Module - D Marketing of Banking Products
Module - D Marketing of Banking Products
Module - D Marketing of Banking Products
Marketing :
“Marketing is the science and art of exploring, creating, and delivering value to satisfy the needs
of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines
measures and quantifies the size of the identified market and the profit potential. It pinpoints
which segments the company is capable of serving best and it designs and promotes the
appropriate products and services.”
Marketing is the process by which companies create value for customers and build strong
customer
relationships in order to capture value from customers in return.
-Philip Kotler and Gary Armstrong “Marketing is an organisational function and a set of
processes for creating, communicating and delivering value to customers and for managing
customer relationships in a way that benefit theorganisation and its stakeholders”.
-The American Marketing Association : Marketing is "the management process responsible for
identifying, anticipating and satisfying customer requirements profitably." -Chartered Institute of
Marketing
There are a lot many definitions of marketing depending on various perspectives and focus.
In the banking context, which provides both financial and non-financial services, Banks have to
discover, ascertain, and anticipate the needs of the customer and offer the services which
satisfy their needs totally.
General needs of the customers include:
Financial Security and attractive yield on their money, Quick and personalized
service,Convenience and easy accessibility,Low cost loans,Simple procedures,Status symbol
DIFFERENTIATION
Each product / service has some features. The features are available in the products / services
offered by other market players as well. These are normally generic features. In order to make
the consumer feel that there is a difference between the products / service offered by one
market player and the others, differentiation technique is used.
Kamadhenu Deposit is a generic re-investment product. The imaginative name has been given
to create a feeling that the deposit is different from the re-investment deposits offered by other
banks.
The word „Kamadhenu‟ itself connotes a feeling of additional feature in the minds of consumers,
even though there is none compared to re-investment deposits offered by other banks.
Creating Niches: Niche is also closely connected to Positioning and is a macro level strategic
tool.
If a market player finds it risky to hold the entire market or the player‟s competence is restricted
to specific product / service, he can opt for growth in a small part of the market, which is niche.
Sometimes a market player may find a gap in the market which is not filled at all or not given
enough focus. The player focuses on this Niche activity and builds business.
COMPETITION
Any marketing effort to be successful, it is important to be aware of the competition and know
the competitors‟ policies, positioning and potential.
There may be a generic competition where products satisfying the same need compete with
each other; Brand competition where products compete for the same market segment; or the
industry competition which involves all the companies in a given industry.
In the recent trends in banking industry, especially post liberalization, the pressure is on to
produce greater efficiency and higher profitability, leading to a more intense competition in a
saturated market.
Banks were competing with other banks; now banks are competing with mutual funds and non –
banking financial institutions for mobilizing the funds and extending loan products respectively.
There is a tremendous pressure from all the stake holders – share holders want more dividends
and backed by quality assets, depositors want more interest backed by safety and security of
their funds, other service providers and vendors want the best rates in the market, employees
want highest salary, borrowers want the best bargain in terms of rate of interest and repayment
options.
COMPETING TO WIN : In the relentless race to beat the competition, it is a matter if timing. A
swift move into the target‟s mindspace and physical process of buying is required. The
strategies include „push selling‟ and „pull selling‟. All the stages of marketing contain a strategy
to beat the competition.
The demands of changing customer tastes and preferences, technological advancements,
threat of new entrants, innovative substitutes are to be addressed simultaneously. In banking
scenario, the market has moved from a seller‟s market to buyer‟s market post liberalization.
This necessitates protecting the winner‟s edge by internally positioning ourselves to satisfy and
deliver in a changed scenario.
PRODUCT LIFE CYCLE
Just as a biological life cycle is defined, a concept of life cycle has been given to the products
also. This concept is based on the opinion that a product undergoes a cycle of launch and
decline.
A product is designed and launched after a meticulous research and development
exercise. A lot of
promotional activities will take place at this stage. More focus will be on attracting the
consumers. If they appreciate the product many takers will step up the demand.
The product grows through increasing demand and need based customization. The success of
a service product is more assessable and visible at this stage. The product has to keep growing
because competitors will bring in similar products.
The demand flattens after a stage and the growth becomes stagnant. This will continue for a
period of time. The promotional efforts in terms of cost and effort will be curtailed. Maturing of
the product will also happen when indications of change start appearing.
Once the change starts setting in, that is, when lifestyles and mode of using the product
changes, the existing product will go on a decline path. This will also happen when consumers‟
values, attitudes and preferences change.
In banking context, the MT and TT are products to reckon at this point. The payments in the
business world used to be through highly efficient Telegraphic Transfer system at that time. Bill
payments used to carry the connotation “payment by Wire”. MT was used for domestic fund
transfer.
