MARKETING OF BANKING SERVICES

INTRODUCTION:
Marketing approach in banking sector had taken significance after 1950 in western
countries and then after 1980 in turkey. New banking perceptiveness oriented toward
market had influenced banks to create new market banks started to perform marketing
and planning techniques in banking in order to be able to offer their new services
efficiently. A process of planning and executing the conception, pricing, promotion
and distribution of goods and services and ides to create exchanges with target groups
that satisfy customer and organizational objectives.
The Role of marketing in the banking industry continues to change. For many
years the primary focus of bank marketing was public relations. Then the focus
shifted to advertising and sales promotion. That was followed by focus on the
development of a sales culture. Although all theelements of the marketing concept
customer satisfaction, profit integrated framework and social responsibility will
remain important, customer satisfaction must receive the greatest emphasis in the
years ahead. The chief concerns of most bank executives still focus on legal and
regulatory issues, according to most surveys. Community banks are particularly
concerned with eliminating barriers that give unfair advantages to financial services
competitors, such as credit unions. However, another concern pertains to technology.

Bankers Identify Near Team and Long Term Concerns

1995

2015

Maintaining profitability
Service quality
Credit Portfolio Management
Maintaining profitability
Service Quality
Market / customer focus
Regional Economy
Operations/systems/technology
Cost Management / Expense reduction
Credit portfolio management
Declining Earnings/ more failures
Productivity improvement
Market / customer focus
Investment to stay competitive
Capital adequacy
Stock market value
Stock market value
Asset/liability management
Industry Overcapacity
Electronic Banking
When this gateway system was first proposed, access to the Internet was very new
and few banks had the resources and knowledge to set up their own direct-access lines
for customers. Customers have shown a growing interest in online banking services,
and banks have responded by quickly putting in place proprietary sites on the World
Wide Web and offering PC banking. With 24-hour access to either automated
information or live operators, customers do everything from check their accounts to
apply for a loan. Bank executives also identified PC banking as having the most
promise for the future, followed by Interest access and broad function kiosks.
A services is any act or performance that one party can offer to another that is
essentially intangible and does not result in the ownership of anything. Its production
may not be tied to physical product.
An aggregation of a service engagement with one or more service acts between two or
more service systems creating service outcomes. Service (economics), the nonmaterial equivalent of a good in economics and marketing, within the service-product
continuum (as used in marketing mix article) Service economy, which increases the
integration of services in other sectors of the economy.
Service-oriented architecture(SOA), a design pattern in which application components
provide services to other components via a communications protocol, typically over a
network.The Industrial revolution involved changes not in the production but also in
the financial structure, transportation as well as communication network the
economics benefits of large-scale production could never had realized without the
emergence of two biggest service sectors viz. rail, roads and banks.

The globalization and liberalization has opened new vistas for the development of
services generating organization. As a result these organization should have a more
professional approach to manage their business. It is against this background that we
are taking about marketing of service

BANK MARKETING
We define bank marketing as follows: Bank marketing is the aggregate of
functions, directed at providing services to satisfy customers financial (and other
related) needs and wants, more effectively and efficiently. This aggregate of
functions is the sum total of allindividual activities consisting of an integrated effort
to discover, create, arouse and satisfycustomer needs. This means, without exception,
that each individual working in the bank is amarketing person who contributes to the
total satisfaction to customers and the bank shouldultimately develop customer
orientation among all the personnel of the bank. Different banksoffer different
3

benefits by offering various schemes which can take care of the wants of
thecustomers.
Marketing helps in achieving the organizational objectives of the bank. Indian
bankshave duel organizational objective commercial objective to make profit and
social objectivewhich is a developmental role, particularly in the rural area. Marketing
concept is essentiallyabout the following few thing which contribute towards banks
success:
1) The bank cannot exist without the customers.
2) The purpose of the bank is to create, win, and keep a customer.
3) The customer is and should be the central focus of everything the banks does.
4) It is also a way of organizing the bank.
5) Ultimate aim of a bank is to deliver total satisfaction to the customer.
6) Customer satisfaction is affected by the performance of all the personal of the bank.
All the techniques and strategies of marketing are used so that ultimately they induce
the people to do business with a particular bank. Marketing is an organizational
philosophy. This philosophy demands the satisfaction of customers needs as the prerequisite for the existence and survival of the bank. The first and most important step
in applying the marketing concept is to have a whole hearted commitment to customer
orientation by all the employees. Marketing is an attitude of mind.
This means that the central focus of all the activities of a bank is customer. Marketing
is not a separate function for banks. The marketing function in Indian Bank is
required to be integrated with operation. Marketing is much more than justAdvertising
and promotion; it is a basic part of total business operation. What is required for the
bank is the market orientation and customer consciousness among all the personal of
the bank. For developing marketing philosophy and marketing culture, a bank may
require a marketing coordinator or integrator at the head office for effective
coordination of different functions, such as marketed research, training, public
relations, advertising, and business development,to ensure customer satisfaction.
Hence, the total Bank marketing function involves the following:
a. Market research
b. Product Development
c. Pricing of the service
d. Developing market.

