MARKETING STRATEGIES OF BANKS

INDEX

Chapters 1 2 3 4 5 6 7 8 9 10 11 12 13 INTRODUCTION

Topic

Page no.

REVIEW OF LITERATURE CONCEPTUAL FRAMEWORKS MARKETING STRATEGIES OF BANKS NEW TRENDS IN MARKETING RESERVE BANK OF INDIA STATE BANK OF INDIA ICICI SBI V/S ICICI NEW CHALLENGES TO MARKETING OF BANKS CONCLUSION RESEARCH AND FINDINGS BIBLIOGRAPHY

Chp no:1 INTRODUCTION

1.1) BACKGROUND OF THE BANKING INDUSTRY Performance of the banking sector is considered as a proxy for the economy as a whole, due to banks' wide spectrum of exposure across industries. Unfortunately for India, the banking sector has historically remained under the impact of non-competitiveness, poor technology integration, high NPAs and grossly under productive manpower. Banking sector in India has a wide mix, comprising of joint sector (scheduled and non-scheduled banks), nationalized sector (Reserve Bank of India, State Bank of India and all other nationalized commercial banks and post office savings bank), specialized corporate financial institutions (specific industrial finance corporations and state finance corporations), cooperative sector (co-operative banks and land development banks) and foreign sector (foreign commercial banks and exchange banks). All large private banks were nationalized in two stages: The first in 1969 and the second in 1980. Subsequently, quantitative loan targets were imposed on these banks to expand their networks in rural areas and they were directed to extend credit to priority sectors. These nationalized banks were then increasingly used to finance fiscal deficits. Although non-nationalized private banks and foreign banks were allowed to coexist with public-sector banks at that time, their activities were highly restricted through entry regulations and strict branch licensing policies. Thus, their activities remained negligible.
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During mid-1969, 14 major Indian commercial banks were nationalized. One of the major criticism against nationalization of commercial banks was with respect to efficiency. And the critics were right. Since nationalization, the operational efficiency of the commercial banks have come down, thanks to the public-sector working attitude of the bank work force. Since, their pay is not linked to performance, there is no inducement for the banking staff to perform well. This has been further, deteriorated by the poor quality to manpower planning which is linked to selection of inefficient staff on the basis of social reservations . In the period 1969-1991, the number of banks increased slightly, but savings were successfully mobilized in part because relatively low inflation kept negative real interest rates at a mild level and in part because the number of branches was encouraged to expand rapidly. Nevertheless, many banks remained unprofitable, inefficient, and unsound owing to their poor lending strategy and lack of internal risk management under government ownership. Joshi and Little (1996) have reported that the average return on assets in the second half of the 1980s was only about 0.15 per cent, while capital and reserves averaged about 1.5 per cent of assets. Given that global accounting standards were not applied, even these indicators are likely to have exaggerated the banks true performance. Further, in 1992/93, nonperforming assets (NPAs) of 27 public-sector banks amounted to 24 per cent of total credit, only 15 public-sector banks achieved a net profit, and half of the public-sector banks faced negative net worth. The major factors that contributed to deteriorating bank performance included:

(a) To stringent regulatory requirements (i.e., a cash reserve requirement [CRR] and statutory liquidity requirement [SLR] that required banks to hold a certain amount of government and eligible securities); (b) low interest rates charged on government bonds(as compared with those on commercial advances); (c) directed and concessional lending; (d) administered interest rates; and (e) lack of competition. These factors not only reduced incentives to operate properly, but also undermined regulators incentives to prevent banks from taking risks via incentive-compatible prudential regulations and protect depositors with a well-designed deposit insurance system. While government involvement in the financial sector can be justified at the initial stage of economic development, the prolonged presence of excessively large public-sector banks often results in inefficient resource allocation and concentration of power in a few banks. Further, once entry deregulation takes place, it will put newly established private banks as well as foreign banks in an extremely disadvantageous position. Against this background, the first wave of financial liberalization took place in the second half of the 1980s, mainly taking the form of interest rate deregulation. Prior to this period, almost all interest rates were administered and influenced by budgetary concerns and the degree of concessionality of directed loans. To preserve some profitability, interest rate margins were kept sufficiently large by keeping deposit rates low and non-concessional

lending rates high. Based on the 1985 report of the Chakravarty Committee, coupon rates on government bonds were gradually increased to reflect demand and supply conditions. Following the 1991 report of the Narasimham Committee, more comprehensive reforms took place that same year. The reforms consisted of (a) a shift of banking sector supervision from intrusive micro-level intervention over credit decisions toward prudential regulations and supervision; (b) a reduction of the CRR and SLR; (c) interest rate and entry deregulation; and (d) adoption of prudential norms. Further, in 1992, the Reserve Bank of India issued guidelines for income recognition, asset classification and provisioning, and also adopted the Basle Accord capital adequacy standards. The government also established the Board of Financial Supervision in the Reserve Bank of India and recapitalized public-sector banks in order to give banks sufficient financial strength and to enable them to gain access to capital markets. In 1993, the Reserve Bank of India permitted private entry into the banking sector, provided that new banks were well capitalized and technologically advanced, and at the same time prohibited cross-holding practices with industrial groups. The Reserve Bank of India also imposed some restrictions on new banks with respect to opening branches, with a view to maintaining the franchise value of existing banks.

As a result of the reforms, the number of banks increased rapidly. In 1991, there were 27 public-sector banks and 26 domestic private banks with 60,000 branches, 24 foreign banks with 140 branches, and 20 foreign banks with a representative office. Between January 1993 and March 1998, 24 new private banks (nine domestic and 15 foreign) entered the market; the total number of scheduled commercial banks, excluding specialized banks such as the Regional Rural Banks rose from 75 in 1991/92 to 99 in 1997/98. Entry deregulation was accompanied by progressive deregulation of interest rates on deposits and advances. From October 1994, interest rates were deregulated in a phased manner and by October 1997, banks were allowed to set interest rates on all term deposits of maturity of more than 30 days and on all advances exceeding Rs 200,000. While the CRR and SLR, interest rate policy, and prudential norms have always been applied uniformly to all commercial banks, the Reserve Bank of India treated foreign banks differently with respect to the regulation that requires a portion of credit to be allocated to priority sectors. Since 1991, India has been engaged in banking sector reforms aimed at increasing the profitability and efficiency of the then 27 public-sector banks that controlled about 90 per cent of all deposits, assets and credit. Prior to the reforms, Indias financial sector had long been characterized as highly regulated and financially repressed. The prevalence of reserve requirements, interest rate controls, and allocation of financial resources to priority sectors increased the degree of financial repression and adversely affected the countrys financial resource mobilization and allocation.

1.2) FUNCTIONS OF BANKS Functioning of a Bank is among the more complicated of corporate operations. Since Banking involves dealing directly with money, governments in most countries regulate this sector rather stringently. In India, the regulation traditionally has been very strict and in the opinion of certain quarters, responsible for the present condition of banks, where NPAs are of a very high order. The process of financial reforms, which started in 1991, has cleared the cobwebs somewhat but a lot remains to be done. The multiplicity of policy and regulations that a Bank has to work with makes its operations even more complicated, sometimes bordering on illogical. This section, which is also intended for banking professional, attempts to give an overview of the functions in as simple manner as possible. Banking Regulation Act of India, 1949 defines Banking as "accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawal by cheques , draft, order or otherwise." Deriving from this definition and viewed solely from the point of view of the customers, banks essentially perform the following functions : 1) Accepting deposits from public/others(Deposits) 2) Lending money to public(Loans) 3) Transferring money from one place to another( remittances) 4) Acting as trustees 5) Keeping valuables in safe custody 6) Government business

But do these functions constitute banking? The answer must be a no. There are so many intricacies involved in the activities that a bank performs today, that the above list must sound very simple to a seasoned banker. Banks are organized in a linear structure to perform these activities at the base of which lies a Branch. The corporate office of a bank is normally called a head office Accepting deposits Banks are also called custodians of public money. Basically, the money is accepted as deposit for safe keeping. But since the banks use this money to earn interest from people who need money, Banks share a part of this interest with the depositors. However, accepting deposits and keeping track of the money involves a lot of book-keeping and other operations. Let us see what the Banks must maintain to provide this service An effective branch network to reach the targeted customer base A system of Intra branch accounting with separate account(s) for each customer A system of reconciliation at the end of the day Availability of adequate funds at each branch Trained staff for effective customer service Infrastructural environment etc. inputs like space, stationery, comfortable

Lending money to the public Lending money is one of the two major activities of any bank. In a way, the bank acts as an intermediary between the people who have the money to lend and those who have the need for money to carry out business transactions. This activity places its own requirements on the resources of the bank. For effective functioning of this, a bank must possess: Sufficient deposits. Skills to appraise the potential borrowers and the activity. Legal skills for documentation. Legal skills for recovery of its dues through the courts. Skills to follow up and monitor the end-use of money lent by it. An effective credit delivery system. Transfer of money Apart from accepting deposits and lending money, banks also carry out, on behalf of their customers the act of transfer of money both domestic and foreign.- from one place to another. This activity is known as "remittance business" . Banks issue Demand Drafts, Banker's Cheques, and Money Orders etc. for transferring the money. Banks also have the facility of quick transfer of money also know as Telegraphic Transfer or Tele Cash Orders.

