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Chapter No. 04:
Marketing Strategies
of SBI
Introduction.Financial Services of the Indian Banks.Marketing Strategies of Foreign Banks and NewPrivate Sector Banks.Strategic Response of SBI to Reforms.Marketing strategy.Marketing Decisions Taken In Banking Services.E-Banking.E-Banking Services.Financial Product Advertising.Branding of Financial Services.Mass Media Advertising: Most Preferred mode formarketing of Banking Services.Personal Selling and Societal Marketing.Effective Sales Promotions.Electronic payment system.Confidence Level Of Consumers In The Use Of AnEPS.Products And Services Of State Bank of India.Online SBI.Marketing In Banking.Types of Customers.Marketing Strategy Used By SBI.SBI`S Marketing Strategies In The Current Scenario.CRM Initiatives in SBI.Marketing Research.New Marketing Challenges.Future Marketing Strategy of SBI.
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Introduction:
The banking industry like many other financial service
industries is facing a rapidly changing market, new technologies,
economic uncertainties, fierce competition and more demanding
customers and the changing climate has presented an
unprecedented set of challenges. Banking is a customer oriented
services industry, therefore, the customer is the focus and
customer service is the differentiating factors. The banking
industry in India has undergone a sea change since post
independence. More recently, liberalization, the opening up of the
economy in the 1990s and the government's decision to
privatize banks by reduction in state ownership culminated in the
banking reforms based on the recommendations of Narasimhan
Committee.1
The prime mover for banks today is profit, with clear
indications from the government to perform or perish.2 Banks
have also started realizing that business depends on client service
and the satisfaction of the customer and this is compelling them to
improve customer service and build up relationship with
customers. With the current change in the functional orientation of
banks, the purpose of banking is redefined. The main driver of this
change is changing customer needs and expectations. Customers in
urban India no longer want to wait in long queues and spend hours
in banking transactions. This change in customer attitude has gone
hand in hand with the development of ATMs, phone and net
banking along with availability of service right at the customer's
doorstep. With the emergence of universal banking, banks aim to
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provide all banking product and service offering under one roof
and their endeavor is to be customer centric. With the emergence
of economic reforms in world in general and in India in particular,
private banks have come up in a big way with prime emphasis on
technical and customer focused issues.3 In this Chapter the
researcher is to highlight the marketing strategies of SBI.
Financial Services of the Indian Banks:
In financial services, people are primarily bothered about
security of their funds and default risks. After the year 1969, the
deposits of banks increased more than 80 times as a result of the
nationalization of banks. It is the fact that financial service
providers are not perceived highly trusted, so that they might have
difficulty in selling risk-based products. The effort to promote
banking business is quite distinguished affair. At present, it has
become very tricky due to the changing trends of industry,
increasing competition and efficiency of regulatory environment,
and the financial system. The complexity in the banking services is
also an issue of vital importance.4 This is the time when banks are
offering new and innovative services, frequently in the market.
The content of promotional tools should help the customer in
making most valuable decision. This can be firmly said that well-
designed promotional strategies are very important to promote
banking services effectively. In marketing any product or service,
customer satisfaction has been given the prime importance. The
most frustrating aspect of bank marketing is lack of management
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support, lack of inter-departmental cooperation, crisis
management, government intrusion and advertising & media
problems. Manpower in service organizations must work with the
focus of satisfying the customer.5 Banking should bring out the
areas requiring improvement and which further throw light on the
measures to improve the quality of services. Promotional packages
are very important for financial service industry. Thus the
orientation of banks should be with a much wider focus in relation
to consumer and market needs, and the consequent marketing
strategies. The challenges put forth by the changing environment
have to be effectively tackled to identify the consumer needs and
providing valuable services through product innovation.
In banking the temporal and spatial dimensions are
perceived as more important than traditional dimensions based on
outcome and process elements. The usage of marketing concepts &
techniques and recommended that a well-structured marketing
department in banks is essential for profitability & effectiveness.6
The promotional strategies should be designed as per the nature of
the services to be promoted. The advertisers should seek a
narrative approach to communicate the service experience rather
than a logical, argumentative approach. Narrative approach
involves storytelling methodology using sequence of events.
Location convenience, speed of service, competence and
friendliness of bank personnel are also the most important points
with maximum value in banking services.
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The study revealed that maximum respondents banked at the
branch nearest to their home place and place of work.
Convenience, in terms of location, was also found to be the single
most important factor for selecting a branch. It has been
generalized in the studies that services marketing advertisement is
more challenging than the advertising of tangible products.
Winning new customers costs 10 times more than simply holding
onto existing ones. While formulating marketing strategy, a bank
should focus attention on
Consumer sovereignty,
Attitude,
Responsiveness and personal skills of bank staff,
Revitalizing the marketing department,
Top management support to the marketing department,
Participation of marketing personnel in key bank decisions.
