Kathmandu University School of Management Kathmandu College of Management

Internship Report Title of the project: A Study on the need of market segmentation and targeting at Nepal Bank Limited

As part of the requirement for BBA/BBIS programme Internship Programme Code: RIS 401

Internship Employer Himalayan Bank Limited

Interns Anup Basnet, KU Redg No: A009187-08 Sambeed Regmi, KU Redg No: A009233-08

June, 2012

SIGNATURE PAGE I/We certify that I/we have read the document and, in my/our opinion, it is satisfactory in scope and quality as a project in the partial fulfillment for the undergraduate course of Internship held at the Kathmandu College of Management during the Fourth Year Second Semester, 2011.

Date: June 2011 _______________________ Project Evaluator Kathmandu University School of Management

DISCLAIMER The authors are confident that the result presented in this report will be taken as guidance for a more comprehensive study at the future date. The authors of the report are not responsible or liable legally or by any other means against the results of the report. Any consequent decision based on this report shall not make the authors responsible. The views expressed in this report are as per the findings and research undertaken. These do not reflect the single rule of thumb nor are these endorsed by the college.

DECLARATION We, the undersigned declare that this project entitled is a result of our own study/research carried out in the year 2011. It has not been submitted to any other university or any other examinations.

Signature:

______________ Bhawana Khanal Batch 2007-11 Kathmandu College of Management Reg No: A008035-07

_____________ Sumira Shrestha Batch 2007-11 Kathmandu College of Management Reg No: A008077-07

ACKNOWLEDGEMENT
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This report and project work would have not been successful without help of so many people. We would like to express our sincere gratitude to all of those helping hands. Foremost we would like to thank KUSOM and KCM for providing this opportunity to do internship. We would also like to thank Mr. Bishnu Raj Adhikari, principle of KCM for giving us moral support and boosting up our confidence all the time. We are much indebted to our internship co-coordinator Mr. Lakpa Gelu Sherpa, who guided us throughout the project and helped us to complete the project in time. Also we extend heartfelt thanks to Nepal Bank Limited family for giving us this opportunity to be a part of their family and guiding us throughout the internship. We would also like to thank Mr. Biswo Raj Kandel branch manager and Mr. Gyanendra Bikram Karki (deputy manager/work supervisor) of Dillibazar branch for believing in us and giving us responsibilities. We also express our heartfelt gratitude to all the members of NBL, Dillibazar for their invaluable assistance, openness, cooperation, supporting us throughput the internship period and helping us to learn so many things.

EXECUTIVE SUMMARY

Nepal Bank Limited is the oldest commercial bank of Nepal. Nepal Bank Limited was inaugurated by His Majesty King Tribhuwan. It was established 1937 which marked the beginning of an era of formal banking in Nepal. It is certified A grade financial institution by NRB. NBL is one of the pioneers in Nepalese banking history and it has a very wide network of branches across Nepal. This internship report is divided into four parts. The first part is related to the background of the internship which is described in terms of the opportunities and experiences and the reasons for choosing the specified bank which is NBL, in our case. We have presented our goals and objectives for the internship so that we would have a map of how we are going to achieve those objectives during the entire internship period. We were engaged in different departments during the internship and performed various jobs such as helping customers in account opening and closing and also filling up the forms for customers who had difficulty in reading and writing; Scrutinizing various schemes and interest rates of deposit and loan provided by the bank and informed customers who inquired about the schemes; Printing, issuing and recording the issue of checkbooks and printed statements for customers; Preparing debit vouchers for Tribhuwan University pension and recorded the pension disbursement; Operated Newton software to solve customers inquiries, print checkbooks, statements and open or close accounts and so on. In the second part of this report, a brief introduction of banking industry in Nepal and Nepal Bank Limited is given. A major part of the report consists of the project undertaken during our internship. Basically, our research was directed towards importance of market segmentation and targeting for effective marketing of banking services. We prepared a questionnaire, and we also analyzed secondary data available regarding the bank and we also conducted interviews with banks customers to know more about the customer attitude, preferences, and their views regarding services provided by banks. We also conducted unstructured, direct personal interviews and telephone interviews with the banks customers. The purpose of our research was to help NBL identify profitable market segments and to target them with appropriate marketing strategies. The existing and potential customers are divided into four segments on the basis of gender, age, income and occupation. The segments were
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identified by observing the actual customers in the bank, during our internship. In order to study the profitable segments and position the services to reach these segments, we conducted a survey focused on segmentation and targeting the market. The questions were focused on the preference of various services and service attributes, by different segments. The survey consisted of questions regarding the preferences of customers towards services quality, appealing attributes of service schemes, preference of communication media for receiving information about banks new services, time preference by customers of different segments and new services preferred by various groups. The survey established that, customers use all the services of banks and providing higher quality service along with value addition will help in promoting the brand name as well as capturing larger market share. Similarly, contribution to corporate social responsibility helps to cast positive image on customers and build brand equity. Quality in delivery of core services is very important, nevertheless, attributes like ambience, fast service and convenience should not be ignored The major finding of the survey is that appropriate market segmenting and targeting is very important for effective marketing of services and enhancing of brand equity. Market should be segmented into appropriate target groups according to demographics or psychographics, and then bank should target each segment by building appropriate marketing strategies. NBL must design innovative services and customize the services to match the needs of various segments. More and more people are switching to internet based services and online banking. So, NBL must put more effort on increasing its ATMs, developing interactive website, developing internet based services and putting up advertisement and promotion materials on internet according to the preference of the target segment. Similarly, NBL providing flexibility in its service hours and procedures according to the need of people belonging to various occupation groups is important. Special accounts for senior citizens and children help in differentiating the services. Corporate social responsibility and higher interest rates have similar appeals amongst the customers. Similarly, customizing the services for various segments helps generate maximum value from the market. Developing innovative marketing strategies backed by strong products and services succeed in capturing customer value and large share of market. Therefore, NBL should
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focus on effective segmentation and targeting by launching the right products, to the right customers, at the right time.

LIST OF TABLES
1. List of products of NBL.10 2. Comparison of interest rates and profitability21
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LIST OF FIGURES
1. Factors considered by customers while transacting with bank.32 2. Importance given by customers to corporate social responsibility33 3. Preference of communication media by various age groups.34 4. Preference of communication media on the basis of occupation..35 5. Preferred time of customers on the basis of occupation for doing banking transactions36 6. Preference of new service by different age groups...37 7. Preference of new services by different occupation segments.38 8. What customers liked about recently visited bank....39

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LIST OF ACRONYMS

KCM: BBA: NBL: NRB: KUSOM: ABBS: PEST: SWOT: BOD: CSR: SLR: CRR: CEO: BOD: HBL NIBL: RBB:

Kathmandu College of Management Bachelor in Business Administration Nepal Bank Limited Nepal Rastriya Bank Kathmandu University School of Management Any Branch Banking System Political-legal, Economic, Socio-cultural, and Technology Strength, Weaknesses, Opportunities, Threats Board of Directors Corporate Social Responsibility Statutory Liquidity Requirement Cash Reserve Ratio Chief Executive Officer Board of Directors Himalayan Bank Limited Nepal Investment Bank Limited Rastriya Banijya Bank
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ATM: IT: HRM:

Automated Teller Machine Information technology Human Resource Management

Declaration Recommendation letter from employer Recommendation letter from college supervisor Acknowledgement Executive summary Table of contents List of tables List of figures

TABLE OF CONTENTS
Contents
Part one

Page

INTRODUCTION
1. Background 2. Objectives of internship 3. Jobs performed in the internship 4. Jobs of interns supervisors 1 2 3 6

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Part Two INTRODUCTION OF COMPANY 1. Introduction of Nepal Bank Limited a. Vision/Mission/Values and objectives b. Organizational Strategies c. Major Products/product lines d. Organizational structure 2. Analysis of the organizations general and competitive environment 10 14 15 8 8 9

Part Three PRESENTATION OF THE PROJECT A study on the need of market segmentation and targeting at Nepal Bank Limited Section I: Introduction 1. Introduction of the project 2. Objectives 3. Scope and limitations 22 23 23

Section II: Conceptual Framework 1. Review of related literature

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Section III: Methodology 1. Methodology/ procedures

28

Section IV: Presentation and Analysis

31

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Section V: Conclusions 1. Project specific conclusion and suggestions

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Part four

REFLECTION OF INTERNSHIP
References Appendixes

43 45

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PART ONE INTRODUCTION

1.