BANK MARKETING EVOLUTION

The stages of the bank marketing evolution are the following:
During the 70s, many banks did not use the marketing in their activity, their
management being market oriented. Once the competition intensified, some of the
banks have started to use the marketing, launching some extremely expensive
advertising campaigns. The banks were counting on the fact that they could fool the
customers by various promotional activities, by which they could hide the negative
aspects related to their own banking services.
The first failures of the advertising campaigns proved to the banks that on the one
hand these campaigns could ruin them, and on the other hand that the main problem
5

did not consist in attracting new customers, but in keeping them. During this period,
the advertisement was the most important marketing activity performed by the banks;
-during the 80s, the banks developed programs to support the business, they promoted
the bank marketing on a large scale, engaging all its constituent aspects: establishing
and organizing the offer of products/services to satisfy the existing needs; promoting
and orientating the products/services towards responding to the considered
requirements of the business.
It is a time when the banks no longer accentuate the trade, the short term sale of
banking products, their volume increase; instead they focus on the perennial value of
the customer, pursuing the winning of new customers. -during the 90s, the banks
focused their efforts in order to create some superior banking products/services, on
the one hand following the assurance of the customer needs satisfaction, and on the
other hand establishing lasting relationships with them.
During this period, the financial sector and implicitly the banking sector experiences a
significant growth in the developed countries. -during the 21st century, the banks act
in a dynamic environment, where the market and the other factors (components of the
political, economical, social, juridical, cultural, demographical and technological
environment) frequently raise problems, forcing them to additional efforts or offering
them opportunities that need to be fructified as well as possible; they need to integrate
their current actions to their long term objectives which were previously determined
by the bank marketing policy.

Adapting the banking institutions activity to the environment requires a continuous

tracking of the structural quantity and quality changes which the environment
registers or will register888.
In conclusion, in order to successfully achieve the purpose of the marketing process,
the banksshould: -perform analyses in order to know the bank customers to the
highest possible extent, so that the offered banking products/services match their
needs and the sale is ensured.
That is why the bank needs to involve as actively as possible in their customers
activities, by financial and logistical support, specialty consultancy and assistance.
-perform studies, systematical analyses of the financial market identifying the
6

profitable markets, the new capital flows on the financial markets, the new agencies,
intermediaries and entrepreneurs (sellers) acting on these markets, their operations
and performances

CONCEPT OF BANKMARKETING
The bank marketingis a specialized field of the marketing and it has emerged
following the extensive development of the general marketing and following the
appearance, development, separation, delimitation, deepening and specialization of
services marketing. The bank marketing concept evolved following the significant
increase in the developed countries of the financial sector and implicitly the banking
sector due to the appearance of new competitors, the market overcapacity and the
competition intensification.

The bank marketing is "the marketing that applies in the universal banks field
(commercial banks as: savings and cooperative banks) and in the specialized banks
field (actual credit institutions, investment companies, etc.). Besides the insurance
companies and savings institutions for constructions, the banks are the most important
offers on the market of financial services. Today, on the market of bank services, there
is a powerful competition, the transparency is more pronounced and the customers
have become more critical and less fastidious, being better informed about the
monetary and financial issues, but also better advised for this purpose. Therefore,
many banks admitted the need to develop and implement professional and efficient
bank marketingin the relationship with their own private customers".
In the specialty literature, the bank marketingis also called marketing for servicesor
for immaterial goods. Compared to other services, the banking products are
distinguished by the fact that they are complex and abstract. Most of the customers do
not easily understand what the financial services 1166 consist in, what benefit they
bring and how they can be distinguished from one another. To this we can add the fact
that the benefit of a banking service, for example a consultancy for the acquisition of
a mortgage loan, for the placement of some shares or a funding for the execution of a
construction, is exposed to an external insecurity, more than the other goods. The
factors that influence these situations are the following: the evolution of national and
world economy and the evolution of banking, monetary and capital markets. The
exogenous

insecurity

and

the

immateriality

generate

very

high

qualitativeinsecurityof the banking products for customers. Most of the banking

products are mainly integrating, meaning that the customer takes part, more or less
actively, in their realization.
For banking services, the specialist Kaas K.P. emphasizes the importance of the
customers giving some information about the standard financial data (income and
patrimony), about their financial objectives for life planning, about their attitude
towards risk, about the intended period of the commitment, etc. in interaction with the
bank employees.
The innovating products, for example a special savings contract or a chip card, cannot
be protected against the competition by patents or property know-how. A bank can
create competition advantages by a high quality of the services, customer orientation
and customerloyalty development. Examples to that effect are the customers carefully
chosen, formed and motivated to serve the customers in an exceptional manner and
8

also the information systems which allow the bank to optimally adapt its services to
customer needs and restrictions.
The contemporary specialty literature shows numerous definitions of the bank
marketing, more or less different, on the one hand due to the development level of the
banking market and of the economy in the authors origin country and on the other
hand due to the viewpoint in which the concept has been approached and perceived.
Belgian specialist Claessens R., in his writing "Marketing of retail banking products"
stated that "The banks should identify the future needs and wishes of the customers
and should use their ownservices and distribution channels in order to efficiently
develop the integrated marketing concept onlong term".

CHART: I
CONCEPT OF MARKETING ORIENTATION IN BANKING

CONSUMER

BANKERS ABILITY
TO ANTICIPATE
CONSUMER NEEDS

BANKINGS WILLINGNESS
TO SATISFY CUSTOMERS
CONSUMER
NEED SATISFACTION
NEED
9

MARKETING ORIENTATION

PURPOSE OF MARKETING IN BANK SERVICES:

In order to make the banks marketing effort more meaningful and more
successful more emphasis should be placed on the development of new products,
further industry representation. There should be an intensify programs of market
segmentation and strategic distribution of units and lending teams in response to the
changing needs of the markets as this can provide a mutt tire coverage of major
companies and selected market segments of the national market which is the key to
growth in the local banking market.

