topmost executive to the junior most employee of the bank is market.
Due to the introduction of LPG policy and IT Act of 2000 the scope of the
market has enhanced. Customers' expectations are high from the service industry
like a banking industry. Only those banks will survive who will provide efficient
and customer desired services.
The various factors which have led to the increasing importance of

marketing in the banking industry are categorized as follows:

Increasing awareness among Customers

Modern technology has made customers aware of the developments in the
economic environment, including the financial system. Financial needs of the
customers have grown multifold into various forms like quick cash accessibility,
money transfer, asset security, increased return on surplus funds, financial advice,
deferred payments etc. With a wide network of branches, even in a dissimilar
banking scenario, customers expect the banks to offer a more and better service to
match their demands and this has compelled banks to take up marketing in right
earnest.
Greater focus to service quality
Quality is the watchword in the competitive world, which is market driven
and banks have had to face up to this emerging scenario. In fact, it may not be
exaggerating to say that quality will be the sole determinant of successful
banking ventures in future and marketing has to focus on this most crucial need
of the hour.
Rising competition
Increased Competition is being faced by the Indian banking industry from
within the system with other agencies both, local and foreign, offering value
added services. Competition is no more confined to resource mobilization but
also to lending and other areas of banking activity. The foreign and private sector
banks especially NGPBs with their superior technology, speed in operations and
imaginative positioning of their services has also provided the necessary impetus
to the Indian banks to innovate and compete in the market place.
Greater adoption of technology
Greater adoption of technology has resulted in financial product
development especially in the international and investment banking areas. The
western experience has demonstrated that technology has not only made
execution of work faster but has also resulted in greater availability of manpower
for customer contact.

Reducing importance of intermediating role of banks

(Disintermediation)
The increasing role of capital markets in mobilizing funds is reducing the
importance of banks as intermediaries. Companies are directly approaching the
savers through the capital markets. Mutual funds help in attracting the small
investors who do not want to take much risk.
3.2.5 Marketing strategies in Banks

To formulate an effective marketing strategy the bankers should know the
following aspects
The total potential presently available and its present share in the total
market for deposits, advances and other services.
Core customer segments i.e. which customers provide highest profit
and business potential, so that they always get the desired attention.
Core products and services, i.e. which services or products best match
the requirements of customers in general and core customers in
particular and provide high business and profit potential, so that action
is taken to improve such products further to make them more
acceptable.
What products are supplementary products and keep the core products
and services, as high business and profit potentials.
Core competitors, i.e. which competitors are posing major threat in
serving the core customer segments and which core products and
services are they offering to the clients, so that if possible, bank can
explore the possibility of offering similar products or services.
Core appeal i.e. which advantage should be offered and communicated
to customers in general to differentiate one’s own organization in terms
of pricing, servicing, conveniences etc.
Potential products to suit the changing environment, so that they meet
the change in customer’s needs over a time period.

Potential customers who could be brought to bank’s fold. Potential

competitors who may erode bank’s market share, so that action may be
taken to change the strategies in time, to remain the market leader.
Which other products are needed to be introduced to maintain or
enhance the exiting business, so that the customer does not feel the
necessity of shifting his patronage elsewhere.
How strong is the information system in the bank and what needs to be
done to create a prompt and accurate information system which forms
core of any marketing exercise.
Customers like all human –beings, like to deal with people who care.
Hence attitudinal changes particularly in the staff at counter, is needed
to understand that their existence is due to customer and customers is
really an important visitor on the banks premises.
3.2.6 Bank market segmentation

The market segmentation implies regrouping of bank’s various services and
activities into separate departments for each category of customers, depending
upon the business handled in each market. The marketing effort should be
directed through segmentation. The rationale of segmentation lies in the fact that
banking being a financial services industry, focus has to be on customer and his
needs, instead of organizational convenience. Segmentation could be done by
sub- dividing the market into more or less homogeneous sub-sets of customers.
The customers can be sub grouped taking into account geographical area, social
status, income levels, profession, economic activity, age group etc.
3.3. Marketing mix

Marketing mix-“A mixture of several ideas and plans followed by a
marketing representative to promote a particular product or brand is called
marketing mix”. “Marketing Mix is the combination of four elements- product,
pricing structure, distribution system and promotional activities- used to satisfy
the needs of an organization’s target market and at the same time, achieve
marketing objectives”. From a buyer’s perspective, each marketing tool is
designed to deliver customer benefits. Lauterborn (1990) suggested that the

seller’s 4 Ps correspond to the customers 4Cs product correspond with customer

needs and wants, price responds with cost to the customer, place responds with
convenience and promotion corresponds with communication.
Sellers 4 Ps Buyers 4Cs

Product Needs and wants
Price Cost
Place Convenience
Promotion Communication
Kotler, (2003) suggests that the traditional marketing mix approach used in
the marketing of goods is insufficient to market and manage services effectively
because of services distinctive features. A key factor distinguishing the services
marketing from marketing of physical products is the human element. The human
factor underlines the personal nature of the services marketing. The personnel are
a powerful element of customer persuasion and a major parameter affecting the
customer’s perception on the delivered service quality. The services marketing
function in an organization is much broader than the activities and outputs of the
traditional marketing department, requiring close co-operation between marketers
and those managers responsible for operations and human resources Therefore,
the traditional marketing mix has been expanded by the addition of three new
marketing mix variables people, processes and physical evidence.
These considerations are now known as 7Ps of marketing, sometimes