Background

This report is prepared in the partial fulfillment of the undergraduate program of Kathmandu University School of Management. The students of Bachelors of Business Administration (BBA) are required to undergo internship program for a period of eight weeks, during the eighth semester. The internship program provides students with an excellent opportunity to apply the knowledge gained in the classroom lectures, into real work environment. It also builds up confidence in the students so as to prepare them for the challenge of the corporate world. Internship program helps students in developing practical approach and professionalism toward work and improving business relations. For our internship, we choose Nepal Bank Limited, Dillibazar. Nepal Bank Limited is one of the pioneers in Nepali Banking Industry. It has the widest networking all over Nepal and provides wide range of services. It has been providing banking services to all segments of people and organizations. We chose NBL to accomplish our internship so that we could learn the basics of banking and understand the challenges and opportunities faced by a typical Nepali bank. During the internship period we were placed in customer service desk, remittance department, credit department, teller and administration. We gained knowledge and experience about the functioning and organization of various departments and the role of each department in the overall functioning of the bank. We also conducted a study on the need of market segmentation and targeting at Nepal Bank Limited. This research was very important to the bank and it was also an interesting subject matter for us because it was related to theories we learnt in classroom lectures. We surveyed the customers of various age groups, income groups to identify the profitable segments in the market and target them appropriately.

2.

Objectives of Internship

Internship program for Bachelors of Business Management, Kathmandu University is basically designed for students to gain practical knowledge and real life experience. Internship Program provided the interns with an excellent opportunity to learn the work in the field of interest. As fresh graduates, it is quite difficult to enter the job market without experiences. The internship programs main objective is to develop a very good platform to develop our skills, confidence and prepare us for the challenge Internship program provided interns with an opportunity to learn practical aspects of Nepali Banking industry. Working in one of oldest banks of Nepal, Nepal Bank Limited, helped in gaining knowledge about the basics of contemporary banking. Since we intend to work for contributing to Nepali Banking Industry, we had to gain acquaintance with the industry, the corporate culture and the nature of work. Goals for internship To complete internship program, regarding it as an opportunity to get acquainted with real work environment. To observe and learn the functioning, operations and management of banking system. To get acquainted with the corporate culture in banks of Nepal and explore the challenges and opportunities To explore the career opportunities, in Banking. To enhance decision making skills and ability to work in teams. To develop personality and build a professional attitude towards work. To develop interpersonal and communication skills. To increase personal relations with people in the industry. To make practical use of classroom learning in solving real world problems.

3. Jobs performed in the internship

During our two months period of internship in Nepal Bank Limited we were placed in all the departments of the branch. On the first day we were given a brief orientation of the organization and we were introduced to the members of the bank. We had a brief meeting with the branch manager Mr. Bishow Raj Kandel who explained us our duties and responsibilities in the organization throughout our internship. We were given knowledge of NBL culture, operations/functions. We worked in the Customer Service Department, Teller, Remittance Department, Credit Department and Administration Department. We also invested some of our time in marketing the products of the bank. Customer Service Department The customer service department is the department where the customers make first contact with the bank. The customer service department basically seeks to help customers with their problems and queries. We started our work from customer services by performing the following jobs: The supportive members of customer services briefed us about the functioning of the customer services and the whole bank. They explained the tasks performed at the help desk and acquainted us with the relationship between the tasks performed at the help desk and that of other departments. Helped customers in account opening and closing and also filling up the forms for customers who had difficulty in reading and writing.

Prepare interest expense voucher, tax paid voucher, and voucher for service charge taken.

Scrutinized various schemes and interest rates of deposit and loan provided by the bank and informed customers who inquired about the schemes.

Printed, issued and recorded the issue of checkbooks and printed statements for customers.

Prepared debit vouchers for Tribhuwan University pension and recorded the pension disbursement.

Operated Newton software to solve customers inquiries, print checkbooks, statements and open or close accounts.

Teller

Helped in filing the vouchers and other records.

Teller is the place where the cash deposits are received and credited to respective accounts and cash payments are made against checks and respective accounts are debited. I performed the following jobs in this department: Observed the process of deposit and withdrawal process, ABBS transactions and entering the transactions in the software. Identifying discrepancies (if any) in the checks. Checking the requirements for processing any transaction; like authorized signature, endorsements and common seal. Observed the process of clearing.

Remittance Department

Remittance Department at Nepal Bank Limited is the department which sends and receives money from various parts of the world and from those branches of NBL which does not have ABBS facility. Helped customers in filling up receipts for sending and receiving remittances. Recording and preparing vouchers for remittance, drafts and out bills. Entered the OBC vouchers in OBC ledger, stamped the out bills and entered them in excel sheet format prepared by the remittance department.

Assisted in the clearing process. Support employees in maintaining other records Prepared voucher for commission charged in sending money to branches not having ABBS facility

Credit Department Credit department is that section of bank which provides various types of credit to individuals and organizations to generate interest income to the bank. In the credit department we performed the following jobs: Prepared vouchers for interest income received, closing and renewal of the loan accounts Went through credit manual of NBL to get basic knowledge of various types of credit provided by NBL and the detail guidelines to process credit to customers. Entered transactions like renewal of loan, new loan and closing of loan accounts in the Newton software. Helped in loan sanction process.

Administration Department

Administration department is responsible for the recording of all the transactions daily, correspondence, inventory management and other administration activities. We performed the following jobs in administration department: Observed how salary sheets are prepared, passed and recorded. Similarly, studied how all other expenses and revenue accounts are recorded, rechecked and passed. Studied the procedure for tax preparation to report to head office and Nepal Rastra Bank Learnt the formal procedures of correspondence and communication with the head office and other branches. Learned the basic functions of administration department such as writing off depreciation, preparing salary of employees, maintaining books of assets, preparing budget and so on.

4. Role of Interns Supervisors

At NBL, the deputy manager, Gyanendra Bikram Karki, is the operation head of the branch office. He supervises all the work in the office except credit He verifies the transactions of the bank and approves important decisions as. He is also the work supervisor of the interns. He is responsible for assigning work and duties to the interns and evaluating performance. Customer Service Department At the customer service desk, the department heads had the following responsibilities: Catering to the clients needs, serving their problems, and responding to their queries.

 Printing statements, issuing checks, opening accounts, filing and recording and carrying out various other transactions. Disbursement of pensions and providing ATM cards. Remittance Department At the remittance department, the department heads had the following responsibilities: Transferring money to various other branches of NBL and receiving money from abroad as well as from other branches of NBL. Clearing function Teller At the teller, the department heads had the following responsibilities: Receiving deposits and making cash payments to customers. Payment of salary, pension and preparing pension lists. Fund management. Administration At the administration department, the department heads had the following responsibilities: Passing salary accounts and all other expenses and revenue accounts. Maintaining accounts of assets, managing inventory. Preparing estimated budget to report to the head office Preparing quarterly reports and sending it to NRB. Financial statements and tax reporting. Credit Department

At the credit department, the department heads had the following responsibilities: Loan appraisal. Opening, renewal and closing of loan accounts. Evaluation and assessment of collateral. Dealing with clients and maintain valuable customer relationship.

