Banking Sector

DefinitionA Bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers that have capital deficits to customers with capital surpluses.

Introduction: The banking industry in India has a huge

canvas of history, which covers the traditional banking practices from the time of Britisher’s to the reforms period.

Nationalization to Privatization of banks and now increasing numbers of foreign banks in India. Therefore, Banking in India has been through a long journey.

Banking industry in India has also achieved a new height with the changing times. The use of technology has brought a revolution in the working style of the banks.

History: Bank of Hindustan was set up in 1870.

Later, three presidency banks under Presidency Bank's act 1876 were setup.

In 1921, all presidency banks were amalgamated to form the Imperial Bank of India.

Reserve Bank of India Act was passed in 1934 & Reserve Bank of India (RBI) was constituted as an apex body.

In 1955, RBI acquired control of the Imperial Bank of India, which was renamed as State Bank of India.

Present scenario: Due to the process of liberalization ,Globalization,

Privatization and reform of the financial sector, banking sector has undergone major transformation.

Banks are extremely useful and indispensable in the modern community.

The banks create the purchasing power

The banks have played substantial role in the growth of Indian economy.

Use of information Technology and Internet.

Service Environment

Technological Environment.

Economical Environment

Political / Legal Environment

Social Environment

CONSUMER BUYING PATTERN

CONSUMER BUYING PATTERN Definition: Typical manner in which

consumer purchase goods or services in terms of amount, frequency, timing ,etc.

Bank should analyze the following things: Why consumer make the purchase?

What factors influence their product?

Changing factors in our society?

Processes Today’s customer are short of time and they

get uncomfortable when the process is lengthy.

Very simple and should be at the minimum and one time go.

Repeated info and excessive documentation dis-satisfy the customer.

The delivery channels!!

Effortless, simple, secure and efficient channel.

EX: a customer uses internet banking He knows what are his payment

instructions and he can track the payment online.

If this facility is not available, he may not be comfortable with internet.

Stages in decision-making? Need recognition Info search Evaluation of alternatives Purchase Consumer experience Post-exp evaluation

Total Product Concept

TOTAL PRODUCT CONCEPT This concept says that the customers will

buy those products which are available, offer most qualities, performance and features.

The customers will select the solution that meets their need most effectively.

It is often difficult to identify the exact market within which a firm competes.

INTRODUCED BY This concept is introduce by: “ Theodore leavitt “ He says a product is like a onion in that

there are many layers of offering. There is a saying: “Customers don’t buy

product, they buy benefits!!”

PRODUCTS ? Core products Formal products Augmented products Potential products Futuristic products

Contest winners free

deposits,Offers for discountsFuture

Product

Augmented product

Formal product

Core product

Service Marketing Triangle

Marketing Triangle

Aligning The Triangle Organizations that seek to provide

consistently high levels of service excellence will continuously work to align the three sides of the triangle.

Aligning the sides of the triangle is an ongoing process.

This model shows the three marketing functions important for service firms

These three marketing functions are internal marketing, interactive marketing and external marketing.

According to Grönroos,… the internal marketing has to be managed by the

company’s leadership, the interactive marketing happens between the

employees and the clients and the external marketing is what takes place

between the company’s management and the clients.

Making Promises Understanding customer needs Managing expectations Traditional marketing communications Sales and promotion Advertising Internet and web site communication

Keeping Promises Service delivery Reliability, responsiveness, empathy,

assurance,tangibles, recovery, flexibility.

Face-to-face, telephone & online interactions. The Customer Experience. Customer interactions with sub-contractors

or business partners. The “moment of truth”.

Enabling Promises Hiring the right people. Training and developing people to deliver

service. Employee empowermen.t Support systems. Appropriate technology and equipment. Rewards and incentives.

Way to Use Service Marketing Triangle Overall Strategic

Assessment

How is the service organization doing on all three sides of the triangle?

Where are the weaknesses?

What are the strengths?

Specific Service Implementation

What is being promoted and by whom?

How will it be delivered and by whom?

Are the supporting systems in place to deliver the promised service?

7 Ps in banking

Core product:The basic services in banking form a basic productEg: Accepting deposits, granting loans

Formal product:It is the set of attributes and conditions expected

by the customers when they purchasr the productEg: Insurance facilities, locker facilities, atm’s

Product

Augmented product:It is the additional feature that banks provide which

exceeds the customer’s expectationsEg: Discounts, Good waiting rooms

Potential product:It includes Innovations and product differentiation.

Banks alters its services according to the requirement of the individual customers

Eg: Mobile and internet banking, new schemes tailored for specific customers

Interest rates charged Transaction charged Value pricing Going rate pricing Mark up pricing Charges for cheque books Commmission charges

Price

Important factors affecting the determination of the location of bank are:

The trade area Population characteristics Commercial structure Industrial structure Visibility Access

Place

Public relations Personal selling Word of mouth promotion Internet Tele marketing

Promotion

It refers to the overall layout of the place i.e. how the entire bank is designed. Physical evidence refers to all those factors that makes process much easier and smoother.