Marketing Strategies of Foreign Banks and New Private
Sector Banks:
Though the new private sector banks and foreign banks have
a lower share in customer deposits (8.2 per cent and 4.9 per cent
respectively), they command a higher share of the net profit (9.8
per cent and 10.4 per cent respectively).7 Due to restrictions on
branch expansion, foreign banks traditionally focused their
operations on the top cities of the country. However, they
differentiated their operations by focusing on premier customers
and set superior standards in productivity, customer service and
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operating efficiencies by using state-of-the-art technology. Global
best practices were introduced and practiced. More importantly,
they built durable competencies by attracting the best manpower,
building proprietary technologies and processes and by building
strong brand image. The new private sector banks modeled their
marketing strategies after the foreign banks. They built much
larger branch networks than foreign banks, though small by
comparison to public sector banks and pose, by far, the greatest
challenge to the dominance of SBI.
Strategic Response of SBI to Reforms:
The State Bank group had to face a tough challenge when the
new private sector banks made their entry in early nineties. The
new banks had the benefit of starting on a clean slate and had
started with state-of-the-art technology which in turn helped them
save on man power costs and provide better services. On the other
hand, the older banks had not kept up-to-date with technology and
were facing competition of this kind for the first time. SBI
launched an array of products and services, especially on the retail
front, to match the competition. Some of the new products include
Debit cards, Credit cards, International cards, Special deposits,
Sweep-in accounts, Demat accounts and Any-where-banking.
Some of the new services include round-the-clock phone-banking,
Automated Teller Machines (ATMs), inter-city, inter-branch
banking, net-banking and bill payment services. The bank has even
launched their own asset management companies to offer mutual
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fund services to their customers.8 The following marketing
strategies implemented by SBI.
Computerization and networking of branches: SBI
invested aggressively in computerization and networking of
branches. The bank had computerized number of branches.
Many of these branches were also networked so that their
customers could be offered ‘any-time, any-where’ banking
services. The other public sector banks too embarked on a
similar computerization drive.
Installation of ATM networks: All banks have made heavy
investments in the installation of large networks of ATMs.
ATMs proved a tremendous success by reducing the load on
branches significantly as, apart from carrying out routine
transactions such as cash withdrawal etc, customers can avail
such services as transfer of funds and payment of utility bills by
visiting any of the ATMs located conveniently.
Risk Management and Capital Adequacy: Many public
sector banks were saddled with large non-performing assets
(NPAs) and suffered from low capital adequacy. Banks have
since put in place stringent Risk Management Systems to
address not only credit risk, but also market risk and other
operational risks. There have been attempts to systematically
recover from defaulting customers and make adequate
provisions for NPAs. Many Banks have raised capital either on
their own strengths or with the help of government’s infusion
of capital to raise the capital adequacy levels to meet prudential
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norms. All these measures resulted in a much better financial
structure for the SBI compared to the position a decade back.
If the above strategies are merely measures to improve
operational effectiveness, then what strategies should banks follow
to gain a sustainable competitive advantage? The current thinking
in Strategy Research advocates those strategies that generate
valuable resources to the firm. Every bank has a collection of
physical and intangible assets and capabilities that it has developed
over a period of time. These can be broadly termed as ‘resources’
and each bank’s unique stock of resources is the basis for its
competitive advantage. Possessing such valuable resources lends a
bank a sustainable competitive advantage because it becomes very
hard or sometimes impossible for competing banks to acquire
similar resources. Hence successful marketing strategies are those
that enable banks to acquire such valuable resources which cannot
be competed away.
In a customer surveys, the brand recollection and positive
image of SBI has come out to be so strong that it is comparable to
many well-known consumer brands. This is a valuable resource
that SBI could continuously nurture and build into a strong
competitive advantage.9 Many other older banks such as Bank of
Baroda, Bank of India, Indian Bank etc., which are currently bigger
than many private sector banks may find themselves rapidly losing
market share if they do not invest in building strong brands.
Another resource that is potentially valuable is the wide network of
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branches that public sector banks possess. A winning strategy has
to be unique and different. SBI can find its own set of valuable
resources that can be the foundation for winning strategies.
Marketing Strategy:
It is a process that can allow an organization to concentrate
its limited resources on the greatest opportunities to increase sales
and achieve a sustainable competitive advantage. A marketing
strategy should be centered around the key concept that customer
satisfaction is the main goal.10 Marketing strategy is a method of
focusing an organization's energies and resources on a course of
action which can lead to increased sales and dominance of a
targeted market niche. A marketing strategy combines product
development, promotion, distribution, pricing, relationship
management and other elements; identifies the firm's marketing
goals, and explains how they will be achieved, ideally within a
stated timeframe. Marketing strategy determines the choice of
target market segments, positioning, marketing mix, and
allocation of resources. It is most effective when it is an integral
component of overall firm strategy, defining how the organization
will successfully engage customers, prospects, and competitors in
the market arena. Corporate strategies, corporate missions, and
corporate goals. As the customer constitutes the source of a
company's revenue, marketing strategy is closely linked with sales.
A key component of marketing strategy is often to keep marketing
in line with a company's overarching mission statement.