PART TWO INTRODUCTION OF INDUSTRY AND COMPANY

Commercial Bank Act 1974 defines a commercial bank: ' A commercial bank means bank which deals in exchanging currency, accepting deposit, giving loans and doing commercial

transactions.' Prior to the establishment of Nepal Bank Limited, people relied on borrowings from the corrupt moneylenders, who charged very high interest rates and added other dues. With the cooperation of Imperial Bank of India, Nepal Bank Limited came into existence under the Nepal Bank Act 1937. Nepal Bank played a dual role of commercial bank and the central bank until the establishment of Nepal Rastra Bank on 26th April, 1956 it carried all the functions of a central bank. Among various service sector banking is the most growing sector in case of Nepal. There are 31 commercial banks, but only a small percent of people are covered by banking services. There is very high competition because most of the banks and financial institutions are concentrated in urban sectors only. There are lots of untapped areas where banks can excel it and at the same time attract more and more people to the banking services.

1. Introduction of Nepal Bank Limited

Nepal Bank Limited is one of the oldest commercial bank in Nepal. Nepal Bank Limited was established in 1937. NBL was inaugurated by His Majesty King Tribhuwan. The age of formal commercial bank, in Nepal started with the establishment of Nepal Bank Limited. The bank is also one of the largest in Nepal with 110 branches in the 55 districts of the country.

a. Vision, Mission, Values and Objectives of Nepal Bank Limited

Vision: To remain the leading financial institution of the country

Mission: Nepal Bank Limited seeks to provide an environment within which the bank can bring unique financial value and services to all customers. It will be a sound institution where depositors continue to have faith in the security of their funds and receive reasonable returns; borrowers are assured of appropriate credit facilities at reasonable prices; other service- seekers receive prompt and attentive service at reasonable cost; employees are paid

adequate compensation with professional career growth opportunities and stockholders receive satisfactory return for their investment. (Bank overview: Nepal Bank Limited) Values:

Respect, service and safety for the customers we serve Respect, reward and opportunity for the people with whom we work Respect, cooperation and support for the economic community of Nepal

Objectives: Nepal Bank Limited has the following objectives:

Maintaining leading share of banking sector with a significant presence in all major geographical areas in the country.

Providing competitive and customer oriented banking services to all customers through competent and professional staff.

Reclaiming leadership within the national financial community.

b. Organizational Strategies
The organizational strategies for NBL are as follows: To improve the human resource of the bank to provide greater customer satisfaction To expand the market share and increase the customer base of the bank To bring in new products and programs that meet customer needs To maintain strategy of stabilization

c. Major products of NBL

NBL is one of banks, in Nepal, having largest deposit base. It renders its services to a very large number of customers all over Nepal, by maintaining its competitive position, despite the fierce competition. The products and services offered by NBL has been continuously

upgraded and improved according to the needs of the customers and changes in the banking environment. The Products of NBL are basically the services designed and provided to customers in terms of deposit schemes, credit facilities and other services of the bank. Since NBL is one of oldest commercial bank of Nepal, it has providing banking services to a large number of customers. NBL has designed its schemes and services in such a way that it is assessable and suitable for everyone. The products and services of the bank target all the age groups from senior citizens to youngsters. NBL has competitive interest rates for women, senior citizens and E-banking and ATM facilities to young and busy people. Similarly, it has credit facilities for entrepreneurs, businesses and consumption purposes. It provides services that meet the needs of modern bank in order to compete in the market and retain its customers. It has ABBS facility within Kathmandu Valley and various parts of Nepal. It has recently started mobile banking and E- banking facilities to its customers. The list of products and services provided by NBL is presented below: Table 1: List of products of NBL Deposits: NBL General Savings Women Special Savings Senior Citizen Special Savings Employee Saving Account NBL fixed Deposit Account Current Deposit and call deposit account Special Savings Account Loans: Gold- Silver Loans Export Loans Post-shipment and pre-shipment loans Hypothecation Loan Trust Receipt Loan Overdraft loan Housing Loan, Personal Loan

Term Loan Industrial and working capital Loan

Other services provided by NBL are listed below:

SMS Banking: NBL has recently launched SMS Banking services. SMS banking provides the following services: Secure transaction with PIN code Instant Balance Information Last three transactions with current Balance PIN code changing facility Latest Exchange rate of Foreign currency Account Stop Facility Check Book print request Account statement print request New Product information of bank

Remittance: NBL Remit service is based on online data transfer system and it is instant enough, efficient and very much secure. For the authentication purpose, secret key is generated on the system, which is required by the customer while being paid. Remittance facility is available both for instant cash payment and credit to the beneficiary personal account. Managers Check: It is a check drawn by Nepal bank on itself, which is used for payments on behalf of Nepal bank. ABBS: Customers can withdraw or deposit money from any branch of NBL, without having to bear extra charges, across Nepal having the facility of anywhere branch banking services. Clearing: NBL provides the facility of clearing check on behalf of its customer it accepts check of other banks.

ATM Card: NBL provides ATM cards to its customers. The ATMs are placed at main points in Kathmandu and other cities and customers can also use the card in India in the ATMs of Punjab Bank Limited. Transactions from ATM of NBL, is free of cost. Similarly, Point of sale transactions and issuance of new card doesnt incur any cost to customers. E-Banking: Nepal Bank Limited provides the customers with E- Banking services so as to enhance its services along with the rapid changes in technology Bank Draft: NBL also has the facility of bank draft for transfer of money. However, the uses of bank draft have decreased considerably due to E- remittance services and electronic payment systems.

d. Organizational structure of the company

NBL has centralized organization structure. Organizations strategies, policies, procedures, interest rates, and all other major decision are made by head-office and all the branches work in accordance to the circulation given by head-office. Branch have very less say regarding decision making. NBL has centralized structure with management committee on the top of the hierarchy. Below the management committee lays the Chief Executive Officer and Management team. Below in the hierarchy are the various departments such as corporate planning, accounts, treasury, central finance, credit, HRM, IT, legal, inspection and internal audit. Corporate planning department is responsible for planning, budgeting, and statistics, and market analysis. Similarly, account department performs the general accounting, head office account and payment functions. Likewise treasury department does the asset-liability management and other banking jobs. Central finance department handles the trade finance, guarantee, remittance, agency, and back office. Likewise, credit department deals with risk management, relationship management, and credit management. Human Resource Management department manages the acquisition, development, and promotion of employees, manages employee benefits and relation, transfer and retirement, human resource management system, and training centers. Similarly, BMD department supervises the operation of various branches, review performance, and marketing and promotion. IT department ensures that the technical support is always standing by in case if

any problem occurs in the bank software, checks security and quality, observe day to day operation, and administration. MSD department carries the task of asset management, procurement, developing PR, and dispatch. Legal department handles issues related to staff, credit, and legal audit and documentation. And finally Inspection and internal audit department carries the function of internal audit, system audit and, inspection. There are various committees to further supervise the departments such as asset-liability committee for treasury department, credit committee for credit department, disciplinary committee for Human Resource Department, and IT steering committee for IT department. All the departments further assist branches but especially branch management department is responsible for direct supervision of branches. Organization structure of Nepal Bank Limited is presented in Annex-2. NBL, Dillibazar organizational structure is based on hierarchy. There is one branch manager, one deputy manager, one assistant manager, and other employees of various levels. There are various departments such as Customer service, Remittance, teller, administration, and credit.

2. Organizations general and competitive environment

Environment Analysis
Organizations environment is the surrounding and context in which businesses operate. Environment plays a major role in defining the success and profitability of and organization. Businesses are highly affected and influenced by the environment in which they operate. Banking industry is also very much affected and influenced by the external environment, so banks need to study and analyze the external environment continuously. PEST analysis is one of the methods to analyze the environmental forces. It considers 4 major environmental forces affecting the industry. They are: Political-legal environment, Economic environment,

socio-cultural environment and Technological environment.

