MPC IDFC FIRST BANK: FIELD VISIT 3

Product Mix
A product mix consists of all the product lines and items that a particular seller offers for sale.
IDFC First Bank’s diverse portfolio consists of four primary product businesses worldwide:
1. Personal Banking Products
2. Business Banking Products
3. Wholesale Banking Products
4. Wealth Management Products
A company’s product mix has four important dimensions: width, length, depth, and
consistency.
 Product Mix Width refers to the number of different product lines the company
carries. IDFC First Bank markets a wide range of products ranging from Personal
Banking (Loans, Savings Account, Deposits etc.) to Wholesale Banking (Corporates,
MNCs etc.) and to Wealth Management.

 Product Mix length refers to the total number of items the company carries within its
product lines. IDFC First Bank typically carries many products within each line.
 The Personal Banking Product line includes Savings Account, Deposits,
Loans, Investment, Insurance, Payments and Cards.
 The Business Banking Product Line includes Accounts & Deposits, Cash
management Services, Business investment Solutions, Trade Forex Services
and Cards.
 The Wholesale Banking Product Line includes Corporates, MNCs, FASTag,
Government and Financial Institutions.
 The Wealth Management Product Line includes Investment Solutions,
Personal Insurance Solutions and Business Insurance Solutions.

 Product Mix depth refers to number of versions offered by each product in the line.
IDFC First bank has a very deep product mix. Like in personal banking product line
Savings Account includes various types of different saving accounts such as NRI
Savings Account, Minor’s Savings Account, Senior Citizens Savings Account etc.

 Product Mix consistency refers to how closely related the various product lines are in
the end use, production requirements, distribution channels or some other way. IDFC
First Bank’s product lines are consistent in that they perform similar functions for
buyers and go through the same distribution channels.
Brand Positioning
 IDFC First bank launched #Always First Campaign, to promote the new customer –
first approach and their saving accounts, interactive avenues, a reprise network
company, which is the digital arm of IPG Media brands, took to Facebook, Twitter,
Instagram ,and You tube to create an influencer marketing campaign.

 IDFC First bank’s mantra is ‘Talk less and Bank more.’ IDFC believes that banking
industry is poised for disruption. It also introduces vibrant youthful and access to rural
customers across the country.

 IDFC First bank aims at delivering the banking services anytime, anywhere at scale
by using world class technology to relentlessly drive efficiency and set new standards
for customer experiences and experiences.

 IDFC First bank launched contemporary payment systems, internet and mobile
banking and strong retail franchises in niche segments with strong credit opportunities
for its target customer market.

 IDFC First bank diversified the asset profile and there is a strong growth in its retail
deposits and CASA.

 It also has a large customer base of more than 70 lacs live customers including 30 lacs
rural customers.

Brand Strategies
 #Banking Nibhao, IDFC says, by way of terse sign off. It's a classic
challenger brand strategy, and one quite appropriate for IDFC, the youngest bank in
an extremely overcrowded market.

 Dr. Rajiv Lall, Executive Vice Chairman and Managing Director, IDFC Bank said
Our new logo reflects this diversity and is symbolic of the upcoming colours of
change in banking to meet the rapidly changing expectations of consumers”.

o IDFC Bank’s identity is the first and most visible indication that it wants to be
a bank unlike any other. The palette is bright, warm with violet, yellow, pink,
and orange that symbolizes transformation, energy, youth and optimism – the
qualities of modern India. The colours are translucent to capture the
transparency in IDFC Bank’s DNA.

 The tale of never-ending EMIs evokes both financial and mental pressure for
customers. While the entire banking category is talking about pre-sanction of loan,
IDFC Bank has taken a differentiated stand to communicate the Loans proposition.
  The campaign idea is derived from their philosophy of ‘Providing simple, quick and
meaningful solutions’. This insight and product truth were combined to create a film
that provides a single message to customers - ‘IDFC Bank se loan lena aasan, chalana
aur chukana super aasaan’.
o The new campaign is an extension of the brand’s point-of-view of being a no-
nonsense bank and takes forward the campaign thought of #BankingNibhao.

 Building and fostering a customer first culture by crafting unique employee &
customer promise and activating it to drive customer centric behaviour.

Pricing Objectives
1) Profitability:
 Net Interest Margin: The bank plans to expand the NIM to about 5.0% - 5.5% in
the next 5 years based on better cost of funds and carefully selecting the product
segments where we have strong proven capabilities over the years.

 Asset Quality: Over 90% of the Retail Loan Book of the bank constitutes of loan
book brought from erstwhile Capital First. The book is seasoned over 8 years
across business and loan cycles and has had stable performance throughout, and
has been adequately stress tested across significant events such as high interest
rate cycle (2010-2014), high inflation rate cycle (2010- 2014), Demonetization
(2016, where over 86% of the cash of the country was withdrawn overnight), GST
implementation (2017, which changed the business environment and methods for
MSMEs) and yet asset quality remained high over the period.