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Marketing Decisions Taken In Banking Services:
The following chart will tell about the all marketing decisions
taken in banking services. These all are essential decisions which
are concerned are essential ingredients of services marketing mix.
The analysis has been done in the context of banking services.
(Source: Mittal Arun, Advertising and Sales Promotion,
Wisdom Publication, New Delhi, Edition -2008, p-225)
When customer is treated as the king of the market, the study of
consumer behaviour becomes more important for marketing
decisions. There is no doubt that the behaviour is the base of
marketing decisions. Banks are defined as the Organizations,
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which accepts deposits from public and give loans from the general
public. In the present time they are over and above this definition.
Banks are providing innovative services with innovates styles.
ATMs, Credit cards and Internet banking have changed the quality
of delivery of services of banks. Banking services are growing with
many new additions such as money transfers, Bank assurance, NRI
services and so on. Promotion of service has been a challenging
task. Banking services being of a sophisticated nature should be
promoted carefully, clearly and innovatively.
E-Banking:
The E-banking is changing the banking industry and is
having major effect on banking relationship. E-banking involves
use of internet for delivery of banking products and services. The
banking industry in India is facing unprecedented competition
from non traditional banking institutions, which now offer banking
and financial services over the internet.11 The deregulation of the
banking industry coupled with the emergence of new technologies,
is enabling new competitors to enter the financial services market
quickly and efficiently. Commercial banks offer a wide range of e-
banking services to the customer. Banking services are delivered to
a customer at his office or home by using electronic technology.
Customer need not necessarily visit banks to carry out their
banking transactions and can meet their requirements through the
means of electronic banking facility.
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E-banking is becoming immensely popular globally, and
India is not exception to it. The declining internet rates, falling PC
prices, broad bandwidth access through cable and digital
subscriber lines, accessing the Net through cable TV etc. Would
definitely encourage the boom in E-banking in India.12 Electronic
devices are helping the banks to reduce transaction cost and
improve efficiency. E-banking is reducing the transaction costs and
is winning the trust of customers and roving to be an appropriate
model for customer service of commercial banks in India. So the E-
banking has a greater role in customer service of commercial banks
in India.
E-Banking Services:
The following services through E-Banking are available:
Net Banking, Phone Banking, Credit/Debit Cards: This
is an online banking facility available for savings account
holders as well as current account holders. Some of the special
Net banking services are - Demat accounts for sale/purchase of
stocks and shares, Foreign Exchange services, Direct/Instant
payment of bills on the account-holder’s behalf, Financial
Planning & advice, Electronic Funds Transfer, Loans to
account-holders. Banks facilitate E-commerce by providing the
most vital trade instrument, namely the Credit or Debit Card,
without which E-commerce would be impossible.
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Automated Teller Machine (ATM) Services: The
Automatic Teller Machine (ATM) was first commercially
introduced in 1960. By 2005, there were over 1.5 million ATMs
installed worldwide. The introduction of the ATM proved to be
an important technological development that enabled financial
institutions to provide services to their customers in a 24*7
environment. The ATM has enhanced the convenience of
customers’ by enabling them to access their cash wherever
required from the nearest ATM.13 ATM have gained
prominence as a delivery channel for banking transactions in
India. Banks have been deploying ATMs to increase their reach.
While ATMs facilitate a variety of banking transactions for
customers, their main utility has been for cash withdrawal, and
balance enquiry. More banks prefer to deploy ATMs at locations
where they have a large customer base or expect considerable
use.
ATM has today secured a comfortable place in the customer’s
mindscape, which few other innovations can replace. In the past
couple of years ATMs have changed the face of banking services.
SBI provides easy access to money to its customers through
more than 8,500 ATMs in India. The Bank also facilitates the
free transaction of money at the ATMs of State Bank Group,
which includes the ATMs of State Bank of India as well as the
Associate Banks – State Bank of Bikaner & Jaipur, State Bank of
Hyderabad, State Bank of Indore, etc. You may also transact
money through SBI Commercial and International Bank Ltd. by
using the State Bank ATM-cum-Debit (Cash Plus) card.14 The
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banks are looking at bringing in advanced technologies. As they
go forward, multifunctional, ATMs will hold the key in the
immediate future. ATMs that are capable of offering e-
commerce activities, interactive features, or identification of
customers through fingerprints or eye scans, may not be a
distant reality.
Funds Transfer: E-banking allows the possibility of improved
quality and an enlarged range of services being made available
to customers.15 You can transfer any amount from one account
to another of the same or any another bank. Customers can send
money anywhere in India. Once you log in to your account, you
need to mention the payee’s account number, his bank and the
branch. The transfer will take place in a day or so, whereas in a
traditional method, it takes about three working days. Banks
can also offer many cash management products. Instant credit,
one day credit, immediate payment of utility bills, instant
transfer of funds etc. is possible under E-banking.
Internet Advertising: In present time the most popular tool
for promotion of banking services has become Internet
Marketing of services. E-Advertising is being very much
popular. In city areas of India, people use internet so frequently.
Studies tell that they use internet mostly for checking their
mails, finding results and educations and research purposes.