Political- legal environment

Instability in the political system in Nepal poses huge challenge to banking industry. Political system changes often and rules and regulations keep changing accordingly. Political systems have direct affect on the growth and development of the society. Political system shapes the economy of any country. Banking is the backbone of economy, so it is highly regulated. The government plays a major role in designing the banking industry. In Nepal, banks and financial institutions are regulated by Nepal Rastra Bank. Since the central bank is also the banker to the government, NBL is influenced by the political environment to a great extent. Similarly legal environment also affects the banking industry. NBL should work according to the directives and circulations send by Central Bank. The central bank determines the interest rates, SLR, CRR and other requirements that have to be compulsorily fulfilled by the financial institutions. The legal environment not only consists of the regulator but also the industry. Commercial banks operate within a highly dynamic and competitive environment where the banks have to draw fine line between ethics and profitability. Banks operate in a highly litigious environment. So, commercial banks must be very careful in matters, in which it stands accountable and liable. NBL lies strictly within the regulation of NRB, so, it has to comply with the regulations posed by NRB because it has a huge amount of money and assets of public, government and owners. Legal environment is also very much dynamic since it keeps on changing and bank has to maintain compliance with the new rules and regulation no matter what

Economic environment
Economic environment is one of the important external factors, influencing the industry and the firm itself. Economic environment includes the general macro-economic factors such as interest rates, inflation level, unemployment level, growth in economy and so on. Since bank is the backbone of economy, economic environment has direct impact on the

behavior of customers of bank. When, economy is in growing trend, economic activities boom. People and businesses will have surplus money and the deposit of bank will increase. Similarly, investment activities increase and bank will be able to lend out more money to borrowers and investors and realize higher profits. More people will demand money in the form of credit for business and consumption purposes. Thus, bank will generate more revenue. Unemployment level also affects the banking industry. Rise in inflation rate will discourage people to keep money in the bank, as value of money starts decreasing.

Socio-cultural environment
Society and culture shapes the attitude and behavior of people. Bank operates in a society and society has a major role in determining the profitability and growth of the bank. The attitude of the members of the society is important for a banks success. So, positioning the bank in terms of its value proposition is important. Moreover, customers nowadays are more educated and better aware about the banking system mainly due to education and having access to information. Socio-cultural forces include the lifestyle, demographics, psychographics and behavioral aspects of the people.Change in lifestyle have entailed a major impact on the banking sector. Nepal Bank has faced the need to continuously upgrade its service quality and value addition for retaining its brand image in the society. Similarly, NBL was faced the challenge of technological innovation and advancement. Besides, banking in the past was considered to be a place for rich people only. But nowadays, banking is not confined to rich people and business people only. People from all levels of the society, backgrounds, income levels and occupational status are coming under the banking service. Banking is equally important for students, businesses, housewives, and all other people. Banking habit of people is changing continuously and in a better way. Bank has become a inevitable element for the development of people and society. Nepal bank is very much aware about such changes in the socio-cultural environment and is constantly updating and upgrading its products and services accordingly.

Technological environment
Technological environment is the most dynamic and challenging environment for banks. Changes in technology have made the banking operation much easier, systematic and standard. Nevertheless technology provides businesses with competitive advantage, innovation and cost leadership, it poses immense threat of competition and imitation by competitors. Technology poses threats because every new technology becomes obsolete when new and improved version comes in the market. When competitors easily imitate the technology the pioneer will face strong competition to overcome the huge investment in research and development of the technology. Technological environment has affected the banking industry to a great extent. The major change that has been seen in Nepal Bank Limited is that few years back, the bank was not computerized. But now it has been computerized, out of necessity as well as due to competition given by other commercial banks. The bank has become more efficient due to the presence of computerized system and software. The transactions are operated through the server and it has increased the customer satisfaction as well as employee performance. NBL has been able to provide the facility of any branch banking system due to the technological change; otherwise it would have been impossible to provide the facility of ABBS. Another major example of technological change is the presence of instant ATM cards to customers for withdrawing money.

Porters Analysis
An industry is comprised of a number of firms producing similar product or providing similar services. Industry Analysis considers identifying and examining important stakeholder groups in a corporations task environment. According to Michael Porter there are five factors that determine the competitive position of a firm/industry and its ability to generate revenue. Threats of new entrants Rivalry among existing firms bargaining power of buyers

Bargaining power of suppliers Availability of substitute products

Threat of New Entrants: Threat of new entrants is one of the forces defined by Porter as Forces driving industry profit. New entrants to an industry are threats to existing firms because they enter the industry with new strategies, resources and capacity. Banking Industry in Nepal had high intensity of threat of new entrants. Banking industry highly regulated in Nepal. However the number of banks and financial institutions seems to be increasing every year. The number of commercial banks in Nepal is thirty one. New commercial banks bring with them required capital investment, as per the regulation of NRB. In addition, they bring new technology and better resources. In order to capture market share and accumulate large deposits they practice market penetration strategy; that is, they offer higher interest rates for deposits and lower interest rates for loans. NBL is constantly facing the threat of new entrants in the industry and it had to increase its interest rate and introduce new schemes to align with market competition. NBL has been trying to keep up with the fierce competition. Rivalry among Existing Firms: Competition is aggressive in every profitable industry. Similarly, there is intense competition among the banks. Commercial banks face competition, not only from other commercial banks, but also from finance companies, development banks and co-operatives. The rivalry among the firms in this industry is high. The banks are competing to increase their profitability. The following factors can be observed in Nepali banking industry, which leads to intense rivalry among the firms, according to Porter.

Number of competitors: The number of competitors in Nepalese banking industry is very large for economy like Nepal. There are 31 commercial banks till date. Competitive move by one bank leads to similar actions and sometimes counter efforts by other banks.

Product or service characteristics: The products and services provided by all the commercial banks are almost the same. For example: ATM, evening counter, call deposit accounts, lockers, documents for import, export and so on. Customers. Moreover most of banks are located in similar locations.

Height of Exit Barriers: Banks have a greater height of exit barriers. Banking sector is highly regulated and banks cannot voluntarily leave the industry because they have publics and governments money at stake.

Bargaining Power of buyers

For banks, buyers are the people who take loans or borrow from bank. Nowadays due to competition bargaining power of buyers is higher than before. They demand lower interest rate and flexible paying terms. To cater to the customer needs NBL has been providing various kinds of loans.

Bargaining power of Suppliers

For banks, suppliers are the depositors. There is huge pressure on the bank to increase interest rate as new banks are proving interest on general savings as high as 11%. Depositors are very well-informed and educated this day, so their bargaining power is also high.

Availability of substitute products

Substitute products are those products which are not alike but fulfill the same purpose. Even finance companies and co-operative are providing services like commercial banks. Customers nowadays have so many options on where to deposit their money or make investment. Similar is the case while borrowing. The services provided by banks are highly substituted.

SWOT ANALYSIS An organizations performance is highly determined by the environment in which it operates. In order to survive and compete in hypercompetitive environment, Businesses

need to scan the external as well as internal environment. SWOT is one of the very important analyses; any organization has to go through in order to analyze the Strengths, Weaknesses, Opportunities and Threats. SWOT is an effective way to identify and analyze strategic factors. The SWOT analysis of NBL is presented below: Strengths of NBL NBL is a pioneer in Nepali Banking Industry and it has been providing banking services in Nepal since its establishment in 1937 A.D. Therefore, NBL has a distinct recognition in banking sector. NBL provides banking services even in remote areas and benefits from such networking. NBL is a semi government undertaking, thus less risky for depositors. NBL has public faith and trust. NBL has experienced top- management. The Board of Directors is a five-member committee, appointed by NRB. They provide good governance and support to the bank. NBL offers a wide range of products and services to compete with other banks and improve its services with technological changes. Weaknesses of NBL NBL is one of the banks with largest deposit base. Despite having huge capital, NBL has not been able to exploit the opportunities. Centralized decision making in the organizational structure causes delay in decision making. Least effort put into innovating new product and services according to the need of customers. NBL has been quite slow in adapting to technological changes in the banking industry, in comparison to other commercial banks.

Few opportunities provided to employees for development of their professionalism, organizational orientation and career.