To deliver this service, a Bank must have: An effective branch network or correspondent relationships. A system of Inter branch reconciliation A system of reconciliation with the correspondents Availability of funds at all the centers Trustee Business Banks also act as trustees for various purposes. For example, whenever a company wishes to issue secured debentures, it has to appoint a financial intermediary as trustee who takes charge of the security for the debenture and looks after the interests of the debenture holders. Such entity necessarily has to have expertise in financial matters and also be of sufficient standing in the market/society to generate confidence in the minds of potential subscribers to the debenture. While Banks are the natural choice for the customers, Banks must possess the following to be effective and retain that: A track record of sufficient length. Facilities for safe keeping. Legal skills to take necessary steps for the trusteeship Keeping Valuables in Safe Custody Bankers are in the business of providing security to the money and valuables of the general public. While security of money is taken care of through offering various types of deposit schemes, security of valuables is provided through making secured space available to
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general public for keeping these valuables. These spaces are available in the shape of LOCKERS. These are stored in the Bank's Strong Room and are fully secure. Lockers can neither be opened by the hirer or the Bank individually. Both must come together and use their respective keys to open the locker. To make this facility available to its customers, the Bank must provide: Physical structures to house the lockers Locker cabinets Security arrangements Record of access to lockers Government Business Earlier Government business used to be exclusively carried out by Government Treasuries where all type of transactions took place. However, now Banks act on behalf of the Government to accept its tax and non tax receipts. Most of the Government disbursements like pension payments and tax refunds also take place through banks. While the Banks carry out this business for a fee to be paid by the Government, providing this service requires a lot of effort and organization. The banks must provide: Interface with the public Liaison with local government departments and government treasury Arrangement for reconciliation with the Government Accounts Department

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1.3) MARKETING APPROACH Banking industry is essentially a service industry which provides various types of banking and allied services to its clients. Bank customers are such persons and organizations that have surplus or shortage of funds and those who need various types of financial and related services provided by the banking sector. Naturally, the need of each individual group of customers is distinct from the needs of other groups. It is, therefore, necessary to identify different homogenous groups and even sub-groups of customers, and then with utmost precision determine their needs, design schemes to suit their exact needs, and deliver them most efficiently. It should be 'bottom to top' approach with customers at the grass-roots level as the focal point for working out various products / schemes to suit the needs of different homogenous groups of customers. Thus, bank marketing approach, in general, is a group or "Collective" approach. Customers Relationship Management, on the other hand, is an individualistic approach which concentrates on certain select customers from the homogeneous groups, and develops sustainable relationships with them for adding value to the bank. This may be termed as a "Selective" approach. Thus, bank marketing concept, whether "collective" approach or "selective" approach, is a fundamental recognition of the fact that banks need customer oriented approach. In other words, bank marketing is the design and delivery of customer needed services worked out by keeping in view the corporate objectives of the bank and environmental constraints.

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The following chart gives an overview of the Two Pronged Approach to Bank Marketing

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1.4) PRINCIPAL ASPECTS OF BANK MARKETING

1) Customer Oriented Services - Services offered by the banks are to be worked out in such a manner that they fulfil the needs of the customers. Traditionally, bankers have been accustomed to think in terms of what banks can offer and not what customers want. However, bank marketing concept requires them to change this orientation, and start working out schemes and services by keeping changing customer needs as the focus of their new and novel products. In order to design and deliver customer needed services, the banks must learn to seek information about the existing and potential customers, and their perceived and latent needs on a regular and systematic basis. 2) Design and Delivery of Such Services - The word design implies that good marketing services need to be properly designed and painstakingly crafted so as to suit a particular well-defined group of clients. They do not just emerge effortlessly. Moreover, such properly designed services must be properly traded. In fact, poor delivery of smartly designed services is just as bad as smart delivery of poorly designed services. The quality of delivery is to be ensured not only through focused advertisement, but also through proper customer services offered at the bank's retail outlets. Customer satisfaction is a dynamic process and it is necessary to keep pace with rising expectations of the customers. Further, the development of IT and spread of Internet are opening up newer mechanisms of customer contact and services.

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3) Corporate Objectives Of Bank - The corporate objectives of the bank are to be worked out within the broad framework of the national policy. The corporate objectives are of two types, Short Term and Long Term. The Short Term Objectives could be of the type: a. Increasing profitability of the bank next year, b. Widening customer base by offering new services, c. Increasing growth rate of credit next year, etc. The Long Term Objectives could be: a. To rise to number one position in five years, b. To become the universal bank over the period of next 3 years, etc. Once the corporate objectives are clearly spelt out, various schemes can be designed to fulfill the needs of the customers within the framework of the chosen corporate objectives. Further, the resources made available for systematic marketing efforts are also constrained by policies, vision and attitudes of the management. 4) Environmental And Other Constraints - Environmental and other constraints play an important role in bank marketing decisions. Generally, the environmental constraints fall into four categories: Economic, Cultural, Legal and Political. A thorough understanding of local and national economy is essential for taking effective decisions about what product to be offered, where it is to be offered, at what price it is to be offered, and how it is to be offered?

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Banking schemes which are suitable for a developed economy might not be suitable for a developing economy. It is essential to have intimate knowledge of income pattern of potential customers, population growth, nature of industrial and trading activities, extent of agricultural development, employment levels, wage structures, and other relevant factors, in order to make decisions about services to be offered. The cultural environment in which the bank operates also has a bearing on bank marketing decisions. This includes attitude of local people about saving, borrowing and spending, and also their traditions and values. The schemes suited for urban sector would be different from those suited for rural sector. Legal and political environment mainly constrains the decisions about the price of product to be offered and the place for offering the product. For example, price of deposits and various types of advances is constrained by the interest rate policies of the regulator Thus, the knowledge of environmental constraints is an essential factor in the designing and delivery of various types of customeroriented schemes and services

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chp no: 2) REVIEW OF LITERATURE

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CHAPTER NO: 3 ) CONCEPTUAL FRAMEWORK

3.1

Marketing Research

Marketing research involves conducting research to support marketing activities, and the statistical interpretation of data into information. This information is then used by managers to plan marketing activities, gauge the nature of a firm's marketing environment and attain information from supplier. The task of marketing research is to provide management with relevant, accurate, reliable, valid, and current information. A distinction should be made between marketing research and market research. Market research pertains to research in a given market. As an example, a firm may conduct research in a target market, after selecting a suitable market segment. In contrast, marketing research relates to all research conducted within marketing. Thus, market research is a subset of marketing research.

3.2

Types of Marketing Research

Marketing research, as a sub-set aspect of marketing activities, can be divided into the following parts: Primary research (also known as field research), which involves the conduction and compilation of research for the purpose it was intended. Secondary research (also referred to as desk research), is initially conducted for one purpose, but often used to support another purpose or end goal.

3.3

Marketing Planning

The area of marketing planning involves forging a plan for a firm's marketing activities. A marketing plan can also pertain to a specific product, as well as to an organization's overall marketing strategy. Generally
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speaking, an organization's marketing planning process is derived from its overall business strategy. Thus, when top management is devising the firm's strategic direction or mission, the intended marketing activities are incorporated into this plan. There are several levels of marketing objectives within an organization. The senior management of a firm would formulate a general business strategy for a firm. However, this general business strategy would be interpreted and implemented in different contexts throughout the firm.

