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A PROJECT ON BANKING SECTOR CONTENTS AN INTRODUCTION TO BANKING SECTOR IN INDIA PEST ANALYSIS 7P’s OF BANKING SECTOR BLUEPRINTING 4I’s OF BANKING RATER ANALYSIS FOR INDIAN OVERSEAS BANK MARKET SEGMENTATION COMPLAINT HANDLING–HDFC BANK CASE STUDY-I RATER SERVICE RECOVERY

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Page 1: Banking Sector

A PROJECT ON BANKING SECTOR

CONTENTS

AN INTRODUCTION TO BANKING SECTOR IN INDIA

PEST ANALYSIS

7P’s OF BANKING SECTOR

BLUEPRINTING

4I’s OF BANKING

RATER ANALYSIS FOR INDIAN OVERSEAS BANK

MARKET SEGMENTATION

COMPLAINT HANDLING–HDFC BANK

CASE STUDY-I

RATER

SERVICE RECOVERY

FISH BONE

CASE STUDY-II (ICICI BANK)

RATER

BIBLIOGRAPHY

Page 2: Banking Sector

ARTICLES

AN INTRODUCTION TO THE BANKING SECTOR IN INDIA

Page 3: Banking Sector

Banks are the most significant players in the Indian financial market.

They are the biggest purveyors of credit, and they also attract most of the

savings from the population. Dominated by public sector, the banking

industry has so far acted as an efficient partner in the growth and the

development of the country. Driven by the socialist ideologies and the

welfare state concept, public sector banks have long been the supporters

of agriculture and other priority sectors. They act as crucial channels of

the government in its efforts to ensure equitable economic development.

The Indian banking can be broadly categorized into nationalized

(government owned), private banks and specialized banking institutions.

The Reserve Bank of India acts a centralized body monitoring any

discrepancies and shortcoming in the system. Since the nationalization

of banks in 1969, the public sector banks or the nationalized banks have

acquired a place of prominence and has since then seen tremendous

progress. The need to become highly customer focused has forced the

slow-moving public sector banks to adopt a fast track approach. The

unleashing of products and services through the net has galvanized

players at all levels of the banking and financial institutions market grid

to look anew at their existing portfolio offering. Conservative banking

practices allowed Indian banks to be insulated partially from the Asian

currency crisis. Indian banks are now quoting al higher valuation when

compared to banks in other Asian countries (viz. Hong Kong, Singapore,

Philippines etc.) that have major problems linked to huge Non Performing

Assets (NPAs) and payment defaults. Co-operative banks are nimble

footed in approach and armed with efficient branch networks focus

primarily on the ‘high revenue’ niche retail segments.

The Indian banking has finally worked up to the competitive

dynamics of the ‘new’ Indian market and is addressing the relevant

issues to take on the multifarious challenges of globalization. Banks that

employ IT solutions are perceived to be ‘futuristic’ and proactive players

Page 4: Banking Sector

capable of meeting the multifarious requirements of the large customer’s

base. Private Banks have been fast on the uptake and are reorienting

their strategies using the internet as a medium The Internet has

emerged as the new and challenging frontier of marketing with the

conventional physical world tenets being just as applicable like in any

other marketing medium.

The Indian banking has come from a long way from being a sleepy

business institution to a highly proactive and dynamic entity. This

transformation has been largely brought about by the large dose of

liberalization and economic reforms that allowed banks to explore new

business opportunities rather than generating revenues from

conventional streams (i.e. borrowing and lending). The banking in India

is highly fragmented with 30 banking units contributing to almost 50% of

deposits and 60% of advances. Indian nationalized banks (banks owned

by the government) continue to be the major lenders in the economy

due to their sheer size and penetrative networks which assures them

high deposit mobilization. The Indian banking can be broadly

categorized into nationalized, private banks and specialized banking

institutions.

The Reserve Bank of India acts as a centralized body monitoring

any discrepancies and shortcoming in the system. It is the foremost

monitoring body in the Indian financial sector. The nationalized banks

(i.e. government-owned banks) continue to dominate the Indian banking

arena. Industry estimates indicate that out of 274 commercial banks

operating in India, 223 banks are in the public sector and 51 are in the

private sector. The private sector bank grid also includes 24 foreign

banks that have started their operations here.

The liberalize policy of Government of India permitted entry to

private sector in the banking, the industry has witnessed the entry of nine

Page 5: Banking Sector

new generation private banks. The major differentiating parameter

that distinguishes these banks from all the other banks in the

Indian banking is the level of service that is offered to the

customer. Their focus has always centered around the customer –

understanding his needs, preempting him and consequently

delighting him with various configurations of benefits and a wide

portfolio of products and services. These banks have generally been

established by promoters of repute or by ‘high value’ domestic financial

institutions.

The popularity of these banks can be gauged by the fact that in a

short span of time, these banks have gained considerable customer

confidence and consequently have shown impressive growth rates.

Today, the private banks corner almost four per cent share of the total

share of deposits. Most of the banks in this category are concentrated in

the high-growth urban areas in metros (that account for approximately

70% of the total banking business). With efficiency being the major

focus, these banks have leveraged on their strengths and competencies

viz. Management, operational efficiency and flexibility, superior product

positioning and higher employee productivity skills. 

The private banks with their focused business and service portfolio

have a reputation of being niche players in the industry. A strategy that

has allowed these banks to concentrate on few reliable high net worth

companies and individuals rather than cater to the mass market. These

well-chalked out integrates strategy plans have allowed most of these

banks to deliver superlative levels of personalized services. With the

Reserve Bank of India allowing these banks to operate 70% of their

businesses in urban areas, this statutory requirement has translated into

lower deposit mobilization costs and higher margins relative to public

sector banks.

Page 6: Banking Sector

PEST ANALYSIS

TECHNOLOGICAL ENVIROMENT

Technology plays a very important role in bank’s internal control

mechanisms as well as services offered by them. It has in fact given new

dimensions to the banks as well as services that they cater to and the

banks are enthusiastically adopting new technological innovations for

devising new products and services.

The latest developments in terms of technology in computer and

telecommunication have encouraged the bankers to change the concept

of branch banking to anywhere banking. The use of ATM and Internet

banking has allowed ‘anytime, anywhere banking’ facilities. Automatic

voice recorders now answer simple queries, currency accounting

machines makes the job easier and self-service counters are now

encouraged. Credit card facility has encouraged an era of cashless

society. Today MasterCard and Visa card are the two most popular cards

used world over. The banks have now started issuing smartcards or debit

cards to be used for making payments. These are also called as electronic

purse. Some of the banks have also started home banking through

telecommunication facilities and computer technology by using terminals

installed at customers home and they can make the balance inquiry, get

the statement of accounts, give instructions for fund transfers, etc.