10

This situation calls for a prudent, strategic positioning and quality control of the banks
loans and financial services portfolio which includes foremost corporate name as well
as formulation and implementation of a credit policy.
Another important purpose is the need to take stock of performance and compare
it with existing and prospective competitors. The comparison should include overall
market share, and geographical territory. Other variables such as major customers or
client base, quality speed and presentation of product of services, pricing, marketing,
sales, and promotion activities financial result achieve and so on.
Purpose of a marketing plan is a document developed by company leaders and
marketing professionals. This too offer a guide for the marketing department to
implement steps necessary to align with stated marketing strategies. Typically,
companies develop a marketing plan every few years but review it periodically for
adjustment or changes based on Companies strategy.
A formal marketing plan provides a clear reference point for activities throughout the
planning period. However, perhaps the most importantbenefit of these plans is the
planning process itself.
This typically offer a unique opportunity, a forum, for information-rich and
productively focused discussions between the various managers involved. The plan,
together with the associated discussions, then provides an agreed context for their
subsequent management activities, even for those not described in the plan itself.

In Essence, a Marketing Plan:

Makes the marketing team look at their past decisions and understand

their results;
Makes the marketing team look at the environment in which they

operate;
Establishes a future direction that everyone in the organization should

both understand and support;

Helps get funding for future initiatives;

11

Marketing plans are included in business plans, offering data showing investors how
the company will grow and what kind return on investment they will receive.
Thus, marketing plans are written to:

Fulfill the requirements of the yearly planning process within the

marketing department;
Describe the strategy for a new product or to solve an existing

problem;
Gain funding from outside investors.

Ultimately, marketing plans serve a purpose both inside and outside of the company.

MARKETING MIX IN BANKING SECTOR:

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, promotion, process, physical
evidence, and people.
CHART: II

12

PRODUCT:
A product can be defined as the bundle of utilities consisting of various product
features accompanying services. Bank services are viewed with not just things that are
created with value but they are seen in term of satisfaction they deliver.
In the banking services the product are services. Services cannot be seen or
protected like goods. The potential buyer of the services can form an opinion about
the services offered.

PRODUCT MIX:
Deposit: Banking sector offers wide variety of deposit products to suit our
requirements. These are Savings Account, Senior Citizen Services, Fixed
Deposits, Recurring Deposits, Bank @ Campus, Bank Salary Account etc.
Investments: Along with Deposit products and loan offerings, Banks provide
variousinvestment options such as Mutual Funds, Life Insurance, Gold Bonds
etc.
Anywhere Banking.
13

 Loan: It offers a wide range of loans like Home Loans, Personal Loans, Car
Loans, Two Wheeler Loans, Commercial Vehicle Loans and Loans against
Securities, Farm Equipment

Loans, Construction Equipment Loans, Office

Equipment Loans, and Medical Equipment Loans etc.

Cards: Credit Cards, Debit Cards cum ATM Cards, Travel Cards.
DE matService.
Mobile Banking.
Net Banking & Online Money Transfer: The facility available to worldwide
through the click of a button.
The changing trends in the non-banking investments compel certain modification

to be made in the existing product line.

Therefore the bank marketer must offer a multidimensional product. They need to add
more innovative services to their product in order to differentiate them from the
competitors.
PRICE:
The prices in banking have names like interest, commission and expenses. Price
is the sole element of marketing variables that create earnings, while others cause
expenditure. While marketing mix elements other than price affect sales volume,
price affect both profit and sales volume directly. Price decisions are found
instrumental in motivating and influencing the target market. The RBI regulates the
rate of interest and the Indian Banks association controls other charges. In our
country, the price mix is more important because the banking organizations are also
supposed to sub serve the interests of the weaker sections and the backward regions.
Also in making the pricing decisions, the Government of India commands
everything as a shadow policy maker. This also complicates the price mix for banking
sectors.
PROMOTION:
Promotion mix includes advertising, publicity, sales promotion, personal selling
and telemarketing. Each of these services needs to be applied in different degree.
These components can be useful in the banking business in the following ways;

14

 ADVERTISING: Today advertising has occupied a place of significance. It is

used for mass communication. Advertising can serve the purpose if it is well
read, heard, believed, remembered and acted upon by the potential users or
target audience.
PUBLICITY: It is different from advertising. It is an editorial comment about
the ideas, products, and organizations. It is an important part of public relations.
Today when we find that social welfare to be an important part of banking
services, the publicity measures need due care.
TELEMARKETING: The telemarketing is a process of promotion of the
business with the help of sophisticated communication network. Telemarketing
is found instrumental in advertising the banking services and the banking
organizations can use this tool of the promotion mix for both for advertising and
selling.This minimizes the dependence of banking organizations on sales people
and just a counter or center as listed in the call numbers may service multidimensional services.
PLACE:
This component of marketing mix is related to the offering of services.Selection of a
suitable place is an important element in the overall marketing decision. The
locational decision helps in activating the business. It means searching a suitable point
for offering the banking services or locating the branch at a sensitive point.
The reasons for selecting specific place as branch:
The selection of a suitable place for the establishment of abranch is significant

with the view point of marketing place accessible.

The safety and security provisions.
Convenient to both the parties, such as the users and the bankers.
Infrastructure facility.
Near to station and located in well crowded area.
Market coverage.