referred to as marketing mix. It is the set of tools that the firm uses to pursue its
marketing objectives in the target market.
3.3.1 Product-A vital component of marketing mix, the product or service is the
basis on which customer satisfaction is created. A product is anything that can be
offered to a market for attention, acquisition, use or consumption that might
satisfy a want or a need'.(Kotler, P). 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 domination
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. In the first process, the
needs to the target market are anticipated and visualized and in the second
process, the banks react to the expressed needs and therefore we consider it
reactive. It is essential that every product is measured up to the accepted technical
standards. Technical perfection in service is meant prompt delivery, quick
disposal, and presentation of right data, right filing, proper documentation etc.
Product and service are the words used interchangeably in banking

parlance. The bank products are deposit, borrowing or other product like credit
card or foreign exchange transaction which is 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 service.
3.3.2. Promotion: Promotion is the direct way an organization attempts to reach

its public and is performed through the five elements of promotion mix including
advertising, sales promotion, personal selling, public relations and direct
marketing.Promotion includes all forms of communication used to communicate
the benefits of the offering to the target market(s). The objective is to persuade
the customer in such a way that he or she recognizes that the offering is uniquely
qualified to meet his or her needs. With the technological advancement
throughout the world, new and new financial products are being innovated every
day. But only adoption of new products & services are not enough. For success it
is very much needed to make the customers aware of the new products. Besides,
many people of the developing countries till now is not that much aware of the
regular services of banking industry. So it becomes a duty of the commercial

banks to provide more information to their target customers about themselves &
their products. Promotional packages are very important for financial service
industry. Thus the orientation of banks should be with a much wider focus in
relation to customer and market needs, and the consequent marketing strategies.
3.3.2.1. Elements of promotion mix-

3.3.2.1.1. Advertising
Advertising is any paid form of non-personal communication about an
organization, good, service or idea by an identified sponsor. Advertising is the
most visible element of the communications mix because it makes use of the
mass media, i.e. newspapers, television, radio, magazines, bus hoardings and
billboards. Sales promotion consists of short-term incentives to encourage
purchase or sales of a product or service (Kotler&Armstrong, 2005). Banking
organizations use this component of the promotion mix with motto of informing,
sensing and persuading the customers. A bank can improve its brand image and
brand equity with the help of advertising. It also helps the bank in differentiating
and positioning its services from those of competitors. While advertising it is
essential to be aware of key decision making areas so that instrumentally helps
banks at micro and macro levels. Banks should care about following criteria for
selection of media-
1. Which media the target market prefer

2. Characteristics of service
3. Content of message
4. Cost
Ads should be mostly educative, image making .and provide information

regarding activities of banks, new services, Situation of market, government
decisions, future developments etc. Advertising media and channels that banks
prefer are newspaper, magazine, radio, direct posting and outdoor ads, TV
commercials and social media. In the selection of media, target market should be
determined and the media that reach this target easily and cheaply must be
preferred. The advertising professionals bear the responsibility of making the

appeals, slogans and messages more creative. Here, creative means making the
advertisement programs distinct to the competitive organizations, which are
active in influencing the impulse of the customers and successful in informing
and sensing the customers. This requires an in-depth knowledge of the receiving
capacity of the target market for which the advertisements are designed.
3.3.2.1.2 Personal Selling

Due to the characteristics of banking services, personal selling is the way
that most banks prefer in expanding the sales. Personal selling occurs in two
ways. First occurs in a way that customer and banker perform interaction face to
face at branch office. In this case, whole personnel, bank employees, chief and
office manager, takes part in selling. Second occurs in a way that customer
representatives go to customers’ place. Customer representatives are specialist in
banks’ services to be offered and they shape the relationship between bank and
customer.
3.3.2.1.3 Sales Promotion: -Sales promotion is often used by the companies to

improve the sales of a product or service either by encouraging the existing
customers to use the service more frequently or by attracting new customers to
use their service. Banks also aim to pull customers to use their services by
attracting them with free offers, coupons, cash discounts, warranties; prizes etc.
3.3.2.1.4 Public relations:

In the banking services the effectiveness of public Relations is found in
high magnitude. The objectives of public relations tend to be broader than those
of other components of promotional strategy. It is concerned with the prestige
and image of the organisation as a whole. It constitutes an indirect approach to
promoting an organisation’s products and/or services. Public relations in banking
should provide;
1. Establishing most effective communication system
2. Creating sympathy about relationship between bank and customer
3. Giving broadest information about activities of bank.

3.3.2.1.5 Telemarketing:
The telemarketing is a process of promoting the business with the help of

sophisticated communication network. Telemarketing is found instrumental in
advertising the banking services and the banking organizations can use this tool
of the promotion mix both for advertising and selling. This minimizes the
dependence of banking organizations on sales people and just a counter or center
as listed in the call numbers may serve multi- dimensional services.
Telemarketing is likely to play an incremental role in marketing the

banking services. The leading foreign banks and even some of the private sector
commercial banks have been found promoting telemarketing and they have been
getting positive results for their efforts.
3.3.2.1.6 Word-Of- Mouth:

Much communication about the banking services actually takes place by
word- of- mouth information, which is also known as word- of- mouth
promotion. The oral publicity plays an important role in eliminating the negative
comments and improving the services. A satisfied group of customers is
considered to be the most successful hidden promoters and if the bankkeep on
moving the process of satisfying the customers, the circle of word of mouth
promotion would keep on moving. This also helps the banker to know the
feedback, which may simplify the task of improving the quality of services. By
improving the quality of services and by offering small gifts to the word- of-
mouth promoters, bankers can get more business command in their area.
3.3.3. People
The word ‘people’ is used in services marketing in two perspectives. One
for employees, i.e., internal marketing and the other for customers, i.e. external
marketing. In this way the term people indicate both employees and customers in
services marketing.
People are crucial to the success of any business. It is far more so in a

service oriented industry like banking. It is not only about making available

necessary knowledge and skill for servicing the customer better, but there is a
need to market banking products to own grassroots level people before marketing
these products effectively to customers. All people directly or indirectly involved
in the consumption of banking services are an important part of the extended
marketing mix. Knowledge Workers, Employees, Management and other
Consumers often add significant value to the total product or service offering.
Each employee in a bank irrespective of his position in the bank hierarchy

is both a recipient and provider of service. For instance to realize its potential in
bank marketing, banks should be conscious in its potential in internal marketing -
the attraction, development, motivation and retention of qualified employee-
customers through need meeting job-products. Internal marketing paves way for
external marketing of services. The basic objective of internal marketing is to
develop motivated and customer conscious employees. A service company can be
only as good as its people. A service is a performance and it is usually difficult to
separate the performance from the people.
3.3.3.1 Internal Marketing

Internal marketing emerged in 1960s as a way to deliver high quality
products and services. The rationale behind internal marketing is the belief that
by satisfying internal customers (employees) the organizations will strengthen its
human capital and will be better positioned to satisfy the requirements of its
external customers .This is based on the assumption that fulfilling employees’
needs will increase their motivation and commitment, and enhance their
performance. The main concept of internal marketing is to make the employees
as important as the external customers by treating them as internal customers
.The importance of internal marketing lies in motivating the employees and
encouraging them to offer superior services to customers which in turn will
reflect in the increased profits to the firm.
Services are different from products in that they are produced and
consumed at the same time in a cooperative relationship between the customer
and employee. So to provide services, companies must provide their employees

an understanding of the services and convince them of the usefulness of these

services (internal customers).To obtain high level of customer satisfaction the
employees who provide the services should have a high level of satisfaction
themselves. Banks need satisfied employees to make customers satisfied.
This concept shows the chain of profit creation in service organisations in
the following way-
1. Internal service quality-Hiring the service of talented employees,
giving them sufficient training, motivation, supporting working
environment etc. thus providing high quality internal service.
2. Employee satisfaction-Through good internal service, employees job
satisfaction increase which leads to lower employee turnover rate,
improved skills, increased loyalty which ultimately leads to increased
employee productivity.
3. External service-satisfied employees provide good service, increasing
the external service value.
4. Customer satisfaction- The increased external service value leads to
increased customer satisfaction.
5. Customer loyalty-Satisfied customers remain loyal, make repeated
purchase and recommend other potential customers about the service
they are enjoying from the firm.
6. Increased revenue and profit-Retaining the existing customers and
attracting the new ones increases the revenue and profit of the firm.
Thus profit in service companies depends on how well they are taking care
of their employees. Figure 3.2and 3.3 shows the three types of marketing that
takes place in service organisations and the chain of profit creation in such
organisations.

Three types of service marketing
Marketing Forms in Services Industry

Kotler & Armstrong (2006)
Service profit chain
Source-James L.Heskett et al(1994)-Putting the service profit chain to work.
Harward business review. Figure (3.3)

For the present study, 28 statements are drawn under 5 heads namely
Motivation, Organisational integration, Empowerment, Service orientation and
Organisational environment &supporting facilities for studying the effectiveness
of internal marketing strategy adopted in the selected banks.
Motivation- According to Mark et al. (1998) Motivation is “the movement

of workers to act in a desired manner”. In other words motivation is “the attribute
that moves us to do or not to do something”. Here, it includes efficient internal
communication system, recognition from top management, attractive salary and
incentives, moral motives and opportunity to reach higher post.
Organisational integration-Employees feel proud to work for a bank that

offers good service and backs up its claims by maintaining high standards
through an efficient internal structure and genuine concern for the employees and
customers. It explains how far employees are emotionally attached with the firm.
Empowerment-Empowerment has been described as a venue to enable

employees to make decisions and as a personal experience where individuals take
responsibility for their own actions. Through training programmes, organisation
provides opportunity for the systematic development of the knowledge, skills and
attitudes required by employees to perform adequately on a given task or job.
Service orientation-The success of service industry depends on how well
the suppliers views are matched with the customers’ needs and preferences .For
this employees must possess enough skills to understand the changing needs and
preferences of customers to delight them with excellent service.
Organisational environment and supporting facilities-In today’s
environment providing a humane context to the work place, creating an
environment for team work and providing necessary supporting facilities for
performing the job effectively would contribute much to the organisation.

(Figure3.4)
3.3.4. Price Mix:
The price for services is an important element of the marketing mix, being
an important income source for the organization. Price is the amount of money
customers have to pay to obtain the product. Zeithaml (1988) has defined price as
“what is given up or sacrificed to obtain a product”. Perceived price was defined
according to Zeithaml as “the price that is encoded by the consumer. Managers
seek customer satisfaction as a pricing policy objective as they assume a positive
link between customer satisfaction and profitability. Satisfied customers return
for purchases, buy more and help to attract new customers via recommendations,
while dissatisfaction leads to complaints, lost customers and reputational damage.