The e-advertising of banking services not only promote the
services by giving offers but it also interacts with the person and
a potential customer can purchase the product with the help of
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this. However internet advertising in pop ups irritates the
internet users but advertisements done on home page of any
website such as email service provider is useful and customers
get knowledge about the new banking services and
promotions.16 When they see something in front of their eyes
they can remember it much. In brief, consumer behaviour is the
base of all marketing activities and promotional strategies are
also the part of marketing so they are also designed by
considering all the aspects of consumer's behaviour.
E-commerce has impacted many areas of our society as it has
grown. Its future is very promising, considering the new
technologies that have been implemented and created to make E-
commerce successful and worthwhile. As the world is changing and
enters the new millennium, E-commerce is becoming a product of
the future where via a click of a button we will be able to carry out
our transactions. This makes E-commerce a necessity for the
future. In the new millennium, people will be able to do their entire
banking over the net without even going to the bank. Also, people
will be able to pay their bills online, thus lessening ordinary mail.
Security methods, such as encryption, authenticating, digital
signatures, digital certificates, and so on are enabling us to accept
E-commerce as a prominent tool.17 E-commerce undoubtedly has
changed our lives by convenience and ease in our day to day
activities, so without associating with it, we would be handicapped.
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Financial Product Advertising:
Financial advertising is a very useful tool for promotion of
financial products to persuade the new breed of investor to bring
his money into the market.18 Financial advertising can distinguish
the financial products of the company from those of its
competitors. It has to be noted that financial market displays
trends two types of advertising. Competitor may use the same and
take the advantage. Hence the marketing information should be
processed instantly and implemented quickly. The reliability of the
marketing information should always be cautiously looked into at
every stage while implementing. Advertising specific features,
benefits, and other relevant information or a particular product to
induce the investor. In India, as the investor is still new to the
gamut of many new financial products and services being offered
to him, the task promotion thus, became much more challenging
and exciting.
Branding of Financial Services:
Brand identities are an important marketing factor, which
facilitates product identification at the market place brand is a
broad term that includes practically all means of identifying a
product by way of ‘logo’ or ‘punch lines’ or product names. Brand
name is that part of the brand which can be verbalized whereas
Brand mark is that part of brand which can be recognized. A brand
commands customer loyalty for the product. Financial products
aim to attract the investor to bring his savings into the market.
Most of the financial products available in the market are very
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similar in nature. This is where the advantages of branding can be
exploited. Branding can help in creating product differentiation
and also create a distinctive product identity. Developing a brand
require a great deal of long term investment especially advertising,
promotion etc.
Mass Media Advertising: Most Preferred mode for
marketing of Banking Services:
Mass media advertising includes TV commercials and
advertising in national level newspapers which have a wide
coverage. Advertising in these has made maximum people aware
about the offerings of the banks and established most of the bank
names as big brands. In a recent survey ICICI Bank has been
considered as the most popular banks in private sector. The use of
umbrella branding works well in promotion of banking services.
Different types of advertisement campaigns have been seen in form
of TV commercials and as print ads in newspapers. Print ads
mainly focus on corporate image advertising of banks as well as a
new offering of the bank such as increase in interest rate on
deposits or decrease in the interest rates in loans and so on. TV
commercials mainly focused on corporate advertising, where
banking service is promoted as a whole rather than a particular
product of banks.19
Advertising appeal is the method used to draw the attention
of consumers and to influence their feelings toward the product,
service, or cause. There are hundreds of different appeals that can
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be used as the foundation for advertising messages. These are the
central idea of advertise which has been used to catch the
attraction of customer by heart. The theme of a commercial strikes
a person in depth and forces him/her to act in the desired manner.
Generally advertising appeals are broken into two categories:
rational appeals and emotional appeals.20
Personal Selling and Societal Marketing:
Personal Selling is being very much popular and effective for
private banks in India.21 It is concerned with face to face meeting
with the customer and making the presentation of the service
offering to the prospect and making the person customer of the
bank. This process has its own advantages and disadvantages.
Banks may have some complex service offer which may include so
many charges and facilities of different types. The biggest
advantage of personal selling in banking services is that the
salesperson can make the prospect well understood about the
product. Further customers may prefer it because they need not to
go anywhere the sales person comes to them. But there is certain
limitation also people usually do not give their time to meet and
talk on issue. It also does not become cost effective if the sales are
not closed in a handsome number. Banks are going to be societal
now and taking care of environment the plantation Bank of Baroda
and Punjab National Bank is the examples of the same. Consumers
are always emotional about the Brands doing social and national
services. Banks wants to win the faith of the customers and also
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wants to come out from their typical financial image. Societal
marketing really helps to attain this objective.