Opportunities for NBL NBL has the capacity to acquire latest banking technologies to position its premium services and attract target new segments in the market. NBL can upgrade its non- computerized branches to computerized branches, in order to enhance its networking efficiency and performance. It can improve its information system and upgrade the software to make the operations more efficient, reduce down time and enhance networking. NBL has a huge deposit base compared to other commercial banks, despite of the fierce competition in the banking industry. Thus, it has opportunities for investing in big projects like hydropower, drinking water and national priority sectors. Since, NBL has a wide network; it can invest in small and medium projects in remote parts of Nepal and serve niche markets like micro credit, alternative energy sources like solar power. Threats for NBL NBL faces the pressure of operating in a highly regulated sector. Establishment of several new commercial banks has lead to hyper competition in the industry. Marketing penetration strategies undertaken by new banks and financial institutions has reduced the spread of NBL.

Customers are aware and well informed about the infrastructures, interest rates and value added services so NBL is obliged to provide high quality, customized servicesto customers.

Financial institutions like finance companies, cooperatives and development banks providing more customized services, in competitive rates.

Political, social and economic instability in the country is major threat to the economy as well as banking sector.

Competitive Analysis
The organizations competitive position in the market is determined by analyzing the rates of deposits and loans as well as other services provided by the competitor banks. For comparing the rates of loans, deposits and overalls profitability of NBL with other competitive banks, we selected the following banks: Nepal Bank limited (NBL) Himalayan Bank Limited(HBL) Nepal Investment Bank Limited (NIBL) Rastriya Banijya Bank (RBB)

Table 2: Comparison of interest rates and profitability Criteria Normal Savings NBL 3.5% HBL 5% 9.5% NIBL 4.5% 7.5% RBB 3% 7%

Fixed Deposit (1 8% year) Term-loan 13-16.5%

16-17%

16%

13-14%

Overdraft Net Profit

13-15% 894,254,182

15-17% 508,798,193

17% 1,265,949,588

13.5-14% 4,735,756,000

From the above data we can observe the following tendencies: HBL provides the highest rate of interest rates in normal saving accounts and fixed deposit. It makes up for its expensive deposit schemes by charging higher interest on loans, than other banks. Though the interest rate on deposit and loans seems to vary according to the banks, the spread is almost similar. RBB has the highest net profit. HBL provides highest rate in fixed deposit accounts in order to attract more amount of fixed deposit. HBL and NIBL have similar rates for loans, while NBL and RBB provide flexible interest rates on loans.

PART THREE PRESENTATION OF MAJOR PROJECT A study on the need of market segmentation and targeting at Nepal Bank Limited
Section I. Introduction 1. Introduction of the project

Nepal Bank Limited has been providing modern banking services in Nepali banking industry for 74 years. It is one of the pioneers in Nepalese banking industry. Few decades back, there were few banks and competition was very low. Most banks were concentrated within Kathmandu valley and NBL was the bank which initiated branching outside the valley and introduced banking to all segments of people all over Nepal. Since its establishment, it accumulated huge deposits and retained its top position for a very long time. However, due to rapid growth in the number of commercial banks, during the past

few years, NBL faced difficulty in retaining its customers. Moreover, it was unable to attract new customers in comparison to the past. New commercial banks entered the market with innovative products and services, advance technology, outstanding marketing campaigns. They practiced market penetration pricing strategy by offering higher interest rates on deposits and lower rates on loans in comparison to the prevailing market rates. Since the switching cost for customers lowered, NBL lost many of its clients to competitors. Nevertheless, NBL put least emphasis on marketing and promotions while other banks continuously adapted to the latest marketing trends in order to reach to the customers. In this age of information, customers are bombarded with information. So, businesses put their best efforts to reach their customers through marketing. Marketing is very important to survive, compete and maintain valuable relationships with customers. The basic rule of marketing is to segment the market and identify profitable segments to cater to the needs of various segments, by innovating new services. Banking industry is a service industry and it has huge potential to come up with innovative and creative services to stay ahead of the competition and delight customers with value addition. For this, the most important thing for a bank is to know who are its customers? and what are their needs? The bank needs to segment the market into various segments and develop new products and services according to the need and interest of the segments. The bank should identify profitable segments and niches which are not served and focus on such segments to generate higher profits. The bank should design its products and services through customer driven marketing strategy. This project is a small effort to study the need of market segmentation and targeting at Nepal Bank Limited.

2. Objectives of the project

The objectives of the project are as follows: To study the need of market segmentation in NBL, for marketing its services effectively. To determine which customer segments exist in the customer base of NBL.

To determine the demographic, socio-economic and behavioral characteristics of existing and potential customers in the banking industry.

To identify the market segments with unmet needs that products and services of NBL could meet.

To identify how NBL should position its services to reach target segments. To find out the suitable means of communication for different target segments To find out which new services should be developed to generate higher profits from potentially profitable target segments.

3. Scope and limitations of project

Scope Scope of the project is to study the need of targeting and segmentation at NBL. Analysis of segmentation and targeting is quite important in todays context to build strategies and develop new product and services according to the needs of various customer segments in the market. This projects study will be helpful for the bank to identity various segments, their characteristics, their preferences of existing as well as new services, their preferred means of communications to receive banks information, preferred time for visiting the bank and their attitudes towards social welfare activities of the bank. Limitations The major limitations of the project undertaken are as follows: The findings and conclusions are made on our own analysis of primary and secondary data. The research was carried out on small scale and we had limited access to information and resources, therefore the result may not be relevant if generalized on a large scale.

 We had limited time to conduct the research in-depth. The customers were unwilling to invest more time and hesitant to provide more information. In certain circumstances we had to make simplified assumptions to the complex situation in absence of reliable and relevant information.

SECTION II: CONCEPTUAL FRAMEWORK 1. Review of related literature

This section portrays knowledge, understanding and definition about the subject matter derived by reviewing the concepts from text books, related articles, theories and other reliable sources of references.

Market is composed of various customer groups having distinctive needs, preferences, and characteristics. Market is no more a place where the same products and services can satisfy all the customers. Due to such heterogeneity in the markets, companies have accepted the fact that, it is impossible to please all the customers with same products and services. So, companies focus on developing customer driven marketing strategies to reach the profitable segments in the market by designing appropriate marketing strategies.While building customer driven marketing strategy, marketers plan the marketing mix. Marketing mix is one of the modern concepts in marketing. Service marketing mix consists of marketing elements like product elements, place and time, price, promotion and education, process, physical environment, people, productivity and quality. These elements are controllable in nature and defined by the marketers. Similarly, marketers have to emphasize customer driven marketing strategy. It consists of decisions like how to divide the market into significant customer groups, selecting the customer groups to be served, designing and creating products and services that best serve the target customers and positioning the products and services. Marketing is a process by which companies create value for customers and build strong relationship with the customers to capture value from customers. However, it is important for marketers to understand and develop suitable marketing strategies for various customer segments with differing characteristics and needs. The initial step in designing customer driven marketing strategy is to segment the market. Market segmentation is the process of dividing the market into smaller groups with distinct needs, characteristics and behavior. These consumer groups may require separate products or marketing mixes. (Philip & Gary, Designing a Customer-Driven Marketing Strategy, 2008)

Banking industry is one of the most competitive industries in Nepalese economy. It is a smaller market with many firms competing with each other to capture more market and claim more customers. So, marketers of banking products and services have to understand that they cannot appeal to all the customers in the same way because customers vary in demographic, psychographic, geographic, and behavioral attributes. In order to market banking services effectively, it is important to identify market segments, select one or more segments, developing services and marketing programs customized for each segment.

