Vinay Dutta

Senior Professor in Finance

FORE School of Management, New Delhi
 Discussion Issue
?

How is bank marketing strategy different from

marketing strategy of other products and services ?
 Bank marketing strategy is two-dimensional
Banks must develop marketing strategy in two
directions

Deposit acquisition strategy Loan acquisition strategy

(retail and wholesale sources of funds) (retail and wholesale users of funds)

Deposit inflow Loan application inflow

Pool of available funds

Loan application evaluated Loan
rejected
for creditworthiness

Bank investments Loans* Loans approved

* Loan-making (lending) is the principal revenue

generating activity of a Bank
 Changing bank marketing strategy and style

• Deposit marketing
• Credit marketing
• Third party products and services marketing
 Banking companies changing marketing space
and Customer Focus
Changing marketing space : From confined physical
location to unlimited market space: e-enabled, multi-
channel, omnichannel players
Changing Customer focus: From class (elitist ) banking
to Mass banking, and now Micro banking: Money for
the poor (urban, semi-urban and rural) through
financial inclusion
Market share mentality to market creation mentality
 Changing product profile of banking companies

• Limited product line

• Extensive product breadth
• One- size- fit- all standardized products
• Customized and innovative products
• Product to package approach –No of Products and services
per customer
 Rethinking the 4P’s –The SAVE Framework
Instead of Focus on
Product Solution: Define offerings by the needs they meet,
not by their features, functions, or technological
superiority
Place Access: Develop an integrated cross-channel
presence that considers customers’ entire purchase
journey instead of emphasizing individual purchase
locations and channels.
Price Value: Articulate the benefits relative to price,
rather than stressing how price relates to production
costs, profit margins, or competitors’ prices.
Promotion Education: Provide information relevant to
customers’ specific needs at each point in the
purchase cycle, rather than relying on advertising,
PR, and personal selling that covers the waterfront.

Source: HBR January–February 2013 Issue

 Discussion Issue
?
Articulating the Bank’s Marketing Strategy

• Marketing objective
• Marketing goal
• Strategy
• Tactic
 Articulating the bank marketing strategy
The Case of Punjab National Bank
Term Meaning Example
Marketing A broad statement of direction To become the leading retail banking institution
objective in India
Marketing The specific measurable To increase CASA (current account and saving
goal results to be attained in account) deposit ) by ₹ 18000 crore crore or 12
pursuit of the corporate or per cent by year-end, that is, March 2021
financial objective

Strategy The specific method devised • Hire a specialist deposit product manager
for achieving the objective • Introduce at least one new deposit product
• Improve the cross-sales skills of branch staff
• Provide an incentive for all employees to
refer deposit business from existing customers

Tactic Specific actions to be taken • Instruct human resources to begin recruiting

for a specialist product manager immediately
• Develop and implement a cross-sales training
program by Mid-August
• Prepare proposal for incentive program by
year end
• Using central information file, develop list of
customers with total balances in excess of ₹12
lakh who have no savings/current or money
market account with the bank
 Bank Customer Acquisition Strategy

Discussion Issue

• Silo based versus Relationship based approach

• Hunters versus Harvesters

 Bank customer acquisition strategies

Products and services

Customers Savings Car-Home loans Credit cards DP accounts

customer #1

customer #2

customer #3
Relationship
customer #4 based

customer #5

customer #6

customer #7

Silo based
 Bank One

• Retail strategy is based on quality accounts

• The bank is more concerned with quality of growth
• They like relationships to be fully leveraged for
income potential
• They have a steady focus on growth through
expansions
 Sun Bank

• Retail had been identified as a high growth area

• Bank pushes for rapid acquisition of new accounts
• Bank also distributes products aggressively
seeking to expand the customer base through new
offerings
• Bank believes size can address issues
• Would like to clean up portfolio after assessing
the quality of customers it has in its catchment
 Hunters Versus Harvesters

Hunters : Those front sales persons whose job it is to go

after acquisition of new clients. They will follow specialist
and silo approach

Harvesters: Operate from call centers and back offices,

their job is to profile customers, predict needs and push
those offers to existing customers
 Common mistakes in bank customer acquisition strategies
1. Narrowly defining “new” customers
• New accounts of existing clients
• New to the locality
• New accounts of existing residents not currently dealing
with bank
2. Under estimating the profitability of new accounts
3. Targeting promotional message poorly
4. Paying inadequate attention to new customer products
5. Failing to offer price appeals
6. Failing to offer premiums
7. Neglecting to provide employees adequate training
8. Failing to track and calculate new customer costs
9. Failing to make a long-term commitment
 Strategies to retain customers by banks
1. Retaining profitable business customers can be as profitable
as finding new customers
2. Small clients: Convenience and personalized attention
3. Large clients: Product-oriented, best price
4. Aligning resources to best service
5. Battle in banking is not “battle of products and services, but
a battle of positioning*”
6. When business customers walk into a branch, they want to
be known (recognized), want a relationship with their bank,
want a banker who knows their business
7. No matter what a customer’s business needs, there is a
universal maxim for success “be sincere and don’t offer
something that you cannot deliver”

* Positioning : Art of promoting a product and or service in such a

way as to make a distinctive impression about the product/service
in the consumer’s mind
Seven immutable laws of bank marketing

Source: Bank Marketing Magazine

 Exercise : In Banking Customer is Money (Resource)
Base Case Scenario Scenario Scenario
Particulars scenario 1 2 3
Leads generated by Sun Bank marketing and sales
team during the year 100,000
Conversion rate as % of leads generated 10%
Average business generated per customer (₹) 10000
Profit margin (spread) 2%
Number of new customers
Total business mobilized ( portfolio size) in (₹)
Net profit (₹)
Profit to leads ratio (Net profit after improvements
in lead generation, conversion rate, and business
per customer – Net profit in base case scenario/Net
profit in base case scenario)

Alternative scenarios:
Scenario 1. leads generated during the year improves by 100 per cent, calculate net profit and
profit to leads ratio
Scenario 2. leads generated and conversion rate during the year improves by 50 per cent,
calculate net profit and profit to leads ratio
Scenario 3. leads generated, conversion rate and business per customer improves by 33 per
cent, calculate net profit and profit to leads ratio
Recommend specific actions Sun Bank’s sales and marketing team should take to improve leads
generated, conversion rate and business per customer.
 Discussion Issues
?
• Return on Marketing Investment or Marketing Spend
(ROMI)” for a Banking Company
• Formula for calculating ROMI
 Return on Marketing Investment (Marketing Spend)
ROMI is the practice of attributing revenue and profit growth to
the impact of marketing initiatives. It is a metric used by banks to
measure the effectiveness of marketing spend either holistically,
or on a campaign-basis.

Formula for calculation of ROMI:

(Incremental revenue *Gross margin on incremental revenue)

- Marketing investment)/ Marketing investment
or
(Gross Profit –Marketing investment)/Marketing investment=ROMI

Incremental revenue = Revenue growth – organic revenue growth

 Exercise on ROMI

Bank One initiated an ambitious ad campaign on NDTV

for increasing market share of its innovative retail
banking products. Before the campaign, Bank One’s
retail portfolio was worth ₹1000 crores, generating
gross profit of ₹174 crores. After the launch of the ad
campaign, Bank One’s retail banking business grew to
₹1250 crore with a gross profit of ₹210. Bank One
incurred campaign cost of ₹30 crores.

Calculate ROMI and comment on the effectiveness of

Bank One ad campaign.