Quality of service provided has direct relationship with the fees charged.
While deciding the price mix customer services rank the top position. The value
and satisfaction cannot be quantified in terms of money since it differs from
person to person. Keeping in view the level of satisfaction of a particular
segment, the banks have to frame the pricing strategies.
Traditionally price was not used as a key competitive weapon in the

banking sector in India due to the administered rate system. But liberalisation of
financial sector has changed the scenario and customers too have become more
prices sensitive. The banking organizations are required to frame two- fold
strategies. First, the strategy is concerned with interest and fee charged and the
second strategy is related to the interest paid. Since both the strategies throw a
vice- versa impact, it is important that banks attempt to establish a correlation
between two. It is essential that both the buyers as well as the sellers have feeling
of winning. Another component to consider in the pricing of earning assets is the
risk of loss. Most notably, this is relevant in loan pricing. Many banks allocate a
risk weighting to individual loans over a definite size or based on loan type and
assign a credit risk charge based on those ratings. Asset and liability mix also
impacts pricing results. Generally speaking, banks operating with higher loan-to-
asset ratios are able to afford to pay more for deposits.
Pricing matters to banks for two key reasons: it impacts on customer

satisfaction and profitability. Price satisfaction is generated when the actual price
matches with a customer’s expectations. Price satisfaction is a product of several
elements, for retail finance products in particular a distinction can be made
between the following factors:
1. Price-quality ratio, i.e. whether the costs are perceived as commensurate

for the quality of the service offered.
2. Relative price, i.e. how the price measures up to competitors’ offers.

3. Price reliability, i.e. whether the price is currently good value and whether
the presumed price corresponds with the actual price or contains "hidden
elements" that are not visible at first glance.
4. Price fairness, i.e. whether the price is judged to be fair and justified by the
customer.
5. Price transparency, i.e. whether the price is clear and easily understand-
able. (Matzler et al. (2007).
Associated Chambers of Commerce and Industry of India (2009) survey on
growth and emergence of public and private sector banks in India reveals that
private sector banks are not preferred for traditional items, such as loans, as their
offers are difficult to understand and perceived rate of interest is high, whereas
public sector banks are perceived more reliable with lower rates of interest. In
Indian banking industry where differentiation is not much in terms of prices, it is
required to be fair and transparent without hidden charges.
It is to be noted that the best pricing strategies are flexible and allow a
company to respond to changes in supply or demand, new competition, changes
in technology, etc. Price strategies should constantly be evaluated and tested to
ensure the company maximizes return on sales while meeting a variety of other
goals and needs.
3.3.5. Place
The place where customers buy a product, and the means of distributing the
product to that place, must be appropriate and convenient for the customer. The
product must be available in the right place, at the right time and in the right
quantity. 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. As income of people is rising, there is
inclination towards convenience related services.
Banking services delivered via the Internet, mobile phone interface, voice
response system, call center, 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. These days it might appear many of us hardly use
branches. We get cash from ATMs, make payments and arrangements through
direct debits and internet banking, and we can compare hundreds of insurance
offers in moments. And yet, banks seem to be failing to realise the potential
power of the branch. Jed Mole(2013) says in a survey conducted in UK among
1,30,000 respondents, to understand how people want to communicate with their
bank , revealed that more than three-quarters of people (77 per cent) say it’s still
very important to have a local branch. He states that further examination also
pointed out regardless of differing preferences by demographics, three out of four
customers still clamour for the personal touch; there is enormous interest in
having access to a local branch network. Banks must see their branch as a fully
integrated part of the marketing mix and need to integrate customer data across
this and all touch points to avoid a schizophrenic brand experience. Armed and
informed with the right insight, created themselves and through third-parties,
bank staff can have a much more personalised conversation which is far more
likely to be helpful for the customer, but will also make selling wider services
easier; it will feel less ‘bolted on’.

3.3.6 Process
Process involves actual procedures, mechanisms and flow of activities by which

service is delivered. It is the service delivery and operating system (Thuo, 2008).
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.
Standardization: banks have got standardized procedures for 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.
Customization: There are specialty counters at each branch to deal with
customers of a particular scheme.
Number of steps: Number of steps is usually specified and a specific
pattern is followed to minimize the 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 and regional language help the customers further.
Customer involvement: ATM does not involve any bank employees.
Besides, during usual banking transactions, there is definite customer
involvement at some or the other place because of the money matters
and signature requires.
3.3.7 Physical Evidence-Physical Evidence/Ambience refers to the environment

in which the service is delivered. It is where the firms and customers interact.
Physical evidence also called tangibles is defined as the appearance of physical

facilities, equipment, personnel and communication material. Tangible indicators

in the physical environment of a service firm influence behaviour of customers
and their future purchase decisions (Burgers et al., 2000). Consumers look at
tangible elements and assume about the service firm and its performance. Better
tangible aspects of service quality of the bank branches enhance customers'
satisfaction (Lenka et al., 2009). Apart from the physical décor of the workplace,
tangible aspects also include display of current guidelines regarding rate of
interest in each investment plan, required service charges for different bank
transactions, and other facilities provided by the banks.
Physical evidence includes (a) Physical facilities and (b) Physical

nvironment.
Physical facilities: On the basis of Physical evidence like building, furniture,

equipment, stationery, etc. are the influencing factors for the potential customers
to form an impression about the service organization.
Physical environment: Physical setting or the service environment within which

the service takes place influences consumer expectation of service quality and
satisfaction. The important elements of physical settings are:
Ambience: The ambience of physical setting includes temperature, lighting,

noise, music, scent and colour.
Space: People need space around them to feel comfort.
Decors and artifacts: Sign, symbol, reports, punch lines, other tangibles,
employee’s dress code etc. are important component of decor. The company’s
financial reports are issued to the customers to emphasis 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.
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.
3.4. Customer Satisfaction
Customer satisfaction is one of the important outcomes of marketing

activity (Oliver, 1980) Customer satisfaction is a person’s feelings of pleasure or
disappointment that result from comparing a product’s perceived performance (or
outcome) to their expectations. Customer satisfaction has been perceived as a key
factor in finding out why customers leave or stay with a bank. Generally, any
bank needs to know how to keep their customers, even if they seem to be
satisfied. As competition within the financial services industry is more intense
than ever, and as banking companies’ service menus are becoming increasingly
comparable, the need to understand bank customer satisfaction is vital.
Customer satisfaction is the key to long term success of any organisation.

