service sector management-nkumar

8/8/2019 Service Sector Management-Nkumar

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THE FOUNDATION OF SERVICES MARKETING ................................................................... 2BANK MARKETING ................................................................................................................... 20TOURISM MARKETING ............................................................................................................. 30HOSPITAL MARKETING ........................................................................................................... 40INSURANCE MARKETING ........................................................................................................ 50

MUTUAL FUND MARKETING .................................................................................................. 64TELECOMMUNICATIONS SERVICES ..................................................................................... 72COURIER SERVICES .................................................................................................................. 79AUTOMOBILE SERVICES ......................................................................................................... 88

Service Sector Management: BBA-III. - 1 -


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THE FOUNDATION OF SERVICES MARKETING

Introduction:

What is a Service?

In economics and marketing, a service is the non-material equivalent of a good . Service provision has been defined as an economic activity that does not result in ownership, and this iswhat differentiates it from providing physical goods. It is claimed to be a process that creates

benefits by facilitating either a change in customers, a change in their physical possessions, or achange in their intangible assets.

Dictionary definitions of "Intangible":

1. Lacking substance or reality; incapable of being touched or seen

2. Incapable of being perceived by the senses especially the sense of touch

3. (Of especially business assets) not having physical substance or intrinsic productive value

By supplying some level of skill, ingenuity, and experience, providers of a service participate inan economy without the restrictions of carrying stock (inventory) or the need to concernthemselves with bulky raw materials. On the other hand, their investment in expertise doesrequire marketing and upgrading in the face of competition that has equally few physicalrestrictions.

Key attributes of Services

Services can be described in terms of their main attributes.

Intangibility - They cannot be seen, handled, smelled, etc. There is no need for storage. Becauseservices are difficult to conceptualize, marketing them requires creative visualization toeffectively evoke a concrete image in the customer's mind. From the customer's point of view,this attribute makes it difficult to evaluate or compare services prior to experiencing the service.

Perishability - Unsold service time is "lost", that is, it cannot be regained. It is a lost economicopportunity. For example a doctor who is booked for only two hours a day cannot later work those hours she has lost her economic opportunity. Other service examples are airplane seats(once the plane departs, those empty seats cannot be sold), and movie tickets (sales end at acertain point).

Lack of transportability - Services tend to be consumed at the point of "production" (althoughthis doesn't apply to outsourced business services).

Lack of homogeneity - Services are typically modified for each client or each new situation(customized). Mass production of services is very difficult. This can be seen as a problem of inconsistent quality. Both inputs and outputs to the processes involved providing services arehighly variable, as are the relationships between these processes, making it difficult to maintainconsistent quality.

Labour intensity - Services usually involve considerable human activity, rather than a preciselydetermined process. Human resource management is important. The human factor is often thekey success factor in service industries. It is difficult to achieve economies of scale or gaindominant market share.

Demand fluctuations - It can be difficult to forecast demand (which is also true of many goods).Demand can vary by season, time of day, business cycle, etc.

Buyer involvement - Most service provision requires a high degree of interaction between client

and service provider.



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Client-Based Relationships - Is based on creating long-term business relationships.Accountants, lawyers, and financial advisers maintain long-term relationships with their clientsfor decades. These repeat consumers refer friends and family, helping to create a client-basedrelationship.

Service delivery

The delivery of a service typically involves five factors:

The service providers (e.g. the people) Equipment used to provide the service (e.g. vehicles, computers) The physical facilities (e.g. buildings, parking, waiting rooms) The client Other customers at the service delivery location Customer contact

The service encounter is defined as all activities involved in the service delivery process. Someservice managers use the term "moment of truth" to indicate that defining point in a specificservice encounter where interactions are most intense.

Many business theorists view service provision as a performance or act. The location of theservice delivery is referred to as the stage and the objects that facilitate the service process arecalled props. A script is a sequence of behaviours followed by all those involved, including theclient(s). Some service dramas are tightly scripted, others are more ad lib. Role congruenceoccurs when each actor follows a script that harmonizes with the roles played by the other actors.

In some service industries, especially health care, dispute resolution, and social services, a popular concept is the idea of the caseload, which refers to the total number of patients, clients,litigants, or claimants that a given employee is presently responsible for. On a daily basis, in allthose fields, employees must balance the needs of any individual case against the needs of allother current cases as well as their own personal needs.

The service sector the tertiary sector

The three-sector hypothesis is an economic theory that divides economies into three sectors of activity:

Extraction of raw materials (primary) Manufacturing (secondary)



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Services (tertiary).

According to the theory the main focus of an economy's activity shifts from the primary, throughthe secondary and finally to the tertiary sector. The process is essentially positive, and relates toincrease in quality of life, social security, blossoming of education and culture, higher level of

qualifications, humanisation of work, and avoidance of unemployment.

Countries with a low per capita income are in an early state of development; the main part of their national income is achieved through production in the primary sector. Countries in a moreadvanced state of development, with a medium national income, generate their income mostly inthe secondary sector. In highly developed countries with a high income, the tertiary sector dominates the total output of the economy.

Service Sector is also known as the tertiary sector of industry is one of the three mainindustrial categories of a developed economy, the others being the secondary industry(manufacturing), and primary industry (extraction such as mining, agriculture and

fishing). Services are defined in conventional economic literature as "intangible goods".According to some economists, the service sector tends to be wealth consuming, whereasmanufacturing is wealth producing. Sir Keith Joseph in his lecture Monetarism Is Not Enough,contrasted wealth producing sectors in an economy such as manufacturing with the service sector which tends to be a wealth consuming sector. He contended that an economy declines as itswealth producing sector begins to shrink.

The tertiary sector of industry involves the provision of services to businesses as well as finalconsumers. Services may involve the transport, distribution and sale of goods from producer to aconsumer as may happen in wholesaling and retailing, or may involve the provision of a service,such as in pest control or entertainment. Goods may be transformed in the process of providing a

service, as happens in the restaurant industry . However, the focus is on people interacting withpeople and serving the customer rather than transforming physical goods. Since the 1960s,there has been a substantial shift from the other two industry sectors to the Tertiary Sector inindustrialised countries. The service sector consists of the "soft" parts of the economy such asinsurance, government, tourism, banking, retail and education. In soft sector employment, peopleuse time to deploy knowledge assets, collaboration assets, and process-engagement to create

productivity (effectiveness), performance improvement potential (potential) and sustainability.Typically the output of this time is content (information), service, attention, advice, experiences,and/or discussion (also known as "intangible goods"). Other examples of service sector employment include:

Franchising Restaurants Retailing Entertainment, including the record industry, music industry, radio, television and

movies. News media Leisure industry/hotels Consulting Transport Healthcare/hospitals

Public utilities are often considered part of the tertiary sector as they provide services to people,while creating the utility's infrastructure is often considered part of the secondary sector, eventhough the same business may be involved in both aspects of the operation.

Services Marketing

A wide variety of activities labeled as services are practised by both profit-orientatedorganizations and non-profit orientated organizations. The success of these organizationsdepends on delivering excellent service quality and creating value to customers. Definingservices is therefore not a simplistic task. Over the years service marketing literature has

provided readers with an assortment of service definitions.



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The Tangibility spectrum

These problems can, to a certain extent, be successfully resolved by reducing the intangibility of service offerings through stressing the tangibility components of offerings, stimulating word of mouth communication, creating a strong corporate communicate with customers, and usingunique attributable cost and perceived value pricing. Service providers must always take into

account the fact that customers use the tangible elements, such as the people who provide theservice, the environment in which the service encounter takes place, the equipment used, and the price of the offering, to make assumptions about the quality of the service and to compare it tothe offerings of other service providers.