Effective Sales Promotions:
Sales promotional has become popular due to the popularity
of the usage of debit and credit cards. The offers are also given to
the customers for registering and transacting with internet
banking. For example recently HDFC bank has come with the offer
where a flip book light is free on opening an account and a DVD of
famous movie on shopping with Debit Card. Further there are lots
of other schemes also giving discount and other gifts on different
types of purchase on debit and credit card of the bank. The
corporation/Brands such as Indiatimes shopping, Barista, Mudra
Pure Gold, Ayush Therapy Center, VLCC Slimming Beauty
Fitness, Well-home, Dr. Batra's Multispecialty Hospitals, Javed
Habib, Gini & Jony, Vishal Mega mart, Dominos and Book my
Show have clubbed with the bank to provide this promotion to the
customers.22 However the sales promotion has its nature that it is
always for a particular time being. The purpose of sales promotion
is to enhance the sales in particular time duration. The sales
promotion offers are redesigned frequently for effective promotion
in sales. Consumers feel happy when they get something extra then
the regular utility. Sales promotion offers really attract customers.
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Electronic payment system:
An electronic payment system (EPS) is a system of financial
exchange between buyers and sellers in the online environment
that is facilitated by a digital financial instrument (such as
encrypted credit card numbers, electronic checks, or digital cash)
backed by a bank, an intermediary, or by legal tender. EPS plays
an important role in e-commerce because it closes the e-
commerce loop. In developing countries, the underdeveloped
electronic payments system is a serious impediment to the growth
of e-commerce. In these countries, entrepreneurs are not able to
accept credit card payments over the Internet due to legal and
business concerns. The primary issue is transaction security. The
absence of inadequacy of legal infrastructures governing the
operation of e-payments is also a concern. Hence, banks with e-
banking operations employ service agreements between
themselves and their clients.23 The relatively undeveloped credit
card industry is also a barrier to e-commerce. Only a small
segment of the population can buy goods and services over the
Internet due to the small credit card market base. There is also the
problem of the requirement of a signature by a card owner. The
payment schemes available for online transactions are the
following:
Traditional Payment Methods:
● Cash-on-delivery: Many online transactions only involve
submitting purchase orders online. Payment is by cash upon
the delivery of the physical goods.
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● Through Bank payments: After ordering goods online,
payment is made by depositing cash into the bank account of
the company from which the goods were ordered. Delivery is
likewise done the conventional way.
Electronic Payment Methods:
● Innovations affecting consumers: It includes credit and
debit cards, ATMs, stored value cards, and e-banking.
● Innovations enabling online commerce: Innovations
enabling online commerce are e-cash, e-checks, smart cards,
and encrypted credit cards. These payment methods are not
too popular in developing countries. They are employed by a
few large companies in specific secured channels on a
transaction basis.
● Innovations affecting companies: Innovations affecting
companies pertain to payment mechanisms that banks
provide their clients, including inter-bank transfers through
automated clearing houses allowing
Confidence Level Of Consumers In The Use Of An EPS:
Many developing countries are still cash-based economies.
Cash is the preferred mode of payment not only on account of
security but also because of anonymity, which is useful for tax
evasion purposes or keeping secret what one’s money is being
spent on. For other countries, security concerns have a lot to do
with a lack of a legal framework for adjudicating fraud and the
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uncertainty of the legal limit on the liability associated with a lost
or stolen credit card. In sum, among the relevant issues that need
to be resolved with respect to EPS are: consumer protection from
fraud through efficiency in record-keeping; transaction privacy and
safety, competitive payment services to ensure equal access to all
consumers, and the right to choice of institutions and payment
methods.24 Legal frameworks in developing countries should also
begin to recognize electronic transactions and payment schemes.
Products And Services Of State Bank of India:
Customers are the most important part of a bank and provide
the raw materials of deposits and the demand for loans. They are
valuable to a bank in terms of revenue generations. The success of
a bank depends upon its ability to attract and retain its customers
and the business it attracts. The following products and services
are offered by State Bank of India to its customer.
Personal Banking:
SBI Term Deposits.
SBI Loan for Pensioners.
SBI Recurring Deposits.
Loan Against Mortgage Of Property.
SBI Housing Loan.
Loans Against Shares & Debentures.
SBI Car Loan.
Rent Plus Scheme.
SBI Educational Loan.
Medi-Plus Scheme
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Other Services
Agriculture/Rural Banking.
NRI Services.
ATM Services.
Demat Services.
Corporate Banking.
Internet Banking.
Mobile Banking.
International Banking.
Safe Deposit Locker.
RBIEFT.
E-Pay.
E-Rail.
SBI Vishwa Yatra Foreign Travel Card.
Broking Services.
Gift Cheques
Online SBI:
State Bank of India is India's largest bank with a branch
network of over 11,000 branches and 7 associate banks located
even in the remotest parts of India. Online SBI is the Internet
banking portal for State Bank of India. The portal provides
anywhere, anytime, online access to accounts for State Bank's
Retail and Corporate customers. The application is developed
using the latest cutting edge technology and tools. The
infrastructure supports unified, secure access to banking services
for accounts in over 11,000 branches across India. The Retail
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banking application is an integration of several functional areas,
and enables customers to:25
Issue Demand Drafts online.
Transfer funds to own and third party accounts.
Credit beneficiary accounts using the VISA Money Transfer,
RTGS/NEFT feature
Generate account statements.