Research has proven that customer dissatisfaction has a greater psychological
impact and a greater longevity compared to good experiences as it has been
estimated that two out of three times as many customers will tell others of a bad
experience than relate a good one. Therefore, there is a multiplier effect of bad
service; it hurts not only the bottom line of the bank and its reputation, but
implies additional costs of losing potential customers apart from existing ones. A
number of studies have also shown that the costs of acquiring a new customer are
more expensive than retaining existing ones.

The quality of the services provided determines in great extent the level of
customer satisfaction and analysing the latter can help banks identify their weak
points and act as a wake-up call for management and employees alike. For this
reason most banks consider customer satisfaction as the primary criterion in their
strategic planning since it is directly related to the institutions’ profitability.. New
technologies are being introduced and there is always a fear of economic
uncertainties. Fierce competition, more demanding customers and the economic
uncertainties have presented an unparalleled set of challenges. In such a
competitive scenario, it is extremely important that banks are able to retain a
loyal base of customers. To attain this and to improve their market and profit
positions, banks in India have to formulate their strategies and policies towards
increasing customer satisfaction levels. Banking institutions all over the world
have recognized the importance of customer satisfaction and of developing and
maintaining enduring relationship with their customers as two crucial parameters
leading to increased business performance.
At the same time, several banking institutions are experiencing increasing

level of retail customer dissatisfaction. Research suggests that customer
dissatisfaction is still the major reason of bank customers’ switch to other banks.
This dissatisfaction could be because of a variety of reasons (access, services,
products, prices, image, personnel skills, treatment credibility, and
responsiveness, waiting time, location and technology). The importance of
measurement of customer satisfaction lies in the fact that one key to customer
retention is customer satisfaction. A highly satisfied customer generally stays
longer, buys more as the company introduces new products and services and
upgrades existing products and services, talks favorably to others about the
company, pays less attention to competing brands, offers product or service ideas
to the company, and costs less to serve than new customers because transactions
can become routine. Greater customer satisfaction has also been linked to higher
returns and faster company growth.

DECADE-FOCUS ON CUSTOMER ((Figure-3.5)
2000 & beyond retaining customer
1990-2000 delighting customer
1980-90 pleasing customer
1970-80 satisfying customer
1960-70 serving customer
In this study customer satisfaction is measured through 9 indicators namely,

service quality, systems & procedures, Appearance of tangibles, Range of
products and services, Rates and charges, Customer awareness and education,
Supporting facilities, Yield on deposits and Staff accessibility.
Service quality - Service quality (SQ) is considered by many as the key to

gaining competitive advantage. It is difficult to find today a bank that has not
initiated some kind of service quality improvement program. One of the
challenges that service managers face is how to deliver services of high
quality. Branches ignoring service quality may report high volume of
products and services offered, as well as profits, but lose their advantage in
the long-run due to eroding service quality.
Perceived dimensions of service quality.

Reliability - The ability to perform the promised services accurately and
dependably.
Responsiveness -The willingness to help customers and provide prompt
service.

Assurance - The knowledge and courtesy of employees and their ability to

convey trust and confidence.
Tangibles -The appearance of physical facilities, equipment, personnel and
communication materials.
Empathy- The caring, individualized attention provided to the customer.
Systems & procedures-This include actual procedures, mechanisms and

flow of activities by which service is delivered. It is the service delivery and
operating system. Simplification of systems and procedures make
transactions faster. If customer does not have sufficient time, he seeks bank
that provides effort and time saving banking services. Technology has
remarkable influence on the growth of service delivery options. More and
more banks have adopted latest technological tools to deliver their services
and this has resulted in reduced costs, creation of value-added services for
customers and the facilitation of their employees' jobs and ultimately, the
provision of self-service options for customers.
Appearance of tangibles- This include Physical evidence like building,

furniture, equipment, stationery, etc., the influencing factors for the potential
customers to form an impression about the service organization.
Range of products and services-This include the product variety to suit the
diversified needs of customers. Banks offer products with different features
for meeting the needs of different segments of customers. The bank products
are deposits, loans or other value added services.
Rates and charges-This include amount of money customers have to pay to

obtain the product or service. This include interest on loans, processing
charge on loans, rent on safe deposit lockers, minimum balance requirement
etc.
Customer awareness and education- For success of any business it is very

much needed to make the customers aware of the new products and services.
Besides, many people of the developing countries till now is not that much

aware of the regular services. So it becomes a duty of the commercial banks

to provide more information to their target customers about themselves &
their products. This include informative advertisements, communication on
service related matters, periodical customers meet etc.
Supporting facilities-It includes the infrastructural facilities available in the
bank such as safety and quality of ATM centres, good connectivity, good
technological back up, self-depositing Kiosks, self-printing passbook
machines etc.
Yield on deposits-This include better returns on deposits. Banks offer
different varieties of products with different features. For deposit products
interest is a determining factor for decision making. The return should be
attractive compared to alternate investments.
Staff accessibility-This include the nearness of staff to the
customer. Customer should feel free to approach any official in the bank for
his needs. Here the attitude of the staff matters a lot in deciding accessibility.
Figure(3.6) Determinants of Customer satisfaction

