UNIT-IV- MARKETING OF BANKING SERVICES

1.0 INTRODUCTION
Human being is a social being. Throughout the life, all we do is try our best to fulfill our needs.
The place where things are exchanged or say mutual needs are satisfied, is called the market and
the efforts to make people aware of your offerings encouraging them to deal with you and let
them believe that in doing so, they are satisfying their needs at its best is called marketing. After
the banking sector reforms, marketing has developed as a more integrated function within
financial service organizations like banks largely as a result of rapid changes in the operating
environment. Banks Marketing is defined as an aggregate of function directed at providing service
to satisfy customer's financial needs and wants, more effectively than the competition keeping in
view the organizational objective of the bank. The bank marketing has become a very complex
yet interesting subject as it requires the knowledge of economics, sociology, psychology, banking
and also core marketing concept. In marketing, it is the customer who has upper hand. The mantra
of effective marketing bank products lies in the systematic and professional approach towards
satisfying customers’ needs (Ojha, V.K. p. 19). Thus, banks have to set up "Research and Market
Intelligence" wings so as to remain innovative to ensure customer satisfaction and to keep abreast
of market development.

Product and Service: A product is defined as "Anything that has the capacity to provide the
satisfaction use or perhaps, the profit desired by the customer". Product and service are the words
used interchangeably in banking parlance. The bank products are deposit, borrowing or other
product like credit card or foreign exchange transaction which are tangible and measurable
whereas service can be such products plus the way/manner in which they are offered that can be
expressed but cannot be measured i.e. intangibles. Better service is more important than just a
good product in the marketing of banking service, so the focus should be on the want and need of
satisfying that product or service.

2. Different Products and Services:

Deposits - Banks accept the deposits of the public. In order to attract the savings of the people,
the bank provides every sort of facility and inspiration to them and collects the scattered savings
of the society. The bank opens an account of those people who deposit their savings with the
bank. These deposit accounts can mainly be of three types and people can open any of these three
types of accounts according to their wish. These accounts are current account, saving bank
account, fixed deposit account.

Loans - The bank just don't keep with themselves the deposited amount of the people, rather they
advance them in the form of loans to the businessman and entrepreneurs, just to earn profits for
their partners. The loan keeps some gold, silver, fixed and variable assets in the form of security
with the bank. The bank can advance loan to their customers in three ways: overdrafts, money at
call, discounting bills of exchange.

Ancillary services- Refer notes

1
3.0 STRATEGIES FOR MARKETING BANK SERVICES
A bank's strategy encompasses the elements of the traditional marketing mix-product, price,
promotion and place (i.e. distribution), and seek to attract the target audience.

The target market selection process identifies potentially profitable market segments, each of
which has relatively homogenous needs that can be satisfied by suing appropriate marketing mix.
Which particular marketing mix is developed to suit a targeted market segment is determined by
the distinctive needs of the groups.

Although each element of the marketing mix is important in itself, it is how well each element is
blended and coordinated with other elements that ultimately determines whether a marketing
strategy successful (Ugoji 1995)

3.0.1 Product Strategy: The product is the means to an end for the target market. It is the benefit
provider - a way of directly satisfying existing or latent needs. The success of anyone product is a
function of how well it solves the target markets needs or wants relative to the competitors’
products.
Banks that excel, as far as product strategy is concerned, develop and offer products designed
specifically to solve the problems of their target markets. Certain questions are often asked while
formulating product strategy e.g. are there customers who need some services that are not
currently being provided by existing banks? What are the products currently offered in the market
etc.

3.0.2 Pricing Strategy: Selling a product at a price that the target market sees as commensurate
with the product's perceived benefits is the key to success.
Before the policy of deregulation was introduced, banks were constrained in their use of pricing
strategies by regulations governing interest rates n deposits and loans. It was after the
deregulation policy was introduced that banks were given the opportunity to select a deposit
pricing strategy.

Some banks choose to pay consistently high rates for deposits brought to them by their customers
while others pay less believing that their target market is less responsive to interest rates and more
responsive to superior services or safety of funds.
Banks should always put some question~ into considerations regarding competitors in their
pricing strategies.

3.0.3 Promotion Strategy: This strategy focuses on communicating the availability of products
or services to the target markets. Advertising campaigns, sales promotion activities, direct
marketing and product publicity are the main elements of the promotion of a bank's products.

2
The development and implementation of attention getting, information and persuasive
communication techniques is vital to market awareness of a bank's should always put the
activities of competitors into consideration.

3.0.4 Distribution Strategy: This strategy is concerned principally with making the product
available at the desired time and place. Product must always be made available when and where
consumers want it.
An important element of distribution strategy for banks is site location. A bank might have
superior services and products, but if it is located in an areas where potential customers must pass
by several other financial institutions on the way, its ability to attract those customers will be
greatly hampered.
In the light of this, many banks are responding by introducing automated teller networks to
maximize the number of locations where customers can access their accounts.