Variability

Variability refers to the unwanted or random variable levels of service quality customers receivewhen they support an organization. The primary reason for variability is the human elementpresent in the service process , accordingly sustaining the statement of Kotler, that the quality of service depends on the service provider. Because humans normally perform services, the chance

of two service performances being the same is highly unlikely.Different service employees will perform the same service process differently and the sameservice employee will provide a varying service under different circumstances or at differenttimes. Nevertheless, the recipients of the service are also human, with their own unique demandsand expectations of the service performance. Service marketers find it difficult to control thequality of the service performances because it is dependant on fallible employees as one of themain inputs

The reliance on peoples performances causes standardisation service processes to be almostimpossible. The intentional or unintentional customisation of service processes and output

performances by service employees for individual customers makes promotion of services verydifficult.

Customers in general perceive the person who delivers the service as the service. As a result,service providers have the ability to alter the outcome and level of customer satisfaction. Servicemarketers are confronted with the challenge of controlling service quality because consistentquality service performances play a vital role in the survival of organizations. Service quality is

profoundly dependent on the ability of customers to articulate their needs and level of servicedemands. Equally, service quality depends on the ability, and willingness of the service provider to satisfy customers needs and demands. Organizations can put into practice service qualitycontrol and measurements by recruiting service-orientated employees and training them to

provide a service that will meet or exceed customers expectations.



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Inseparability

Inseparability refers to the simultaneous production and consumption of a service, thus it is oftendifficult to separate the service provider from the service performance. Customers are normally

present at and during the service performance and play an active role in the service production

process. The quality of the service performance is dependent on the interaction between theservice provider and the customer.

The customers involvement in the production process of the service can influence the outcomeof the service positively or negatively. Service marketers must recognize that the roles customers

play in the service production process influence the service outcome, not only for themselves butalso for other customers. The inter-client interaction between customers also plays an integral

part in the outcome of service experiences

Service organizations must acknowledge the influential role that service employees play inservice processes. The service employees or the service providers are often seen as the service

itself. The inseparability of production and consumption means that very few service offeringscan be mass-produced, but almost every service offering can be customised to customers needsand demands. Customisation is to the advantage of service organizations, because customers usethe degree of customisation of service offerings to measure the quality of services.

PerishabilityPerishability is the inability of a service to be inventoried or stored. This characteristic is of major concern to service marketers because it inevitably leads to supply and demand problems.The capacity lost in services can never be regained and to equalise supply and demand is adifficult task. These distinct service problems present service marketers with the challenge of setting up good recovery strategies for service process failures. Research has shown thatresolving customer problems effectively has a powerful impact on customer satisfaction andloyalty. The perishability characteristic of services creates the opportunity for the organization todevelop creative planning for capacity utilization and management of future demand.

OwnershipOwnership is the last characteristic of services that distinguish it from goods. Customers receiveonly the right to a service process when they purchase it. Subsequently it is assumed that

payment for services buys only the right of access to a service and not physical transfer of ownership to customers. Customers view the lack of ownership of a service as a perceived risk.Firstly they are presented with the uncertainty as to whether the right service has been obtainedand secondly with the uncertainty about the consequences of the service purchase. Since servicesare produced and consumed simultaneously, the option of returning a service does not exist.The inability to own a service also has direct implications on the distribution of services. Servicecustomers usually only have use or access to a facility where a service is performed.

Kotler suggests that services call for special marketing solutions. The characteristics of servicescreate problems for service marketers that are not experienced by product marketers. If these

problems are not carefully managed, organizations may experience negative influences onservice quality that will ultimately reduce customer retention and organization profits

In this regard, Zeithaml and Bitner have proposed a services marketing triangle that will bediscussed in the next section.

The services marketing triangle

Service marketers face marketing challenges, which revolve around issues such as: Understanding customers needs and expectations of services, Making services tangible to customers and Keeping and dealing with promises made to the customers

The services marketing triangle shown in the below figure helps service marketers to addressthese challenges. The three points of the service triangle represent the organization, thecustomers, and the employees. Between each of the three points of the triangle differentmarketing processes such as external marketing, interactive marketing and internal marketing



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must be successfully carried out for service processes to succeed and to build and maintainrelationships with the internal and external customers.

The services marketing triangle

External marketing

The link between an organization and its customers is the external marketing process. Externalmarketing represents the promises that organizations make to their customers withreference to products or services they offer. Organizations make promises to customersconcerning their offerings and how delivery of the offerings will be conducted. The externalcommunication activities of the service provider play a key role in the formation of customersexpectations, because their expectations are affected by the service providers direct and indirectmarketing messages.

In goods as well as services, the traditional marketing activities facilitate external marketing processes. Promises made in advertisements and through promotions are used by customers toform service expectations. These can also positively or negatively influence the customers

initial expectations of the desired level of service compared to the adequate level of service.Customers use price as an indication of the quality of the offering, while the promise of availability and accessibility of an offering has an impact on the customers service expectations.

However, for service organizations, factors such as service employees, organization image andvisible structures, and the actual service process itself, form the basis for customers expectationsof the offering and the delivery thereof. Customers expectations and experiences fuse, thereforemuch of their final belief is drawn from the environment in which they receive the service andthe personalities and behaviour of the people they encounter during service processes.

The organizations projected values and integrity must be the priorities that govern the promises

made to the customers during the external marketing process. Customers expect consistent andrealistic promises that will at all times be honoured by the organization. Creating unrealisticcustomer expectations create dissatisfied customers. Misleading customers or over-promising tothem can negatively influence the relationship between the organization and the customer.

Interactive marketingThe interactive marketing process is about keeping the promises made by the organization to thecustomer along with delivering a quality service to the customer. Interactive marketing is theactual contact between the service employees and the customers and is called the "moment of truth" or service encounter. It is the decisive moment in the service process where organizationsactually show what they can do and how they meet the set expectations. At these decisive



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moments, everything about the service process can succeed or fail. The success or failure can betemporary, complete, or final but the interaction can never be restaged or controlled.

The marketing focus of service organizations has shifted from the offering to the customers, tothe interaction that takes place between the service employees and the customers. Through their

interactions with employees, customers form a perception of the integrity of an organizationsservice promises. They furthermore use the interaction to assess the value of the offering, and tomake the decision to purchase or repeat the purchase of an offering. From a customers point of view, this is the most important stage of the service delivery process as it is during this processthat they receive the value they actually desire. Interactive marketing performs a vital function inthe establishment of a relationship between the organization and the customer. The customers

perception of the service is derived from the delivery of the service, and cannot be separatedfrom the contact they experience with service employees. Therefore, it can be argued thatrelationships are an inevitable outcome of service delivery. However, it is important for organizations to acknowledge the fact that relationships do not necessarily exist between theorganization and the customer, but to a greater extent between the service employees and

customers. The success of these relationships depends profoundly on the attitude serviceemployees have towards their employment and their loyalty towards the organization. It is theresponsibility of the organization to recruit service-orientated employees very carefully, involvethem in organization activities, and motivate them to follow the examples set by the leaders of the organization

During interaction, employees and customers meet face to face and the actions of serviceemployees will be a major factor in influencing the customers expectations of the service.Customers evaluation of services is based on their interaction with service employees, thereforeit is of the utmost importance that service organizations continuously strive to improve thequality of interactions. People forget how fast you performed a service but they remember howwell you did it. Service organizations must therefore ensure that their service employees have theskills and ability to perform the service to meet the customers expectations. The reliability of services is tested every time a customer interacts with the employees and the service provider whom they represent.