Through ECS we can receive the dividends and interest directly to our

account avoiding the delay or chance of loosing the post.

Today banks are also using SMS and Internet as major tool of

promotions and giving great utility to its customers. For example SMS

functions through simple text messages sent from your mobile. The

messages are then recognized by the bank to provide you with the

required information.

All these technological changes have forced the bankers to adopt

customer-based approach instead of product-based approach.

Page 7: Banking Sector

ECONOMICAL ENVIROMENT

Banking is as old as authentic history and the modern commercial

banking are traceable to ancient times. In India, banking has existed in

one form or the other from time to time. The present era in banking may

be taken to have commenced with establishment of bank of Bengal in

1809 under the government charter and with government participation in

share capital. Allahabad bank was started in the year 1865 and Punjab

national bank in 1895, and thus, others followed

Every year RBI declares its 6 monthly policy and accordingly the

various measures and rates are implemented which has an impact on the

banking sector. Also the Union budget affects the banking sector to boost

the economy by giving certain concessions or facilities. If in the Budget

savings are encouraged, then more deposits will be attracted towards the

banks and in turn they can lend more money to the agricultural sector and

industrial sector, therefore, booming the economy. If the FDI limits are

relaxed, then more FDI are brought in India through banking channels.

POLITICAL/ LEGAL ENVIROMENT

Government and RBI policies affect the banking sector. Sometimes

looking into the political advantage of a particular party, the Government

declares some measures to their benefits like waiver of short-term

agricultural loans, to attract the farmer’s votes. By doing so the profits of

the bank get affected. Various banks in the cooperative sector are open

and run by the politicians. They exploit these banks for their benefits.

Sometimes the government appoints various chairmen of the banks.

Various policies are framed by the RBI looking at the present

situation of the country for better control over the banks.

Page 8: Banking Sector

SOCIAL ENVIROMENT

Before nationalization of the banks, their control was in the hands of

the private parties and only big business houses and the effluent sections

of the society were getting benefits of banking in India. In 1969

government nationalized 14 banks. To adopt the social development in

the banking sector it was necessary for speedy economic progress,

consistent with social justice, in democratic political system, which is free

from domination of law, and in which opportunities are open to all.

Accordingly, keeping in mind both the national and social objectives,

bankers were given direction to help economically weaker section of the

society and also provide need-based finance to all the sectors of the

economy with flexible and liberal attitude. Now the banks provide various

types of loans to farmers, working women, professionals, and traders.

They also provide education loan to the students and housing loans,

consumer loans, etc.

Banks having big clients or big companies have to provide services

like personalized banking to their clients because these customers do not

believe in running about and waiting in queues for getting their work

done. The bankers also have to provide these customers with special

provisions and at times with benefits like food and parties. But the banks

do not mind incurring these costs because of the kind of business these

clients bring for the bank.

  Banks have changed the culture of human life in India and have

made life much easier for the people.

Page 9: Banking Sector

7 P’S of BANKING SECTOR

It is very important for any bank to identify the 7 P’s of services so

was understands their customers better and provide them with best of

service. The 7 P’s are:

1. PRODUCT MIX

2. PRICE MIX

3. PLACE

4. PROMOTION

5. PEOPLE

6. PROCESS

7. PHYSICAL EVIDENCE

PRODUCT MIX

The product mix of a company includes all different product lines a

company offers to its customers. The product line of a bank might easily

include more than 100 different services. In today’s competitive scenario

it has become very necessary for a bank to provide it’s customers with a

wide variety of services and the best technology in order to attract them.

Here is an example of some of the products offered by UTI Bank to its

customers.

Offering

UTI Bank's Savings Account is just the right product for everyone, salaried,

employees or businessmen, high net worth individuals and NRI's. The

Page 10: Banking Sector

unmatched package of UTI Bank Savings Bank account given below brings

the benefits of better, efficient and hassle free banking.

ATM Network

A Savings Bank Account with UTI Bank entitles you to a free ATM card,

which enables you to access your account anytime and at any ATM centre

across the country. You can withdraw and deposit money and cheques

with your ATM card. Unlike most other ATMs, a UTI Bank ATM allows you

to withdraw up to Rs. 20,000 a day. In addition, cash can be withdrawn

from any of the ATMs against your MasterCard (domestic/international).

7-Day Banking

At select branches spread over the country, you can bank on all the 7

days of the week (except for public holidays), over extended working

hours.

Telebanking

Telebanking service provides you instant access to your account. It offers

you a wide range of services over the phone such as account information,

Balance Enquiry, Transaction Details, Statement of Account, Status of

your Cheque , etc.

iConnect-Internet Banking

This is the concept of "the Bank on your desk-top". You can look-up the

status of your account, query and undertake a range of financial

transactions, simply by clicking the mouse. Now don't you think you have

a great opportunity to see yourself laughing your way to the bank?

Offering

Page 11: Banking Sector

UTI Bank has joined hands with Citibank, to give rise to a new kind of card

power - unique and unmatched benefits and international utility at the

most competitive rates. The UTI Bank Citibank International Silver Card,

the MasterCard and 'Unique' Card offers quite a few benefits.

Rewards

UTI Bank Citibank Card combines dual conveniences of high purchase

power and flexible payment facility. Purchase of high-value items is now

convenient and when it comes to payback time, your bill can be paid in

installments, depending on your financial liquidity at a given moment. The

Revolving Credit Facility lets you pay as little as 5% of your total

outstanding every month. Giving you the power to buy now and pay later

in parts!

Dial-A-Draft

One can use your UTI Bank Citibank Card to pay for your personal

expenses at places where credit cards are not accepted yet. Like paying

for investments, telephone and electricity bills, school fees and much

more. Just call CitiPhone and the draft you need will be delivered to you!

Credit Limit Increase

You can call CitiPhone and ask for a Credit Limit Increase in the event that

you have to make a large purchase on your card urgently. It's especially

handy for paying off vehicle repairs, telephone bills and electricity bills.