These products after serving their popularity charts outlived their purpose with the advent of
new technology.
As the technology started growing, they started their decline. Today these products are not
there, but fund transfer mechanism has taken a new shape.
However, the declined and abandoned products hold their place of honour as being the
stepping stones for new innovated products which is an ongoing phenomenon.
Compiled by Sanjay Kumar Trivedy, RSTC, MUMBAI
SERVICES MARKETING : The customers‟ values have changed since; their preferences and
needs have changed with the changes in the social and economic environment. Scientific
progress has also drastically changed the customers‟ needs. Service industries have also
changed, creating a highly dynamic market competition.
Banking being a service industry and „Service‟ having its own peculiarities, the marketing
processes of services take a different orientation.
Characteristics of service:
1. Intangibility
The most basic, and universally cited, difference between goods and services is intangibility
Intangibility presents several marketing challenges
Services cannot be inventoried, and therefore fluctuations in demand are often difficult to
manage
Services cannot be patented legally, and new service concepts can therefore easily be copied
by competitors.
Services cannot be readily displayed or easily communicated to customers, so quality may be
difficult for consumers to assess.
„Tangibilising‟ financial services: Pass Book, Bank Statements, “Gold / Platinum” Credit cards
Enhance image of service / provider, Bestow status!!! Physical reminders of service product, our
brand name – reassure the consumer & help the organization's positioning aka -Simultaneous
production and consumption Goods are produced first, then sold and consumed, whereas
services are sold first, and then produced and consumed simultaneously Service person plays a
role as part of the product itself and as an essential ingredient in the service experience for the
consumer. The quality of service and customer satisfaction will be highly dependent on what
happens in “real time”, including actions of employees and the interactions between the
employees and customers. Banking services vary in their level of simultaneous production and
consumption E.g., Term Deposit – for 1 year vs. 10years
The customer is involved in and observes the production process and thus may affect (positively
or negatively) the outcome of the service transaction In a related vein, “problem customers”
(those who disrupt the service process) can cause problems for themselves or others in the
service settings, resulting in lowered customer satisfaction
Perishability :Perishability refers to the fact that services cannot be saved, stored resold or
returned.
E.g., Uncleared cheque by the specified date due to system delay – benefits to consumer lost –
service perishes The fact that services cannot typically be returned or resold also implies a need
for strong recovery strategies when things do go wrong.
Product: In India banking services may be financial and non-financial in nature. Banks offer
varied products like Deposits, Investment, Insurance, Loans and advances, Pensions, Credit
Cards, Fund transfers, Payment systems, Safe deposit lockers, Asset Management and
Taxation, Collection services and other services. Product features are announced in the form of
policy guidelines. These guidelines will be within the statutory, regulatory and managerial
framework. Consumers‟ needs are fitted in acceptable terms and conditions. The delivery takes
place in the form of a contract.
Frontline personnel should implement as and when the guidelines are issued so as to keep the
customer satisfaction at the highest level; Delayed implementation will lead to the product
becoming redundant, frustrating the efforts of beating the competition.
Price: Pricing of banking products relates to cost to the customer, like bank charges and credit
interest rates. In a highly competitive market it evokes low level of customer sensitivity. An
affordable Pricing in retail banking and a competitive bargain in case of corporates are market
driven parameters. As such, customer sensitivity becomes apparent in case of value of the
product. Value of the product can be ensured by implementing those value additions and giving
best service by the front office personnel.
Promotion: To strengthen the awareness of the brand and Bank‟s image, various
advertisement campaigns, business development drives and image building activities are
undertaken by the banks.
With the advent of technology, e-mail has become a very popular for customer service and
marketing communications. The website of a Bank is potentially the most powerful
communication tool and is the basis of relationship between the consumer and the Bank.
Place: Place or location has always been highly critical in retail banking. The place should be
easily accessible to the consumer. Banks boast about their branch network size and reach in
their advertising campaigns. „Taking bank to the doorstep or the mouse click of the consumer‟
People: Services are provided through the people to the people. It is needless to emphasize
the importance of having the right personnel at the right place. From the perspective of
customer expectation, the requirements are approachability and professionalism, which
means that the employees deployed for delivering the service must be sufficiently trained.
Must have the necessary knowledge, skill, attitude and motivation. Customers form an opinion
based on the person they interact with. The personnel in the banking industry are recruited
after testing their Quantative, Reasoning aptitude, English language and general knowledge,
followed by interviews to test their communication skills and attitude.
