Bank Marketing

Group 3
July 2010
 BANK MARKETING

 Aggregate of functions, directed at providing services to satisfy customers’ financial

(and other related) needs and wants, more effectively and efficiently that the

competitors keeping in view the organizational objectives of the bank

 Customer Orientation

 Part of total business operation

 Why Bank Marketing?

COMPETITION
1. Bank Marketing Vs Marketing of Other
Commercial Organizations
 COMMERCIAL Vs BANK MARKETING

 Emotion based Marketing

 Input= Output= Cash

 Highly regulated industry ~ innovative marketing assumes increased importance

 Large untapped market ~ inclusive marketing

 Marketing mix~ people & process mix assume greater significance

 Nature of products ~ abstract ~ marketing of intangible

 Lengthy decision-process

 Develop marketing as organization philosophy

2. CRITICAL EXAMINATION OF
• GOAL
• OBJECTIVE
• STRATEGY TACTIC
• SELLING TECHNIQUES IN BANK MARKETING.
 GOAL
• To be the best bank in India

• To become the biggest name in particular segment

OBJECTIVES
• Quantification of Goals.

• Deciding the measure to be used say, achieving 60% market share in one year, etc.

Objectives

Commercial Social
Objectives Objectives

Business solutions
To fight To increase To attract To satisfy to social and
competition profitability customer customers environmental
problems
Sustainability Zone at Yes Bank
 STRATEGY DEVELOPMENT
To decide what product to be developed, the extra services to be offered,
customers to be targeted, promotion campaigns, etc.

Bank

Deposit
Loan application
Acquisition
inflow
strategy

Loan
Pool of availaible Applications
fund evaluated for
credit worthiness

Bank
Loans Loans approved Loans Rejected
Investments
STRATEGY IMPLEMENTATION
Step 1- Segmentation
 Step 2- Targeting
Choosing Target Segment Right

bracket Bracket
18-35 age 40-55 Age
RBC- 18-35
age bracket

Medical School & Dental School

Share in the sub segment up from 2 to 18%
Revenue per client is now 3.7 times that of the average customer
STEP 4- PORTFOLIO DEVELOPMENT FOR THE TARGET GROUP
 STEP 4- PACKAGING

Core
Product

Package
for
Competitive
Advantage
Peripheral
Service
 Step 5- Positioning
Basic Customer Experience
Segment Specific Customer Experience
The Organisation-Specific Experience
 STEP 5-PROMOTION

Advertising

Public Relations~ High

degree of Importance

Personal Selling ~ Most

Important

Sales Promotion ~ Bankers &

Customers
 Selling Techniques
Putting the plan to action. Hiring required people, launching products, etc.

Cross Selling

Life Cycle based Selling

Branch Acquisition

Remote Acquisition

CRM
3. IMPACT OF
• CHANGING MARKETING STRATEGY AND STYLE,
• CHANGING MARKETING SPACE,
• CHANGING CUSTOMER PROFILE,
• CHANGING PRODUCT PROFILE,
• CHANGING DISTRIBUTION CHANNEL
ON BANKS BUSINESS MODELS
 CHANGING MARKETING STRATEGY

Pre Marketing Era

Promotion stage

Friendly bank stage

Proliferation Stage

Image & Positioning stage

Strategic Marketing Stage

Customer Orientation Stage

 CHANGING MARKETING SPACE

Technology Development

Credit is Easier to Obtain

Disintermediation

Increasing Competition
 CHANGING CUSTOMER PROFILE

Increasing Urbanization,
Education and Awareness

Decline in Traditional
Indian Values

Rise in the Percentage of

Working Women
 CHANGING PRODUCT PROFILE

Traditionally Now
 CHANGING DISTRIBUTION CHANNEL

Brick-and-
mortar Flexible
model Distribution
Channels
 CHANGING BUSINESS MODEL

Business Correspondent Model

Comparative Analysis of Marketing
Strategies of Two Banks
A case of ICICI Bank and HDFC Bank
 What is a Silo Based Marketing Strategy?

 The silo effect is a phrase describes a lack

of communication and common goals
between departments in an organization.