A market is made up of various different customer groups with different characteristics. The heterogeneity in the customers makes it very difficult for the marketers of banking services to market their service effectively. Therefore marketers segment the consumer markets into various different segments. A market segment is made up of a group of buyers having common characteristics, needs preferences and status. The purchasing behavior and consumption patterns of each segment differ from the others. Effective segmentation helps in identifying various customers and prospects into segments so that the relevant characteristics within each segment and the dissimilarity between segments can be measured. After segmenting the market the marketers select target segments to market their products and services effectively. Marketing the products and services to the target segments with appropriate marketing strategies helps in effectively reaching the profitable customers. (Christoper & Jochen, 2004)

Markets can be divided into various segments with various attributes. The most common basis for segmentation could be demographic, geographic, psychographic and lifestyle, media and price segmentation. Demographic segmentation helps in segmenting the market according to various demographic variables like age, gender, income, education level and so on. It is very important because the characteristics and behavior of various demographic groups tend to vary. Similarly, geographic segmentation divides the market or consumers into various geographic regions. Such segmentation is useful for businesses operating in different parts of the country or world. The values, culture, preferences and needs of

consumers vary according to the geographic area. Another important segmentation factor is psychographic and lifestyle segmentation. Psychographic and lifestyle segmentation is based on consumer attitudes, behaviors, emotions and interests. It focuses on values and beliefs of the consumers. In order to locate such segments, qualitative segmentation becomes very important. Similarly, media segmentation is based on the difference in media to reach different customers while price segmentation segments the market according to the price attributes of products and services. (market segmantation)

Marketing banking services poses a challenge amongst the marketers because unlike consumer products and commodities, services have mostly intangible aspects. The service quality is difficult to evaluate and the service cannot usually be experienced beforehand. So it is difficult for marketers to determine what services to provide and what level of services to provide to various customers. Thus the need for segmenting the customer market is important for banks to identify profitable segments in the market and develop appropriate products, services and strategies to market the services effectively. Customers of service industry like banks differ in various attributes and are widely scattered. So, bank must evaluate a segments size, growth and profitability and design services by targeting those customers. Market segmentation provides better results than simply offering same service to all the segments. Not catering to the real needs of various customer groups can result in customer switching to other banks and loss of brand value. Customers feel that they have least options to choose from and their needs being ignored. Moreover segmenting the market helps the bank in finding out the profitable segments and their unmet needs. In order to create value for targeted customers, bank should further differentiate the services and position the services so that it occupies distinctive and advantageous position in target customers minds, in comparison to competitors services.

The bank can develop new services, upgrade old ones or bring changes to the existing services so as to provide superior value to the customers and delight them. Bank can also

add value proposition to its products and services and communicate the value proposition in the market.

SECTION III: METHODOLOGY

Research methodology is the well formulated plan for carrying out the research. This research was carried out by following the steps and procedures prescribed in marketing research text book.

1.

Problem Definition
Management decision problem Is it necessary to segment customers in banking services? Marketing research objective To study the need of market segmentation and targeting for Nepal Bank Limited.

2.

Research design formulation

This research was conducted as exploratory research to get insight about the need of market segmentation and targeting in NBL to market its services effectively. For this research, we needed information about the potential and existing customers. We also needed the information about the current marketing plan of the bank and efforts made on promotion of products and services. Similarly, we required the list of products and services currently offered by the bank and products and services to be launched in near future. The most important information was to discover whether market segmentation and targeting is important to market banking services effectively.

Nature of the data

The data collected from various sources can be categorized into two parts. Primary Data unstructured interviews with customers of bank unstructured interview with top-level employees of NBL Questionnaire survey

Secondary Data Information from website of the bank Published articles and journals Internet articles related to segmentation and targeting Annual reports of competitive banks

Secondary Data Analysis

To gain a brief insight about our project we referred to the website of NBL (nbl.com.np). We obtained information regarding Deposit ( current ,saving, fixed) Loan/ Advances( consumer, corporate) Remittance Other services (Safe deposit vaults, ABBS, Internet Banking, ATM)

3. Methods of collecting data

Questionnaire Survey

We designed a questionnaire to collect primary data. This questionnaire consisted of open ended, multiple choice, and dichotomous questions. The questionnaire was made up of twelve questions which briefed about the most obvious customer segments of the bank. Rest of the questions was directed towards the needs, preferences and behavior of various customer groups. The questionnaire had questions regarding factors considered by customers while banking, the services mostly used by the respondents, time preferred by the customers to visit the bank, preference of communication media, and importance of social responsibility of bank. The results from the survey helped us to understand the attitude, preferences, and attributes that are regarded valuable by different segments of the customers. Questionnaire survey is presented in Annex-2. Interview Direct communication and interaction with the customers of NBL during our internship help us to discover real problems, preferences, and needs of the customers. We interviewed 20 customers of the bank so that we could come up with appropriate questionnaire. The customers were from various age groups. After the questionnaire was formulated, we interviewed 8 customers of the bank for any required additions and amendments in the questionnaire. We also contacted customers over the telephone to get required information about the aspects of the banks services which customer value.

Information from websites We collected information regarding various services provided by NBL and other competitive banks like Himalayan Bank Limited, Nepal Investment Bank Limited and Rastriya Banijya Bank to compare the interest rates offered by these banks. We also reviewed articles related to segmentation and target in the internet so that we could learn about different types of segments in the banking service industry.

4. Sampling process and sample size

For collection of data for our research, we used sampling method. We used simple random sampling and the sample size was 150. The sample we selected consisted of random people in the market. Some of them were existing customers of NBL. This method was appropriate for us not only because it was economical and least time consuming, but it also provided us unbiased and accurate data for our research. The sample for our study was quite representative of the population because it consisted of people from all age groups, we had pre determined, Similarly, there were respondents from various occupations, students, homemakers and unemployed. The respondents also had varied income scale.

5. Data preparation and analysis

The data we collected from the survey was processed through Excel. Further, it was analyzed and interpreted using statistical tools like frequency distribution, methods of central tendency and statistical diagrams. The questionnaire forms were inspected and edited and the data was processed in Excel for further analysis.

Section IV: Presentation and analysis of the project

1. Analytical presentation of the project

Our project was to determine the need of market segmentation and targeting for Nepal Bank Limited, to market the services more effectively to the target customers. Market segmentation is important to services organization like banks due to the large number of existing and potential customers, the existing and potential customers are divided into four segments on the basis of gender, age, income and occupation. The segments were identified

by observing the actual customers in the bank, during our internship. However, there are other segments in the market for banking services, which we have not considered for this study. In order to study the profitable segments and position the services to reach these segments, we conducted a survey focused on segmentation and targeting the market. The survey consisted of questionnaire and unstructured interview with the customers of bank. The questions were focused on the preference of various services and service attributes, by different segments. The questions provided an insight towards the most profitable segment and segment with greater potential to increase the banks customer base and profitability. We asked questions regarding the services they currently used most, new services they would be interested in, appeal of corporate social responsibility, their preference of time for visiting the bank, preference of communication media to receive information about the banking services and so on. Presently in NBL there are few products and services targeted towards some segments in the market. NBL has deposit schemes like Women Special Savings which provides higher interest than normal savings; Senior Citizen Special Savings is meant for senior citizens who are mostly retired and look for reliable and trustworthy institution for placing their savings and income. NBL has not reached most profitable segments in the market. It has two deposit schemes that are targeted to actual segments in the market. The bank offers the same products or schemes and services of all the customers. Similarly it tries to reach all the customer groups with the same message through the same media.

a. Service attributes valued by customers

Fig 1: Factors considered by customers while transacting with bank Banking industry is a very competitive industry in Nepal. Commercial banks are struggling to retain their market position and attract new customers as they are competing not only with the players of the same industry but also from other financial institutions like

development banks, finance companies and co operatives. So, it is very important for bank to differentiate itself from the competitors and add value to its services. In the survey conducted, the respondents were asked what factors they paid more importance to, while transacting with a bank. The survey result showed that 31% of the respondents gave more importance to convenience. Convenience refers to the location of the bank, the flexibility in providing services and time of delivering the services. Similarly, 28% of the respondents think that quality of customer services is an important attribute in banks. 24% of the respondents emphasize trust factor, considering the incidents that has been taking place in a few banks recently. Finally, 17% of the respondents think that they consider networking of a bank, while transacting with it. From the survey, we can see that customers put more emphasis in convenience of a bank, in providing services to the customers. b. Importance of Corporate social responsibility versus interest rates