Processes: Processes are the flow of activity through which the service is delivered. In a Bank,
processes mainly depend on the systems and procedures. It also depends on the delivery
channel in the present day context. The procedures must be easily adaptable to the needs of a
heterogeneous clientele that a bank services. The processes must be simple, comprehendible
and transparent.
In the banking sector, the systems and procedures and documentation are more or less
standardized which reduces customers‟ confusion and helps them make comparisons of service
delivery.
Physical Evidence: The Perishability and Intangibility characteristics of service make it difficult
for a
consumer to make a judgment in the decision making process. Banks depend highly on word of
mouth advertising by the captive clientele. There should be some evidence to prove the claim
for being competent and competitive in the market. The physical evidences of good service add
the actual face value to the brand.
PERSONAL SELLING
Understanding consumer behaviour: This is a very complex stage of personal selling. How
the buying process takes place is understood by understanding the psychology of individual
customers and the collective psychology of the targeted market segment is very important to
close the sale at the decision making stage. The buying process:
It is the consumer who recognizes the need first. He prioritizes the need in order of necessities,
comforts and luxuries / in the order of desirability.Once the consumer recognizes the need to
buy / invest in a product, he starts evaluating the options. This is the stage when the consumer
is influenced by various factors like cost, convenience and competitiveness.The process of
collecting information and understanding various products may lead to further questions and
doubts. The consumer begins the process of eliminating these doubts.
Once the doubts are eliminated, the consumer decides to buy the product.
It can be summarized that the buying process goes through the Recognize need, Evaluate
options, Eliminate doubts and Decide to buy (R.E. E.D) stages.
The selling Process: In service marketing, the selling process is closely related to the buying
process because the manufacturing and consumption takes place simultaneously and has to be
done immediately after the decision stage. The sale has to be opened when the prospect is
recognizing the need. It has to be developed when he is looking for options. Solution has to be
proposed. Eliminate the doubts and close.
The 4 P‟s take a new dimension when renamed as „SIVA‟ model i.e.; Solution, Information,
Value and Access
Prospecting: prospecting is the search for and qualification of potential customers. A lead is
the name
of a person who may be a possible customer. A prospect is a customer who wants or needs the
product. If an individual wants the product, can afford to buy it, and is the decision maker, this
individual is a qualified prospect.
Pre – approach: Prior to making the call, a certain amount of preparation is required.
Assessment of possible requirements of the prospect, Assessing the possible scale and time
frame for delivery, and the CPC factor i.e.; having a comprehensive Company information,
Product information and Competitor information have to be meticulously prepared before
making the call.
Approach: This is the stage where the meeting with the prospect happens.
Have a pleasant expression and demeanor. Greet
Introduce yourself and give the Business Card if the prospect is not already known.
Make a general benefit statement
Gain attention and arouse interest
Develop the interview by customer profiling :
by asking background questions
by posing intelligent and purposeful questions to understand the purchasing policies / buying
criteria of the customer,Customer‟s expectation from you, Buying motives of the customer,
Understand and recognize the specific needs,Lay the foundation for presentation
Objection handling: The objections raised by the customers may be due to lack of
understanding / misunderstanding of the product features, skepticism and value objection.
Objection may be of two types:
Psychological : resistance to interference, preference for established brands, reluctance to give
up something, unpleasant association created by sales representatives, pre – determined ideas
Logical: Resistance to price, delivery schedule, processes
If the customer talks about the competitor, never talk ill about the competitor. Competitors are
almost at par with each other; that is why they are called competitors. Talk about the special
benefits of our products. Be eloquent of the talking points of our
products. Dispel the misunderstanding by a sympathetic dialogue and providing proper and
complete information. If there is a value objection, revisit the developing stage and customize
the service for the specific need of the customer. Never let go at this stage. Provide answers to
all the objections. That is where the skill lies.
Use the KEITH MALPERIN „HELP‟ MODEL Hear, Empathize, Look for Options Provide
QUESTION BANK
A. QUESTIONS
2. Fill in the blanks:
(a) Marketing implies 'meeting needs _______
(b) The businesses became customer and market driven due to increased ___
(c) Marketing identifies and ________ the customer requirements.
ANSWERS : A. (a) profitably, (b) competition, (c) satisfies B. 1. market, 2. technology, high
networth customers, 3. physical object, service, 4. production,
consumption, 5. financial. C. (i)-(d)-(3), (ii)-(c)-(l
B. QUESTIONS
3. QUESTIONS :
Compiled by Sanjay Kumar Trivedy, RSTC, MUMBAI
1. Please choose the correct alternatives for each of the following statements:
(a) Out of the following, __________ is not an objective of pricing.