3.4

Strategic planning

Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. Various business analysis techniques can be used in strategic planning, including swot analysis (strengths, weaknesses, opportunities, and threats ), pest analysis(political, economic, social, and technological), steer analysis (sociocultural, technological, economic, ecological, and regulatory factors), and epistle (environment, political, informatics, social, technological, economic and legal). Strategic planning is the formal consideration of an organization's future course. All strategic planning deals with at least one of three key questions:

"What do we do?" "For whom do we do it?" "How do we excel?" In business strategic planning, the third question is better phrased "how can we beat or avoid competition?". 1

Source: Book-bradford and duncan, page 1.

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In order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. The resulting document is called the "strategic plan." It is also true that strategic planning may be a tool for effectively plotting the direction of a company; however, strategic planning itself cannot foretell exactly how the market will evolve and what issues will surface in the coming days in order to plan your organizational strategy. Therefore, strategic innovation and tinkering with the 'strategic plan' have to be a cornerstone strategy for an organization to survive the turbulent business climate.

3.5

Marketing Management

Marketing management is a business discipline which is focused on the practical application of marketing techniques and the management of a firm's marketing resources and activities. Rapidly emerging forces of globalization have compelled firms to market beyond the borders of their home country making international marketing highly significant and an integral part of a firm's marketing strategy. Marketing managers are often responsible for influencing the level, timing, and composition of customer demand accepted definition of the term. In part, this is because the role of a marketing manager can vary significantly based on a business' size, corporate culture, and industry context. For example, in a large consumer products company, the marketing manager may act as the overall general manager of his or her assigned product to create an effective, cost-efficient

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marketing management strategy, firms must possess a detailed, objective understanding of their own business and the market in which they operate. 3.6 Business Networking Business networking is the process of establishing a mutually beneficial relationship with other business people and potential clients and/or customers. The key to true business networking is the establishment of a mutually beneficial relationship, and that's an incredibly rare event at the standard shake-hands-and-exchange-your-business-card events that are touted as business networking "opportunities". The purpose of business networking is to increase business revenue one way or another. The thickening of the bottom line can be immediately apparent, as in developing a relationship with a new client, or develop over time, as in learning a new business skill.

3.7

Branding In Service Marketing

A brand is defined by philips kotler as a name , term, symbol or design or a combination of them which is intended to identify the goods and services of one or more seller or a group of sellers and to differentiate them from those of competitors

3.8

Advertising In Marketing Of Services

Advertising is a mass, paid communication which is used to transmit information, develop attitudes and induce some form of response on the part of audience. It seeks to bring about a response by providing information to potential customers, by trying to modify their desires and by supplying reasons why they should prefer that particular companys services.

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3.9

International Marketing

International marketing is a very broad field and it encompasses many different types of professionals working at vastly different types of occupations. Some of the international marketing executives work in the world of business, some others in finance, and others in advertising, and the rest in human resources. International marketing usually help companies define and transmit a consistent message about a product across all markets. They also take care to retool advertising campaigns and brand names to fit the tastes of each culture.

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Chp no:4 ) MARKETING STRATEGIES IN BANKS

The marketing strategy consists of a very clear definition of prospective customers and their needs and the creation of marketing mix to satisfy them. A recent development in this regard is Customer Relationship Management (CRM). It is a business strategy to learn more and more about customer behavior in order to create long term and sustainable relationship with them. It is a comprehensive process of acquiring and retaining selective customers to generate value for the bank and its customers. Under CRM, acquisition of customers is done through personal visits, media advertisement or word of mouth from existing customers. Customer retention is carried out through data warehousing and mining tools, customer service and call services, and improved customer value is obtained through cross-selling and up selling to the retained customers. 4.1) Identification of Targeting Customer and Their Needs This is an important area in formulation of a marketing strategy. Unless the bank has clear idea about the customers it wants to serve, it is not possible to work out products to satisfy their needs. This identification process involves: Finding out profile of present customers in terms of their education, occupation, income, geographical location, population group, age, sex, marital status, products and services they purchase, their habits, tastes and preferences, their businesses and future prospects, etc.

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 Finding out opinions of existing customers about the services provided by the bank and their suggestions for improvement in present services and introduction of new services. Collecting such information from the persons who are not currently customers of the bank. All this can be done by conducting a survey of customers and noncustomers of the bank. Moreover, this process of seeking information about the market must form an integral part of the system and must be done on a regular basis. The survey would give valuable information about profiles and opinions of customers and non-customers of the bank, and it can be analysed to find out the target group of the customers and their felt and latent needs. The concept of data warehousing and data mining used in CRM helps in seeking information about individual customers and their needs on a regular and systematic basis. Data warehousing builds customer wise data by mapping it from various services. And products used by the customers such as deposits, credits, foreign exchange, e-business, safe custody, lockers, bill collection, etc. Data mining carries out various types of analysis on collected data to determine customer behaviour with respect to product, price and distribution channels, and offers a holistic view of every customer at a given point of time. The customer information gathered by the bank in their day-to-day banking operations is often sufficient for effective data storage. However, many times, it needs to be supported by data collected from outside sources and agencies.

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Further, the Customer Relations Management focuses on customer classification by classifying the customers into: a high value (a more profitable) customer and a low value (a less profitable) customer. Once bank differentiates the customers in terms of their profitability and other traits, it becomes easy for the banks to customize their services and products to maximize overall value of their customer portfolio.

4.2) Marketing Mix The second element in formulation of marketing strategy is development of proper marketing mix, so as to satisfy the needs of the target group of customers. This would involve decisions regarding product, place, price and promotion. Decisions about product would answer questions about the design of the services offered to suit customer needs, the desirable hours for offering such services, the attractive names of such services and so on. Various alternative ways to provide the basic services might have to be worked out depending on the needs of the various target groups. Decisions about place should answer questions about location of the prospective customers and, therefore, location for offering such services. Decisions about price should answer questions about right price for services offered, worked out by taking into consideration the cost of such services, competitor's charges and other factors. Decision about promotion answers questions about communication with the customer. After getting information on needs and location of the

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prospective customer and after designing schemes to suit their needs, it is necessary to take decisions on making schemes known to the prospective customers through proper communication media and through proper words, so as to bring out the salient features of the scheme. Actual delivery of the schemes at the counters and at the manager's desk also plays a vital role in determining the success of the scheme. Expectations of the customers in post-reforms period have been changing very fast and customers have started shifting loyalty to better banks. It is, therefore, all the more necessary to ensure that not only the felt needs but also the latent needs of the customers are foreseen and satisfied. A very good example of formulation of a market strategy under the "collective" approach is development of the product, "Kisan Credit Cards". The target groups identified for this were farmers with the purpose of dispensation of agricultural and rural credit to them. Agricultural credit cards and cash credit facilities which were niche-marketed and were exclusively preserved for the privileged class of farmers were, thus, extended to the small and marginal farmers since 1999

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4.3) 7ps of marketing

The marketing mix is the combination of marketing activities that an organisation engages in so as to best meet the needs of its targeted market. Traditionally the marketing mix consisted of just 4 ps.

Product To begin with, develop the habit of looking at your product as though you were an outside marketing consultant brought in to help your company decide whether or not it's in the right business at this time. Ask critical
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questions such as, "Is your current product or service, or mix of products and services, appropriate and suitable for the market and the customers of today?" Whenever you're having difficulty selling as much of your products or services as you'd like, you need to develop the habit of assessing your business honestly and asking, "Are these the right products or services for our customers today?"

Is there any product or service you're offering today that, knowing what you now know, you would not bring out again today? Compared to your competitors, is your product or service superior in some significant way to anything else available? If so, what is it? If not, could you develop an area of superiority? Should you be offering this product or service at all in the current marketplace? Prices The second P in the formula is price. Develop the habit of continually examining and reexamining the prices of the products and services you sell to make sure they're still appropriate to the realities of the current market. Sometimes you need to lower your prices. At other times, it may be appropriate to raise your prices. Many companies have found that the profitability of certain products or services doesn't justify the amount of effort and resources that go into producing them. By raising their prices, they may lose a percentage of their customers, but the remaining percentage generates a profit on every sale. Could this be appropriate for you?