Setup Standing Instructions.
Configure profile settings.
Use e-Tax for online tax payment.
Use e-Pay for automatic bill payments.
Interface with merchants for railway and airline reservations.
Avail DEMAT and IPO services.
The Online SBI corporate banking application provides features to
administer and manage corporate accounts online. The corporate
module provides roles such as Regulator, Admin, Up-loader,
Transaction Maker, Authorizer, and Auditor. These roles have
access to the following functions:
Manage users, define rights and transaction rules on
corporate accounts
Access accounts in several branches with a single sign-on
mechanism
Upload files to make bulk transactions to third parties,
supplier, vendor and tax collection authorities.
Use online transactional features such as fund transfer to
own accounts, third party payments (both Inter and Intra
bank), and draft issues.
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Make bill payments over the Internet.
Authorize, modify, reschedule and cancel transactions, based
on rights assigned to the user.
Generate account statement.
Enquire on transaction details or current balance.
In addition to the above the Internet banking application also
provides the following value added services:
Tax payments to central and state governments through site
to site integration.
Supply Chain Finance (Electronic Vendor Finance Scheme)
Direct Debit Facility.
E -Collection Facilities for:
o Core Banking Transactions.
o Inter Bank Transactions for incoming RTGS/NEFT
Transactions.
o Internet Banking Transactions for SBI & Associate Banks.
o Direct Debit facility where suppliers can directly debit
their customer’s account through Internet Banking Login
Marketing In Banking:
Marketing approach in banking sector had taken significance
after 1950 in western countries and then after 1980 in Turkey.26
New banking perceptiveness oriented toward market had
influenced banks to create new market. Banks had started to
perform marketing and planning techniques in banking in order to
be able to offer their new services efficiently. Marketing scope in
banking sector should be considered under the service marketing
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framework. Performed marketing strategy is the case which is
determination of the place of financial institutions on customers’
mind. Bank marketing does not only include service selling of the
bank but also is the function which gets personality and image for
bank on its customers’ mind. On the other hand, financial
marketing is the function which relates un-congenitally,
differences and non similar applications between financial
institutions and judgment standards of their customers.
The reasons for marketing scope to have importance in
banking and for banks to interest in marketing subject can be
arranged as:27
Change in demographic structure: Differentiation of
population in the number and composition affect quality and
attribute of customer whom benefits from banking services.
Intense competition in financial service sector: The
competition became intense due to the growing international
banking perceptiveness and recently being non-limiting for
new enterprises in the sector. Increase in liberalization of
interest rates has intensified the competition.
Bank’s wish for increasing profit: Banks have to
increase their profits to create new markets, to protect and
develop their market shares and to survive on the basis of
intense competition and demographic chance levels. The
marketing comprehension that is performed by banks can be
shown as in following five stages:
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o Promotion oriented marketing comprehension.
o Marketing comprehension based on having close
relations for customers.
o Reformist marketing comprehension.
o Marketing comprehension that focused on specializing
in certain areas.
o Research, planning and control oriented marketing
comprehension
Types of Customers:
There are two types of customers in the business of financial
services. They are-28
1. Individual customer for product such as Bank Deposits,
company fixed deposits, mutual fund units, insurance
policies, company shares & debentures, consumer durable
loans, credit card, depositors, housing, vehicle loans.
2. Consumer as Corporate Entity for term loans from
financial institution, working capital loan from commercial
banks, inter-corporate deposits, equity by way of shares /
debentures, etc.
In the first category, consumer has also been defined in terms of
social class i.e. NRI class, high net worth class, upper middle class,
middle class, lower middle class, working class, etc. The consumers
have been categorized to design marketing strategies to tap their
savings in a financial product.
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Marketing Strategy Used By SBI:
Generic strategies adopted by State Bank of India:
Institution for advanced learning: to provide state of the art
training in financial products to middle level and senior level
executives.
Internal consultant/change agent: to act as a catalyst for
change in attitudes and orientation of banking staff and to
provide expertise and consultative support.
Feedback supplier: to capture and structure feedback from
trainees and from the market.
Think tank: to provide expert and inform suggestions, model
business strategies, analysis of market developments from a
banker perspective.
Research and development role: to carry out research on
contemporary subjects that is relevant to the banks short
term and medium term and operational needs and policy
formulation.
Overlapping staff training centers: to validate and closely
monitor the staff training centers in seven circles attached to
the academy.
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The Restructuring:
To overcome the intense competition from private and
foreign banks, SBI planned a major organizational restructuring
exercise. The key aspects involved-
Redesigning of branches,
Providing alternate channels;
Focus on a lean structure and
Technological up gradation.
A business process reengineering (BPR) team was constituted in
June 2003 with McKinsey & Company as consultants. The BPR's
basic goal was to create an operating architecture that would
facilitate service.
New Products and Service:
Apart from restructuring, SBI launched several innovative,
value-added products and services to project a customer friendly
image. It launched a special service for corporate customers called
tele-banking and remote login' to support transactional requests.