(i) Profit
(ii) Stabilising demand and sales of the product
(iii) Improvement in product quality
(iv) Expansion of business
(b) Of the following pricing methods, _. is not based on competitors pricing.
(i) English auction (ii) Sealed bid auction
(iii) Going-rate pricing (iv) Group pricing
(c) Of the following pricing strategies, is not ideal for new products.
(i) Market-skimming (ii) Discriminatory pricing
(iii) Market-penetration (iv) Promotional Pricing
2. Please state for each of the following statements whether it is True or False.
(a) Price for any product is a constant.
(b) One of the objectives of pricing is getting cash inflows at the required time.
(c) Perceived value pricing takes the buyers' perception into account.
ANSWERS : 1. (a)-(iv), (b)-(iv), (c)-(ii); 2. (a) False, (b) True, (c) True.
4. QUESTIONS
1. Please choose the correct alternative for the following statements:
(a) Marketing channel refers to ______
(i) a physical channel for movement of goods from the seller to the buyer, (ii) a set of firms who
handle the physical movement of goods from one point to another, (iii) different departments of the
producer firm which are associated in ensuring delivery of
goods to the buyer, (iv) a set of independent organisations involved in the process of making a product
or service
available for use or consumption.
(b) The functions of distribution channel do not include
(i) gathering and providing market information.
(ii) marketing research.
(iii) assisting the consumer in understanding and using the goods, (iv) promoting the sales of goods.
(c) Which of the following characteristics is found only in some services like banking and not
found in case of many services.
(i) inseparability (ii) variability
(iii) client relationship (iv) perishability
5. QUESTIONS
ANSWERS : 1. (a) False, (b) False, (c) True, (d) True, (e) True.
6. QUESTIONS
1. (a) The tools for communications with the customer are _____
(i) Promotion mix (ii) Product and price (iii) (i) and (ii) (iv) (i) and other three elements of
marketing mix
(b) Promotion seeks to influence the buyer in decision-making through _______
(i) Persuasion
(ii) Compulsion
(iii) Reminding
(iv) (i), (iii), information and reinforcement
(c) Promotion is an exercise of maintaining contact with the consumer at different levels so as to
(i) enhance customer relationship
(ii) lure the customer in to buying the products
(iii) prevent customer from being critical of the firm
(iv) none of the above
2. State whether the following statements are True or False.
(a) Promotion mix of a firm includes public relations.
(b) In integrated marketing communications, the elements of promotion mix are blended.
(c) Buyers' behaviour stage is not relevant for determining the promotion mix.
ANSWERS : 1. (a)-(iv), (b)-(iv), (c)-(i); 2. (a) True, (b) True, (c) False.
6. QUESTIONS
(e) Which of the following situation falls under the purview of Marketing Research System?
(i) Riddhi Vriddhi Bank wants to send Diwali greeting cards to all its fixed deposit account holders
with deposits of Rs. 10,000 or more.
(ii) Money Honey Bank wants to have a profile of Kalahandi District to decide about opening a new
branch there.
(iii) Get Rich Fast Bank wants a comparative business statistics with other ten peer level banks in the
country.
(iv) Baroda branch of Prosperous Customer Bank is twelve-year-old and it recorded a compounded
annual growth rate of 20 per cent in deposits during the first ten years, which has been better than the
industry average. However, during the last two years the branch has witnessed a significant decline in
its deposits. Managing director of the bank desires to know the causes for this reversal in the business
trend and suggestions for ameliorating the situation.
ANSWERS
14. Which of the following is the first step in the 'transaction processing cycle', which captures
business data through various modes such as optical scanning or at an electronic commerce
website?
(1) Document and report generation
(2) Database maintenance
(3) Transaction processing
4. Data Entry (5) None of these Ans. (1)
15. CRM (Customer Relationship Management) is
(1) A pre-sales activity
(2) A tool for lead generation
(3) An ongoing daily activity
(4) The task of a DSA
(5) All of the above Ans. (5)
16. Bancassurance can be sold to
(1) All banks
(2) All insurance companies
(3) Insurance Agents
(4) All existing and prospective bank customers
(5) All of the above Ans. (4)
17. Cross-selling is not effective for which one of the following products?
(1) Debit Cards
(2) Savings Accounts
(3) Internet Banking
(4) Pension loans
(5) Personal loans Ans. (2)
18. Which of the following is not involved in the Growth Strategies of a company?
(1) Horizontal integration
(2) Vertical Integration
(3) Diversification
(4) Intensification
(5) None of these Ans. (4)
19. A successful "Blue Ocean" requires