3.2 MARKETING APPROACH TO BANKING SERVICES

 Identifying the customer's financial needs and wants.
 Develop appropriate banking products and services to meet customer's needs.
 Determine the prices for the products/services developed.
 Advertise and promote the product to existing and potential customer of financial services.
 Set up suitable distribution channels and bank branches.
 Forecasting and research of future market needs.

From the above discussion of bank marketing, it can be understood that the existence of the bank
has little value without the existence of the customer. The key task of the bank is not only to
create and win more and more customers but also to retain them through effective customer
service. Customers are attracted through promises and are retained through satisfaction of
expectations, needs and wants. Marketing as related to banking is to define an appropriate
promise to a customer through a range of services (products) and also to ensure effective delivery
through satisfaction. The actual satisfaction delivered to a customer depends upon how the
customer is interacted with. It goes on to emphasize that every employee from the topmost
executive to the junior most employee of the bank is market. Due to the introduction of
capitalization of 2004 the scope of the market has enhanced. Customer's expectations are high
from the service industry like a banking industry. Only those banks will survive who will provide
efficient and customer desired services.

The smooth development and functioning of any business organization. Finance objectives like
value maximization to shareholders are integral parts of any new strategy adopted by the
organization. But this objective seems to have been lost amidst the flurry of marketing activities
focusing on market share. Conscious efforts must be taken to avoid the missing core objective and
for sales growth. Dixit, V.C. (2004) concludes that for successful marketing and to make it more
effective, 'identify the customer needs by way of designing new products to suit the customers.
The staff should be well equipped with adequate knowledge to fulfill the customer's needs. We
should adopt long-term strategies to convert the entire organization into a customer-oriented one.

Gupta, 0. (1997) described the emergence of services sector and banks experience in service
marketing. He emphasized customer satisfaction as the key to success and suggested a few
measures to meet the needs and expectations of the customers. Gurumurthy, N. (2004) asserts that
3
technology today is claimed to be a 'leveler' and not a 'differentiator'. After the 'wow' feelings die
down, technology would become a must for most clients. Banking products can be easily copied
and replicated by competitors unlike manufactured products. It is also not a viable model for
marketers I1on price. The solution, therefore, would lie in effective application of marketing
strategies. Iyanlla (1999) described that marketer has to know that each and every country is
having various marketing environment. Comparatively, it has to be very clear that the
international marketer is bound to hold on the reorganization that every marketing environment
differs from place to place as well as nation to nation than that of the same country state.

3.3 CHALLENGES OF BANK MARKETING

3.3.1 Technology
Marketing by private sector banks and foreign banks is more effective than public sector banks
because these banks are IT oriented. Private sector banks and foreign banks are attracting more
customers by providing e-services. Thus, technology has become a challenge before the public
sector banks.

3.3.2 Untrained Staff

Often it happens that when a prospective customer approaches the branch, the employees seem to
have very little knowledge about the scheme. This reflects an ugly picture of our bank's image.
Banks are not losing one prospective customer but 10 more customers who would be touch of this
man. Attitude of the employees towards customers is also not very well. Thus, it is a need of time
to reorient the staff.

3.3.3 Rural Marketing

This is a big challenge before the Indian banks to enhance rural marketing to increase their
customers. Banks should open their branches not only in the urban and semi-urban areas but also
in the rural areas.

3.3.4 Customers’ trust

Marketing can be enhanced only by increasing the number of customers accessing your services.
Customers can be increased or attracted only by winning the trust of the customers.

3.3.5 Customer’s Awareness

Customer awareness is also a challenge before the banks. Bank can market their products and
services by giving the proper knowledge about the product to customer or by awarding the
customer about the products. Bank should literate the customers.

3.4 STRATEGIES FOR THE ENHANCEMENT OF BANK MARKETING

In the fierce competitive market, needs of customer keep changing. Hence, our marketing strategy
must be dynamic and flexible to meet the changing scenario. Here are steps that form successful
and effective marketing strategy for bank products.

 Emphasis on Deposits
Emphasis, though in a discrete manner, should be given to mobilize more of term deposits as they
are more profitable for the bank in comparison to demand. Introduction of products comparable to

4
"Kisan Vikas Patra" of post office and product with the facility of tax rebate under section 88 of
Income Tax Act will of much help in this regard.

 Form a Saleable Product Scheme

Bank should form a scheme that meets the needs of customers.
A bunch of such schemes can also form a product. A bank product may include deposit scheme,
an account offering more flexibilities, technically sound banking, tele/mobile/net banking, an
innovative scheme targeted to special group of customers like children, females, old aged persons,
businessman etc. In short, a bank product may consist of anything that you offer to customers.

 Effective Branding
Man is a bundle of sentiments and emotions. This can effectively be helpful in branding our
products. Considering the features of products and target group of customers, the product can be
effectively branded so as to sound it catchy and appealing. Some proven examples are Apna Ghar,
Dhan Laxmi, Kuber, Flexi Deposit, Smart Kid, Sapney, Vidya etc.