Internal marketingThe marketing process that enables service marketers to deliver promises to customers is calledinternal marketing. Through internal marketing, the organization reveals that it consists of individuals and departments who are considered to be each others customers. Employees do notonly provide a service to the external customers but also to each other within the organization.Promises are easy to make, but unless organizations have internal systems in place to ensure thedelivery thereof, service processes cannot succeed. The success of internal service systems isdependent on the relationship between the organization and the employees.

Internal marketing hinges on the assumption that employee satisfaction and customer satisfactionare interlinked, thus internal marketing must precede external marketing. Organizations whoseobjective is to deliver constant high service quality have to enable all employees to practicecustomer orientation and marketing. Service organizations must recognize that achievingobjectives and creating change can only be achieved through employees. Service providers needto recruit, train, and provide tools to employees to perform superior service. People are valuableassets to an organization. They should therefore be fully equipped to provide the best service tothe external and internal customers. Employees who understand their functions within theorganization are more likely to create a harmonious work environment that will pave the way for less role ambiguity, less conflict, and more satisfied employees in the workplace.

The examples set by management for their employees are critical factors for the success of theinternal marketing process. There is a direct link between internal marketing and the actualdelivery of the service, because customers believe that what you are is what matters not whatyou say.

The success of services relies on the three marketing activities to be carried out successfully andto be aligned with each other. Each of the activities presents a challenge and it is important tofind strategies that support them all. Successful external relationships will be repeated internally.



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Services marketing mix - the 7 Ps (The concept)

The traditional marketing mix is the most basic concept in marketing and is defined as elementswhich organizations control and use to satisfy or communicate with customers. The componentsof the traditional marketing mix are the four Ps: product, price, place, and promotion.

Careful management of these components is essential for the successful marketing of goods andservices in both long-term and short-term marketing strategies of organizations. Conversely, thetraditional marketing mix components have been found to be too limited in theirapplication of services.

The intangibility of service offerings is not taken into consideration because the focus is on thetangibility of products. The price component overlooks the fact that many services are producedwithout a price being charged to the final customers, and customers frequently use price as anindication of service quality. Equally, the simultaneous production and consumption of serviceofferings make the distribution component difficult to implement and control. While the

promotion component of the traditional marketing mix concerns itself with advertising, sales

promotions and publicity, services marketing involves service employees and customers in thereal time marketing of services during the interaction process. The limitations of the traditionalmarketing mix have lead to exploitation by service marketers of additional components thatservices can utilise to satisfy and communicate with customers, resulting in the adoption of theservice mix.

The elements off this new concept are:1. Service offerings (product)2. Price3. Distribution (place)4. Promotions

5. People6. Physical evidence7. Processes.

The three new components address the uniqueness of three of the service characteristics. Theyfocus, firstly, on the inseparability of service marketers from customers, secondly, on theinability to hold service in inventory which makes it critical for the service process to flowsmoothly and lastly, on the fact that a highly intangible service offering must appear tangible Theadditional components of the service mix can be fully controlled by the service organization and

play a vital role in ensuring that marketing is customer focused, not product. The ensuingsections will provide a detailed description of the service mix.

Service offerings (Product)

A product is anything that an organization offers to customers that might satisfy a need, whether it is tangible or intangible. In contrast, the decisions that face service marketers concerningservice offerings are very different from those related to goods. An analysis of service offeringsshows that it can be divided it into two distinct components namely:

A core service offering that represents the intangible core benefits of services A secondary service offering that represents the tangible and augmented elements of the

service offerings.

The core service offerings are developed with customers benefit in mind and place the emphasison the customers perception of services. The secondary service offerings illustrate the additional benefits that the service offers to meet customers additional needs, and serve to differentiate theofferings from those of competitors. These benefits can combine both the tangible andintangible elements of service offerings that facilitate the customer to comprehend the coreservice.

Because of its intangibility, services are difficult to control and display to customers.Consequently, service marketers often emphasise the tangible elements of service offerings. Themore intangible a service, the greater is the need for tangible evidence. Tangible evidenceincludes packaging, brand name, corporate image, service delivery, and service employees.



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Price

In the determination of price, service marketers deal very much with the same price issues asgoods marketers. Subsequently, the differences present itself when the intangible characteristicof services specifies that price becomes a quality indicator. The art of successful pricing is to

establish a price level that is low enough for the exchange to represent good value to customers, but high enough to allow service providers to achieve their financial objectives. The perishablenature of services makes it important to control the demand and supply of the service offerings.The price component is the easiest to change and normally provides the quickest results.Manipulation of the price can influence and control quantity demand. An increase in price willreduce the demand and/or cause a shift to lower usage periods. Equally, a decrease in price willcause an increase in demand and stimulate new demand for the service.

The price of service offerings is often used by customers as an input into their expectations, purchase decisions, and evaluation of service quality. It is seen as a tangible cue in services witha high risk and experience properties, to form expectations of the service. Price is used as an

indicator of quality by customers. Thus, the assumption is formed that the higher the price of service offerings, the more is expected of it by customers.

Distribution (Place)

The distribution decision refers to the availability and accessibility of service offerings tocustomers. Availability from the customers point of view signifies that services are on handwhen they want them, while accessibility is the relative ease with which customers can conductservice processes with the service providers. For pure services, the distribution decision is of little relevance, though most services involve a tangible component. As a result, the distributiondecision involves physical locations and decisions which intermediaries use to provide theservices.

Promotions

The promotion mix for the traditional marketing mix is usually broken down into four components namely advertising, sales promotions, public relations, and personal selling .However, with the promotion of services, there is a greater need to emphasise the tangibleelements of services such as packaging, brand name, corporate image, service delivery, andservice employees.

The distinctive promotional needs of services stem directly from some of the uniquecharacteristics of services. The intangibility characteristic of services results in customers

perceiving them as high-risk purchases, with a need for tangible components as evidence of theservice. The inseparability characteristic of services emphasises the fact that the promotion of service offerings cannot be isolated from service providers. Therefore, the visible production

process, especially the part played by service employees during interaction, is a critical elementin the promotion process. The service promotion challenge is to transform invisibility intovisibility, vagueness into sharpness, uncertainty into evidence and risk into benefit.

The development of a promotional mix for services relies on the detailed specification of promotion objectives to ensure that that appropriate messages are chosen and effectivelychanneled in a cost effective manner to reach the target market. Typical service promotionalobjectives are:

To develop an awareness or interest in the organization and its services To communicate the benefits of purchasing a service To build a positive image of the organization To differentiate the organization from its competitors To remind customers of the existence of the service and the service organization

The services promotion mix uses a combination of channels to convey messages to the targetmarket. These messages are received from sources within the organization and externally.External sources include word of mouth communications or press editorials, while internalcommunications originate from the traditional marketing mix and from the frontline employees.The combination of communication channels depends on the characteristics of the target market,



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the size of the service, the nature of the service and the cost of the various channels. The promotional mix of a service organization involves the transmission of messages to past, presentand future customers. The ultimate aim is to make future customers aware of the service andinfluence them towards purchase.

People

People as an element in the service mix include all the human actors - the firms employees(internal customers), the buyers (external customers), and other customers - who play a part inservice delivery and accordingly influence the buyers perception of choice in the serviceenvironment. Service employees interact with customers during service delivery processes and

provide cues to external customers concerning the services. Hence, it can be said that serviceemployees competence, attitude, and appearance influence customers perception of services.Customers often experience service employees as synonymous with the service and no matter how small or large a part they play in the actual delivery of the service, they are still the focal

point of the service for customers. It is crucial that service organizations stipulate very

specifically to their employees what is expected of them during interactions with customers. Toachieve the desired standards of service, service organizations recruitment and training cannot be left to the human resources department only, but should form an integral part of the servicemix decisions.