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Sometimes you need to change your terms and conditions of sale. Sometimes, by spreading your price over a series of months or years, you can sell far more than you are today, and the interest you can charge will more than make up for the delay in cash receipts. Sometimes you can combine products and services together with special offers and special promotions. Sometimes you can include free additional items that cost you very little to produce but make your prices appear far more attractive to your customers. In business, as in nature, whenever you experience resistance or frustration in any part of your sales or marketing activities, be open to revisiting that area. Be open to the possibility that your current pricing structure is not ideal for the current market. Be open to the need to revise your prices, if necessary, to remain competitive, to survive and thrive in a fast-changing marketplace. Promotion The third habit in marketing and sales is to think in terms of promotion all the time. Promotion includes all the ways you tell your customers about your products or services and how you then market and sell to them. Small changes in the way you promote and sell your products can lead to dramatic changes in your results. Even small changes in your advertising can lead immediately to higher sales. Experienced copywriters can often increase the response rate from advertising by 500 percent by simply changing the headline on an advertisement. Large and small companies in every industry continually experiment with different ways of advertising, promoting, and selling their products and
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services. And here is the rule: Whatever method of marketing and sales you're using today will, sooner or later, stop working. Sometimes it will stop working for reasons you know, and sometimes it will be for reasons you don't know. In either case, your methods of marketing and sales will eventually stop working, and you'll have to develop new sales, marketing and advertising approaches, offerings, and strategies. Place The fourth P in the marketing mix is the place where your product or service is actually sold. Develop the habit of reviewing and reflecting upon the exact location where the customer meets the salesperson. Sometimes a change in place can lead to a rapid increase in sales. You can sell your product in many different places. Some companies use direct selling, sending their salespeople out to personally meet and talk with the prospect. Some sell by telemarketing. Some sell through catalogs or mail order. Some sell at trade shows or in retail establishments. Some sell in joint ventures with other similar products or services. Some companies use manufacturers' representatives or distributors. Many companies use a combination of one or more of these methods. In each case, the entrepreneur must make the right choice about the very best location or place for the customer to receive essential buying information on the product or service needed to make a buying decision. What is yours? In what way should you change it? Where else could you offer your products or services?

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Packaging The fifth element in the marketing mix is the packaging. Develop the habit of standing back and looking at every visual element in the packaging of your product or service through the eyes of a critical prospect. Remember, people form their first impression about you within the first 30 seconds of seeing you or some element of your company. Small improvements in the packaging or external appearance of your product or service can often lead to completely different reactions from your customers. With regard to the packaging of your company, your product or service, you should think in terms of everything that the customer sees from the first moment of contact with your company all the way through the purchasing process. Packaging refers to the way your product or service appears from the outside. Packaging also refers to your people and how they dress and groom. It refers to your offices, your waiting rooms, your brochures, your correspondence and every single visual element about your company. Everything counts. Everything helps or hurts. Everything affects your customer's confidence about dealing with you. When IBM started under the guidance of Thomas J. Watson, Sr., he very early concluded that fully 99 percent of the visual contact a customer would have with his company, at least initially, would be represented by IBM salespeople. Because IBM was selling relatively sophisticated high-tech equipment, Watson knew customers would have to have a high level of confidence in the credibility of the salesperson. He therefore instituted a

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dress and grooming code that became an inflexible set of rules and regulations within IBM. As a result, every salesperson was required to look like a professional in every respect. Every element of their clothing-including dark suits, dark ties, white shirts, conservative hairstyles, shined shoes, clean fingernails-and every other feature gave off the message of professionalism and competence. One of the highest compliments a person could receive was, "You look like someone from IBM." Positioning The next P is positioning. You should develop the habit of thinking continually about how you are positioned in the hearts and minds of your customers. How do people think and talk about you when you're not present? How do people think and talk about your company? What positioning do you have in your market, in terms of the specific words people use when they describe you and your offerings to others? In the famous book by Al Reis and Jack Trout, Positioning, the authors point out that how you are seen and thought about by your customers is the critical determinant of your success in a competitive marketplace. Attribution theory says that most customers think of you in terms of a single attribute, either positive or negative. Sometimes it's "service." Sometimes it's "excellence." Sometimes it's "quality engineering," as with Mercedes Benz. Sometimes it's "the ultimate driving machine," as with BMW. In every case, how deeply entrenched that attribute is in the minds of your customers and prospective customers determines how readily they'll buy your product or service and how much they'll pay.

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Develop the habit of thinking about how you could improve your positioning. Begin by determining the position you'd like to have. If you could create the ideal impression in the hearts and minds of your customers, what would it be? What would you have to do in every customer interaction to get your customers to think and talk about in that specific way? What changes do you need to make in the way interact with customers today in order to be seen as the very best choice for your customers of tomorrow?

PEOPLE

The final P of the marketing mix is people. Develop the habit of thinking in terms of the people inside and outside of your business who are responsible for every element of your sales and marketing strategy and activities. It's amazing how many entrepreneurs and businesspeople will work extremely hard to think through every element of the marketing strategy and the marketing mix, and then pay little attention to the fact that every single decision and policy has to be carried out by a specific person, in a specific way. Your ability to select, recruit, hire and retain the proper people, with the skills and abilities to do the job you need to have done, is more important than everything else put together. In his best-selling book, Good to Great, Jim Collins discovered the most important factor applied by the best companies was that they first of all "got the right people on the bus, and the wrong people off the bus." Once these

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companies had hired the right people, the second step was to "get the right people in the right seats on the bus." To be successful in business, you must develop the habit of thinking in terms of exactly who is going to carry out each task and responsibility. In many cases, it's not possible to move forward until you can attract and put the right person into the right position. Many of the best business plans ever developed sit on shelves today because the [people who created them] could not find the key people who could execute those plans.

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4.4) PROMOTIONAL STRATEGY OF BANK MARKETING

Even if a scheme is properly developed and designed to suit customer needs, it will not pick up, unless it is properly marketed at all levels. Some of the strategies which would help banks in their promotional efforts are given below: To promote "Personal Selling", whether performed by counter clerk, bank officer or customer service representatives of the bank. To ensure "Proper Knowledge and Awareness" of various schemes of the bank among the employees of the bank. To impart "Sales and Product Training" including tele-banking and netbanking concepts to employees of the bank. One of the ways of doing this is to organise periodical in-branch departmental meetings of the employees addressed by Branch Managers / Departmental Heads. To develop incentive programmes which reward good-customer oriented selling behavior. The incentives need not be necessarily in terms of a cash payment but several other alternatives can also be thought of, e.g., if a particular employee brings certain minimum amount of business to the bank, he/she should be eligible for certain special leave or they can be made members of a special club called "Chairman's Club" for a particular period. Several other such ways giving cashless incentives to the employees can be worked out.

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To ensure conversion of the entire employees organization of the bank into a well-informed, disciplined and professional force committed to the corporate values and objectives. To make effective use of the large network of the retail outlets of the bank visited by a large number of customers every day. A typical bank customer visits his/her branch two or more times a month so one can imagine how many customer visits each branch will have per year. The use of "In-bank Advertising" would, therefore, help a lot in marketing bank services e worked out. In this connection the bank may have to think of retail shopkeepers' strategy of exhibiting their products in an attractive manner. This would include: a) Careful physical layout of the branch and creation of inviting environment. (b) Exhibition windows as found in many departmental stores displaying various products of the bank in an attractive manner. (c) Attractive table with glass box on top exhibiting literature on various products offered by the bank to be kept at an appropriate location on the branch floor. (d) Creative ideas to exhibit "intangible products" in "tangible manner", e.g., visual images, small models / photographs of life style, customer could achieve with the help of proper financial planning done through bank schemes.

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(e) Creation and updating of literature on various schemes and services offered by the bank and ensuring its availability at each branch. (f) Specially designed in-branch video visuals exhibiting various products and services of the bank. Public sector banks with a large network of branches have an excellent opportunity to expand customer relationships and provide them with additional complementary services. Personal contacts in any case are much better as compared to contacts through phones or Internet. In Customer Relationship Management (CRM), results of data warehousing and mining must be made available to all the concerned employees so that they have complete knowledge about the value / profit each individual customer adds to the bank, their future needs and ways and means to satisfy them.