PEOPLE:
All people directly or indirectly involved in the consumption of banking services are
an important part of the extended marketing mix.Knowledge workers, management
and other consumers often add significant value to the total product or service

15

offering. It is the employees of the bank which represent the organization to its
customers.
In a bank organization, employees,are essentially the contact personnel with customer.
Therefore, an employee plays an important role in the marketing operations of a
service organization. To realize its potential in bank marketing, banking, sector
become conscious in its potential in internal marketing the attraction , development,
motivation, and retenstion of qualified employee customers through need meeting job
products.
Internal marketing paves way for external marketing of services. In internal
marketing a variety of activities are used internally in an active, marketing like
manner and in a coordinated way. Most of the banks are moving towards technology
based banking. But still matters like investment banking deposits, mobilization, credit
evaluation, etc. can be done through personal contacts.
PROCESS:
Flow of activities: All the major activities of banks follow RBI Guidelines. There has
to be adherence to certain rules and principles in the banking operations. The
activities

have

been

segregated

into

various

departments

accordingly:

Standardization, Customization, Simplicity,Customer involvement etc.

PHYSICAL EVIDENCE:
Physical evidence is the material part of a service. Strictly speaking there are no
physical attributes to a service, so a consumer tends to rely on material cues. There are
many examples of physical evidence: 1.Paperwork 2.Brochures 3.Furnishings 4.
Business cards 5.The building itself. The physical evidences also include signage,
reports, punch lines, other tangibles, employees dress code etc.
Signage: Each and every bank has its logo by which a person can identify the
company. Thus such signage is significant for creating visualization and corporate
identity.
Financial reports: The Companys financial reports are issued to the customers to
emphasis or credibility.
16

Tangibles: Bank gives pens, writing pads to the internal customers. Even the
passbooks, cheque books, etc. reduce the inherent intangibility of services.
Punch lines: Punch lines or the corporate statement depict the philosophy and attitude
of the bank. Banks have influential punch lines to attract the customers.
Employees dress code: For example ICICI bank follows a dress code for their
internal customers. This helps the customers to feel the ease and comfort.

PROCESS OF MARKETING MIX:

FLOW OF ACTIVITIES:
All the major activities of banks follow RBI guidelines. There has to be
adherence to certain rules and principles in the banking operations. The
activities have been segregated into various departments accordingly.
STANDARDIZATION:
Bank has standardized procedures got typical transactions. In fact not
only all the branches of a single bank, but all the banks have some
standardization in them. This is because of the rules they are subject to.

17

Besides this, each of the banks has its standard forms, documentations etc.
Standardization saves a lot of time behind individual transaction.
CUSTOMIZATION:
There are specialty counters at each branch to deal with customers of a
particular scheme. Besides this the customers can select their deposit period
among the available alternatives. Number of steps: Numbers of steps are
usually specified and a specific pattern is followed to minimize time taken.
SIMPLICITY:
In banks various functions are segregated. Separate counters exist with clear
indication. Thus a customer wanting to deposit money goes to deposit counter
and does not mingle elsewhere. This makes procedures not only simple but
consume less time. Besides instruction boards in national boards in national
and regional language help the customers further.
CUSTOMER INVOLVEMENT:
ATM does not involve any bank employees. Besides, during usual bank
transactions, there is definite customer involvement at some or the other place
because of the money matters and signature requires.

BANK 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. These customers
belong to different strata of economy, different geographical locations and different
professions and businesses.
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 the most efficiently. Banks,
18

generally, have been working out various services and products at the level of the
Head Office and these are traded through their retail outlets (branches) to different
customers at the grass-roots level.
This is the so called Top to Bottom' approach. However, bank marketing requires a
change in this traditional outlook. 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 bankand
environmental constraints.

The following chart gives an overviewof the two pronged approach to bank marketing
:
CHART: III
THE TWO PROLONGED APPROACH TO BANK MARKETING
Bank Marketing
A Two Prolonged Approach

Design & Delivery of customer

Needed services worked out by
Keeping in view corporate objectives
& environmental constrains

19

Collective Approach

Selective Approach

To satisfy all customers of

the bank & to develop a
positive image of the bank
in terms of quality of
services.

To develop sustainable
relationship with selective
high value customers &
making efforts for their
retention for added value to
the bank.

To introduce a system of objective

assessment of the standard of
customer service to find out areas
& causes of deficiencies & take
appropriate corrective action.

To concentrate on selective
valuable customers through CRM
to find out their latent & felt needs
& to develop ways & means to
satisfy them to ensure sustainable
relationship.

Definition of target group of customers and their needs.

Development of proper marketing mix in terms of product, place, price &
promotion.

COMPONENTS OF MARKETING APPROACH

A marketing approach to banking includes the following components or activities
(Bettinger, 1985):
Determining in a rational, informed, and strategic manner the desired customer base
Identifying the current and future needs of desired customer and customer prospect
Segments.
Creating need-satisfying benefits that respond appropriately and profitably to
-customer needs and which positively differentiate the organization from its
competitors.

20

 Communicating and delivering these benefits effectively and efficiently to the

market place.
Converting the employees of the organization into a well-informed, disciplined, and
Professional force committed to the organization's values and objectives.
This is a comprehensive, responsibility oriented approach towards formulating a
strategy for achieving the bank's performance objectives. In the Indian context, the
primary objectives of the marketing approach are as follows:
Increase deposits.
Improve the quality of customer service.
Develop bank's image.
Report a marginal profit.