Within successful service organizations, the human resources department, and the marketingdepartment work together to establish hiring criteria, training needs, and promotion activities toattract and retain employees who can deliver the quality service expected by the organizationstarget market.

The marketing department plays an important role in influencing the experience that bothinternal customers and external customers will have. External customers choose to visit a serviceorganization because of the messages relayed through the service mix, or word of mouthmessages communicated by other customers. External customers, who encounter anunacceptable level of service from internal customers, convey negative word of mouth messagesabout the service received to other customers. Consequently, it is crucial that marketingdepartments and human resources departments work together to ensure that the quality of servicedelivery by internal customers leads to positive word of mouth messages to external customers.

Every employee in an organization must serve other employees in some way or another.Therefore, just as external customers are needed, so are quality employees (internal customers)needed. The responsibility lies with service marketers to involve all employees in the marketing

process of an organization. A high level of employee involvement and motivation is directlylinked to an improvement in sales, profitability and customer loyalty.

Processes

Processes are the actual procedures, mechanisms, and flow of activities by which services aredelivered. Customers judge services on the operational flow or on the actual delivery thereof.The inseparability characteristic of services requires customers to follow a series of extensive or complicated actions to complete the process. Often the logic of these actions escapes thecustomers. Whether the service process is standardised or customised, it is used as evidence bycustomers to judge service quality. Standardised services will follow a production-line approach,while customised services command a greater degree of empowerment. Nonetheless, the momentof truth where customers experience the evidence, is not a once-off event but an ongoing

process.

The main ingredients of services processes are the people who participate in it. Services are of anintegrated nature and the organizations employees continuously fuse with the externalcustomers. The production and consumption usually takes place at the same time and researchinto customers attitudes towards service organizations suggests that customers see a service asan integral process in which they are intensely involved. The difference between service

processes and manufacturing processes are that:

The customers are participants in the service processes Service processes are difficult to structure



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The outcome of services is dependent on internal and external factors The output of service processes leaves only promises and memories Service processes play an integral part in customer satisfaction.

As a rule, services cannot be fixed to a definite time span, because depending on the nature of the

service; it can take anything from a moment to months to complete. A service can be a well-defined process, where all participants are aware of the process but a service can also be illdefined or not obvious to the participant in the process. Services that offer high degrees of customisation are usually ill defined. When service processes progress smoothly, they are hardlynoticed by the customers, who are under the assumption that the process will occur without any

problems every time it is performed. However, when the service process is not completedsuccessfully, both the internal and external customers are frustrated and distrustful of the serviceorganization. The success of service processes depends on the loyalty and trust- relationshipsorganizations can build with customers.

Marketing and the other organizational functions should work together to determine the needs of

the internal and external customers and satisfy those needs by designing and refining effectiveand efficient customer-friendly service delivery processes.

The actual service delivery process can be performed in three locations namely, the customersenvironment, at a store or an office or electronically or via telecommunications. Managementhas a great deal of control over the last two service delivery processes.

A service can also be performed on customers, objects, and technological equipment. Knowingthis helps to understand the perceived risk for customers attached to the service purchase.Service organizations must consider the importance of communication strategies, appearance,skills, and attitude of service employees. The physical evidence of delivery processes, such asthe delivery vehicles, print matter and delivery employees must also support a serviceorganizations image. The perishability characteristic of services influences the service delivery

process through the difficulty it presents in managing supply and demand. Supply and demandcannot be readily adjusted but techniques such as flexible service hours, price advantages for customers who buy during low demand periods, special offers that can only be redeemed duringslack time, and refinement of delivery processes, can provide solutions to service organizations.

Physical evidence

The environment in which the service provider delivers the service and where the customers andthe organization interact, as well as any tangible component that facilitates performance orcommunication of the service, is referred to as physical evidence .

Service organizations need to provide tangible evidence of the service to develop an image in themind of current and prospective customers. Often physical evidence overlaps with the promotionand distribution mix of the service mix . All tangible representations of services, such asbrochures, letterheads, business cards, report formats, signage, equipment, and physicalfacilities where service are rendered, represent the physical evidence of services.

Physical evidence provides service organizations with excellent opportunities to send strong,consistent, and positive messages regarding the nature of service offerings to customers. Physicalevidence is most successful if it is integrated throughout the organization, meaning that it should

be included in an organizations strategic planning. Once it has been accepted by management, itis the responsibility of the marketing department to implement it throughout the entireorganization.

The more intangible a service is, the more it relies on physical evidence to convey an appropriatemessage to customers. Physical evidence elements are employed to reduce the level of perceivedrisk experienced by customers. Due to the intangibility characteristic of services, it is hard toevaluate services in advance or to know the outcome of service experiences. Customers areforever looking for tangible cues by which to judge service quality. They tend to reduce the risk attached to the service offering by comparing the physical evidence of services to the offeringsof competitors, use their previous experience as a framework, or rely on the opinion of others.Extremely intangible services do not necessarily provide the greatest risk to the customers.Only \



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when a price is attached to service offerings, can customers truly evaluate the risk attached to it.

The unique characteristics of services cause customers to search for evidence of the service ineach of their interactions with the organization. The new elements of the service mix, namely

people, process, and physical evidence, provide customers with that evidence and allow them toform their own judgment.

Difference between goods and services

Intangibility: The most basic and universally cited, difference between goods and services is

intangibility. Because services are performances or actions rather than objects, they cannot beseen, felt, tasted or touched in the same manner that we can sense intangible goods. E.g., healthcare services are actions (surgery, diagnosis, examination and treatment) performers by providersand directed towards the patients and their families. The services cannot be actually seen or touched by the patients, although the patient may be able to see or touch the tangible componentsof the service (e.g. equipment, hospital room)

Intangibility presents several marketing challenges: Services cannot be inventoried, and thereforefluctuations in demand are often difficult to manage. E.g. there is tremendous demand for resortaccommodations in phoenix in February, but little demand in July. Yet the resort owners havethe same number of rooms to sell year-round. Services cannot be patented legally, and new

service concepts can therefore easily be copied by the competitors. Services cannot be readilydisplayed or easily communicated to the customers, so quality may be difficult for the consumersto assess. Decisions about what to include in advertising and other promotional materialschallenging, as is pricing. The actual cost of a unit of service is hard to determine and the

price-quality relationship is complex.

Heterogeneity: Because services are performances, frequently produced by humans, no 2services will be precisely alike. Heterogeneity also results because no two customers are

precisely alike; each will have unique demands or experience the service in a unique way. Thus,the heterogeneity connected with services is largely the result of human interaction (between andamong employees and customers) and all of the vagaries that accompany it.

E.g. a tax accountant may provide a different service experience to two different customers onthe same day depending upon their personal needs and personalities.

Because services are heterogeneous across time, organizations and people, ensuring consistentservice quality is important. Quality actually depends on many factors that cannot be fullycontrolled by the service supplier, such as ability of consumer to articulate his needs, willingness& ability of the personnel to satisfy those needs, presence of other consumers and level of demand for the service.

Simultaneous production and consumption: Whereas most goods are produced first, then sold

and consumed, most services are sold first and then produced and consumedsimultaneously. For example, an automobile can be manufactured in Detroit, shipped toSan Francisco, sold 2 months later and consumed over a period of years. But restaurantservices cannot be provided until they have been sold, and the dining experience isessentially produced and consumed at the same time. This means that the customer is

present while the service is being produced and thus his views are taken in the production process.