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chp no: 5 NEW TRENDS IN BANKING 5.1) Internet Banking: Internet technology has invaded the portals of our banking institutions and as the clich goes everything will just be a click away. With net banking the customer will be able to transact with the help of a mouse and his visits to the neighbourhood bank will become a thing of the past. Though a modest start has been made in India, net banking has still a long way to go. This development has been acknowledged by the latest Online Banking Report, which features a listing for ICICI Bank. Some others like Citibank, HDFC Bank and Global Trust Bank also have also endeavoured to make real time banking a reality before this century closes. Net banking makes it easy to transfer ones money from one branch in a particular city to any other branch in another city. Types of Internet Banking

Currently, there are three basic kinds of Internet banking that are being employed in the marke Information This is the most basic level of Internet banking.The bank has marketing information about its products and services on a stand-alone server.This level of Internet banking service can be provided by the bank itself or by sourcing it out.Since the server or Web site may be vulnerable to alteration, appropriate controls must therefore be in place to prevent unauthorized alterations to data in the server or web site.

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5.2) Communication This type of Internet banking allows interaction between the banks systems and the customer. It may be limited to electronic mail, account inquiry, loan applications, or static file updates. The risk is higher with this configuration than with the earlier system and therefore appropriate controls need to be in place to prevent, monitor, and alert management of any unauthorized attempt to access banks internal network and computer systems. Under this system the client makes a request to which the bank subsequently responds. 5.3) Transaction Under this system of Internet banking customers are allowed to execute transactions. Relative to the information and communication types of Internet banking, this system possesses the highest level of risk architecture and must have the strongest controls. Customer transactions can include accessing accounts, paying bills, transferring funds, etc. These possibilities demand very stringent security. Various transactions that can be done by internet banking are: Net banking makes it easy to transfer ones money from one branch in a particular city to any other branch in an another city One can open a FD account via the net. One needs to provide data regarding the amount and term of the deposit and also the branch in which the account is to be opened. One can order for an issue of a demand draft or a bankers cheque. However, the draft can be delivered only to the customers address and not to any other third party.

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 One can inquire on the balance in ones savings, current and FD account and also on the tax deducted at source on ones FD account for the current and previous financial year. One can give instructions over the net for stopping payment on a cheques/s. You can request for a cheque book via the internet, which will take three days to come. One can view all the transactions completed on an account for a specified period and get a copy via e-mail. ICICI Bank with its net banking service called Infinity goes a step forward by allowing the account holder to transfer funds into another persons account within the bank. Also one can intimate about the loss of an ATM Card over the net when using Infinity. Moreover, corporate can issue of letters of credit and make enquirys regarding bills sent for collection via this service. A special feature on Infinity is the facility for nicknaming all accounts to avoid remembering lengthy account numbers. In terms of safety, HDFC Bank allows one to have three login attempts after which a new password is given while ICICI Bank will disable the password after five login attempts. Considering the fact that these services are offered without charging a fee, the effort is commendable. The potential for net banking in India is immense considering the rising penetration levels of the World Wide Web in Indian homes and offices.

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The reasons why Internet banking has not taken off in India at a very fast pace are: 1) Slowness in adoption of the Internet by the 40+ age group, 2) Lack of a strong trust environment prevents rapid move of corporate into adopting Internet, 3) Lack of a critical mass of early adopters of security and trust technology among bankers operating in India to drive the transition from bricks and mortar to e-banking

Internet Banking Advantages: Reduced Transaction cost - It has been repeated shown that as a delivery or distribution channel, the Internet could bring a substantial cost advantage for banks. The frequently quoted Booz-Allen and Hamilton study showed that the cost of a customer walking into the branch and using a teller is USD1.01, where as the cost of conducting the same transaction on the Internet is only a tenth of the cost. No doubt the ATM is considerably cheaper than a teller, but even so, the Internet is nearly 3 times cheaper than the ATM usage. In short, replacing a teller with an Internet channel should in theory, show a 10 fold increase in the distribution revenue for the bank. This reason alone should be sufficient for banks to encourage this form of distribution channel.

Internet banking Disadvantages:

Need an account with an Internet Service Provider (ISP) Security concerns, like "hackers" accessing your bank accounts

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Original setup for bill paying time is time-consuming but will ultimately be a time-saver

Switching banks can be more cumbersome online than in person Must have basic computer skills and Internet knowledge Must be comfortable using a computer

5.4) Mobile banking: Mobile Banking is a service that allows you to do banking transactions on your mobile phone without making a call, using the SMS facility. Mobile Banking works on the 'Text Messaging Facility' also called the SMS that is available on mobile phones. This facility allows you to send a short text message from your mobile phone instead of making a phone call.

All you need to do is type out a short text message on your mobile phone and send it out to a pre-designated number. The response is sent to you as an SMS message, all in the matter of a few seconds. This message travels from your mobile phone to the SMS Centre of the Cellular Service Provider, and from there it travels to the Bank's systems. The information is retrieved and sent back to your mobile phone via the SMS Centre, all in a matter of a few seconds. You can access your bank account and conduct a host of banking transactions and inquiries through the Mobile Banking services. You can check your balance, stop a cheque payment, or even pay your utility bills. The Mobile Banking service gives you account information and real-time

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transaction capabilities from the mobile phones at a true "anywhere, anytime, anyhow" convenience. All this is through SMS or WAP. You can access the following transactions using mobile banking: Get your balance details, obtain your last 3 transaction details, request a cheque book ,stop a cheque payment ,enquire cheque status ,request an account statement ,get Fixed Deposit details ,Bill payment details for electricity, mobile phone and telephone services 5.5) Automated Teller Machines Automated Teller Machines are a means of convenience for customers. So much so that most of the people have changed the acronym to Any Time Money. HSBC Bank was the first bank to introduce the ATM concept in India way back in 1987. Now, most of the banks have their ATM outlets in India. Private sector banks have taken the lead in this regard. ICICI, UTI, HDFC and IDBI together account for more than 50% of the total ATMs in India. ICICI Bank was the first bank to cross the 1,000 mark in India. The system works as follows: a switch routes all information and transactions among member institutions. It transmits the information and/or data to the card-issuing bank or its processor, which approves or declines the transaction request and notifies the switch. The card-issuing bank's decision is then routed by the switch to the processor of the ATM, which completes the transaction. At the end of each day, accounts among members are settled and account balances are transmitted to each member institution

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The cost of setting up an ATM center is around Rs1mn. The maintenance cost per annum works out to around Rs1.2-1.4mn per annum. To reach the break-even point within a year, there should be around 250-300 transactions per day per ATM. The companies are telling customers to use the ATMs more rather than visit the branches. 5.6) Phone banking Your bank account is now just a phone call away. The advantages of phone banking are as follows: Security When you use the Phone Banking facilities, your transactions are completely secure. When you open an account with us, you are given a unique Telephone Identification Number (TIN), which is completely confidential Choose your language: You can choose between English and Hindi for guidance through the Interactive Voice Response (IVR) menu of services, at the time of calling the bank. Account details/balance enquiry: You can get up-to-the-second details of your Savings or Current Accounts and your Fixed Deposits. You can also get details of the last five transactions (on the IVR), which would be read out to you at the touch of a button. You can even have a mini account statement of the last 9 transactions faxed to you

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Cheque status inquiries: You can use Phone Banking to check on the status of cheques issued or deposited from anywhere in India. Cheque book/ account statement requests : Register a request for a new cheque book using Phone Banking. It will be couriered within 3 working days in India. Stop payment requests : Stop payment of a cheque, 24 hours a day. You have the facility to stop a single cheque or a series of cheques Fixed Deposits: You can easily open a Fixed Deposit over the phone, by simply authorizing a transfer of funds from your Savings Account. The deposits can be opened in the names of the account holders in the funding account. You may also book the Fixed Deposit in your name alone and maintain a sweep-in facility. You can also enquire about the details of your Fixed Deposit, or Tax Deducted at Source, if any using the Phone Banking service. Reporting of lost ATM / Debit Card: If you happen to lose your ATM/Debit card, call your local Phone Banking number right away. This facility is available 24 hours a day, 7 days a week. 5.7) Demand Drafts You can now place a request for a Demand Draft or Manager's Cheque worth up to Rs. 50,000/- per Customer ID per day, on the phone. For Preferred clients the limit is above that amount per day. The draft or cheque will be sent to the address on our records by courier on the next working day.