3.5. Performance of Commercial Banks.
An efficient banking system is recognized as basic requirement for the

economic development of any economy. Economists have expressed a variety of
opinions on the effectiveness of the banking systems in promoting or facilitating
economic development. Banks are considered to be the mart of the world, the
nerve center of economies and finance of a nation and the barometer of its
economic perspective. A weak banking sector may destroy the long term
sustainability of an economy and be a trigger for a financial crisis which can lead
to total economic crisis. Central banks and governments are paying increasing
attention to monitor the health and efficiency of financial institutions and various
prudential regulations were introduced by the monitoring institutions in different
countries to maintain the financial soundness of the banking system both at the
national level and at the international level.
Productivity and efficiency are considered as leading indicators for
evolving strength or weakness of banking system across the world by all stake
holders in general and regulators in particular. The analysis of managerial
efficiency in terms of productivity is relevant from the stakeholder’s point of
view, because they have interest in knowing the income generating capacity of
the banking firm for better yield on their funds invested with banks. While from
the regulators’ point of view, if banks become better functioning entities, it is
expected to mirror in safety and soundness of financial system and ultimately
lead to increase in the rate of economic growth. The performance of banks has
become a major concern of planners and policy makers in India, since the gains
of real sector economy depend on how efficiently the financial sector performs
the function of financial intermediation. More importantly, such analysis is useful
to identify the success or failure of policy initiatives or alternatively highlight
different strategies undertaken by banks which contribute to their success.
Variables used in the study

In this study, the performance of banks are analysed under three heads
namely productivity, profitability and growth. The ratios taken for analysis under
these three heads are adopted from CAMEL indicators and the parameters

considered by Ernst &Youngin the financial express ‘Best Bank Survey’. All
the major indicators which influence the managerial productivity of the bank are
included under the head productivity. This head includes 8 ratios which are
described under three sub heads namely managerial capability (4 ratios), staff
productivity (2ratios) and branch productivity (2ratios). The major factors which
had an impact on the profitability of the banks are included under the head
profitability. This head include 6 ratios which are described under three heads
namely operational performance (2 ratios),source of earnings (2 ratios)and cost
effectiveness (2 ratios). Growth in key variables is required for an all-round
development and sound performance of the banking sector. Hence growth is
considered as an important parameter in this study and 6 ratios are described
under this head.
Productivity
The most important factor responsible for the efficient functioning of a
bank is the productivity or efficiency of its management. It is not possible for a
bank to run smoothly if its assets, liabilities, incomes and expenses are not
properly planned and managed. The management of the bank takes crucial
decisions depending on its risk perception. It sets vision and goals for the
organization and sees that it achieves them. The performance of Management
capacity is usually qualitative in nature and can be understood through the
subjective evaluation of Management systems, organization culture, and control
mechanisms and so on. However, the efficiency of the management of a bank can
also be gauged with the help of certain ratios of off-site evaluation of bank, which
is related to the capability of the management to deploy its resources aggressively
to maximize the income, utilise the facilities in the bank productively and reduce
costs, etc.
The productivity has been explained with the help of various ratios. These
ratios are described under 3 heads. These are managerial capability, employee
productivity and branch productivity.

Managerial capability-These ratios measure the operational efficiency and

effective and efficient resource management of the bank. The ratios under
this head includes CD ratio, Non interest income to total assets, Spread to
total assets, operating expenses to total assets.
Credit Deposit Ratio(CD Ratio) or Ratio of Total Advances to Total

Deposits-This ratio measures the efficiency and ability of the bank's
management in converting the deposits available with the bank (excluding
other funds like equity capital, reserves etc.) into high-earning advances.
This ratio indicates a bank's aggressiveness in lending which ultimately
result in better profitability. Total Deposits include demand deposits, savings
deposits, term deposits and deposits of other banks. Total advances also
include the receivables. The higher the CD ratio, the higher will be the credit
deployment and the resultant profits.
Non interest income to total assets-

Since modern days, the opportunities of sustaining on spread are squeezing
day in and day out, the success of any bank lies in diversifying its business
from fund based business to the fee based business. This ratio signifies the
growing importance of other income such as off balance sheet exposures and
nontraditional sources of income like fees and commission from ancillary
business. This ratio is worked out as percentage of other income to assets.
This ratio indicates banks efficiency of subsiding its intermediation cost from
disintermediation earnings. Higher the ratio, the better the productivity and
profitability of the bank.
Spread to total assets (net interest income to total assets) - NIM, being the
difference between the interest income and the interest expended as a
percentage of total assets, shows the ability of the bank to keep the interest
on deposits low and interest on advances high. It is an important measure of
a bank's core income (income from lending operations). A higher spread
indicates the better earnings given by the total assets. The interest income
includes dividend income and interest expended includes interest paid on

deposits, loan from the RBI, and other short-term and long-term loans. The
higher the ratio, the better is the profitability position of the bank.
One of the bank's primary intermediation functions is to issue liabilities and

use the proceeds to purchase income earnings assets. If a bank manager has done
a good job of asset and liability management such that the bank earns substantial
income on its assets and have low costs on its liability, profits will be high. How
well a bank manages its asset and liabilities is affected by the spread between the
interest earned on the bank's assets and the interest cost on its liabilities. This
spread is exactly what net interest margin measures. If the bank is able to raise
funds with liabilities that have low interest costs and is able to acquire assets with
high interest income, the net interest margin will be high and the bank is likely to
be highly profitable. If the interest cost of its liabilities rises relatively to the
interest earned on its assets, the net interest margin will fall, and bank
profitability will suffer.
Spread = Interest earned - Interest expended
Operating expenses to total assets-This ratio shows the operating efficiency