Because services are often produced and consumed at the same time, mass production isdifficult. The quality of service and customer satisfaction depends on the real time includingactions of employees and interaction between employees and customers. It is not possible to gaineconomies of scale through centralization. If the services are decentralized they can be delivered



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to the consumer in convenient locations. As the customer is part of the production process, theyaffect the outcome of the service. A problem employee can cause problems for themselves andfor others in the service setting leading to lower level satisfaction.

E.g. in a restaurant setting, an over demanding and intoxicated customer will command extra

attention of service provider and negatively impact the experiences of other customers.

Perishability: Refers to the fact that services cannot be saved, stored, resold or returned. A seaton an airplane or restaurant not used cannot be reclaimed or used or resold at a later time.

Due to this nature a service cannot be inventoried. Demand forecasting and creative planning for capacity utilization are therefore important. Since services cannot typically be returned or resoldit implies strong recovery strategies when things go wrong. E.g. a bad haircut cannot be returned,the customer should have strategies to recover the customers good will if and when such

problems occur

Why marketing of services? / Growth in the service sector:

It is obvious that the growth in the services sector has been substantive. Households as well asfirms are demanding more services as well as services of increasing quality and sophistication.There are number of reasons for this growth in the service sector as mentioned below:

Greater affluence:With the increasing affluence of people resulting from the growth of economies there has been agreater desire for Quality life. Consumers are willing to spend more on leisure resulting ingreater demand for recreation and entertainment facilities, tourist resorts and other hospitality

services. Also, there has been a tendency on externalization of services production fromhouseholds to the formal economy. Demand for services like interior decoration, laundry, care of household products etc. has increased which consumers used to perform themselves earlier.Also, with increased incomes, there has been a greater demand for financial services.

Leisure time: - People do get some time to travel and holiday and therefore there is a need for travel agencies, resorts, hotels, and entertainment. There are others who would like to utilize thistime to improve their career prospects and therefore there is a need for adult education/distancelearning/part time courses.

Working women:

As more and more women have started working, the time has become most scarce commodity infamily life. This has led to more demand for crches, baby-sitting, household domestic help etc.Further, working women and the resulting two income households have created greater demandfor, certain services like retailing, real estate and personal finance services

Greater life expectancy:The economic growth and increasing standard of living have also resulted in the greater lifeexpectancy and thereby an expanding old age population. Thus there is an increased need for services like old age homes, nursing homes, healthcare centers, etc.

Greater complexity of products:

With rapid development in technology, the consumer today uses a lot of complex products in hisday-to-day life. Thus there is a greater demand for specialists who provide maintenance andupkeep of such products like cars, home computers, household appliances etc.

Increased complexity of life:The greater complexity of life has created demand for a wide range of services, especially legaland financial advice. The number of specialists in income tax, labor laws, legal affairs, marriagecounseling, employment services etc. has been increasing.



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GlobalizationGlobalization of economies has led to an increased demand of communication, travel andinformation services. Also there has been an increased and new demand on legal and other

professional services.

Resource scarcity and ecology: - As the natural resources are depleting and need for conservation is increasing, we have seen the coming up of service providers like pollutioncontrol agencies, car, pools, water management, etc.

New products: - the development in information technology has given rise to services likePCOs, Pager service providers, Web Shoppe, etc

While the role of agriculture has been reducing in the economies of industrial societies that of service sector has been increasing at a fast pace. Thus, as the economies shift from developing todeveloped economies the, they show more and more shift towards services.

Buyer Behaviour in Services

In buying decisions many times other people also influence the decision. In services these rolesare played by many persons. In purchase of any service six distinct roles are played

Initiator: The person who has a specific need and proposes to buy a service Influencer: The person or group of persons whom the decision maker refers to or who

advice the decision maker. Gate Keeper: The person or organization or promotional material, which act as filter on

the range of services which enter the decision choice Decider: The person who makes the buying decision Buyer: The person makes the actual purchaser User: The actual user.

For example if a sales executive wants to do a market tour:His boss may be the initiator The travel agency may act as a Gatekeeper The finance department may be the influencer The administrative department the buyer The executive the user.In this case the user may have no role in the buying process. Hence while targeting a customer the service provider may have to influence other persons.

The Consumer decision-makingThe consumers decision to purchase or reject a product or service is the moment of final truthfor the marketer. It signifies the marketing strategy has been wise, insightful and effective,whether it was poorly planned and missed the mark. Marketer are, therefore, interested in theconsumer decision-making process by which a consumer selects an alternative amongst the lotavailable. The decision not to buy is also an alternative.

A simple consumer decision-making model, ties together the psychological, social and culturalconcepts into an easily understood framework. The decision model has three distinct sets of variables:1. Input Variables,2. Process Variables,3. Output Variables.

Input Variables:-

Input variables are those variables that affect the decision making process and includecommercial marketing efforts as well as non-commercial influences from the consumers socio-cultural environment.



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reputation, personal characteristics of the contact personnel and degree of hard sellinvolved in interaction with the customer.

Confidentiality: - the security and the freedom from risk or doubt, involving physicalsafety, financial security or confidentiality.

Customer knowledge: - it involves making the effort to understand the customers

needs, i.e. learning the customers specific requirements, providing individualizedattention and recognizing the regular customer. Tangibles : - it includes physical evidence of the service, physical facilities, and

appearance of personnel tools or equipments used to provide the service, physicalrepresentations of the service such as a plastic credit card or a bank statement and other customers in the service facility.

Emerging key services

As economy shifts from developing to developed stage, they will show more and moreshift toward services

Today, the fastest growing segments of the US economy is services In 1948 54% of the GDP of US was generated by services which is 80% now Employment in this sector which was 55% in 1950 is now 83% The US balance of trade in goods has remained in the red for many years, but there has

been a trade surplus in services Today service sector dominates the economics of many developed nations. As countries developthe role of agriculture in the economy declines and that of services increase. (China has 50%GDP from service, 35% from industry, and 15%from agriculture). During recession it has beenseen that service output declines less than industrial output the service employment is lesssensitive to business cycle fluctuation. Globalisation as strategy for service firm is becomingmore important

INDIAN SCENARIO The service sector now accounts for more than half of India's GDP: 51.16 per cent in

1998-99. This sector has gained at the expense of both the agricultural and industrialsectors through the 1990s. The rise in the service sector's share in GDP marks a structuralshift in the Indian economy and takes it closer to the fundamentals of a developedeconomy (in the developed economies, the industrial and service sectors contribute amajor share in GDP while agriculture accounts for a relatively lower share).

The service sector's share has grown from 43.69 per cent in 1990-91 to 51.16 per cent in1998-99. In contrast, the industrial sector's share in GDP has declined from 25.38 per cent to 22.01 per cent in 1990-91 and 1998-99 respectively. The agricultural sector'sshare has fallen from 30.93 per cent to 26.83 per cent in the respective years.

Some economists caution that if the service sector bypasses the industrial sector,economic growth can be distorted. They say that service sector growth must be supported

by proportionate growth of the industrial sector; otherwise the service sector grown willnot be sustainable. It is true that, in India, the service sector's contribution in GDP hassharply risen and that of industry has fallen (as shown above). But, it is equally true thatthe industrial sector too has grown, and grown quite impressively through the 1990s(except in 1998-99). Three times between 1993-94 and 1998-99, industry surpassed thegrowth rate of GDP. Thus, the service sector has grown at a higher rate than industry thattoo has grown more or less in tandem. The rise of the service sector therefore does notdistort the economy.