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5.8) Fund transfers If you hold multiple accounts with us, all you have to do is call in to transfer funds between accounts, provided the same are linked to the same Cust ID number. There is no fund transfer limit.

This facility is available only during Phone Banking hours (i.e. when Phone Bankers are available). 5.9) Bill Pay Pay your Utility and Bank Credit Card bills through Phone Banking Using Phone banking When you dial in to Phone Banking, a voice prompt will guide you through your transactions. Also, for those who prefer the human touch, some Phone Banking service comes with the option of talking to a Phone Banker, who will provide you with the required assistance

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Chp no: 6) RESERVE BANK OF INDIA - REGULATORY AUTHORITY

India's Central Bank - the RBI - was established on 1 April 1935 and was nationalized on 1 January 1949.

The Preamble prescribes the objective as:

"to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage."

6.1) Functions of RBI

Monetary Authority:

Formulates, implements and monitors the monetary policy. Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.

Regulator and supervisor of the financial system:

Prescribes broad parameters of banking operations within which the countrys banking and financial system functions.

Objective: maintain public confidence in the system, protect

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depositors interest and provide cost-effective banking services to the public. Manager of Exchange Control:

Manages the Foreign Exchange Management Act, 1999. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency:

Issues and exchanges or destroys currency and coins not fit for circulation.

Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role:

Performs a wide range of promotional functions to support national objectives.

Related Functions:

Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.

Banker to banks: maintains banking accounts of all scheduled banks.

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CHP NO: 7) STATE BANK OF INDIA

The State Bank of India is the largest commercial bank in India in terms of profits, assets, deposits, branches and employees. The origins of State Bank of India date back to 1806, when the Bank of Calcutta (later called the Bank of Bengal) was established. In 1921, the Bank of Bengal and two other banks (Bank of Madras and Bank of Bombay) were amalgamated to form the Imperial Bank of India. In 1955, the controlling interests of the Imperial Bank of India were acquired by the Reserve Bank of India and the State Bank of India was created by an act of Parliament to succeed the Imperial Bank of India. It has Rs. 318619 crore in deposits and average working funds of Rs. 375804 crore, the State bank of India stands tall in the industry. The closest competitors are not a third as big as SBI. Punjab National bank ranks # 2 in deposits, but has deposits of just Rs. 87816 crore. ICICI is the second biggest as far as average working funds are concerned, but that stacks up to just Rs. 106593 crore. SBI , which accounts for 18% of all deposits with commercial banks in India , is able to mop up such large amounts in low cost deposits because of its sheer reach ; it has 13635 branches spread all over the country. Last year, while SBIs deposits grew 7%, those of new private banks swelled at 29.6%. Add to it the coming mergers and acquisitions, and SBIs position will come under threat. SBI has a good size and excellent geography in India and are interested in exploring acquisitions overseas .To keep its lead , the banking elephant will have to learn to dance .
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SBIs Time Line

1955: Branch expansion 1960s: small scale industries and small businesses 1970s: entrepreneurial development and agriculture 1980s: International expansion 1990s: Technology information and corporate financing 2002: focus on retail banking 2003: Business Process Reengineering 2004: Full computerization and restructuring ATMs Total ATMs of State Bank Group 5500 +; all networked -largest network in the country 6000+ ATMs for the Group by March 2007 Card base of the Group 5.7 mn largest in the country (debit +credit cards) Customers have access over 34,000 POS through debit-cum-ATM card

Internet Banking 3, 50,000 + retail customers and value added services extended to all multidistribution channel.

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Challenges Increasing competition in Retail Banking Trading profit under pressure Training and redeployment of human resources Reduce gross NPAs

SBI strategy Leverage unparalleled network Leverage multi-product platform Enhance technology platform - virtual merger Focus on infrastructure and growth oriented industries Process re-engineering to enhance efficiency Low cost funding Expand fee income sources Reorientation of organization and training of human resources - sales focused ; customer focused Use of recent regulatory changes in tackling NPAs Overseas expansion

Technology Universal computerization of all branches of SBI Group Centralized database system Single Window Services at branches Increased ATM coverage through tie ups with other banks

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Business process re engineering Creation of separate SBUs to focus marketing efforts Personal Banking Agricultural SMEs Government business Centralized credit management New credit delivery model aimed at Mid-Corporate segment lending Stressed Asset Management Group set up to address issue of sticky assets Focus on Project Finance SBU

People Training Lateral Recruitment Specialist recruitment for Agriculture Sector In US$ billion SBI State Bank Group FY 05-06 Operating Profit Net Profit Balance Sheet Size 2.63 0.88 104.85 3.38 0.84 93.28 3.52 1.27 126.03 SBI State Bank Group FY 06-07 3.82 1.53 130.24

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chp no:8) ICICI BANK

In 2006 the bank added 13,000 retail customers every single day of the year, or a mind boggling 3.4 million customers, taking the tally of its customers to 10 million. When the year began it had presence in 600 cities across the country; before the year is rung out, it will be present in 1000.ICICI leads in every single retail segment it is present in , be it mortgages, auto loans , personal loans or credit cards. In mortgages it has a 28% share in auto loans it has 37%, in personal and consumer 29% and so on. In the case of auto finance, it is growing faster than the industry average, and in the credit cards it currently has 26 lakh customers and Citibank the erstwhile market leader, is likely to drop way behind ICICI bank. And with Rs. 106593 crore in average working funds, it is second only to the public behemoth, the State bank of India. Earlier when a customer applied to open an account, a three week waiting period was involved .In that time, his cheque book , ATM card and pin number would arrive in separate envelopes, because the process was manual. Starting a few months ago . Customers are now given a pre- printed welcome kit when they open an account and the cards are activated the next day. However it is yet to score significant improvement in areas such as quality of earnings and non performing assets (NPAs) , a large part of

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which is historical and includes lending to the ill- starred Dabhol power project. These are the reasons why despite its dazzling growth , it ranks a distant #24 on the BT-KPMG survey of Indias best banks in 2006.The banks retail net NPA is 0.75 %. Going forward , the banks strategy is to consolidate its presence in existing markets , accelerate growth, sustain profitability and build a business model to withstand the pressures of a global rollout ICICI Bank currently has subsidiaries in the United Kingdom and Canada, branches in Singapore and Bahrain and representative offices in the United States, China, United Arab Emirates and Bangladesh.ICICI Bank's equity shares are listed in India on the Stock Exchange, Mumbai and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). ICICI banks Distinct 4 C approach Customer Focus Understanding and effectively meeting customer requirements Cross sell Maximize share of wallet Offer comprehensive solutions Contain risk Effective risk management Risk mitigating structure
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 Cost control Centralized processes Technology enabled solutions Multi channel delivery

Internet Banking First Bank in India to launch website - 1996 First Bank in India to launch Internet Banking - 1997 First Bank in India to launch online bill payment-1999 Only Bank in India with million online customers Monthly average transactions per online customer- 7

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chp no: 9) SBI V/S ICICI - SERVQUAL: A PROVEN CUSTOMER NEEDS FRAMEWORK

Parasuraman Zeithaml and Berry (1985) list ten determinants of service quality that can be generalized to any type of service. The ten dimensions include: Tangibles - the physical evidence of the service, physical facilities, appearance of personnel, tools or equipment used to provide the service, other customers in the service facility; Reliability - consistency of performance and dependability; Responsiveness - willingness or readiness of staff to provide service; Competence - possession of the required skills and knowledge to perform the service by the contact personnel as well as operational support personnel; Access - approachability and ease of contact; Communication - keeping customers informed in language they can understand; Credibility - trustworthiness, believability, and honesty; Security - the freedom from danger, risk, or doubt. (e.g. physical safety and confidentiality); Understanding - making the effort to understand the customers needs.