 ICICI Bank is following this strategy.

ICICI
Personal
Banking

Accounts & Wealth

Deposits Loans Cards Investments Insurance Management
 Disadvantages of Silo Based Strategy

 Customer acquisition is low.

 The costs of getting new

customers are high.

 Fixed costs are

high.
 Disadvantages of Silo Based Strategy

 Advantages of cross-selling are not

availed.

 A customer can leave

easily.

 Detailed customer profiling is

not done.
 What is Relationship Based Marketing Strategy?

 Recognizes the long term value of customer

relationships.

 Overall Goals:
• Find, attract, and win new clients
• Nurture and retain exiting clients
• Entice former clients
• Reduce costs
 HDFC Bank

 Focused on pursuing relationship based

strategy.

 Plans life cycle programs for various

products/services to cross-sell.

 Has a data warehouse, with Unica for

managing campaigns, and Cognos for
reporting.
Lifecycle Programs for Credit/Debit Cards
HDFC Bank Preferred Program
 Why CRM in Banking?

 Customers tend to increase their holding of the

other products.

 Long-term customers are more likely to become a

referral source.

 Greater opportunity to tailor products and services

and cross-sell the product / service range.
 Benefits of CRM

A 5% increase in customer retention can

increase profitability by :

 35% in banking business,

 50% in insurance and brokerage,

 125% in the consumer credit card market.

-Harvard Business Review

 Advantages of Relationship Marketing

 Match between customer

and product.

Cross selling leading to more

business from one customer.

 Customer retention is high.

Common Mistakes in Customer Acquisition
Source: Bank Marketing Paper By White, Philip D.

1. Narrowly Defining "New" Customers.

2. Underestimating the Profitability of New

Accounts

3. Targeting Promotional Messages

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

 Consumer Behavior Matrix in Banking

2 types of fundamental mode in the banker customer interchange:

• Active mode during which the consumer interacts with the

bank provider
• Inactive mode during which the consumer is essentially
passive.

By placing the two principal factors that motivate and determine

Individual contracting choices, Involvement and Uncertainty, it is
possible to construct a matrix of consumer behavior which
provides greater insight into the interaction modes
 Consumer Behavior Matrix in Banking

Challenge of the
bank marketer

Potential
Differentiation
Customer
 Product Development In Banking

 Consumer expectations of services increasing.

 Intense Competition.

 Types:
• New product
• Modifications in existing product
• Changing distribution channels
• Better technology
SOME INNOVATIVE PRODUCTS
BY BANKS
 BANK OF AMERICA-KEEP THE CHANGE PROGRAM

 Rounds up purchases that are

made with debit card or check
card to the nearest dollar.
 Takes the money from the
customer’s checking account and puts it in
his/her savings account.

 Core Product- Savings Account Facility

 Intangible Product- Keep the Change Program
 Augmented Product- Automatic Savings
 ICICI- Branchfree Banking

  Zero balance online savings account with

various added features.
 Quantum optima facility.
 Online demand draft facility.
 Virtual credit card
 No ATM Card, Debit Card, Checkbook,
Passbook.

NO NEED TO VISIT BRANCH

 ICICI- Branchfree Banking

 Core Product-Net Banking

 Intangible Product- Branch Free Banking
Service
 Augmented Product- Customer Convenience
 Central Bank Of India-Prepaid MasterCard

 Innovative payment solution.

 MasterCard number provided that gives shoppers a
secure way to buy wherever MasterCard is accepted
without requiring a bank account or credit card.

 Core Product-Plastic Money

 Tangible Product- MasterCard Virtual Card
 Augmented Product- Benefit
of secure payment without
having a bank account
 ICICI Bank-Smart Cards for Farmers

 Initiated agri-micro-credit in rural areas.

 To remove problems of rural banking came up
with Smart Card solutions.
 ICICI Bank-Smart Cards for Farmers

 Smart Cards+ Biometric makes banking easier

for illiterate.
 Reduced costs for banks.

 Core Product-Banking services like Credit

 Tangible Product- Smart Card
 Augmented Product- Convenience for
illiterate.