The share of agriculture sector to GDP has come down from 50% in 1960 to 24% Service sector contribution to GDP is around 54% with an annual growth of 8% Employment in this sector is around 50% The response to liberalization has been more in service sector, partly because lower fixed

investment requirements, example:- todays concept of banking Technological advances have made it possible for India to compete on global basis in

areas like SOFTWARE, IT, HEALTH, EDUCATION, etc., In addition lower wage structure has helped to develop CALL CENTRES, MEDICAL TRANSCRIPTION, etc., From 1996 BSE has given a prominent place to service industry in its 30-share index



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Since no tax is imposed on agriculture sector, most of the tax came from manufacturingsector. Now services are being taxed

Service tax collection is to the tune of 5000 crore. 83% of this is contributed by servicesectors. 51% -Telecom, others are Insurance, AD agencies, Courier and stockbrokers.

Many export benefits like EPCG is now extended to the service sector. In last 25 years the increase in employment in the organized sector is 57% while if only

service sector is considered it is 70%(other than service sector it 41%) Indias service exports in1997 were 9.3 billion $ against its merchandized exports of

$32.2 billion. It is expected that service exports could a third of merchandize exports nowthis will be well above the global average of . It implies that India which has failed tocatch the bus in the exports of manufactures is among the early leaders of the developingworld in the race for service exports.

Within the services sector, the share of trade, hotels and restaurants increased from 12.52 per cent in 1990-91 to 15.68 per cent in 1998-99. The share of transport, storage andcommunications has grown from 5.26 per cent to 7.61 per cent in the years under reference. The share of construction has remained nearly the same during the periodwhile that of financing, insurance, real estate and business services has risen from 10.22

per cent to 11.44 per cent. The fact that the service sector now accounts for more than half the GDP probably marks

a watershed in the evolution of the Indian economy.



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BANK MARKETING

Introduction :

The banking sector in India has been widening its scope due to liberalization. Banks today

are not mere suppliers of money. They have become providers of services such as sellinginsurance, mutual funds, investment opportunities, etc. In the past, the banks did not findany attraction in the Indian Economy because of the low level of economic activities andfew business prospects. Today we find positive changes in the National BusinessDevelopment Policy. The private sector banks failed in serving the society. This resultedin the nationalization of 14 commercial banks in 1969.

Nationalization of commercial banks paved the way for the development of Indianeconomy and canalized financial resources for the upliftment of weaker sections of thesociety. The involvement of Public Sector banks transformed the Indian economy. It wasfelt that bankers review their services not only as financial intermediary but also as a

pacesetter.

Adequate financial resources are required for completing welfare projects. Theentrepreneurs need large-scale credit facilities on liberal terms and conditions. Individualshave developed new hopes and aspirations from banks and the rural population and

backward regions strongly claim their right for a sound and balanced development.

Banking marketing:

The banking industry is undergoing a revolution caused by deregulation. This scenario isreflected in the evolution of bank marketing. Banking systems may vary in different partsof the world, the reasons for the variation maybe due to features like social banking, low

degree of technological sophistication and cumbersome legal systems.Marketing of banking services is concerned with product, place, distribution, pricing and

promotion decisions in the changing socio-economic and business environment.

The users of banking services or the prospects play a very significant role in theformulation of overall marketing strategies. The bank marketing activities are concernedwith the designing of product strategies keeping in view the needs and requirements of

prospects.

The causes of Bank Marketing can be seen as: Rising customer needs and expectations due to improvements in general standard of

living. Entry of foreign and private sector banks in India. Economic liberalization of Indian economy. Phenomenal growth of competition due to economic liberalization. Rise in the Indian middle class with considerable resources. Government intervention in protecting the interests of consumers.

A comprehensive definition of bank marketing by Deryk Weyer of Barclays bank states

that: - It consists of identifying the most profitable market now and in future by assessingthe present and future needs of the customer . This is done by setting businessdevelopment goals, making plans to meet them, managing and promoting the variousservices to achieve these goals. Bank marketing is not just advertising and promotioncampaigns but a managerial process by which services are matched with markets . Thisindicates evolving a suitable marketing strategy which suits the need of thecustomer.



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Banking structure in India

Socio-economic factors affecting savings :

The social and economic factors have a far-reaching impact on the behaviour of customers.This is due to the fact that human beings are directly influenced by the socio-economicconsideration.

Social factors

a) Group of family,

b) Family life-cycle,

c) Family decisions, andd) Role of opinion leaders.

Economic factors

a) Disposable income,

b) Price Index

c) Stages of economic transformation

d) Global economic co-operation.

MARKET SEGMENTATION

In banking services, the banks are expected to satisfy rural customers, urban customers,and high-earning and low-earning customers, small-scale and large-scale entrepreneursand so on.

Importance of segmentation in banking services:

Since the banks have to deal with different types of customers from different fields andlocalities, banking services need segmentation.

The purchasing power of potential customers is different. In respect of term deposits of different maturities or deposit schemes, the potential customers are required to beinfluenced. These potential customers may be located in various pockets of urban areas.

In the Indian setting, we find the emergence of a wide rural market. Here, it is necessarythat the segmentation be done in tune with the changing socio-economic conditions of therural customers.

Thus, market segmentation is important not only from the perspective of expanding themarket but also with the motto of satisfying the client. If the marketing decisions of the

banks are on the basis of micro-level market segment, only then a fine blend of service and profit elements is possible.



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MARKETING MIX

PRODUCTBanks products :

(A) Deposits:

Savings, Current, Fixed etc.

(B) Advances:

(1) Fund Oriented:

a) Term Loan, b) Clean Loan,c) Bills Discounting,d) Advances,e) Pre-shipment Finance,f) Post-shipment finance,

g) Secured and Unsecured lines of credit.(2) Non-fund oriented:

a) Guarantees, and b) Letter of Credit.

(C) International banking:

a) Letter of Credit, and b) Foreign Currency.

(D) Consultancy:

a) Investment Counselling, b) Project Counselling,c) Merchant Banking, and

d) Tax Consultancy.

(E) Miscellaneous:a) Traveller Cheques,

b) Credit card,c) Remittances,d) Collections,e) Sale of Drafts,f) Standing instructions, and

g) Trusteeship.

In the banking the products are services. Services cannot be seen or protected like goods.The potential buyer of the services can form an opinion about the services offered.

The changing trends in the non-banking investments compel certain modifications to bemade in the existing product line. The product should suit the market needs.

Bank services are viewed in terms of the satisfaction they deliver and not just the thingsthat are created with value. For instance, a bank account is seen in terms of customer satisfaction such as safety, convenience of paying dues, keeping records, transferringfunds, status, and pride in ones bank. The various deposits, loans and advances,consultancy services, international banking, safe deposits, credit cards, etc. are the

products sold by the bank.

Bankers need to identify their core and supplementary product services as it has moremarketing implication. The banker should offer an optimum mix of the core and

augmented products.



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CORE PRODUCT : It is the fundamental benefit the customer buys from the bank.They define what kind of business the firm does, for example, the business of commercial

bank. But customers do not buy the core product, they only buy the benefit. The role of the bank marketer is to convert the core products into a generic product, which satisfies theneeds of the customer. AUGMENTED PRODUCT : This is the basic product with some ancillary attached toit. For example, when one opens a Suvidha Account with Citibank, he gets an ATM Cardfree. The bank marketer must offer a multidimensional product or what is called a product

package.