 Cost to Income: The Bank plans to improve Cost to Income ratio to ~50-55%
over the next 5 years, down from ~80% (post merger results, Quarter ended
December 31, 2018)

 ROA and ROE: With the improvement in the NIM and cost to income ratio, the
bank aims to reach the following benchmarks in the next 5-6 years.
o ROA of 1.4%-1.6%
o ROE of 13%-15%

2) Asset Strategy:
 Growth of Assets:
• The Bank plans to grow retail loan assets from Rs. 36,236 crores (December
31, 2018) to over Rs. 100,000 crores in the next 5 years
• The Bank plans to wind down loans to infrastructure to NIL within five years
(Rs. 22,710 as of 31 December 2018).
• The Bank plans to reduce the total Wholesale loan assets (including the
Infrastructure Loans) from Rs. 56,809 crores (December 31, 2018) to Rs.
 40,000 crores by March 2020 to rebalance and diversify the overall Loan
Book. Thereafter, the Bank plans to maintain it at the similar levels for the
next 5 years and would grow the business based on opportunities available at
the marketplace.

 Diversification of Assets: We recognize that loan book of the bank needs to be well
diversified across sectors and a large number of consumers. The Bank plans to
increase the retail book composition from 34.62% to 70% within 5 years and set the
target to take it to 80% thereon.

 Gross Yield Expansion: As a result of the growth of the retail loan (at a relatively
higher yield compared to the wholesale loans), the gross yield of the Bank’s Loan
Book was initially guided to increase from 9.4% (as per Q2-FY19, pre-merger) to
more than 12% in the next 5 years, however we now upgrade our guidance and
project the yield to be at 13.5% in the next 5 years. The bank will expand Housing
loan portfolio as one of its important product lines.

3) Liability Strategy:
 CASA Growth: This is a key focus and growth area for the bank. We plan to
increase the CASA Ratio from 8.68% as of December 31, 2018 on a continuous
basis year on year and strive to reach 30% CASA ratio within 5 years and increase
it to 40-50% from there on. An array of digital savings & current accounts is
planned to be offered to the customer base (more than 7 million customers) of
Erstwhile Capital First.

 Diversification of Liabilities: We will focus on Retail CASA and Retail Term

Deposits to diversify the liabilities of the bank. As a percentage of the total
borrowings, the Retail Term Deposits and Retail CASA is proposed to increase
from 8.04% as of December 31, 2018, to over 50% in the next 5 years and set up a
trajectory to reach 75% thereafter.

 Branch Expansion: To grow Retail Deposits and CASA, the bank plans to set up
600-700 more bank branches in the next 5 years from the branch count of 206 (as
of 31 Dec 2018). This would be suitably supported by the attractive product
propositions and other associated services as well as cross selling opportunities.
Pricing Strategy
For a bank, the price is one of the marketing mix's components. Prices must always be
consistent with the other four Ps, and they must not be seen solely as a financial issue, in
which they are measured by calculating costs and then adding a profit margin. Marketing
analyses the market mainly from the client's perspective. Consequently, the client's
understanding of the price is more important than the scale of the construction costs or the
benefit that will be realised.
There are 6 main strategies to settle the price for a product. These are:
1. Cost plus profit: This is the most cost-sensitive strategy; the institution measures the
cost to manufacture the commodity, adds the profit margin, and demands this price
from consumers.

2. The settlement of the prices for “taking the cream”: This strategy can be applied to
very new products of high-quality; it means the price settlement of the newly
marketed product by "accepting" the demand for the product, increasing profits in the
expenditure on research and development, which may later, in time, lower prices to
raise demand.

3. The settlement of the price depending on the competition: The strategy takes
account of the price of competition, so the price will be close to the competitive price
but will allow expenditure and profit margin to be covered.

4. The market price settlement: The price of the product is calculated according to the
price of a similar product that already exists on the market. The distinction compared
to the price settlement depending on the competition is that the market settlement
does not cover the costs of manufacture of the product.

5. The price payment depends on the value: This approach is focused on an

assessment of customer understanding of the value of the product, which answers the
question, "How much will a customer pay for that product?"

6. The settlement of the price to penetrate: The bank settles the low price for a
commodity to quickly gain a large market share and thereby achieve a rapid and
significant penetration.
Pricing strategies adopted by IDFC first bank are as follows:
1. The settlement of the prices for “taking the cream” and the settlement of the price to
penetrate.
IDFC First Bank has launched their IDFC FIRST Bank to launch credit cards with
dynamic interest rates. In order to attract the customers, the following facilities have
been provided:
 Low-Interest Rate starting at 0.75% p.m.
 (The majority of credit card issuers in India typically charge Rs. 250 to Rs. 500
for every cash withdrawal along with an interest rate of 2.5% to 3.5% per month)
 Lifetime free credit cards
 Railway lounge access on all cards
 Rewards points are valid for a lifetime (no expiry date)
 No finance charges for cash withdrawals
 Up to 10X reward points on spends greater than Rs. 20,000
 6X reward points on online and 3X reward points on offline spends.

2. Market price settlement:

a. To attract customers and prove themselves different from their customers, the
IDFC First Bank has attractive offers on their saving account facility. The Savings
account of IDFC FIRST Bank will first position its customers. They deliver an
interest rate of 6 percent p.a. on one of the industries' best savings account rates,
up to ₹ 1 Crore.

b. The FD rate of IDFC first bank is highest than their competitors.

Source: https://www.bankbazaar.com/fixed-deposit-rate.html

References

1. https://news.manikarthik.com/best-banks-in-india/money/
2. https://bankbazaar.com
3. https://www.idfcfirstbank.com
4. https://www.paisabazaar.com
5. http://store.ectap.ro/articole/178.pdf