This facility would be available at 593 branches, and remote login
at 269 branches. The banks trade finance solutions, called
EXIMBILLS, were intended to handle trade finance transactions
efficiently and enhance the range of services provided to corporate
and network branches. In March 2004, SBI announced that it
would introduce ‘anywhere banking’ facility for its customers over
all the branches across India in the 2005. All the branches in
Mumbai would provide this facility by 2004. SBI also launched
different customized loan programs to cater to various sections of
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society depending on income levels and repayment capabilities.
Interest rates and repayment periods were tailor-made to suit the
customer groups.
Alliances and Tie-Ups: To boost its business, SBI entered
into several alliances and tie-ups with automobile, insurance,
mutual fund, project finance and medical equipment
companies.
Auto Finance: Unlike other competitors that relied on
reduced interest rates to get business, SBI extended the
tenure of car loans from five to seven years, thereby lowering
the monthly debt repayment burden of the loan seeker. SBI
entered into a tie-up with Maruti Udyog ltd., the largest
automobile manufacturer in India, to provide loans for
purchase of Maruti cars at the rate of 8.25, 9 & 10 per cent
for three years and above three years respectively. After the
scheme was introduced, SBI emerged as the largest financier
for Maruti cars in India.
The Marketing Initiatives For Enhancing Capacity:
SBI carried out various marketing initiatives to enhance its
reach. They included segregating and targeting existing high value
customers, cross sales of other products, setting up call centers and
outbound sales force to secure new customers. Plans were also
made to utilize database marketing to pursue large and medium
sized corporate, government and trade finance customers.
Database marketing was expected to draw increased revenue from
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cross selling, lower costs and increased customer loyalty. SBI also
introduced various other ways of reaching out to customers like
extension of hours of work and aggressive marketing through print
and television media. SBI increased daily working hours by two
hours and Sunday banking was introduced and Aggressive
marketing through print and television media.29
SBI`S Marketing Strategies In The Current Scenario:
SBI have set up capacity in places where they are not very
strong. It’s time for them to follow overall SBI philosophy of
planning new branches, given the huge untapped potential.
Besides, this is also the best time to benefit from their past
expansion, since there is a lot of trust in SBI. Brand SBI is very
strong, while people may be generally cautious about some other
brands. They can not only tap the potential better but can also
provide a safe and transparent insurance alternative to the public.
The bank is entering into many new businesses with strategic tie
ups – Pension Funds, General Insurance, Custodial Services,
Private Equity, Mobile Banking, Point of Sale Merchant
Acquisition, Advisory Services, structured products etc – each one
of these initiatives having a huge potential for growth. Some of the
strategies to cope with the current scenario are listed below:30
It is the part of SBI`s philosophy to open new branches. The
Bank is forging ahead with cutting edge technology and
innovative new banking models, to expand its Rural Banking
base, looking at the vast untapped potential in the hinterland
and proposes to cover 1,00,000 villages in the next two years.
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SBI is planning to hire 11,000 employees in the current fiscal.
The Bank is also in the process of providing complete payment
solution to its clientele with its over 8,500 ATMs, and other
electronic channels such as Internet banking, debit cards, mobile
banking, etc.
Country’s largest lender, State Bank of India has prepared a
blueprint to go retail in its international operations. Such
strategy would help the bank to promote its lead in syndication
of loans in the overseas market, at a cheaper cost. The bank’s
overseas operations have been instructed to thrust more on
promoting retail banking locally, SBI is assessing that by
opening more branches across foreign locations and promoting
retail services by mobilizing deposits at interest rates as low as 3-
3.5 per cent, the bank will be able to increase its operating
margins by 250-300 basis points in overseas markets where
syndication opportunities arise often.SBI is expected to open
seven new branches over next eight months in the United
Kingdom where it operates six branches currently.
In response to signals from the central bank, SBI have
progressively reduced their PLR from 13.75 per cent to 12.25 per
cent during the past few months in stages, and further softening
in interest rates cannot be ruled out. SBI is introducing loan
products at sub-PLR rates - in home loans at 8 per cent, auto
loans at 10 per cent, special products for SMEs and agriculture
sector at 8 per cent, but it may not be possible for them to reduce
the interest rate beyond a certain point.
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SBI is working on infrastructure sector projects, which has seen
a growth of 26 per cent in the current year. For the year 2008 the
Rs 10,000 crores was sanctioned for the infrastructure projects
while in the current year from April 08 to February 09 the
amount sanctioned for the infrastructure project is Rs 13,000
crores, out of which project worth Rs 8,000 crore is in pipeline.
Despite of various viability issues the growth in this sector for
SBI is been intact.
With market-linked products finding fewer takers, insurance
companies are launching more guaranteed products to lure
investors. The latest to join the bandwagon is SBI Life insurance
with SBI Smart ULIP, a product that guarantees returns based
on the highest NAV recorded by the fund in the first seven years.