of the bank. It measures the ability of the management in controlling the
operating expenses of the bank. Operating expenses are expenditures
incurred to operate the activities of a bank and include establishment
expenses, taxes, lighting, printing and stationery, advertisement and
publicity, and depreciation. A low rate of operating expenses to total assets
shows how efficiently a firm functions.
Operating expenses to total assets= Total operating expenses/total assets.
Employee & Branch Productivity
Employee productivity
Employee productivity signifies how far the employees of the bank are
capable of increasing the business and profits of the bank. Employees are
persons who are in direct contact with the customers and, so, the
ambassadors of the bank. Employee productivity is studied through two

indicators, namely, Profit per Employee (PPE) and Business per Employee
(BPE).
Profit per Employee (PPE)

This ratio shows the surplus earned per employee. It is arrived at by dividing
the Profit after Tax(PAT) earned by the bank by the total number of
employees. The higher the ratio, the higher is the efficiency of the
management.
Business per Employee(B/E)

This ratio shows the productivity of human forces of the bank. It is used as a
tool to measure the efficiency of all the employees of a bank in generating
business for the bank. It is arrived at by dividing the total business by total
number of employees. The higher the ratio, the better it is for the bank. By
business, we mean the sum of total deposits and total advances in a particular
year.
Branch productivity
With the objective of garnering deposits and penetrating under banked areas
and population Indian banks are increasing their branch network .The
productivity of the branch is measured in terms of the profitability and the
business earning capacity of the branches of a bank. Ratios used for studying
branch level efficiency were:
Business per Branch (BPB) = Total business of the bank/ Number of

branches
Profit per branch (PPB) = Profit after tax earned by the
bank/number ofbranches.

Table-3.1
Managerial efficiency ratios (Productivity Ratios-) : criteria for analysis
SL.NO. Managerial Productivity criteria

ratios
1 Total advance to total Higher is better
deposits(CD ratio) Managerial
2 Noninterest income to assets Higher is better Competency
3 Net interest income to total Higher is better
assets(Spread)
4 Operating expenses to total Lower is better
assets
5 Business per employee Higher is better Employee
6 Profit per employee Higher is better productivity
7 Business per branch Higher is better Branch
8 Profit per branch Higher is better productivity
Source-Ernst&Young-Best bank Survey & ‘CAMEL’
Profitability
Profit is the very reason for the continued existence of every commercial
organization. The rate of profitability and volume of profits are therefore,
rightfully considered as indicators of efficiency in the deployment of resources of
banks. Profitability indicates earning capacity of the banks. It also portrays work
culture and operating efficiency of the bank. The concept of profitability in banks
assumes greater significance in the present day context. Like any other business
institution, profit is necessary to the banks for their survival. A viable and profit
making bank reflects operational efficiency and effective and efficient resource
management. It is very difficult for a firm to survive without prospects and ability
to earn adequate profits. Profits and Profitability are, therefore, the nerve and
knot of a business. Lord J.M. Keynes remarked “Profit is the engine that drives
the business enterprises”. The profit earned by an organisation over the years is a
barometer reflecting organisational performance.

Management of profitability is a broad concept which consists of many

factors, viz. efficient management of assets, moderate cost of funds, attractive
yield on advances, effective investment portfolio, faster liquidity of funds,
optimum level of productivity, required control on operational expenses etc. The
level of profitability of banks would largely depend on developing a spirit of cost
consciousness at all levels and strengthening overall monitoring arrangements.
So, profitability ratios are a clear indicator of strength and efficiency.6 ratios are
used under this head namely Net profit to Average Assets (ROA), NNPA to Net
advance(NET ADV),Yield on Advances (RETADV), Yield on investments( RET
INV) , Cost of Deposits (COD), and Cost to Income (CI) under three sub heads
namely operating performance, source of earnings and cost effectiveness.
TABLE-3.2
Profitability Ratios:criteria for analysis
S.No Ratios Criteria
1 Net profit to Average Higher ratio is
Assets(ROA) better Operating
2 NNPA to Net advance(NET Lower ratio is performance
ADV.) better
3 Yield on Advances(RET ADV.) Higher ratio is
better Source of
4 Yield on investments(RET IN) Higher ratio is earnings
better
5 Cost of Deposits(COD) Lower ratio is
better Cost
6 Cost to Income(CI) Lower ratio is effectiveness
better
Source-Ernst &Young-Best bank Survey

• Operating performance
Net Profit to Average Assets Ratio (ROA)

Net profit/total assets show the ability of management to acquire deposits at
a reasonable cost and invest them in profitable investments. This is an indicator
of profitability used in international comparisons and also given under the RBI
guidelines for balance sheet comparisons. Net Profit to average assets ratio
indicates the efficiency of the banks in utilizing their assets in generating profits.
A higher ratio indicates the better income generating capacity of the assets and
better efficiency of management. It is arrived at by dividing the net profit by
average assets, which is the average of total assets in the current year and
previous year. Thus, this ratio measures the return on assets employed. A higher
ratio indicates better earning potential in the future.
Net NPA to Net Advance-– Net NPA is the amount of gross NPAs
less (1) interest debited to borrowal and not recovered and not
recognised as income and kept in interest suspense (2) amount of
provisions held in respect of NPAs and (3) amount of claim received
and not appropriated. A lower ratio indicates better management of the
quality of assets.
Source of earnings-There are various sources of income for a