And for anniversaries, weddings, birthdays, or business trips or when a

holiday goes beyond budget

24-Hour ATMs

One can withdraw emergency cash up to 60% of your credit limit from 24-

Hour ATMs in Ahmedabad, Bangalore, Calcutta, Chennai, Delhi,

Hyderabad, Mumbai and Pune. While traveling overseas you can draw

cash from MasterCard ATMs spread across the globe. The same is

Page 12: Banking Sector

applicable for any Citibank branch. Also the cash you withdraw is insured

against theft for a period of 12 hours after withdrawal. A never before

facility is brought to you with the UTI Bank Citibank Card at a transaction

fee of 2.5% or Rs.50 whichever is higher. All cash advances also carry a

service charge from the date of the transaction. The cash withdrawal limit

for the first year is Rs. 5,000.

Photo card

One may choose to have your photograph and signature digitally

imprinted on the front of your Card in color. So that you get the extra

recognition and security you expect as a UTI Bank Citibank card member

Concession on Personal Remittances

Do you often need to remit funds to other cities using facilities such as

Drafts/Telegraphic Transfers, etc.? Here's a benefit you would most

appreciate. A 25% rebate on standard commission is offered on personal

remittances at UTI Bank branches.

Overdraft facility

UTI Bank Citibank credit card provides you with an overdraft facility to the

extent of 75% of the value of your holdings of Demat Shares and Units!

Moreover, you get a waiver of 0.5% on interest rate chargeable under the

scheme. All you need to avail yourself of these benefits is a Demat A/c

with UTI Bank.

Free ATM Card

The UTI Bank Citibank Credit Card offers you a free ATM Card, which can

be used at over 250 UTI Bank ATM centers all over India. All you have to

do is open a saving bank/current Account with UTI Bank.

Other features

UTI Bank Citibank Card has the widest possible reach - welcomed by

1,10,000 Merchant Partners across India and Nepal and yet another 160

Page 13: Banking Sector

lakh Merchant Establishments worldwide. The card can be used both for

major occasions, and also for everyday purchases like groceries,

cosmetics, and petrol and auto accessories. It can also be used to buy

high-value items like consumer durables (refrigerators, washing machines,

microwave ovens, etc.). And even paying customs duty and hospital bills

becomes convenient with the Card.

Page 14: Banking Sector

PRODUCT WIDTH AND DEPTH

Width

Width of the product mix is the number of product lines a company

is offering. The product width could be a narrow one or a wide one

depending from bank to bank. A wide mix encourages more sales since

the banks are able to diversify and provide more to their customers and

they also appeal to a larger target market.

Depth

Depth of the product mix is the number of product items in each

product line. Banks with more schemes and services have more depths

than those offering only a few.

Here is table giving an example of Width and Depth in the Product Mix:

Similarly, different banks plan out their product portfolios and based

on that, the depth and width of their product mix can be determined.

In today’s scenario, where there is cutthroat competition and new

foreign banks entering the Indian markets, it has became more or less like

a law to have very wide product lines with more and more number of

products in each line.

Page 15: Banking Sector

PRODUCT LEVELS

Core Benefit:

It is the main or core reason why the customer will buy the service

of the bank. More like the basic purpose or necessity.

Basic Product:

The core benefit is converted into a basic product. That is the

service can used by the customer in order to fulfill his/her needs.

Expected Product:

It refers to the set of attributes and conditions expected by the

customers when they purchase the service.

Augmented Product:

It is the additional feature that the banks provide which exceeds the

customer’s expectations.

Potential Product:

Innovations and product differential is the bases of a Potential

Product. If the banks alter its services according to the requirements of

the individual customers it reaches this level.

CoreProduct

BasicProduct

Expected Product

Augmented Product

Potential Product

The basic necessity to use

banking services in

order to handle finance more

efficiently

Safety of deposits

Loanable funds etc.

Timely serviceLong banking

hoursLow interest

rates

Goods waiting rooms

Extensive ATM network

Promotional Discounts

Mobile and internet Banking

New Schemes tailored for

specific customers

Page 16: Banking Sector

Thus it can be seen how a particular product passes through

different levels. In today’s competitive scenario most banks try offering

services at the Augmented and Potential level.

PRICE MIX

The price mix in the banking sector is nothing but the interest rates

charged by the different banks. In today’s competitive scenario where

customer is the king, the banks have to charge them interest at a rate in

accordance with the RBI directives. Banks also compete in terms of annual

fees for services like credit cards, DMAT etc. Another important aspect of

the bank’s pricing policy today is the interest charged on the Home Loans

and Car Loans. With India’s economy progressing, there are more and

more buyers seeking these loans but at a very competitive interest rate.

Let’s understand this with an example. A particular buyer

approaches a bank for a car loan for a period of 3 years. He is charged Rs.

20,000 as interest. However, if a sale representative of another bank

comes to know of this deal, he will try to attract the customer by giving

him a better deal i.e. a loan at a lower rate on interest. In this way, it is

the customer that ultimately benefits.

Here is an example of some of the prices charged by ICICI bank for

their services

ATM Card Issue Free – 2 ATM cards issued free if it joint account

Add – on Card RS. 100 – Beyond 2 cardsDuplicate Card Rs. 100

Other General Charges

Current Account Savings Account

Transaction Charges NIL NIL

Page 17: Banking Sector

Charges for issue of Cheques book

NIL NIL

Issue of duplicate statement Rs. 25 per page Rs. 25 per pageAccount closure Rs.100 Rs.100

This example evinces some of the charges that the customer has to

pay for the services provided by the bank.

The pricing factor is very important because of the kind of

competition that is prevailing today in the Indian market. However it is

very important to understand that in the banking sector, the main pricing

policy is concerned with the interest rate charged. This interest rate is

however regulated by the RESERVE BANK OF INDIA and THE INDIAN

BANKING ASSOCAITION. Any one particular bank or a group of banks does

not regulate it. The interest rate charged cannot be higher than that

decide by the RBI and the INDIAN BANKING ASSOCIATION.

Thus, inspite of the constraints in the pricing policy due to the RBI

directives there are mainly three types of pricing methods adopted by

banks. They are:

Value pricing:

Banks having unique or different products or schemes mainly do this

type of pricing. They usually charge a combination of high and low prices

depending on the customer loyalty as well as the products. This type of

pricing strategy is usually coupled with promotion programmes.

Going Rate pricing:

The most commonly used pricing technique is the going rate pricing.

In going rate pricing, the bank bases its price largely depending on the

competitor’s prices. The banks however have to stay within the RBI

directives and compete. The banks may charge higher or lower than their

competitors. After 1991 when the foreign banks entered the Indian market

this method of pricing has gained increasing importance.