Fig 2: Importance given by customers to corporate social responsibility In our survey we had given various options for customer to choose their saving account. There were three options which contribute something to the environment, old age homes, underprivileged children and one that provide slightly higher interest than other accounts. Our survey result shows that CSR increases the appeal of deposit schemes; however bank cannot ignore the interest factor, which has a major influence on decision making by customers. Nowadays customers are becoming more responsible and aware about the social issues and they want institutions like banks to contribute something to the society. Therefore what bank can do is coming up with schemes that actually make a positive impact in the society so that customer get positive image about the bank. The survey results showed that customers value corporate social responsibility of banks to a great extent. Results showed that customers would be happy to contribute to the old age homes, underprivileged children and environment. Higher interest rates on savings accounts and other accounts would

definitely increase the appeal of the account and attract new customers. But customers think that contributing a small amount to social welfare would make the account more appealing. Customers would like to contribute to CSR through the bank accounts. Customers find accounts that contribute certain percentage to CSR more appealing than normal schemes.

c. Preferred communication media

Fig 3: Preference of communication media by various age groups It is important for the marketers of banking services to know that services have to be reached respective target groups. In order to market the services and position the services, bank has to promote the services through appropriate medium. In the survey, we asked the respondents which means of communication they preferred for receiving information about banks services. The result is depicted into a column chart. The survey result shows that among 20 respondents of age group less than 18, 15 preferred internet and 5 preferred newspaper. 30 respondents of age group 18-24, 20 preferred internet and 10 preferred TV. The age group 25-34 mostly preferred newspaper to receive information about the services. Some respondents of this age group chose brochures, internet and marketing by banks personnel. Age group 35-44 prefers to receive information of banks services from brochures, marketing personnel, newspaper and TV. None of the respondents of this group showed liking for internet or radio. The survey shows that age group 45-54 mostly prefers TV for receiving banks information. Similarly, age group 55 and older prefers TV.

Fig 4: Preference of communication media on the basis of occupation It is important for bank to identify preferred means of communication by the target customers to advertise its product and services. After identifying the target segments bank

should identify proper means of communication to reach those target costumers because not all targeted costumers can be reach through same means of communication. We asked people about their preferred means of communication and our surveys results show that business person prefer internet and newspaper to get information regarding bank services. Similarly, housewife prefers television, service personnel prefer television, student prefer internet, and unemployed person prefer radio to get such information. Now bank has to choose such medium that has highest audience reach and also is being seen by the target customers.

d. Time preferences of various occupation segments

Fig 5: Preferred time of customers on the basis of occupation for doing banking transactions Time preference for doing banking activities may vary according to the occupation in which people are involved. For example students are usually free during day time, whereas service people are busy in their offices. Business people prefer to visit bank during the day time because most of their transactions start from about 11 in the morning. So banking during the daytime will be convenient for them. According to our survey business person prefer daytime, housewife also prefer daytime, service personnel prefer evening time as they can do banking activities during their lunch break, students prefer daytime as most of the students have classes on morning, and unemployed people prefer daytime as they are free mostly during daytime. Unemployed people also prefer transacting during the daytime. However, banks cannot ignore the

preference of customers towards evening banking. Customers of many segments prefer evening time for banking.

e. Preference of new services

Fig 6: Preference of new service by different age groups Different age groups have different preference for new service. Bank should analyze its target customer and come with new services that are well designed to meet the need of such target customers. Without proper analysis of target market banks new service may not attract enough customers. To identify which services are most attractive to which age groups our survey included question regarding preference of new services by various age groups. Our survey result shows that credit card service is most preferred by age group of 25-34 and 45-54. Similarly, insurance service is mostly preferred by 18-24, 35-44, and 55 and older. Likewise, mobile banking is preferred by age group of less than 18. And finally wealth management is most preferred by age group of 45-54 and 55 and older.

Fig 7: Preference of new services by different occupation segments Banks can differentiate their services in many ways. Understanding the needs of target segments and differentiating the market offering to create superior value can be profitable to the banks. For this, banks need to continuously develop new services and create value for customers, to gain more profitability. Services like credit card, insurance, mobile banking, utility payment and wealth management has not been well developed in Nepali banking industry. So, in the survey we asked the respondents in which of these new services would they be interested. The survey showed that business people will be more interested in credit card and wealth management services. They are least interested in mobile banking services. Similarly, housewives will be most interested in credit card services. Small number of them shows interest in utility

bills payment. Likewise respondents working in the service industry will be attracted by utility bills payment services because they have no time during the office to go to pay utility bills. Furthermore, students will be more interested in mobile banking. They also show interest in credit cards and unemployed respondents show some interest in insurance services. f. Attributes of a recently visited bank

Fig 8: What customers liked about recently visited bank In the survey, the customers were asked open ended question, what they liked most about the any bank they recently visited. 70 respondents among 150 liked the customer care provided. 35 were impressed by the ambience and 25 valued fast service and not having to wait long time. For customers of bank, high quality services can be delivered by providing superior customer care. Customers view banks as a hub to carry out transactions. Customers can be delighted by providing proper support, care and attention. Similarly, building an attractive ambience enhances the brand image of bank. Banks are continuously working on their ambience to make it just the right place for customers to bank. Respondents agree that the right ambience is very important. Similarly, they said that they like the fast service of a bank they recently visited. So, the fast and efficient service is also equally important to customers. The questionnaire also asked the respondents which transactions they carry out most and which services they used most. Survey results revealed that people of age group 18 and below and 18-24 used ATM, the most. People of age group 25-34 use ATM and deposit transactions the most. Age group 35-44 use deposit, withdrawal, E-banking and remittance services. Likewise, age group 45-54 carries out deposit transactions mostly. Since it is clear that different age group use different services of the bank and different age group diverse choice of services, NBL should focus in targeting particular age group with superior value services.

The survey also had question about the respondents interest in special savings account for children and elderly or retired citizens. 97% of the respondents showed positive response on this. This shows that children can be profitable segments in the market. Children and elderly citizens are profitable segments of markets in Nepal. Elderly citizens who are retirees receive pensions and they have alternative sources of income. This segment can bring in huge deposits into the bank if bank can develop schemes to serve their unique needs. Developing and marketing attractive saving schemes for children and elderly citizens can help the bank to increase its brand image and profitability.

2. Major Findings
During our internship, we carried out a research focusing upon two important attributes of marketing: market segmentation and targeting and its importance in marketing banking services. The survey for the research consisted of a structured questionnaire, which provided detailed information about the characteristics of customer groups, using of various banking services and the necessity to market the services according to the preferences and attitude of customers. While conducting survey to study the need of market segmentation and targeting in NBL, we considered gender, age, occupation and income groups. The questions in the questionnaire were designed to find the needs and preferences of various segments. It helped in defining each segment of existing and potential segment precisely and what can be done by the bank to reach each profitable segment. Our survey result shows that people are interested in doing banking with such banks which are rated high on factors convenience and customer support. Convenience and high quality service provides value addition to banking services. Similarly, survey shows that most respondents remember the quality of customer service and the ambience and environment of the bank. Similarly, different customer groups have different preference of communication media for receiving information so whenever bank comes up with new products and services or are willing to promote the existing ones; it should first identify target group, and target groups preferred media and then communicate the message to the

target customers using the right media. There are many services that are yet to be tapped by banks such as utility bills payment, insurance, credit card services, so that it can be market leader in introducing new services in the industry. Some of the most important services in banking are provided by Kathmandu banking office only; NBL should extend this service to other branches to increase convenience among the customers. It should also add new services and market them to the most profitable segments. Moreover, different customer segments have different preferences about the choice of time suitable for them to visit the bank. Nevertheless, banks are trying to provide 24 hours services through self service technologies like ATMs, customers have to visit the bank for most of the transactions. So people with various job hours and various nature of occupation prefer different time to visit the bank. The importance given by customers to corporate social responsibility and higher interest rates are almost same. People with stable job and income and people of senior age group think that CSR increases the appeal of the products and schemes, while younger respondents think that higher interest rates increase the appeal. So, NBL should come with such schemes and present itself as a responsible bank. Nowadays people are being more and more conscious regarding the credibility of bank because of many cases of trouble faced by some banks and financial institutions. NBL has been able to gain competitive advantage due to trust factor so it should focus on this factor for appropriate positioning of the brand. Our research reflected that in order to market services effectively, market should be segmented into appropriate target groups on the basis of certain characteristics like age group, income group and so on. After segmenting the market, bank should target each segment by building appropriate marketing strategies. The attitude, preferences, needs of each segment differ. So, bank must design its services and customize the services to match the needs of particular segment.