Liberalization has really changed the banking industry. It is
no longer enough for banks to just manage money efficiently; they
also have to manage customers, who now have a wide choice of
alternatives.31 The future promises to be even more exciting,
interesting and challenging. No longer will banks, or any large
organization, treat customers as a group and segment the minto
just some demographic and psychographic profiles. The Internet
has enabled us to talk to each customer as an individual, with
different needs and requirements. Products will need to be
developed to meet those needs, and services will become the
crucial differentiators. For years, customers were part of the banks’
Fixed Assets; now they have moved into the Current Assets
category, and it will be a task keeping them there.
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Understand the strategies adopted by SBI in the banking
industry to retain its market share.
Explore the reasons how a market leader can lose its market
share significantly.
Examine and analyze the key elements of the restructuring
exercise undertaken by SBI.
Study the marketing initiatives adopted by SBI to reposition
itself as a customer-oriented bank.
Examine the challenges that can be faced by a market leader
due to the changes in the industry structure.
Study and analyze the structure of the Indian banking
industry.
By adopting modern technology and offering superior
customer service, the SBI gained a significant share in urban
banking.
Liberalization and de-regulation process initiated by the
Indian Government in early nineties has completely changed the
face of the Indian banking industry. The entry of new private sector
banks with the state-of-the-art technology and lean structures has
forced the old private-sector and public-sector banks to respond to
the new challenges with aggressive restructuring measures. The
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past five years have seen the public sector banks rapidly
introducing new products and services, computerizing and
networking key branches, rationalizing manpower and launch a
number of initiatives to improve operating efficiencies. Are they on
the right track? Are these strategies to become leaner and meaner
sufficient to gain a competitive advantage to survive and grow in
the long run? To survive and thrive in the long run, banks need to
pursue strategies that enable them to develop marketing strategies
that are inimitable, rare, durable and superior to bank
customers.32 SBI a leading public sector bank in Indian
commercial banking system has been braving a lot of challenges
thrown by information technology, acute market competition,
tightening regulation, serving effectively down trodden and other
categories of borrowers in the profit banking saga; continues to be
a leader in Indian banking system.
CRM Initiatives in SBI:
The new vision and mission statements of SBI also declare
the change of ideology of bank in terms of the customer services.
The SBI has identified specialized officer for the post of
Relationship Manager to serve the customer better identifying
their needs. SBI has also created special post of Customer Relation
Executive in 2007. SBI has understood the importance of high net
worth individual and could also sense that many of its long term
high net worth are shifting to other banks because of better
customized services other banks promised and delivered to some
extent. SBI has also created two more new posts customer relation
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associate to further strengthen the customer relationship
management.33 These efforts of SBI clearly indicate the importance
SBI in giving to get identified as customer centric bank. A new era
has begun which will bring in CRM in new many more new colours
and the future of CRM looks more and more bright.
Marketing Research:
Marketing research should be a part of knowledge
management process as well as management information
systems.34 Marketing research needs enlightened people to
interpret and understand what customers and other respondents
are telling them. In the present scenario marketing research should
showed to be more concerned with short term and medium term
strategies as business cycles and product life cycles are getting
shorter. Marketing research has a wide scope of application to
banks function. Banks are required to perform a variety of business
activities and their area of operation is also large. Marketing
research in a bank is search for data which are relevant to
marketing problems in different functional areas of banks
business. Marketing research is about reducing uncertainties in
decision making.
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New Marketing Challenges:
In this new competitive environment of globalized trading
practices, the marketing of commercial banks posed the following
challengers to the financial sector in the market.
Deregulation in the financial service sector gave rise to the
emergence of various spurious companies and may malpractices in
the stock and capital market. This has badly affected the marketing
activities of commercial banks. Increased competition from global
and domestic private players has threatened the survival of many
industries.35
Integration of global market and growing volumes of
financial transaction.
Coping with advances information technology in the
marketing functions.
High level of volatility of the financial market.
Increased customer demands and sophistication of markets
and customers.
Coping with fast growing rate of IT, communication,
multimedia etc.
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Future Marketing Strategy of SBI:
Today’s banking services requires new strategies to survive
and continue to operate. They have to adopt new marketing
strategies and tactics which enable them to capture the maximum
opportunities with the lowest risks in order to enable them to
survive and meet the tough competition from global players of
domestic and foreign origin.36
The State Bank of India has decided to appoint a global
consultant to frame a modern marketing strategy for its products.
SBI official told that the management had also decided to set up an
exclusive marketing division, whose work will be to market the
various financial products offered by SBI as well as its subsidiaries.
According to him, SBI’s new strategy will be to send his own
marketing men to the doors of prospective customers rather than
waiting for the customers to come to its doors. He claimed that SBI
was the first ever PSU bank in India to have taken such an
initiative. The SBI official said that the global consultant would
frame the new marketing strategy for SBI and then the policy will
be implemented by the bank management. The new marketing
division will be appointed out of the officers and award staffs with
good communication and public relation skills. These officers will
be specially deployed in the marketing division, so that their public
image can be effectively utilized in marketing the products. The
SBI official officers and staff deployed in the marketing division
will be specially trained for the marketing job. The training
programme will be conducted internally with guidance from any
reputed consultant.37
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