PRINCIPAL ASPECTS OF BANK MARKETING

Customer Oriented Services
Services offered by the banks are to be worked out in such a manner that they fulfill
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

21

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.
Design & Delivery of Such Services
The word design implies that good marketing services need to be properly designed
and crafted so as to suit a particular well-defined group of clients. Moreover, such
properly designed services must be properly traded. 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.
Corporate Objectives of the 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.
1. 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.
2. 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.
Environmental & Other Constraints
Environmental and other constraints play an important role in bank marketing
decisions. Generally, the environmental constraints fall into four categories:
Economic, Cultural, Legaland Political. A thorough understanding of local and
national economy is essential for takingeffective 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
22

offered? Thus, the knowledge of environmental constraints is anessential factor in the

designing and delivery of various types of customer-oriented schemes and services.
Marketing Concepts Its Application to Banking
When we apply marketing to the banking industry, the bank marketing strategy
can be said to include the following:
I. A very clear definition of target customers.
II. The Development of marketing mix to satisfy customers at a profit for the bank.
III. Planning for each of the source markets.
IV. Organization and Administration.

MARKETING STRATEGY IN BANKING SECTOR

Consumer Behavior and Segmentation
Banks deal with individuals, group of persons and corporate, all of whom have their
likes and dislikes. No bank can afford to assess the needs of each and every individual
buyer (actual or potential). Segmentation of the market into more or less homogenous
groups, in terms of their needs and expectations from the banking industry, provides a
solution to this problem. This involves dividing the market into major market

23

segments, targeting one or more of this segments, and developing products and
marketing programs tailor-made for these segments.
In the first segmentation, the market is divided from a unitary whole, to
groups of buyers who might require separate products and marketing mix. The
marketer typically tries to identify different segments in the market and develop
profiles of resulting market segments. The secondstep is market targeting in which
each segments attractiveness is measured and a target segment is chosen based on its
attractiveness. The third step is product positioning which is the act of establishing a
viable competitive position of the firm and its offer in the target segment chosen.
In the process of segmentation, the market can be divided into major segments which
are gross slices of the market, or into smaller specially formed segments, otherwise
known as niches.
While a market segment attracts several competitors, a niche attracts fewer
competitors and therefore, a company should clearly define its target segment and
devise strategies to target the customer, so that it has a competitive advantage in the
segment. An important criterion for market segmentation the economic system in
which we find agricultural sector, industrial sector, services sector, household sector,
institutional sector and rural sector requiring of weight age while segmenting.
Customer Relationship Management
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.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. 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, ebusiness, safe custody, lockers, bill collection, etc.
24

Data mining carries out various types of analysis on collected data to determine
customer behavior 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.
Identification of Target Customers & 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 their purchase, their habits, tastes & preferences, their businesses &
future prospects ,etc.
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 non-customers 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 noncustomers of the bank, and it can be analyzed to find out the target group of the
customers and their felt and latent needs.

CORE MARKETING CONCEPT

CHART: IV
THE CORE MARKETING CONCEPT

25

Overall, there are various definitions of marketing simply but marketing can be seen
as the delivery of customer satisfaction at a profit.
As the figure 4 shows, the procedure of marketing can be divided into several steps.
The first step is to find out what customers need, want and require. This may vary
between different customer segments. The next step is to create or develop products
or services to satisfy possible customersneeds and wants.
Following that, companies should promote or communicate those benefits in order to
promote purchase. This stage includes finding the correct marketing channel to meet
customers demand; making products Available at: the right place thus the exchange is
facilitated.
The last important step is to create long term relationships with customers by
following their satisfaction level and by responding to that, for instance by rewarding
loyal customers with small benefits.

MARKETING OF SERVICES -- NEW TREND

Marketing concept asserts to identify consumers' needs before theproduct is produced
so that the product developed can meet the needs. It can be said that the consumer is
26

the pivot around which the whole marketing system revolves. Modem marketing
therefore begins with an understanding of consumer needs. The real problem is to
learn what a consumer needs.
The real problem is to learn what a consumer takes into consideration when he
chooses a particular brand. All the behaviour of human beings during the purchase
may be turned as buyer's behaviour. Factors influencing the consumer behavior are
internal like needs, motives, perceptions and attitudes as well as external. The major
external factors are family social group, culture economics, business influence etc.
CHART: V
FACTOR INFLUENCING THE CONSUMER BEHAVIOUR

Hence the ultimate objective of every consumer should be to come with new products
that will serve the consumer and replace the old products which became obsolete with
the passage of time and consumer likes and dislikes.
Aproduct is an overall concept of objects or processes which provide some value to
customers. Goods and services are subcategories which describe two type of'products.
Thus the term product is frequently used in a broad sense to develop either
manufactured goods or product and service. According to Philip Kotler, "a product is
anything that can be offered to a market for attention, acquisition, use or
consumption. It includes physical objects, services, personalities, places,
organizationsand ideasn4* Stanton says, a product is a set of tangible and intangible
27

attributes including packaging, colour, price, manufacturer's prestige,retailer's prestige