The product related strategy includes: Introduction of new schemes- EXAMPLE: DEMAT ACCOUNT. Modification of the product offered by incorporating technological development EXAMPLE: Telebanking, Online Banking, etc. Change in the product line or package EXAMPLE: From Corporate Banking toPersonal Banking; or even deleting an existing service line.

PRICE

Pricing in Banking relates to the interest rates paid by the banker on deposits, interestcharged by the banker on loans and demand drafts, charges for various types of transactions and fees for certain services. In India, banks adopt administered pricingstructure to some extent as the deposit and lending rates are prescribed by RBI . Thecharges for banking services are agreed upon by Indian Banks Association . Pricing

policy of a bank is considered important for raising the number of actual customers. Buteven in this regulated pricing environment, pricing

can be used as a tool in their marketing strategy. The specific pricing methods that can beadopted in deregulated environments are:

Cost plus pricing which calls for a detailed analysis of cost structure of various bank products and services.

Market Oriented Approach which indicates what the market can bear or accept asin the case of a corporate client who may not be price sensitive as against an individualclient.

Competition related Approach , where the price is decided based on the competitors price. In this case, the value like high return, convenience, and speedy service must behighlighted.

The banks are required to frame two-fold strategies. Strategies concerned with interest andcommissions to be paid to the customers and interest and commissions to be paid by thecustomer for different types of services.

PROMOTION

The objects of a promotion programme are to inform about the new service product, to persuade the customer, to remind the customer, build image of the bank, etc.

Banking services can be promoted in two ways:

1. Personal promotion : The bank marketer gets the best opportunity to tangibilise the product through personal selling; persuasion is more effective with direct contact. It helpsin creating impulse buying.

2. Impersonal Promotion : i.e. advertising, publicity and sales promotion measures. Anadvertisement in banking is a promise- a promise of satisfaction to prospects who buy theservice offered by the bank. Banks use all types of advertisement such as newspaper,radio, television, magazines and hoardings. Also, sales promotion devices such as Point of Purchase material, brochures and advertisement specialties like ball pens, calendars,

diaries, etc.



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Publicity is a major strength as a promotion tool than advertising as customers tend to believe a news item rather than an advertisement. Word of promotion is yet another important promotion tool as it is a better persuader and convincer than advertising and

personal selling, as banking services are narrated by customers themselves. Besides, asSocial Welfare and Corporate Social Responsibility are considered to be an important part

of banking services, the publicity measures need due care.PLACE

The place decision mainly deals with selection of a suitable location for the branch. Soundlocation decisions help in activating the business. The location should have adequateavailability of transportation, communication, electricity and other necessary facilities for the smooth functioning of the bank. Technological developments, increased customer satisfaction, inadequacy of the traditional channel to serve all customer segments have

brought bout ATM, telebanking, home banking, Internet banking and now SMS Banking.

Another significant development is a strategic alliance set up by the private banks toovercome the handicap of limited branch network. In such alliances the branch network of

one branch will be used by the other for selected transactions like bill collection, chequecollection, etc.

PEOPLE

Banking products cannot be separated from the person (banker) who markets them. The product and the seller together constitute the banking product. Banks should adopt internalmarketing in order to make the whole business customer-oriented. The bank productsshould be marketed to the employees first before they are marketed to customers. Thecorporate mission should be communicated repeatedly and effectively to all employees bythe top management.

The placement policy should emphasize that the recruits should not only be conversantwith all aspects of banking business but also have the skill for social interaction andtolerance for interpersonal contact.

PROCESS

It involves all activities right from the product conception stage, to product designing anddevelopment down to its marketing at the branch level. Banks which were more focused or activity-oriented have shifted to customer-oriented service delivery. This is essentially dueto the technological advances. Automation of transactions, accounting procedures, data

handling, as well as process re-engineering has helped reduce delays in processingtransactions- example: Loan applications, clearing cheques , etc.

PHYSICAL EVIDENCE

Banking products are intangible and physical evidence focuses the bankers attention onthis aspect. The environment of banks is changing. It is becoming friendlier with attractivelayouts and dcor. Most private and foreign banks like ICICI, Citibank, and HDFC portraya new welcoming and friendly look to the customers rather than drudgery bankingcounters. Attractive brand names, logos, symbols, etc. add to the customers perception of service quality.

PRODUCTIVITYProductivity relates to how inputs are transformed into outputs that are valued bycustomers. Improving productivity keeps cost in control.

Banks have improve productivity through computerization, by changing transactionsystems like the new banks do not have pass books they only send quarterlystatements; the specimen signatures are also checked through the computers.

Bank Marketing in the Indian Perspective



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The Indian banking can be broadly categorized into nationalized (government owned), private banks and specialized banking institutions. The Reserve Bank of India acts a centralized bodymonitoring any discrepancies and shortcoming in the system. Since the nationalization of banksin 1969, the public sector banks or the nationalized banks have acquired a place of prominenceand has since then seen tremendous progress. The need to become highly customer focused hasforced the slow-moving public sector banks to adopt a fast track approach. The unleashing of

products and services through the net has galvanized players at all levels of the banking andfinancial institutions market grid to look anew at their existing portfolio offering. Conservative

banking practices allowed Indian banks to be insulated partially from the Asian currency crisis.Indian banks are now quoting al higher valuation when compared to banks in other Asiancountries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge

Non Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed inapproach and armed with efficient branch networks focus primarily on the high revenue nicheretail segments.

The Indian banking has finally worked up to the competitive dynamics of the new Indianmarket and is addressing the relevant issues to take on the multifarious challenges of globalization. Banks that employ IT solutions are perceived to be futuristic and proactive

players capable of meeting the multifarious requirements of the large customers base. PrivateBanks have been fast on the uptake and are reorienting their strategies using the internet as amedium The Internet has emerged as the new and challenging frontier of marketing with theconventional physical world tenets being just as applicable like in any other marketingmedium.

The Indian banking has come from a long way from being a sleepy business institution to ahighly proactive and dynamic entity. This transformation has been largely brought about bythe large dose of liberalization and economic reforms that allowed banks to explore new

business opportunities rather than generating revenues from conventional streams (i.e. borrowing and lending). The banking in India is highly fragmented with 30 banking unitscontributing to almost 50% of deposits and 60% of advances. Indian nationalized banks (banksowned by the government) continue to be the major lenders in the economy due to their sheer size and penetrative networks which assures them high deposit mobilization. The Indian

banking can be broadly categorized into nationalized, private banks and specialized bankinginstitutions.

The Reserve Bank of India acts as a centralized body monitoring any discrepancies andshortcoming in the system. It is the foremost monitoring body in the Indian financial sector.The nationalized banks (i.e. government-owned banks) continue to dominate the Indian

banking arena. Industry estimates indicate that out of 274 commercial banks operating inIndia, 223 banks are in the public sector and 51 are in the private sector. The private sector

bank grid also includes 24 foreign banks that have started their operations here.

The liberalize policy of Government of India permitted entry to private sector in the banking,the industry has witnessed the entry of nine new generation private banks. The major differentiating parameter that distinguishes these banks from all the other banks in the

Indian banking is the level of service that is offered to the customer. Verify the focus hasalways been centered around the customer understanding his needs, preempting him and consequently delighting him with various configuration of benefits and a wide portfolio of

products and services. These banks have generally been established by promoters of repute or by high value domestic financial institutions.

The popularity of these banks can be gauged by the fact that in a short span of time, these banks have gained considerable customer confidence and consequently have shown impressivegrowth rates. Today, the private banks corner almost four per cent share of the total share of deposits. Most of the banks in this category are concentrated in the high-growth urban areas inmetros (that account for approximately 70% of the total banking business). With efficiency

being the major focus, these banks have leveraged on their strengths and competencies viz.