Page 18: Banking Sector

Mark up pricing:

This is a pricing technique wherein the cost of the service is

determined and a small margin is added to it and then the final price is

offered to the customers. This type of pricing is the not very popular since

in the banking sector it is not very easy to arrive at the cost of the service.

Thus most banks use a combination of mark – up pricing and going rate

pricing.

THE MOST FAVORABLE PRICING STRATEGY

This model shows a pricing strategy, which should be adopted in

order to ensure maximum satisfaction to both the bank as well as the

customers.

The price should be set in such a manner that the customer is

assured that he is not being cheated or overcharged by the bank and at

Page 19: Banking Sector

the same time the bank is able to reap maximum profits. Such a pricing

stand helps the bank get maximum sales as well as profits since the

customer feels that by entering such a transaction he is winning.

PLACE MIX

Place mix is the location analysis for banks branches. There are

number a factors affecting the determination of the location of the branch

of bank. It is very necessary a bank to situated at a location where most of

its target population is located.

Some of the important factors affecting the location analysis of a

bank are:

1. The trade area

2. Population characteristics

3. Commercial structure

4. Industrial structure

5. Banking structure

6. Proximity to other convenient outlets

7. Real estate rates

8. Proximity to public transportation

9. Drawing time

10. Location of competition

11. Visibility

12. Access

It is not necessary that all the above conditions have to be satisfied while

selecting the location but it should be tried to satisfy as many of them as

possible.

1. The Trade Area:

The trade area is a very important factor determining the place

where a bank branch should be set up. For e.g. a particular location

Page 20: Banking Sector

maybe a huge trading place for textiles, diamonds or for that case even

the stock market. Such locations are ideal for setting up of bank branches.

2. Population Characteristics:

The demography of a place is a very important factor. This includes:

The income level of the population

The average age

The average male female population

The caste, religion, culture and customs

The average spending and saving habit of the people.

These factors are very important for a bank as the help them decide

the kind of business the branch will get.

3. Commercial Structure:

The commercial structure refers to the level of commerce i.e.

business activities taking place at a particular location. The higher the

level of business activities taking place in a particular location the more

preferable it is for setting up a bank branch.

4. Industrial Structure:

This is nothing but a combination of the trade area analysis and the

commercial structure. However the industrial structure focuses more on

the kind of industries operating in a particular location. For example, an

area like SEEPZ is marked with a lot of electronic manufacturing units.

Thus the industrial stricture determines the kind of financial transactions

that could take place in a particular location.

5. Banking Structure:

The Banking structure refers to the existence of other banks in the

area. Whether there is already an efficient network of other bank

Page 21: Banking Sector

branches operating at that particular area. Thus the overall infrastructure

needed for the working of a bank.

6. Proximity of other convenient outlets:

This refers to the other branches of the same bank as well other

commercial, entertainment and industrial outlets.

7. Real Estate Rates:

This is mainly dealing with the cost factor involved in opening up a

bank branch at a particular location. The real estate rate is a very strong

factor influencing the location decision for a bank branch.

8. Proximity to public transportation:

The location should be proximate to public transportation facilities.

This means it should have bus stops close by as well as it should be

proximate to railway stations so as to make it convenient for the common

man.

9. Drawing Time:

Drawing time refers to the time period during which a customer can

draw money from the banks. It should be convenient to the customer and

somewhat flexible to accommodate the customer’s needs. No bank has

more than a certain amount with them and in case a customer wants to

withdraw an amount more than that available with the bank, the bank

needs to draw that amount from other banks. Hence, a location must be

such that it facilitates minimum drawing time.

10. Location of Competition:

The existence of other banks also means competition. If the level of

competition is very high in a particular location, it is necessary that a bank

Page 22: Banking Sector

does a lot of market research before opening a branch so as to estimate

the kind of business it would get.

10. Visibility:

The location of a branch should be such that it is visible and easily

noticed by the customers as well other people.

10. Access:

The bank branch should be very easily accessible to the customers.

If this is not the case, the customer might switch to some other bank,

which is more convenient to him and very easily accessible. The location

should be such that it is very convenient for the customer to reach.

Page 23: Banking Sector

Promotion Mix

Promotion is nothing but making the customer more and more

aware of the services and benefits provided by the bank. The banks today

can use a lot of new technology to communicate to their customers. Two

of the fastest growing modern tools of communicating with the customers

are:

1. Internet Banking

2. Mobile Banking

This can be better explained with the example of ICICI bank.

SMS services

SMS functions through simple text messages sent from your cellular

phone. These messages are recognized by ICICI bank to provide you with

the required information.

For example, when you enter ‘IBAL’ your cellular phone screen will

display the current balance in your primary account. Thus with the help of

SMS a wide range of query based transactions can be performed without

even making a call.

ICICI was the first organization in India to provide Wireless

Application Protocol (WAP) based services. Mobile commerce using WAP

Page 24: Banking Sector

technology, allows secure online access of the web using mobile devices.

With WAP one can directly access the ICICI WAP server, check one’s

account details and use other value added services.

Thus different methods are used by different banks to promoter its

services.

A bank may have very attractive schemes and services to offer to

their customers but they are of no use if they are not communicated

properly to the customers. Promotion is o inform and remind the

individuals and persuade them to accept, recommend or use of product,

service or idea. However there some very important points that is to be

considered before the promotion strategy is made. These points are:

Finalizing the Budget

Before the bank decides the kind of promotion that should be done,

it very important to finalize the budget for it. The formulation of a sound

budget is essential to remove the financial constraints in the process. The

budget is determined on the basis of volume of business of the bank. In

addition to this the intensity of competition also plays a decisive role.

Selecting a suitable vehicle

Another very important task is to select a suitable vehicle for driving

the message. There are a number of devices to advertise such as

broadcast media, telecast media and the print media. The selecting of the

mode of advertising is strongly influenced by the kind of budget decided.

Usually for promoting banks the most effective and economical form of

advertising has been the print media.

Making possible creativity

Making possible creativity is nothing but the kind of slogans, punch

lines etc. that are supporting the message. They should be very creative

but yet simple to be understood by the common man. It should appeal to

Page 25: Banking Sector

the customers. It should be distinct from that of the competitors and

should be successful in informing and sensing the customers.

Testing the Effectiveness

It should be borne in mind that the advertisement is first tested for

its effectiveness. This should be done with the help of various techniques

like testing effectiveness on a sample group. This helps determine the

success of the advertisement and in case of any problem the

advertisement can be altered and remedied.