and manufacturers' and retailers' services which the buyer may accept as offering
satisfaction of wants and needs.46 Market is often defined in terms; of both products
and services. Marketing executives and the0retic:ian.s generally have focused their
attention on products under the assumption that services are marketed in much the
same way.
Service sector has emerged as the fastest growing sector of theeconomy. More
than 60 per cent of Western economies are now in the service sector.47 The United
States of America has become the world's first service economy. Service now
generates 74 per cent of US domestic products. Whereas service jobs accounted for 55
per cent of US jobs in 1970, by L993 they accounted for 79 per cent of total
employment.48 Of late, every dollar a consumer spends in USA, about half of it goes
for services.49 World War 11 marked a milestone in the explosive rise of service
industries.
The trend has become evident throughout the world. The growth in service economy
has been accompanied by a number of important factors influencing the overall
economic picture.
Diminishing importance with the balance of trade of primary industries i.e.
agriculture forestry and fishing,
A similar impact on the importance of secondary industries i.e. construction and
manufacturing, and
Accompanying social trends effecting the structure of the working force, many
workers in service industries are employed on a parttime basis and i1 majority of
these are women.50 Services aredivided between consumer service, business
service and industrial service. These fall between the public and the private
sector. Many service offered, span more than one of these categories. These
difference in classification and the complexity of the service market cause
difficulties when analyzing the true picture of the service economy.
There are various reasons for the growth of the service sector.These can be
divided into demographic, social, economic and political changes
Demographic changes
A greater life expectancy has lead to an increase in the demandfor nursing homes and medical care. Smaller family size combined with increasing income levels
has lead to increased demand for consumer service of all types including banking
28

investment and insurance services together with leisure services. Structural shift in
acomnlunities have affected the places where people live and how they.The
development of new towns and regions has increased the need for infrastructure and
support service.
Social change
The increased number of women in the work force has lead to previously domestic
functions being performed outside the home. This has promoted the rapid rise of the
fast food industry, child care facilities and other personnel services. Working women
and the resulting two income households have created a greater demand for consumer
service including retailing, real estate and personal financial services.
Smaller family is the order of the day and the two incomes of these familiesprovide
more disposable income to spend on entertainment travel and hospitality services.
International travel and mobility have produced moresophisticated consumer
tastes. Consumers compare services both nationally and internationally and demand
variety and improved quality.
The greater complexity of life has created a demand for a wide range of services,
particularly legal and financial advice. Furthermore communication has increased
aspiration levels. As a result, both children and adults are making new demands to
cope up with the fast changing environment.
Economic Changes
The new economic order of the world - Globalization and liberalization and
privatization - has increased the demand for communication, travel and information
services. This has been augmented by rapid changes brought about by new
information technology.
Along with it, increased specialization within the economy has lead to greater reliance
on specialist service providers. For example advertising and market research have
become specialist functions supporting all sectors of the economy. Internationalism
has made new demands on legal and other professional services.
In every economy of the world, the share of service sector isincreasing which has
been accompanied by considerable disagreement about what constitutes a service.
Many authors have sought to develop a definite description of ii service; yet no
adequate definition has emerged.
With this theoretical background, an attempt is made in thesubsequent chapters to
examine the operation of bank marketing in Kerala.
29

MARKETING APPROACH TO PROMOTING BANKING

SERVICES
In recent years, banks in India have not been able to mobilize surplus fund sowing to
the rapid emergence of competitive non-banking financial institutions. Non-fund

30

based banking services havebeen underutilized by customers because of low

awareness and this has affected banks' profitability.
In this article, Bhattacharyay presents a marketing approach to promoting banking
services and mobilizing deposits. Using primary data obtained from a country-wide
survey of 19,000 households, Bhattacharyay has identified different segments of the
customers which could be tapped by identifying their current and future needs and
providing an appropriate range of services. Biswa N Bhattacharyay is Professor at
theNational Institute of Bank Management,Pune.
After nationalization, banks in India have largely succeeded in mobilizing surplus
funds in the Indian economy. Of late, however, the rate of growth of deposit
mobilization has reduced considerably with the emergence of non-banking institutions
and growth of competitive financial instruments. Banks have also failed to keep pace
with the growth of surplus investible funds. If this present trend continues, banks may
find it rather difficult to meet credit-obligations.
At the same time, usage by customers of non-fund based miscellaneous banking
services is quite low and has affected the profitability of the banking industry. There is
also a sense of dissatisfaction with banking services in general. Being in the buyers'
market because of the presence of other agencies, the banking industry has to adopt a
marketing approach-towards deposit mobilization and promotion of banking services.

MARKETING STRATEGY SYSTEM

For developing strategies relating to deposit mobilization and improving customer
service, market research has to be conducted for market segmentation and targeting
broadly covering the following categories.
31

Determinants of Deposits
There are several factors which influence the growth of bank deposits. Some of
them are:
Higher industrial and agricultural production
Increasing savings rate in the economy
Development programs of the government to boost rural economy and small scale
industries. Factors having adverse effect on deposit mobilization are:
Setback in the agricultural sector during poor monsoon years
Rising cost of hiring
Government reducing its budget and restricting money supply
Growing competition from other channels of investment which offer higher
interestrates
Government's control on branch expansionof banks
Non-recovery of loans.
A statistical analysis of the determinants of deposits had been performed to measure
the magnitude of influence of different environmental factors on deposit mobilization
(Paul and Bhattacharyay, 1986). Regression analysis on secondary time-series data
has been conducted at all-India and state levels to achieve the above objective
(Bhattacharyay, 1988).
Trends and Patterns of Savings and Deposits
This involves estimating current and potential markets for deposits and segmenting
the market interms of geographical location, customers, socioeconomiccharacteristics,
and other related factors.
Customer Behaviour, Attitude, and Perceptions
This involves understanding customer profile, their socio-economic and demographic
background, their psychographic make-up, motivations behind their savings,
awareness of and attitude to various modes of savings, and reasons for their
preference for one form of savings over another. This will help bankers in providing
new banking services/products through which even non-bank customers can be
adopted.
Customer Services
Launching new schemes with advertisements attracts new depositors. However, what
ultimately sustains the process of generation of new deposits and continues the

32

acceleration of deposit mobilization is the quality of customer service as perceived by

customers.
Bank's performance in different banking services like withdrawal of cash, collection
of cheques,quality and adequacy of infrastructural facilities available to customers,
attitudes of bank employees towards customers, promptness, and general attitude have
to be analysised and evaluated before strategy formulation.
CHART: VI
MARKETING STRATEGY SYSTEM
Marketing Objective
Deposit Mobilization
Improving Customer Services
Improving Bank Image
Increasing Customer Base & its Spread
Marginal Profit

Marketing Strategies
Place

Environmental Analysis

Segmentation of Market & Targeting

Price
Product/
Service

Market Research on Current & Potential

Households & Institutions.