commercial bank. They include interest on loans, dividend on
investments, Commission, discount and brokerage, subsidies received
from central and state governments etc. The major source of earnings
which have a bearing on banks profitability are return on advances and
return on investments.
Return on advances- Lending constitutes one of the important

functions of commercial banks. The major portion of banks deposits
are deployed in loans and advances. The returns from the advances
must be sufficient to, pay interest on deposits, salary to the staff ,meet
establishment expenses ,build up reserves and pay dividend to

shareholders. Higher the ratio of return on advances, higher will be the

productivity of funds management and vice versa.
Return on investment.-Security investment constitutes one of the

major sources of earnings next to return on advances. A banker
primarily holds long term securities for purposes of return and
profitability. The objective of investment by commercial banks is to
maximize earnings and to keep funds liquid and safe. Increased
competition in the banking industry, squeezing of net interest margin in
traditional banking business and growing professionalism in banking
industry made bank management to concentrate on aspects of
investment management. Higher the ratio of return on investment
higher will be the productivity of fund management.
Cost effectiveness
One of the major objectives of banking sector reforms initiated since
the early 1990s has been to improve the operating efficiency and
profitability of banks. Reduced costs basically translate to higher profit
margins. If banks can reduce costs, it can go a long way in increasing
profits. Cost effectiveness is analysed with the help of two ratios
namely Cost of deposits and cost to income.
Cost of deposits- Deposits constitute a vital source of funds required

for banking business. The components of deposit mix, such as fixed,
current, and savings deposits, have their own risk-return profiles that
affect the profitability of banks. Average cost of deposits can be used
as an indicator for analysing the cost or efficiency of deposits of banks
and the banks overall profitability. The higher the ratio, lower will be
the productivity of funds management and vice versa. A lower ratio has
a positive impact on the banks Profitability.
Cost to income-- CI refers to costs incurred to mobilise one unit of

revenue/income by the banking sector reflecting cost efficiency. The

lower the ratio, the more efficient are the operations of the banking
sector and vice versa.
Cost to income measures the income generated per rupee cost. That is
how expensive it is for the bank to produce a unit of output. The lower
the C/I ratio, the better the performance of the bank.
Growth
The aim of every organisation is to grow. Indian banking sector has
witnessed a high growth rate in all the important performance
indicators during the post liberalized era. Growth in key variables is
required for the sound performance of the banking sector. Increasing
market share in deposits is required to fuel the funding requirements
which will lead to increasing profits, assets and equity. Thus growth is
considered as an important parameter in the performance of banks. Six
ratios are included under the head Growth -Growth in deposits,
advances, Assets, Networth, Net profit and Net interest margin.
3.6. Conclusion
This chapter describes the importance of marketing in banking and
performance analysis in the present day competitive world. Bank marketing deals
with providing services to satisfy customers' financial needs and wants. To satisfy
these financial needs, customers want specific services. 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. All the 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.

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AWARENESS LEVEL, EXTENT OF USAGE AND SATISFACTION OF CUSTOMERS

MARKETING STRATEGIES OF COMMERCIAL BANKS–

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 61

3.2. Bank Marketing

Modem marketing concept emerged in the 1950's as a new philosophy of

3.2.1 Evolution of bank marketing.

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 62

Traditional Banking Period upto 1969 Accounting orientation

Bank marketing period after mid 1980s Towards marketing orientation

Financial reform period 1990 onwards Towards aggressive marketing

Post Reform Period – 21st century Image projection

Figure-3.1-Evolution of Bank marketing In India

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 63

3.2.2. Marketing strategy

While formulating marketing strategy, a bank should focus attention on;

There is a need for professionalism and market-oriented banking in our

3.2.3 Marketing Approach to Banking Services

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 64

philosophy of marketing. A marketing orientation requires the

To fix the fair and competitive prices for the

Promoting the products through advertisement to present

To set up suitable distribution channels and bank branches-

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 65

creation of three types of utility: time, place and possession. In terms of

Conduct market research on an ongoing basis-Marketing

3.2.4. Increasing Importance of Marketing in the Banking Industry

The various factors which have led to the increasing importance of

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 66

Increasing awareness among Customers

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 67

Reducing importance of intermediating role of banks

3.2.5 Marketing strategies in Banks

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 68

Potential customers who could be brought to bank’s fold. Potential

3.2.6 Bank market segmentation

3.3. Marketing mix

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 69

seller’s 4 Ps correspond to the customers 4Cs product correspond with customer

Sellers 4 Ps Buyers 4Cs

These considerations are now known as 7Ps of marketing, sometimes

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 70

Product and service are the words used interchangeably in banking

3.3.2. Promotion: Promotion is the direct way an organization attempts to reach

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 71

3.3.2.1. Elements of promotion mix-

1. Which media the target market prefer

Ads should be mostly educative, image making .and provide information

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 72

3.3.2.1.2 Personal Selling

3.3.2.1.3 Sales Promotion: -Sales promotion is often used by the companies to

3.3.2.1.4 Public relations:

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 73

The telemarketing is a process of promoting the business with the help of

Telemarketing is likely to play an incremental role in marketing the

3.3.2.1.6 Word-Of- Mouth:

People are crucial to the success of any business. It is far more so in a

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 74

Each employee in a bank irrespective of his position in the bank hierarchy

3.3.3.1 Internal Marketing

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 75

an understanding of the services and convince them of the usefulness of these

Recent Marketing Strategies of commercial Banks in Kerala-It’s Impact and Implications 76

Three types of service marketing