Instrumentality of Branch Managers

At a micro level, it is the responsibility of the branch managers to

promote and drive the message to the people in the local area. They

should organize small programs in order to attract people and crate

awareness in the local area about the new schemes of the bank.

Different Ways of Promotion

Public Relations:

In today’s competitive scenario developing strong public relations is

very important for any bank to be successful. Most banks today have a

separate Public Relations department. However primarily it is considered

as a responsibility of the various bank managers to develop a steady and

strong relationship with their present customers as well as potential

customers. This can be done by a constant follow up, small programmes

etc.

Personal Selling:

Personal selling is found to be one of the most effective and popular

forms of promoting bank business. The main reason for this is that

banking is a service in which trust plays a very important role. In personal

selling, a bank representative goes to the customers and explains the

scheme to the customers. Also he gives the customers any kind

Page 26: Banking Sector

consultation he might need. He provides the customers all the information

sought by him. The representative tries to persuade the customers to go

for the scheme provided by the bank by telling him all the benefits. Here

are some of the important features of personal selling

It is a direct relation between the buyers and the seller

It is oral presentation in conversation

It is personal and social behavior

It is found to be more effective in service oriented organizations

It is based on the professional excellence or expertise of an individual

Sales Promotion:

Sales promotions are basically giving the customers some additional

benefits, maybe at times just some small gifts, in order to promote the

schemes. The more innovative the sales promotions the more positive are

the results. Some of the most popular sales promotions techniques are

gifts, contests, fairs and shows, discounts and commission, entertainment

and traveling plans for bankers, additional allowance, low interest

financing etc. It is very important that the sales promotions benefits are

designed in such a manner that they are better than those of the

competitors.

Word – of – mouth Promotion:

This form of promotions is not only very effective in banking

services but in any kind of service. However it is more important in

banking for the only reason that this is a service where trust plays a very

important role. If a particular bank’s services are recommended by

friends, relatives, or other well wishers the person is more influenced and

inclined towards that bank. It is very important to note that the internal

employees of the bank play a very important role in word – of – mouth

promotion technique. This is because they can start the process by

recommending the bank to their friends and relatives and after that it is

like a chain, which spreads like a wild fire.

Page 27: Banking Sector

Telemarketing:

In recent times telemarketing has gained increasing importance as

an effective tool for promotion. The telemarketing is a process of making

use of sophisticated communication network for promoting the banks.

This includes promoting through television, telephone, and radio.

Nowadays, cell phones are used extensively for the same. This is the most

popular form of promotion. Banks today have started using ‘SMS’ and

many other services supported by cell phones to provide benefits to their

customers and thus have tried to increase their sales. In today’s

competitive and modern scenario it very important that banks makes use

of telemarketing techniques very efficiently to have desirable results.

Internet:

The use of Internet as a promotional tool is increasing. More and

more banks are using Internet to promote their services. The online

banking has made it even easier for the customers to avail the bank’s

services. No longer do people have to go to their bank branches for small

petty matters like checking their balance etc. All this can be done with the

help of a few clicks.

Thus, these were the numerous ways in which a bank can promote

its services and create more awareness amongst the people.

Page 28: Banking Sector

People

People are the employees that are the service providers. In a

banking sector, the service provider plays a very important and

determinant role in rendering the customers a satisfactory and a good

service. It is extremely essential that the service provider understand

what his customers expect from him. In the banking sector, the customer

needs to be guided in a lot of matters, which is possible only with the help

of the service provider.

The position in the eyes of the customer will be perceived by

appearance, attitude and behavior of the customer contact employees.

Not only does the customer contact employee influence the customer’s

perception but also the customer base of the organization does so.

Page 29: Banking Sector

Process Mix

The process mix constitutes the overall procedure involved in using

the services offered by the bank. It is very necessary that the process is

very customer friendly. In other words a process should be such that the

customer is easily able to understand and easy to follow. Today if

particular banks formalities are long and the procedure very complicated

the overall process fails and the customer may not be inclined towards

using that banks services.

Let’s take for example the process for application for a car loan.

Now this mainly involves 3 things.

1. Producing of proper documents

2. Filling up of application form

3. Paying for the initial down payment.

Here the process may fail in the following cases:

1. If the customer is asked to produce a number of forms out of which

some may not be necessary at all. Thus it is very necessary that the

Page 30: Banking Sector

customer be asked for the minimum but most necessary document

and not the other unnecessary documents.

2. In case of application form, the application form must be in a

language best understood by the customers and it should not be

very lengthy one or demanding a lot of unnecessary information.

3. Finally the payment of initial amount. The customer should be given

options as to how he would like to pay by cheques or by credit card.

Once again the amount should be very competitive not very high

above the regular rates prevailing in the markets.

The smaller and simpler the procedure, the better the process, and the

customer will be more satisfied.

PHYSICAL EVIDENCE

Physical evidence is the overall layout of the place i.e. how the

entire bank has been designed. Physical evidence refers to all those

factors that help make the process much easier and smoother. For

example, in case of a bank, the physical evidence would be the placement

of the customer service executive’s desk, or the location of the place for

depositing cheques. It is very necessary that the place be designed in

such a manner so as to ensure maximum convenience to the customer

and cause no confusion to him.

Let us see an example as to how banks try to make little changes so

as to make the service better for their customers.

The Hong Kong Shanghai Banking Corporation (HSBC) has decided

in introducing a common uniform for all the employees in all its branches

Page 31: Banking Sector

all over India. The plan is possibly in line with the aggressive retail

banking adopted by HSBC. A common uniform its nothing like a

revolutionary change but however this little change makes it very easy for

the customer to identify with his service provider and makes the entire

process very easy for him. The more the bank does to make the service

easier and better the more satisfied will be the customer.

Thus, these are the 7 P’s of services. Each of them plays a very

important and a pivotal role in determining the quality of the service

provided to the customer.

BLUEPRINTING

A service blueprint is a picture or a map that accurately portrays the

service system so that different people involved in providing it can

understand and deal with it objectively regardless of their roles or their

individual points of view. Blueprints are particularly useful at the

designing and redesigning stages of service development. A service

blueprint visually displays the service by simultaneously depicting the

process of service delivery, the points of customer contact, the roles of

customers and employees, and the visible elements of the service. It

provides a way to break the service down into its logical components and

to depict the steps or tasks in the process, the means by which the tasks

are executed and the evidence of the service as the customer experiences

it.

Standard Beginning

Regardless of our mapping objective (to describe a new process or

an existing process), type of map selected (flow chart, risk management,

cross-functional, time elapsed), and state (as-is, should be, could be)

selected, all process maps will have the same common beginning steps.