Promotion

Market Analysis
Customer
Evaluation of
&
Behaviour,
Quality of
Attitudes & CHALLENGESMeasurement
AND OPPORTUNITIES
Customer
Perceptions
Services

The Indian banking sector continues to face some structural challenges. We have a
relatively large number of banks, some of which are sub-optimal in size and scale of
operations. On the regulatory front, alignment with global developments in banking
33

supervision is a focus area for both regulators and banks. The new international
capital norms require a high level of sophistication in risk management, information
systems, and technology which would pose a challenge for many participants in the
Indian banking sector. The deep and often painful process of restructuring in the
Indian economy and Indian industry has resulted in asset quality issues for the
banking sector; while significant progress is being made in this area, a great deal of
work towards resolution of these legacy issues still needs to be done. The Indian
banking sector is thus at an exciting point in its evolution. The opportunities are
immense to enter new businesses and new markets, to develop new ways of
working, to improve efficiency, and to deliver higher levels of customer service. The
process of change and restructuring that must be undergone to capitalize on these
opportunities poses a challenge for many banks.
The Indian banking sector is faced with multiple and concurrent challenges such
as increased competition, rising customer expectations, and diminishing customer
loyalty. The banking industry is also changing at a phenomenal speed. While at the
one end, we have millions of savers and investors who still do not use a bank, another
segment continues to bank with a physical branch and at the other end of the
spectrum, the customers are becoming familiar with ATMs, e-banking, and cashless
economy.
As banks develop their strategies for giving customers access to their accounts
through various advanced services like e banking, mobile banking and net banking,
they should also regard this emerging platform as a potential catalyst for generating
operational efficiencies and as a vehicle for new revenue sources. Banking industrys
opportunities includes:

A growing economy
Banking deregulation
Increased client borrowing
An Increase in the number of banks
An Increase in the money supply
Low government-set credit rates and
Larger customer checking account balances.

India's banking sector has made rapid strides in reforming and aligning itself to
the new competitive business environment. The major challenges faced by banks
today are as to how to cope with competitive forces and strengthen their balance

34

sheet. Today, banks are groaning with burden of NPAs. It is rightly felt that these
contaminated debts, if not recovered, will eat into the very vitals of the banks.
Indian Consumer
The biggest opportunity for the Indian banking system today is the Indian consumer.
Demographic shifts in terms of income levels and cultural shifts in terms of lifestyle
aspirations are changing the profile of the Indian consumer. This is and will be a key
driver of economic growth going forward. The Indian consumer now seeks to fulfil
his lifestyle aspirations at a younger age with an optimal combination of equity and
debt to finance consumption and asset creation. This is leading to a growing demand
for competitive, sophisticated retail banking services. The consumer represents a
market for a wide range of products and services he needs a mortgage to finance his
house; an auto loan for his car; a credit card for on-going purchases; a bank account; a
long-term investment plan to finance his childs higher education; a pension plan for
his retirement; a life insurance policy the possibilities are endless. And, this
consumer does not live just in Indias top ten cities. He is present across cities, towns,
and villages as improving communications increases awareness even in small towns
and rural areas. Consumer goods companies are already tapping this potential it is
for the banks to make the most of the opportunity to deliver solutions to this market.
Revolution of Information Technology
Technology is the key to servicing all customer segments offering convenience to
the retail customer and operating efficiencies to corporate and government clients.
The increasing sophistication, flexibility, and complexity of product and servicing
offerings makes the effective use of technology critical for managing the risks
associated with the business. Developing or acquiring the right technology, deploying
it optimally, and then leveraging it to the maximum extent is essential to achieve and
maintain high service and efficiency standards while remaining cost-effective and
delivering sustainable returns to shareholders. Early adopters of technology acquire
significant competitive advantage. Managing technology is, therefore, a key challenge
for the Indian banking sector. Wide disparities exist between various banks as far as
technology capabilities are concerned; the sector as a whole needs to make significant
progress on this front.
Industrial Development
The developments in Indian industry and government and the integration of India with
the global markets also offer innumerable opportunities to the banking sector.
35