These nine dimensions were regrouped in the well known five dimensions in the SERVQUAL model (Parasuraman, Zeithaml and Berry 1990) which include tangible, reliability, responsiveness, assurance, and empathy:

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Tangible - appearance of physical facilities, equipment, personnel, and communication materials;

Reliability - ability to perform the promised service dependably and accurately; Responsiveness - willingness to help customers and provide prompt service; Assurance - knowledge and courtesy of staff and their ability to convey trust and confidence; Empathy caring and individualized attention to the customer.

9.1) DISCUSSION OF THE SERVQUAL MODEL

Parasuraman, Zeithaml and Berry (1990) proposed to subjectively measure service quality by finding out the extent of discrepancy between customers expectations or desires and their perceptions of the actual quality of performed service. Good service quality exists when customer expectations are met or exceeded and is studied in five dimensions as mentioned in the last section: tangible, reliability, responsiveness, assurance, empathy. The methodology of comparing customers expectation and perception in five dimensions is the popular SERVQUAL (Danuta Ann Nitecki, 1996). The discrepancy between customers expectations or desires and their perceptions of the actual service performance was elaborated in the Discomfirmation of Expectations Paradigm (Patterson 1993) which related satisfaction to customers pre-purchase expectations and perceptions of service performance and identified any difference as Disconfirmation.
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The comparison which forms the basis of the model are as follows: Comparison Process Result 1. Perceived Performance > Expectation: High satisfaction (Delight) 2. Perceived Performance = Expectation: Merely Satisfied 3. Perceived Performance < Expectation: Dissatisfaction

The publication of the first results of the SERVQUAL instrument provoked a debate on how best to measure service quality and in the subsequent decade there have been many attempts to demonstrate the efficacy of the SERVQUAL instrument. It is generally agreed, however, that SERVQUAL instrument is suitable for measurement of service quality because it measures key aspects of service quality. Asubonteng (1996), moreover, claims that SERVQUAL is popular with managers because it combines ease of application and flexibility. Managers know that results obtained using the model are probably not objective truth but that they help identify the direction in which the firm should move. The methodology of comparing the gap between expectation and perception has also attracted criticism. Cronin and Taylor (1992; 1994) argued that SERVQUAL is paradigmatically flawed because of its ill-judged adoption of the disconfirmation model. Babakus and Boller (1992) found that the use of a gap approach to service quality measurement is intuitively appealing, they suspected that the difference in scores does not provide any additional information beyond that already contained in the perception component of

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the SERVQUAL scale. They found that the dominant contributor to the gap score is the perception score. Lewis (1993) criticized the use of a seven-point Likert scale for its lack of verbal labelling for points two to six which may cause respondents to overuse the extreme ends of the scale. Babakus and Mangold (1992) suggested using five- point Likert scale on the grounds that it would reduce the frustration level of respondents and increase response rate and quality The Servqual -model is a tool that measures quality along 5 service quality dimensions in a survey-format. Each of the dimensions have several statements, which have to be answered on a 7-point scale (strongly disagree=1 until strongly agree=7). The advantages of the SQ-model are that it is easy and quick to use for respondents, its useful in several service situations, its an accepted and valid standard. Furthermore its reliable because respondents interpret the statements in the same way. The Servqual model has been used by many different companies in many different industries including: Libraries Telephone companies Restaurants Hotels Hospitals

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Gap1: The difference between the perceptions of management and the real customers needs Gap2: The discrepancy between managements perception of customers expectation and service quality specifications Gap 3: The discrepancy between service quality specifications and the service delivered to the customer Gap 4: The discrepancy between the service provided and the quality of service promised in advertisements and other external ways of communication Gap 5: The discrepancy between customers expectations and perceptions

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9.2) SERVQUAL CALCULATIONS SBI Expectation E1 E2 E3 E4 E5 E6 E7 E8 E9 E10 E11 E12 E13 E14 E15 E16 Perception 5.2 P1 5.3 P2 5.6 P3 5.2 P4 6.2 P5 6.3 P6 6.5 P7 6.8 P8 6.8 P9 6.5 P10 6.8 P11 6.4 P12 6.8 P13 5.3 P14 6.8 P15 6.1 P16 3.9 4.2 3.7 4.4 5.1 4.6 5.1 5.2 5.7 4.3 4.2 5.2 3.7 4.9 4.9 5.3 Gap -1.3 -1.1 -1.9 -0.8 -1.1 -1.7 -1.4 -1.6 -1.1 -2.2 -2.6 -1.2 -3.1 -0.4 -1.9 -0.8

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E17 E18 E19 E20 E21 E22

6.2 P17 5.9 P18 5.1 P19 5.9 P20 6.8 P21 6.4 P22

4.4 5.2 5.1 4.9 3.8 5.2

-1.8 -0.7 0 -1 -3 -1.2

ICICI ICICI Expectation E1 E2 E3 E4 E5 E6 E7 E8 E9 5.6 5.7 6.8 6.6 6.4 6.8 6.7 6.9 6.9 Perception P1 P2 P3 P4 P5 P6 P7 P8 P9 5.2 4.4 5.5 5.5 6.1 6.2 6.2 5.9 6.9 Gap -0.4 -1.3 -1.3 -1.1 -0.3 -0.6 -0.5 -1 0

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E10 E11 E12 E13 E14 E15 E16 E17 E18 E19 E20 E21 E22

6.6 6.8 6.5 6.8 6.3 6.9 6.4 6.8 6.5 6.3 6.7 6.9 6.8

P10 P11 P12 P13 P14 P15 P16 P17 P18 P19 P20 P21 P22

5.9 5.8 5.4 5.2 5.6 5.8 6.3 5.9 5.2 6.4 5.4 4.9 5.8

-0.7 -1 -1.1 -1.6 -0.7 -1.1 -0.1 -0.9 -1.3 0.1 -1.3 -2 -1

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EXPECTATIONS
8 6 4 2 0
SBI

Fig.1

PERCEPTIONS

8 7 6 5 4 3 2 1 0

SBI ICICI

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Fig .2

SBI SERVICE GAP

8 7 6 5 4 3 2 1 0 Expectation Perception

G 1

G 3

G 5

G 7

G 9

G 11

G 13

G 15

G 17

G 19

Fig. 3

ICICI SERVICE GAP

8 7 6 5 4 3 2 1 0 Expectation Perception

G 1

G 3

G 5

G 7

G 9

G 11

G 13

G 15

G 17

G 19

Fig.4

G 21

G 21

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COMPARISON OF SERVICE QUALITY GAP BETWEEN SBI AND ICICI

1 0 -1 -2 -3 -4 -5 -6 ICICI SBI

Fig.5 PSU bank- SBI Table 2: Calculations to obtain unweighted Expectation Servqual score Average Tangible Servqual score Average Reliability Servqual score Average ResponsivenessServqual score Average Assurance Servqual score Average EmpathyServqual score Total Average (= total/5) Unweighted Servqual score 21.3 32.6 26.5 24.4 30.1 16.2 25.7 17.4 19.5 24.2 -5.1 -6.9 -9.1 -4.9 -5.9 31.9 6.38 Perception Gap

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SERVICE GAP IN PUBLIC BANKS (SBI)

35 30 25 20 15 10 5 0 Expectation Perception

en es s

As su ra nc e

Ta ng i

ia bi lity

Fig.6

Servqual importance weights(PSU banks- SBI)

Tangibility Reliability
Empathy 19% Tangibility 12%

Re sp on siv

Re l

Em
Responsiveness Assurance Empathy
Reliability 29%

Assurance 17% Responsiveness 23%

Fig.7

pa th y

bi lit

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9.3) FINDINGS/ ANALYSIS SBI service gap: Here we can clearly see the differences between the expectations and perceptions of the SBI customers in most of the concerned areas. The service gap is highest in Question 10 (employees will tell customers exactly when the service will be performed ), Question 11 ( employees give prompt service) and high gap in Question 13 ( employees are never too busy to respond to customers request ) Responsiveness. The gap is low in Question 14 (behavior of employees instills confidence in them ) Assurance. The gap is highest in Question 21 ( bank has your best interest at heart ) Empathy