Page 32: Banking Sector

1. Begin by defining the objective and the

process boundaries. Our objective in this case is to document the existing

savings-deposit process for the purpose of training new cashiers. The

process boundaries will begin with the customer’s bringing a deposit into

the bank (the input) and end with the last step in the cashier’s handling of

the transaction: issuing a receipt to the customer (the output).

2. List the basic steps that produce the output,

using as brief a description as possible, such as a verb followed by a noun.

These may include: complete deposit slip, greet customer, count cash,

inspect deposit slip, post deposit, post passbook, authenticate passbook

posting, store cash, store deposit slip, thank customer. Arrange these

processes in the sequence in which they occur; this will help you construct

your map logically and easily.

3. Record the map title and reference number at

the top and centre of a landscape-formatted sheet. In the sample below,

use “B1” as the reference number, where “B” refers to a series of savings-

related process maps and “1” is the first map in the series.

4. Record your name and the date prepared

below the map title line, at the left hand margin.

Constructing the Map: What Symbols Do I Use?

5. The starting point for this process is the

customer. Use the “Start” symbol and place this symbol in the upper left

hand corner of your paper.

6. Symbols must be connected by arrows to show flow, which may

represent either the sequence of the processes or the movement

(transportation) of the inputs from process to process. Automatically

enter an arrow after posting a process, inspection, document/input, or

decision symbol to your map. By convention, movement is from left to

right, and from top to bottom; both directions are shown in the sample

below. Alternating the vertical and horizontal flows can help you show

Page 33: Banking Sector

activities that occur almost simultaneously, and can also save space on

your sheet. For example, a down arrow is used to connect the Start

Process (customer) with the first two inputs (passbook and cash). You

could have just as well used a horizontal arrow and placed the two inputs

to the right of the Start Process symbol. The choice is yours. Just

remember, our objective is to present as clear and understandable a map

as possible.

7. The customer’s deposit has three component inputs: the cash, the

deposit slip (the bank’s voucher), and the passbook (the customer’s

receipt). These three inputs have different processes performed on them,

and are stored in different places at the end of the process, so they need

to be identified by distinct symbols. Note that the passbook and deposit

slip use the “Document” symbol, while the “Input” symbol is used to

represent the cash. For the sake of clarity, insert the document name into

the centre of the symbol. From this point forward assume that these

documents flow with the arrows (transportation symbols) until otherwise

indicated. At this point in the process, you have only two inputs: the

passbook and the cash. Place these next to each other, with one arrow to

the right, indicating that they flow together.

8. Your option for this step is to use either the “Process” or “Manual

Operation” symbol. Because the customer must hand-write the document

(rather than it being computer-generated, for example), the better option

is to select the “Manual Operation” symbol.

9. At this point, the cashier processes the deposit. The first step is to

ensure that the customer has submitted a valid deposit slip containing all

required information (which is listed in the process description). Since this

activity serves as a control point as well as a process point—the process

cannot continue if the amount is not recorded, for example—you can

select either a process or an inspection symbol to represent the action.

Page 34: Banking Sector

Because this step is an important control for the further processing of the

deposit, the better option is to select the Inspection symbol.

10. There is not sufficient space left on the sheet to post the next step,

even though there is space below the existing line of symbols. Since

arrows move from left to right and top to bottom, you cannot, by

convention, draw a big arrow from the right side of the paper across to the

left margin in order to continue the flow in the space remaining on the

paper. This means you continue on another sheet of paper. Select the “On

Map” connector symbol from the list. This symbol is used twice: first

where you discontinue, or break, the process, and second, where you

resume it. (If you have two breaks on a map, you will have four On Map

symbols.) To let the reader know which connectors go together (form a

pair), insert a letter or number, assigned sequentially, in each symbol. The

first pair, for example, might be labeled “A,” while the second pair would

be labeled “B.” The reader knows which one of the pair represents the

break in the flow, because there are no more symbols below or to the

right of the connector symbol. The reader knows which one of the pair

represents the resumption of the flow, because symbols will appear below

or to the right of the connector symbol.

11. In this step, the cashier counted the cash and found it to be either

correct or incorrect. This results in two possible courses of action that

must be shown in the process. Use the decision symbol. Insert a word or

two inside the symbol to reflect what condition is being decided; in this

case, you are answering the question: “Amount correct?” The question

has to be phrased so that it can be answered either “Yes” or “No.” Both

courses of action are mapped. The decision symbol, therefore, has two

arrows attached to it, one representing the “Yes” course of action, and the

other, the “No” course of action.

Page 35: Banking Sector

a. NO: This course of action represents a rework loop. The customer

has to either make the correction to the deposit slip and initial the

change, or make up/receive the difference in the amount of cash

deposited so that it will equal the amount shown on the deposit slip. After

the correction process, the arrow points back to the decision diamond

because the cashier now decides again whether the actual cash counted

agrees with the amount reflected on the deposit slip. If it does, then the

process resumes the flow from the “Yes” arrow leaving the decision

diamond.

b. YES: the cashier has answered “Yes” to the question, “Does the

amount of cash received agree with the amount shown on the deposit

slip?” The process continues to the next step.

12. Up to this point, the three inputs—the passbook, deposit slip, and

cash—have been flowing together. It is now time to separate their flow

and to show storage of the cash. The deposit slip and the passbook will

continue to flow together; redraw and label the document symbols for

each of these inputs next to each other, followed by one arrow. (To

emphasize that these documents flow together, you can overlap the

documents as shown in the sample.) Redraw and label the cash symbol,

followed by an arrow. Use the Storage symbol, and place it after the arrow

leading from the Cash symbol to show that the cash has been dropped

from the flow. If it adds clarity and not clutter, you can label the storage

symbol (in this case, “Till”). Note that the act of the cashier placing the

money in the till does not need a process box; it is sufficiently clear to

show through the use of the cash symbol, arrows, and storage symbol

that the cash is going into the till. This illustrates how the use of symbols

can eliminate unnecessary and redundant process boxes.

13. The details of the inspection performed by the back office

supervisor can be described in the second tier of the map. Alternatively,

you can shadow the inspection box (refer to the “Tier Your Maps” section)

Page 36: Banking Sector

and create a sub process map that describes what the back office

supervisor actually does.

14. This step demonstrates a teaching point discussed above. Which

point is represented here? Hint: Describe what is happening here.