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Management, operational efficiency and flexibility, superior product positioning and higher employee productivity skills.

The private banks with their focused business and service portfolio have a reputation of beingniche players in the industry. A strategy that has allowed these banks to concentrate on fewreliable high net worth companies and individuals rather than cater to the mass market. Thesewell-chalked out integrates strategy plans have allowed most of these banks to deliver superlative levels of personalized services. With the Reserve Bank of India allowing these banksto operate 70% of their businesses in urban areas, this statutory requirement has translated intolower deposit mobilization costs and higher margins relative to public sector banks.

LATEST DEVELOPMENTS

ATMs may be treated at par with bank branches: -

The spreading ATM culture looks set to get hard knock with the Reserve Bank of India

planning to treat them at par with bank branches.The RBI on Saturday sent a draft circular on a branch authorization policy to all the banks.For the purpose of authorization, the RBI said a branch would include a full-fledged

branch, a

satellite office, an extension counter as well as offsite ATMs. However, call centers have been kept out of it.

This means that the banks will need the RBIs advance approval for setting up as well asclosing down ATMs. So far, banks could set up ATMs on their own and keep the localRBI offices informed at the time of operationalising them.

The State Bank of India has over 7,000 ATMS roughly half the number of its branches.ICICI Bank has about 2,000 ATMs, four times its branch network. UTI Bank and HDFCBank, too, have sizable number of offsite ATMs. The total number of ATMs could be18,000 throughout the country.

Telebanking and electronic banking: -

A customer can access information about his/her account through a telephone call and bygiving the coded Personal Identification Number (PIN) to the bank by Telebanking. Some

banks like SBI, Andhra Bank, etc. have made this facility available to some branches.

Automatic withdrawals and transmission of cash balance data and other information aboutan account is another facility that is offered by banks in a consolidated form through fax or

telex. Some banks have also adopted the use of E-mail service for data and informationtransmission.

Banks have also started with the Electronic display of information through SatelliteCommunication System and transfer of funds through the same channel for inter branchand inter-bank adjustment and clearance of cheques, drafts, etc.

Cell phone banking and inernet banking: -

Through Inter-net banking one can visit the website of each bank by entering his passwordand know the account balance and even pass his own credit and debit entries.

This means that we can do our banking through our personal computer sitting at home.

Banks may soon allow zero balance savings accounts through Internet facility only.Customers can now make balance enquiries, download statements and open fixed depositsover the net. They will soon be able to carry out all their transactions over the net. Sovisiting a bank would become needless.

Time to come, Mobile phones will drive banking transactions. These mobile phones will be equipped with smart cards that are embedded with banking and other information. Thismobile phone banking facility is yet to come but the mechanics of linking the banking withthe cell phone is being sorted out.

Teller machines are being installed in the banks for the Electronic banking facility. Theuse of e-mail for banking will open up new avenues for Internet banking.

Banking will be on wheels and mobile by the use of smart banking.



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CHARACTERISTICS OF SERVICES with reference to Banking

IntangibilityFinancial services are generally intangible, but the service providers go to considerable

lengths to tangibilise the service for customers. Regular bank statements, gold creditcards, and insurance policies are all examples of the way in which the financial servicesare presented tocustomers. They can enhance the image of the service and the provider can even bestowstatus or implied benefits upon the user as with a gold card. Physical reminders of theservice product, brand name and value serve to reassure the consumer and help theorganisations positioning.

InseparabilityThe degree of inseparability depends upon the type of service and the actual supplier.Many everyday transactions are carried out now via automated services- the automated

teller machines (ATMs), net banking etc.Additionally, many financial services are sold by brokers and agents of various kinds.Services are frequently handled by agents are credit card and other currency/travelerscheque encashment.

Heterogeneity/variabilityThe complexity of the service transaction process will determine the extent of variabilityand this can differ to a large extent between institutions and even with one institution. Thegreater the degree of automation within any transaction process, the greater the degree of standardization. Thus simple transactions may be carried out via ATMs and completelystandardized or via branch counter where they might be fairly standardized but subject tosome variation in quality.Total standardization is not necessarily desirable from the consumers point of view. Afriendly greeting or being addressed by name can enhance service delivery and while anATM cannot arrange an emergency overdraft facility when funds are low, branch staff canlook at the standing of individual customers and make arrangements when appropriate,satisfying the customer and profiting from charges applying to the account.

PerishabilityThe degree of Perishability depends on the type of service. If a cheque needs to be cleared

by a certain date and the system causes delay then the benefits to the consumer are lost sothe service could be said to be perishable. By and large, money and financial services areenduring in nature. If a banks reserves are not fully utilized profitably through lending or investment they will still retain their worth and may be utilized again at a later date. A

bank branch, which does not have any customers at all on a particular day, may actuallygain rather than lose profit as staff may be able to use the peace and quite to catch up onother work.

PEST Analysis for financial services

Political/ Legal Influences which have an impact on financial services and consumer confidence includethe following: State provision of pensions Government encouragement of savings and investment (for e.g. via tax benefits) Regulatory control and protection (to prevent the collapse of financial institutions and

protect investors money)

EconomicEconomic factors are key variables which have an impact on the activity in the financialservices sector. The level of consumer activity is governed by income levels and personalwealth. As income levels grow, more discretionary income is available to spend onfinancial services. Consumer confidence in the economy and in job security also has amajor impact; if lean times are foreseen ahead, savings will take priority over loans and



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other forms of expenditure. Consumers may also seek easy access savings and be willingto tie up their money for longer periods with potentially more attractive investments.

The main economic factors that should be monitored with regard to fianacial servicesmarketing are as follows:

Personal and household disposable income Discretionary income levels Employment levels The rate of inflation Income tax levels and taxation structures Savings and investment levels and trends Stock market performance Consumer spending & Consumer credit

Socio-culturalMany demographic factors have an important bearing on financial services markets. Changing attitude towards consumer credit and debt Changing employment patterns Numbers of working women The ageing population Marriage/divorce/birth rates Consumption trends

TechnologicalTechnology has a major impact on many industries including financial services and

banking in particular. ATM services which not only provide cash but also allow for bill payments, deposits and instant statements are widely used. From the customers viewpoint,technology has played a major role in the development of the process whereby the serviceis delivered. Automated queuing systems have made visits to the bank easier and moreconvenient. Telephone Banking and insurance services are now being used in place of thetraditional branch-based service process. Technology has also played a major role withinorganizations, bringing about far greater efficiency through computerized records andtransaction systems and also in business development, through the setting up of detailedcustomer databases for effective segmentation and targeting.

The main technological developments fall within these categories;

Process developments Information storage and handling Database system

MERCHANT BANKINGMerchant banking may be defined as an institution, which covers a wide range of activitiessuch as management of customer services, portfolio management, credit syndication,acceptance credit, counseling, insurance, etc.The notification of the Ministry of Finance defines a merchant banker as, "any person whois engaged in the business of issue management either by making arrangements regardingselling, buying or subscribing to the securities as managers, consultant, adviser or

rendering corporate advisory service in relation to such issue management"Services of Merchant Banks:

The services of merchant bankers are described in detail in the following way: Project Counseling: Issue Management: Underwriting of Public Issue: Managers, Consultants or Advisers to the Issue: Portfolio Management: Advisory Service Relating to Mergers and Takeovers:

Off Shore Finance:



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Loan Syndication: Corporate Counseling:


service sector management-nkumar

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