Companies and governments are increasingly seeking high-quality banking services

to improve their own operating efficiency. Companies seek to offer better customer
service and maximize shareholder returns and governments seek to improve the
quality of public services. The internationalization of India offers banks the
opportunity to service cross-border needs of Indian companies and India-linked needs
of multinationals.
Knowledged Society
Building knowledge-driven, learning organizations is important in the current
scenario of rapidly evolving operating environments. Knowledge and assimilation of
new ideas and trends are essential to keep the organization ahead on the curve. This is
true for banking as it is for all other sectors. Banks must continuously seek to be
aware of cutting edge practices in banking internationally and institutionalize this
learning across the organization. This will prepare them for the future as Indian
markets become more sophisticated and integrated into the global financial markets.
Another critical area for the Indian banking sector is people. The ability to attract and
retain talent is a key success factor for a people-oriented business like banking. Banks
have to build organizations that are process driven yet innovative, stable yet flexible,
and responsive to change.
Intense Competition
The RBI and Government of India kept banking industry open for the participants of
private sector banks and foreign banks. The foreign banks were also permitted to set
up shop on India either as branches or as subsidiaries. Due to this lowered entry
barriers many new players have entered the marketsuchasprivate banks, foreign
banks, nonbanking finance companies, etc. The foreign banks and new private sector
banks have spearhead the hi-tech revolution. For survival and growth in highly
competitive environment banks have to follow the prompt and efficient customer
service, which calls for appropriate customer centric policies and customer friendly
procedures.
Employees Retention
The banking industry has transformed rapidly in the last ten years, shifting from
transactional

and

customer

service-oriented

to

an

increasingly

aggressive

environment, where competition for revenue is on top priority. Long-time banking

employees are becoming disenchanted with the industry and are often resistant to
36

perform up to new expectations. The diminishing employee morale results in

decreased revenue. Due to the intrinsically close ties between staff and clients, losing
those employees completely can mean the loss of valuable customer relationships.
There tail banking industry is concerned about employee retention from all levels:
from tellers to executives to customer service representatives because competition is
always moving in to hire them away.
Financial inclusion
Financial inclusion has become a necessity in todays business environment.
Whatever is produced by business houses that have to be under the check from
various perspectives like environmental concerns, corporate governance, social and
ethical issues. Apart from it to bridge the gap between rich and poor, the poor people
of the country should be given proper attention to improve their economic condition.
In India, RBI has initiated several measures to achieve greater financial inclusion,
such as facilitating no-frills accounts and GCCs for small deposits and credit.
Rural Market
Banking in India is generally fairly mature in terms of supply, product range and
reach, even though reach in rural India still remains a challenge for the private sector
and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are
considered to have clean, strong and transparent balance sheets relative to other banks
in comparable economies in its region. Consequently, we have seen some examples of
inorganic growth strategy adopted by some nationalized and private sector banks to
face upcoming challenges in banking industry of India. For example recently, ICICI
Bank Ltd. merged the Bank of Rajasthan Ltd. in order to increase its reach in rural
market and market share significantly. State Bank of India (SBI), the largest public
sector bank in India has also adopted the same strategy to retain its position. It is in
the process of acquiring its associates. Recently, SBI has merged State Bank of Indore
in 2010.

High Transaction Costs

A major concern before the banking industry is the high transaction cost of carrying
non- performing assets in their books. The growth led to strains in the operational
efficiency of banks and the accumulation of non-performing assets (NPAs) in their
loan portfolios.
37

Social and Ethical Aspects

There are some banks, which proactively undertake the responsibility to bear the
social and ethical aspects of banking. This is a challenge for commercial banks to
consider these aspects in their working. Apart from profit maximization, commercial
banks are supposed to support those organizations, which have some social concerns.
Timely Technological up gradation
Already electronic transfers, clearings, settlements have reduced translation times. To
face competition it is necessary for banks to absorb the technology and upgrade their
services.
Global banking
The impact of globalization becomes challenges for the domestic enterprises as they
are bound to compete with global players. If we look at the Indian Banking Industry,
then we find that there are 36 foreign banks operating in India, which becomes a
major challenge for Nationalized and private sector banks.

CONCLUSION
Project is all about identifying the Role of marketing in banking industry. Use of
marketing mix in banking sector is increasing day by day with 7Ps. So bank
38

marketing concept is very important for every bank. The main purpose of this study is
to get an overview of bank marketing and to find out of role of marketing in the
banking industry and see that how marketing mix (product, price, place, & promotion)
is most important for a bank. Use of 4p and 4c (customer solution, customer cost,
communication, convenience) for bank and implementation of that thing in bank
marketing concept and way marketing is making important for a bank? And
combination of extra 3Ps (people, process, Physical evidence) are also very
important for a bank in present scenario.
To summarize all these, the project comprises detailed study of the role of marketing
in banking sector. Bank Marketing has become a necessary survival weapon and is
fundamentally changing the banking industry worldwide. The rise of Bank Marketing
is redefining business relationships and the most successful banks will be those that
can truly strengthen their relationship with their customers. Technology innovation
and fierce competition among existing banks have enable a wide array of banking
products and services, being made available to retail and wholesale customer through
an electronic distribution channel, collectively referred to as e-banking. Technology is
altering the relationships between banks and its internal and external customers.
The biggest challenge for banking industry is to serve the mass and huge market of
India. Companies have become customer centric than product centric. The better we
understand our customers, the more successful we will be in meeting their needs. In
order to mitigate above mentioned challenges Indian banks must cut their cost of their
services. Another aspect to encounter the challenges is product differentiation. Apart
from traditional banking services, Indian banks must adopt some product innovation
so that they can compete in gamut of competition. Technology up gradation is an
inevitable aspect to face challenges. The level of consumer awareness is significantly
higher as compared to previous years. Now-a-days they need internet banking, mobile
banking and ATM services.

BIBLIOGRAPHY:
REFERENCE BOOK

39

1. Claessens R: Marketing of retail banking products-From theory to practice &

Strategic Planning implementation, U.B.I Brussels, 2004.
2. Romeo S. Mascarenhas: Marketing In Banking And Insurance-From Vipul
Prakashan
WEB-SITE
1.http//:www. marketing in banking services.in
2. http//:www. scribd.in
3.http//:www. economic times.in
4. http//:www.wikipedia.com

40