15. The passbook/receipt, posted with the deposit (the output), is

returned to the customer. This is the end of the process. Use the End

Process symbol, (which is the same as the Start symbol) and label it to

show that the Customer is the endpoint. This now completes the first tier

of your Process Map.

16. In the second tier, record the description for each step. This task

serves a dual purpose, because it forces you to proofread your symbols to

make sure that you have complied with the requirements described in the

“Proofread Map” section above. You will also be able to see for yourself

whether your process map makes sense. Alternatively, you can complete

these descriptions as you draw your symbols; you may find, however, that

keeping up with the text while also posting symbols on your map is

cumbersome.

17. Lastly, since you have used a second page, carry forward the

Process Map title and number the map pages in the upper right hand

corner.

Page 37: Banking Sector

Cashier Process of Savings Deposit-B1 (Ref-1)

Prepared by: Your Name

18 August 2005

Customer enters banking hall bearing passbook and cash.

Customer completes deposit slip.

Customer hands deposit slip, passbook, and cash to cashier.

Cashier greets customer, then checks deposit slip for name, account number, agreement of written and numerical amounts.

Cashier counts cash and ticks to amount on deposit slip.

Customer

Passbook

Cash

Deposit Slip

A

(Ref-2)

(Ref-3)

(Ref-4)

(Ref-1)

Page 38: Banking Sector
Page 39: Banking Sector

Cashier Process of Savings Deposit-B1

No: Customer corrects and initials correction on deposit slip or adjusts amount of cash tendered.

Yes: Cashier posts transaction to bank’s books of account.

Cashier places cash in till.

Cashier posts deposit to customer’s passbook, calculates and posts new balance, initials passbook balance, then passes passbook and deposit slip.

Cashier thanks customer, placing the deposit slip on spindle for end of day balancing.

Cashier passes passbook to customer; thanks customer; customer leaves banking hall.

A

No

Amount? Ye

sPassbook

Deposit Slip

Cash

Till

Passbook

Deposit Slip

Customer

Spindle

(Ref-5)

(Ref-6)

(Ref-7)

(Ref-8)

Page 40: Banking Sector
Page 41: Banking Sector

Process Mapping Symbols

This symbol is used to indicate both the beginning and the end of your program.

Identifies an activity or task in the process that changes an output. Usually the name of the activity or task is written inside.

Manual Operation. If it is important to indicate that an operation is manually performed, you can use this instead of the square Operations Process symbol.

Document: indicates a physical paper on which information is recorded.

The document symbol, superimposed on itself, indicates the presence of multiple copies of a document. At left, for example, a document in triplicate is shown. When a document is shown in this manner, usually the destination of each copy is traced.

Input: The materials, equipment, information, people, money, or environmental conditions that are required to carry out the process.

Identifies a decision or branching point in the process. Write the decision inside. Label each path emerging from the Decision Diamond with the appropriate options, usually “yes” or “no.” Decision diamonds must post a question. Questions should be worded as specifically and objectively as possible, so that everyone will interpret them in the same way.

Start/End

Operation, Process

Multi-part document

Document

Manual Operation

Decision

Input

Page 42: Banking Sector

Indicates that the flow has been stopped in order to evaluate the quality of the output or to obtain an approval to proceed.

Indicates when something must wait or is placed in temporary storage.

Indicates movement of the output between locations.

Indicates that an output is in storage. Storage differs from delay based on the duration of the wait and the need for some type of authorization to retrieve the item.

An On-Map connector indicates that an output from this process is continued elsewhere on the process map. It is used to reduce awkward or confusing lines across a map. In order to help the reader follow the path, the same letter is used in a corresponding connector posted where the process resumes.

Off-Page connector: This indicates that the flow continues on another process map. Record the page index (H) and the connector number (6) inside the symbol to show where the reader will pick up the flow. Conversely, on the continuation map, record the page index (C) for the previous map, but use the same connector number (6) so that the reader can follow the path.

Inspection/ Measurement

Transportation

Storage

A

H6

Delay

Page 43: Banking Sector

Ref 1&2 Ref 3&4 Ref 5 Ref 6 Ref 7&8 TotalActual Time

2 mins 2 mins 1 min 1.5 mins 2 mins 8.5mins

Target Time

1 min 1.5 mins 0.5 min 1 min 1 min 5 mins

Improvement Opportunity = 8.5 mins – 5 mins = 3.5 mins

Is the incident critical

N Y N N Y

Partici-pants

Customer Customer, Cashier

Customer, Cashier

Custo-mer, Cashier

Custo-mer, Cashier

Visible Furnishings, Appearance, Behaviour, Simplicity of processEvidence of staff of staff

Page 44: Banking Sector

THE 4 I’s OF BANK MARKETING

There are four distinctive characteristics of service, which create

challenges and opportunities. They are commonly known as the four I’s

namely:

1. Intangibility

2. Inconsistency

3. Inseparability

4. Inventory.

1.) Intangibility

It is that characteristics of a service indicating that it has no

physical attributes that a person may feel, hear, taste before they buy

it.

For example, a person who is new to a bank and wants to open up

an account in the bank cannot feel or taste it and ascertain whether

the bank is good or bad before opening an account. He has to

experience it, feel how the service is, how humbly do people or the

staff members behave with him, is his money invested or put in a safe

account or not. It is only then he would come to know about the

services. This could be done only from the ‘trust’ that he would have

built up, as these things cannot be inspected before the use.

Therefore, most banks now a days, indulge in “tangibilizing the

intangibles” i.e. they provide tangible clues to the prospective

customers like the different awards that they have received for their

superior services, their annual records, etc. this helps the customers in

selecting the banks more easily.

Page 45: Banking Sector

2.) Inconsistency

It refers to variability or heterogeneity. In case of a bank, a new

customer or a rarely going customer may not get the same type of

service as a regular customer may get. This may be the case because

the staff members know the person well as he comes often but they

don’t know that person who does not come in again and again.

Also another point for inconsistency is that there is variability in

the service delivered by different people, that is services delivered

differs from people to people. Like in case of a bank, different staff

members would provide different services. In the bank, a person may

have lot of work and may not attend to a customer .On the other hand,

some other person with the same work may attend him with great

enthusiasm. In order to tackle this inconsistency aspect, adequate

training and motivation must be provided to the employees. This will

result in higher number of customers for the bank, higher profits and

subsequently lower retention rate.

Eg. “PUNJAB NATIONAL BANK” prides itself for providing “crown of

quality for customer who is the king” and is an ISO 9002 certified bank.