Eg: In banks the physical evidence would be the placement of customer service executive’s desk or the location of the place for deposting cheques.

Physical evidence

Process constitutes the overall procedure involved in using the services offered by the bank.

The process should be customer friendly If the overall process is too complicated

than the customer may not be inclined to use such services

Process

UNIQUE CHARACTERISTICS OF SERVICES

INTANGIBILITY PERISHABILITY VARIABILITY INSEPARABILITY HETEROGENOUS TRANSFER OF OWNERSHIP NOT POSSIBLE

Characteristics-

MARKET SEGMENTATION

The concept of market segment is based on the fact that the market of commodities are not homogeneous but they are heterogeneous. Market represent a group of customer having common characteristics but two customer are never common in their nature, habits, hobbies income and purchasing techniques.

According to Philips Kotler, “Market segmentation is sub-dividing a market into distinct and homogeneous subgroups of customers, where any group can conceivably be selected as a target market to be met with distinct marketing mix.”

Identity: The members should be divided into various groups such as Professional Sector, Agriculture Sector, Household Sector.

Accessibility: The Banking services should be accessible at all the places. Even at remote places the ATM centers need to be place in order to give service to customers.

Criteria for Market Segmentation

Responsiveness: The banking industry need to know the changing requirements of the customers. They should take customers reviews, suggestions for their services

Size: Segment should be large and should be divided into various groups such as high income group, low income group and middle income group

Branding-

Advantages of BrandingClients are more willing to pay a premium price for strong brands.

A strong brand simplifies client choices.

Helps to retain customers.

People are naturally attracted to firms with strong brands, which translates to a better pool of talent applying for positions

It confirms your credibility.

Branding strategy for banking sector

Meaningful.

Differentiating.

Believable.

Clearly articulated.

Positioning

Positioning Strategy of Banking Sector To successfully position commercial bank services and other

services it requires careful consideration of important, attractive, distinctive and superior service attributes to customers.

It is essential to consider communication to customers as equally important as to employees for successful positioning of commercial banking services. Most important is to use customer contact employees to effectively communicate to customers.

For successful positioning strategy of commercial bank services it is important to consider and promote a few but well specified, distinct and superior benefits relative to competitors since they do influence the position of the bank in the market and significantly contribute to market performance.

Conti….

Top management should analyze carefully the competition that exists within its group (direct competition) and also consider the characteristics of the competitive positioning strategy of the rest of the groups.

Managing Demand and Capacity of banking sector

Demand Too High Demand Too LowUse signage to communicate busy days & times.

Use sales & ads to increase business from current market segments.

Offer incentives to customers for usage during non- peak times.

 Modify the service offering to apply to new market segments.

Take care of loyal or regular customers first.

Offer discounts or price reduction.

Advertise peak usage times & benefits of non-peak use.

Modify Hours of operation.

Charge full price for the service – no discounts.

Bring the service to the customer.

Strategies for Shifting Demand to match capacity:

Demand Too High Demand Too LowStretch time, labour, facilities & equipment.

Perform maintenance, renovations.

Cross-train the employees.  Schedule employee training.

Request over-time work from employees.

Lay-off employees.

Rent or share facilities.

Rent or share equipment.

Sub-contract or out source activities.

Strategies for flexing capacity to match demand:

Yield Management:- Balancing Capacity Utilization, Pricing, Market Segmentation, and Financial Return.

Yield= actual revenue/ potential revenue.

actual revenue= actual capacity used* average actual price.

potential revenue= total capacity* maximum price.

State Bank of India

Largest nationalized commercial bank in India

In terms of assets, number of branches, deposits, profits and workforce.

Headquarters in Mumbai, India and employs about 205,896 people.

PRODUCTS

Investment banking

Commercial Banking

Retail Banking

Private Banking

Asset Management

Pensions

Mortgages

Credit Cards

Communication

SBI

Advertisement

Personal Communication

Sales Promoti

on

Publicity & Public Relation

s

Instructional

Material

STRENGTH

• Brand Name• Wide Distribution

Network• Market Leader• Diversified Portfolio• Low Transition Cost• Highest market

Capitalization & Profits

WEAKNESS

• Hierarchical management structure

• Highest non performing assets (NPAs)

OPPORTUNITIES• Financial Inclusion

• Rural India• Merger of associate

banks with SBI• Global expansion• Micro Finance• Branch Expansion• Strong economic

growth • Corporate demand

for credit

THREATS• Advent of MNC banks• Changing interest

rates and the changing policies of RBI

• Competition in the retail segment

• Private banks in the rural and semi-urban sector

• Change in government policies