Section V: Conclusions

1.

Project specific conclusion and suggestions

NBL has a large and heterogeneous customer base and it has large number of potential customers. The needs, preferences and choices of products and services for each segment of customers are different. It is very important for NBL to segment the market, select the segments to enter, differentiate the services to create superior value and position the services appropriately among the target customers. Marketing alone cannot be helpful without customer driven marketing strategy, backed by a strong product and value addition.

By segmenting and targeting bank can study each target segment individually and customize its products and services. In todays context customization of products and services is quite important to face the competition provided by not only commercial banks, but also development banks, finance companies and co-operatives. NBL has branches all over Nepal, and huge customer base but it should make efforts to retain customers as banks are taking away its customers. So NBL should focus on marketing its products and services by launching the right products, to the right customers, at the right time by segmenting the market and target the right segment. We suggest that NBL should conduct a further detail market research and enhance its products and serves according to the need and demand of various customers segments.

Banking services can be customized according to needs of various customer groups. Market consists of customers who differ in various ways. Existing and potential customers differ in attitude, behavior, lifestyle, wants, resources, locations and so on. It is not possible to appeal all the people in the market with same products and services. So, it is important for banks to break up the large and heterogeneous markets into smaller segments. Banks can target the smaller segments by developing and introducing unique and appropriate services, to reach the segments effectively and efficiently. Thus market segmentation and targeting is very important to serve various segments in the market with appropriate services in order to generate most of the profits out of those segments.

PART IV REFLECTION OF INTERNSHIP

Internship program of KUSOM is designed to provide students with an opportunity to work in real organization. It helps students to develop practical approach, professionalism and understanding of the corporate world. Our eight week long internship at Nepal Bank Limited was a very good experience. This internship program proved very productive for us. We, being students of BBA received excellent exposure in the market. It built up our confidence for facing the corporate world. Since, it was our first experience in a real organization; we enjoyed the experience while building valuable personal relationships. We got an opportunity to apply our business management and banking knowledge into real work environment. Moreover, we learnt the basics of banking since we both interns were considering a career in banking. During the internship period we were placed in customer service desk, remittance department, credit department, teller and administration. We also conducted a research focusing two important attributes of marketing: market segmentation and targeting and its importance in marketing banking services. We gained knowledge and experience about the functioning and organization of various departments and the role of each department in the overall functioning of the bank. We gained practical approach towards the operation and management of each department in a bank and the contribution of each department towards achievement of organizational objectives. The most important objective of the internship program was to observe and learn the functioning, operations and management of banking system and get acquainted with the corporate culture in banks of Nepal and explore the challenges and opportunities. Moreover,
internship program was very important for enhancing decision making skills, interpersonal

skills, communication skills and ability to work in teams. Internship program proved very helpful in achieving the above mentioned objectives in an effective way. We learnt the basics of banking and management of people and resources in an organization. Basically, we learnt about the quality in the process of delivery of services

in a service organization. Moreover, working in a bank helped in developing our interpersonal skills, communication skills, problem solving skills, and decision making skills. It boosted up our confidence to face the corporate world. Learning about a large industry such as banking cannot be completed in such a short period of time. However, we were able to gain the basic knowledge and understanding regarding the operation and management of bank and the overall functioning, problems, challenges, and opportunities of contemporary banks. By working in various departments of banks such as customer service desk, remittance, teller, administration, and credit, we learnt in detail about the roles and functions of each department and the inter relationship of one department with another. The research project that we carried out also gave us valuable experience. We gained basic knowledge and experience to conduct marketing research. We came across lots of challenges while conducting the actual survey and analyzing the data. This helped us learn about research. Above all, internship program helped us develop personality and confidence. It enlarged our knowledge base and complemented theoretical knowledge with practical experience. We were able to achieve the internship objectives to a great extent. The skills and knowledge gained during will be helpful throughout our career.

REFERENCES
D, H. J., & L, W. T. (1999). Strategic Management. Addition Wesley Longman Inc. Christoper, L., & Jochen, W. (2004). Service Marketing: People, Technology, Strategy. Pearson Education. Malhotra, N. K., & Satyabhusan, D. (2011). Introduction to marketing research. In N. K. Malhotra, & D. Satyabhusan, Marketing Research: An Applied Orientation (pp. 6-7). New Delhi: Pearson Education. Philip, K., & Gary, A. (2008). Designing a Customer-Driven Marketing Strategy. In K. Philip, & A. Gary, Principles of Marketing (pp. 184-185). New Delhi: Prentice-Hall, Inc. Philip, K., & Gary, A. (2008). Principles of Marketing. New Delhi: Prentice-Hall, Inc. Bank overview: Nepal Bank Limited. (n.d.). Retrieved May 1, 2011, from Nepal Bank Limited website: http://www.nepalbank.com.np/bankoverview/introduction.php market segmantation. (n.d.). Retrieved May 25, 2011, from http://www.decisionanalyst.com

Appendixes Annex - 1 ORGANIZATION STRUCTURE OF NEPAL BANK LIMITED

Management

Committee

Office of the Management Committee Audit Committee

Chief Executive Officer Office of the CEO

Special Unit

Management Team

Corporate Planning
Planning Budgeting & Statistics Market Analysis

HRM Accounts
General Accounting
H.O. Account &

BMD
Branch Operation Performance Review Marketing & Promotion

Treasury
Acquisition, Development
& Promotion

L IT/MIS e g Administration al
Security & Quality Newton Staff Operations Credi t Technical Support Legal Audit & Docu ment ation IT Steering Committee

Inspe ction &

Intern al Audit
Internal Audit Systems Audit Inspectio n

Dealing Correspondent Banking ALM

Employee Benefits & Relations Transfer and Retirement Dept. Action HRIS Training Centre

Payment

Asset Liabilities Committee

Disciplinary Committee

B RAN C H E S

109

Annex - 2
Survey for market segmentation and targeting for NBL 1. Gender Male Female 25-34 35-44 45 54 55 and

2. What is your age group? Less than 18 18 24 older

3. What is your annual income? Less than 50,000 and above 51,000-100,000 100,000-500,000 500,000

4. What is your occupation? Business Service Student Unemployed housewife

5. What factors would you consider when making transactions with a bank?

Convenience

Trust

Networking

Customer service

6. Which of services do you use the most? (1 being the most used and 8 the least used) E-banking__ Locker__ Mobile banking__ Web__ Remittance__ ATM__ Loan__ Deposit __ Withdrawal__

7. What did you like most about any bank you recently visited? ____________________________________________________ 8. Which is the most suitable time for you to go to bank? Morning Daytime Evening

9. Which of these services would you be interested in? Insurance Mobile banking Bills Payment Credit Card Wealth Management Utility

10. Among the following savings account, which one would appeal you the most? Contributing certain amount to environment contributing to old age homes providing 0.5 % more interest than normal savings contributing to education of underprivileged children

11. If your bank is offering higher interest rate in savings account for children or senior citizens would you be interested? Yes No

12. Which means of communication do you prefer for receiving information about banking services? TV Radio Internet Newspaper Brochures Marketing personnel