ICICI service gap: The service gap in Question 1 ( modern looking equipment ) is low Tangibles The gap is low in Question 5 (banks fulfill promises on time ) and Question 9 ( error free records ) Reliability . It means that if the bank promises to do something by a certain time, they do it and the bank maintains error free records. The gap is also low in Question 19 ( convenient operating hours to customers ) Empathy The gap is highest in Question 21 ( banks have customers interest at heart ) Empathy

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9.4) COMPARISON OF SERVICE QUALITY GAP BETWEEN SBI & ICICI : ICICI has no gap in Question 9 (maintaining error free records) whereas SBI has a gap of -1.1 ICICI customers are more than satisfied with the operating hours of the bank (Question 19) with the score of + 0.1 as compared to SBI customers who are also satisfied but with a score of 0 . Here , ICICI is delivering more than the customers expectations ICICI bank employees are consistently courteous with customers (Question 16). The gap is a minimal -0.1 as compared to 0.8 of SBI. In individual attention ( Question 18) SBI has scored over ICICI bank with a score of -0.7 as compared to -1.3 of ICICI The SBI service gap is maximum in Question 13 ( employees are never too busy to respond to customers request ) with a score of -3.1 as compared to 1.6 of ICICI The SBI customers are more satisfied with (Question 4 ) the materials associated with the service and find them visually appealing. They scored over ICICI bank customers with a score of -0.8 as compared to -1.1 The SBI employees instill confidence in customers . They score over ICICI bank with a score of -0.4 as compared to -0.7 The SBI customers are also more satisfied than ICICI bank customers with employees giving them personal attention ( Question 20 ) . SBI received a score of -1 in comparison to ICICI getting a score of -1.3

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The service gap before assigning importance weights was in the following order: 1. Responsiveness 2. Reliability 3. Empathy 4. Tangibility 5. Assurance

The service gap after assigning importance weights was in the following order: 1. Responsiveness 2. Reliability 3. Empathy 4. Assurance 5. Tangibility Assurance went up to the fourth place and tangibility went down to the last position The service gap in private banks represented by ICICU bank is more or less consistent in all the 5 parameters but is the highest in reliability factor.( Table 1 of ICICI).The expectation and perception gap can be seen to be the highest in the Empathy factor . Although the customers of ICICI bank have given highest importance weightage to reliability, the gap after assigning importance weights is the highest in responsiveness since the gap score was much higher than reliability factor.

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9.5 ) RECOMMENDATIONS For SBI ( Public banks) 1. Employees should give a true picture to the customers of when the services will be performed and also give prompt service 2. The employees should not seem to be too busy to respond to customer requests . the problem may even be understaffing or careless attitude. The organization should look into the matter and increase the work force if required or train employees in customer relationship management. 3. The employees should follow corporate ethics , which would help to instill confidence in the customers. 4. The bank should have the best interest of the customer at heart . They should not have hidden charges for services and should offer added services to the customer 5. The bank should work towards maintaining error free records and employ trained staff for technical job.

For ICICI bank( Private bank) 1. They should also have the best interest of the customer at heart .They should not have hidden charges for services and should offer added services to the customer. 2. They should make an effort not to seem too busy to the customer to respond to their requests. They may also look at the work force in place and train employees in CRM. 3. The service gap is highest in Empathy factor but highest weightage is given to reliability. They should provide individual attention to customers and also keep this in mind while recruiting and training employees.

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9.6) ANNEXURE

Servqual Questionnaire for banks: Following are the instructions for using the servqual questionnaire

Tangibles E1 Excellent banks will have modern looking equipment E2 The physical facilities at excellent banks will be visually appealing P2 P1

Tangibles Your bank has modern looking equipment Your banks are physical visually

facilities appealing

E3

Employees at excellent banks will be neat in appearance.

P3

Your banks employees are neat appearing

E4

Materials

associated

with

the

P4

Materials associated with the service( Pamphlets or statements ) are visually appealing Reliability

service ( pamphlets or statements ) will be visually appealing at an excellent bank Reliability E5 When excellent banks promise to do something by a certain time , they will do so E6 When a customer has a problem , excellent banks will show a P6 P5

When your bank promises to do something by a certain time , it does so When you have a problem your bank shows a sincere

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sincere interest in solving it E7 Excellent banks will perform the service right the first time E8 Excellent banks will provide their services at the time they promise to do so . E9 Excellent banks will insist on error free records Responsiveness E10 Employees of excellent banks will tell customers exactly when the services will be performed E11 Employees of excellent banks will give prompt service to customers E12 Employees of excellent banks will always be willing to help P12 P11 P10 P9 P8 P7

interest in solving it Your bank performs the service right the first time. Your bank provides the service promised Your bank insists on error free records Responsiveness Employees of your bank tell you exactly when services will be performed Employees of your bank give you prompt service Employees in your bank are always willing to help you P13 Employees in your bank are never too busy to respond to your request Assurance P14 The behavior of as they have

customers E13 Employees of excellent banks will never be too busy to respond to customers request Assurance E14 The behavior of employees in excellent banks will instill

employees in your bank instill confidence in you

confidence in customers

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E15 Customers of excellent banks will feel safe in transaction

P15

You feel safe in the transactions bank with your

E16 Employees of excellent banks will be consistently courteous with customers E17 Employees of excellent banks will have knowledge to answer

P16

Employees of your bank are consistently courteous with you

P17

Employees in your bank have the knowledge to answer your questions Empathy

customers questions Empathy E18 Excellent banks will give P18

Your

bank

gives

you

customers individual attention E19 Excellent banks will have P19

individual attention Your bank has operating hours convenient to all its customers

operating hours convenient to all their customers E20 Excellent banks will have P20

Your bank has employees who give you personal attention

employees who give customers personal attention E21 Excellent banks will have their customers best interests at heart P21

Your bank has your best interest at heart

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Chp no: 10) NEW CHALLENGES TO MARKETING BY BANKS : In this new Competitive Environment of globalized trading practices the Marketing of Financial Services posed the following challenges to the financial sector in the market place: (1) Deregulation in the Financial Service Sector has given rise to the emergence of various Spurious Companies and many mal-practices in the Stock and Capital market. This has badly affected the marketing activities of the Financial Services Sector. (2) The increased competition from the global and domestic players has threatened the survival of many Industries.

(3) Integration of global market and growing volumes of financial transaction. (4) Coping with the advanced information technology in the marketing functions. (5) High level of volatility of the finance market. (6) Increased Customer demands and Sophistication of Markets and Customers. (7) Coping with fast growing rate of information Technology, communication, Multi-media etc.

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chp no:11) CONCLUSION

As with most service organizations, not excluding banks, consumers expectations and perceptions differ , and gaps are caused during the service encounter. Quality control of the service offering may be the main problem causing gaps to occur. Referring to this study , both state bank of India and ICICI bank customers are not fully satisfied with their banking services. Their ideal and actual bank services have differences. In terms of quality dimensions, they seem to put proportionate emphasis on tangibility, reliability, responsiveness, assurance and empathy. More importance is put in

reliability:performing the promised service dependably and accurately, but less importance on empathy: caring, individualized attention to customers. Both banks customers have given highest importance to reliability but the area of concern varies since the weights are attached to the 5 parameters and the areas of concern change for both. The service gap is to be seen after the weights are attached to the 5 parameters. The responsiveness parameter is an issue of concern for both the banks.

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chp no: 12) RESEARCH AND FINDINGS

PRIMARY MARKET RESEARCH These are research that conduct rather than relying on information that already published they give more priority for own finding. From primary research is resulted from having direct contact with the customers or the public. Their primary research findings mostly focus on following types of information gathering. Focus groups gather a small group of people together for a discussion customer surveys. Existing customers Potential customers

SECONDARY MARKET RESEARCH This project also comes from secondary sources. It have acquired information which are already published which are relevant to this business or industry. Government information Banking journals Marketing magazines Internet Sbi Icici

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chp no: 13) BIBLIOGRAPHY

Adrian Payne -The essence of services marketing Christopher Lovelock and Jochen Wirtz -Services marketing: People , technology , strategy Audrey Gilmore -Services marketing and Management Philip Kotler -Marketing management Journal of internet banking and commerce Harsh V Verma- Marketing of services Zeithaml Valarie A, Parasuraman A, and Leonard L, Berry - Delivering service Quality Business Today January issue Indias best banks

Webliography

www.sbi .com www.icici.com

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