The branding should be done in such a way that the brand name must attract the attention of
customers. It should be easy to remember. The target group and the silent feature of the product
should resemble brand name. This will help a lot in making the brand successful. All employees
and all our campaigns should refer the product by its brand name only so that to strike the same in
the customer's mind.

 Products for Women

The national perspective plan for women states that 94 per cent of women workers are engaged in
the unorganized sector and 83 per cent of these in agriculture and allied activities like dairy,
animal husbandry, sericulture, handloom, handcrafts and forestry. Banks should do something to
improve their access to credit which they require.

 Customer Awareness
There is a need to educate the customers on bank products. Efforts should be made to widen and
deepen the process of information flow for the benefit and education of Indian customers. Today,
the customers do not have any idea as to how much time is required for any type of banking
service. The rural customers are not aware for what purpose the loans are available and how they
can be availed.

Customers do not know the complete rules, regulations and procedures of the bank and bankers
preserve them for themselves and do not take interest in educating the customers. It is a need to
educate the customers from the grassroots of banking. It is time that each bank branch takes steps
to educate the customers on all banking function, which will facilitate growth of banking on
healthy lines both qualitatively and quantitatively.

 Advertisement
Advertisement is an eminent part of marketing of bank products. Advertisement should be such
that appeals to people. It should not follow the orthodox pattern of narrating a product. For
effective advertisement, bank should understand people’s taste and choices.

5
  Selling Products in Rural Areas
For enhancing the marketing of their product, bank should sell their products in rural areas. For it,
there is a need to open branches in the rural areas.

 Informing Customers About Products

The bank should embark upon aggressive marketing of its products, particularly at the time of
launching a new product, which will inform the perspective customers regarding product and at
the same time relieve staff at branch level from explaining the product to all customers.

 Customer Convenience
In a service industry like banking where product differential is hard to maintain and quality of
service depends upon the service provider, from whom it cannot be separated. So the bank
employees have to render services to the satisfaction of the customer, not as per their own
conveniences or whims.

 Re-orient Staff
Sincerity of efforts in implementation of the measures is lacking among the bank staff. It is a fact
that its employees are not able to rise up to the expectations of its customers. They lack in their
behaviour, attitude and efficiency. The phenomenon is glaring at urban centers. Therefore, it calls
for an immediate attention which is missing link in the entire process of marketing, and the bank
should undertake all such steps to motivate and reorient its staff.

 Sale of Products and Services through E-delivery Channels

After the Information Technology Act, many new e-delivery products have been introduced.
These delivery channels are very helpful in enhancing the marketing of various products and
services. Thus Indian banks should sale the products and services through e-delivery channels.

 Sale of Products and Services through Web-sites

Internet is a network of network which connects the world. Thus, banks should sale their products
through web-site. This will enhance the marketing of the products not only at the national but also
at the international level.

 Implication
Thus the study implies that for a successful and effective banking marketing of bank products is a
necessary condition. This condition can only be fulfilling only by attracting the more and more
customers. Thus, bank should make only policies which are helpful in fulfilling the needs of
customers.

6
 3.5 MATCHING CORPORATE STRATEGY ALTERNATIVES TO FIT A FIRM’S
CIRCUMSTANCES (THE BANKING SECTOR)

RAPID MARKET
GROWTH

QUADRANT 1 QUADRANT 2

Strategies (In order of probable Strategies

attractiveness)
Reformulation of concentration strategies
Concentration
Merger with another firm in some business
Vertical Integration
Divestiture
Concentric Diversification

QUADRANT 3 QUADRANT 4

Strategies (Based on probable Strong Competitiveness Position

attractiveness)
Concentric Diversification
Retrenchment
Conglomerate Diversification
Diversification
Joint Venture into new Area
Divestiture

Liquidation

Slow Market
Growth

In illustrating the effective use of corporate strategy, Roland (1976) presented the graph
above to explain market share and growth potential of a product. He maintained that it makes
sense for firms in quadrant to push hard to maintain or increase their market shares, to
develop further their distinctive competencies, and to make whatever capital investments
necessary to continue in a leadership position.

7
Student Assessment Exercise
Critically examine the major prevailing challenges of bank marketing in Nigeria.

4.0 CONCLUSION
It is indeed axiomatic having been taken through this interesting unit in which many
have little or no knowledge about.
This unit examines holistically the strategies for marketing bank products and services,
product strategy, pricing strategy, promotion strategy and the distribution strategy. This
unit also addressed the marketing approaches to banking services, the challenges of
bank marketing and matching a corporate strategy alternative to fit the bank
circumstances.

5.0 SUMMARY
Banking sector reforms have changed the traditional way of doing banking business.
Mainly technology is the outcome of banking reforms. Customer is now the king and
customer focus or satisfaction of customer is the main aim of the banks. With the
introduction of new products and services competition has grown up among the banks.
Only those will survive who face the competition with the effective ways of marketing.