Thus, they will have to ensure that their service quality level is always

consistent and up to the mark to meet the tall expectations of their

customers.

3.) Inseparability

Page 46: Banking Sector

Inseparability is that characteristics of a service indicating that it

cannot be separated from creator-seller of the product. Many services

are created, delivered and consumed simultaneously through

interaction between customers and service producers. This is a source

of major limitation for the bank. But technology has in a big way

helped the banks to cope with this problem.

Production of services, when it comes to banks can be performed in

the following 3 ways:

(i) Co- production : In this case both the service provider and the customer

work together to produce services. When a customer wants to

withdraw cash from the banking premises, then both the customer and

the service provider needs to be present.

(ii) Isolated production : It is that part of service that is done outside to an

organization. Eg. Tele-Banking.

(iii) Self Service production : In this case, the customer uses the equipments

of the service providers and self serves it. Eg. ATM.

4.) Inventory

Inventory relates to the perishable characteristics of the service

marketing. If a customer starts his day at eight in the morning and

ends it at four, but if bank is open only from 9:00 a.m. to 1:00 p.m. in

the afternoon, then one might not be able to attend it. The demand for

banking services also fluctuates by day and hour. The day before the

holiday, weekend, most Mondays and Saturdays, pension and salary

days are heavier than normal banking hours. So service faces a lot of

Page 47: Banking Sector

problem from inventory as it cannot be stored, saved and then used

later.

RATER Analysis For Indian Overseas Bank

There are many reasons why a customer should be given QUALITY

SERVICES. The most of them are:

1. Industry being so competitive that a customer should be given

the best services as they have many competitors (the company)

and if even a single customer is lost in today’s JLT world then it

very difficult to win back the customer.

2. Most of the customers do not complain as they just opt out and

do get satisfied with better services elsewhere.

When it comes to services, there are 10 quality dimensions. Each of

the dimensions is of utmost importance since human element is

involved and it relates to services.

But Zeithaml, Bitner and Parsuraman have developed a new and

concise model by clubbing some points. This model consists of the

following dimensions:

Reliability

Assurance

Tangibility

Empathy

Responsiveness

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RELIABILITY

RESPONSIVENESS ASSURANCE

EMPATHY TANGIBILITY

RELIABILITY

It is defined as the ability to perform the promised service

dependably and accurately. In its broadest sense, reliability means

that the company delivers on its promises–promises about delivery,

service provision, problem resolution, and pricing. It is also known as

the “No Excuses” service delivery.

Indian Overseas Bank faces stiff competition from many other

banks within its vicinity and some of these banks are foreign banks.

But the existing customers have faith, loyalty and trust in this bank.

The customers are well aware that the bank will provide them back the

best and reliable services. For e.g., no person likes to wait to withdraw

Page 49: Banking Sector

his/her money. In order to correct this problem, Indian Overseas Bank

has ensured that whoever comes in for cash withdrawal will receive

his/her cash within five to ten minutes.

ASSURANCE

Assurance is defined as employee’s knowledge and courtesy and

the ability of the firm and its employees to inspire trust and

confidence. It includes the ability, knowledge, genuineness, and

honesty to provide the best services to the customer from the frontline

staff. In this dimension the front line staff is more important rather

than the owner.

At Indian Overseas Bank, every customer who comes is treated with

utmost care and any problem that takes place is solved with great

enthusiasm. It assures the customers coming up to the bank that the

money they invest is secure; the interest rate that is being provided to

them is at par or sometimes even higher as compared to other banks.

Also, it assures the customers that the money they have invested will

be returned to them as and when required with proper interest. It tries

to empower their customer contact people and regularly train them in

skills to build trust and loyalty between employess and the customers.

They have assigned some of their staff members to build relationships

with the customers by getting to know them personally.

TANGIBLITY

Tangibles are defined as the appearances of physical facilities,

equipments, personnel and communication materials. All of these

provide physical representations or images of the service that

customers, particularly new customers, will use to evaluate quality.

Page 50: Banking Sector

At Indian Overseas Bank, the entire premise is air-conditioned.

They have computerized systems in place and therefore quick,

accurate and efficient service can be provided to the customers. The

tables and chairs are conveniently located for the customers. The

personnel always have a cheerful and helping veneer and are always

ready to help out the customers. The entire place is done up in bright

colours and thus the customer can immediately feel the warmth and

the radiance of the place.

EMPATHY

Empathy is defined as the caring, individualized attention the firm

provides its customers. The essence of empathy is conveying, through

personalized or customized service, the customers are unique and

unique special.

The empathy shown by the employees of the Indian Overseas Bank

is good as they are always polite humble and helpful. There was a case

where once a customer misplaced Rs. 1,00,000 within the premises of

the bank. He panicked but the bank personnel put him at rest and

assured him that they would locate the same for him. Since he was a

regular customer, they knew him very well and took the situation

under control. They quickly located the cash and thus, the customer

was placated. The bank personnel went out of their way to help this

customer and thus understood his predicament. This bank regularly

holds seminars and training workshops so that they can understand

the consumer better and thus serve him better.

RESPONSIVENESS

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Responsiveness is the willingness to help the customer and

provide him with immediate and fast service.

The Indian Overseas Bank is prompt at providing its customers

with the information and services that they seek. It is extremely

prompt when it comes to resolving the complaints of the customers.

The customers, in their feedback form, mentioned this as one of the

most important factor that has prompted them to continue with this

bank.

All the five dimensions basically aim at serving the customers to

the best of their ability, giving them quality services and if things are

followed as they are demanded, (i.e., according to the customers

demand) then there would be no problems in facing any type of

people. The successful service organizations set up speeds for service

standards.

Page 52: Banking Sector

MARKET SEGMENTATION

An organization is supposed to cater to the changing needs of

customers; it is only natural that all customers have their own likes and

dislikes. They have some uniqueness, which throws a big imprint on

their lifestyles. This makes the task of understanding a bit difficult. It

has the context that we go through the problem of market

segmentation in the banking service.

The study of the needs of customers invites a plethora of

problems since in addition to other aspects; the regional

considerations also influence the hierarchy of needs. To be more

specific in the banking services, the banking organizations are

supposed to satisfy different types of customers living in different

segments. The segmentation of market makes the task of bank

professionals easier. If the market segmentation is done in a right

fashion, the task of satisfying the customers is simplified considerably.

The modern marketing theories advocate the formulation of marketing

policies and strategies for each segment, which an organization plans

to solicit.

The marketing segmentation is based in the principle of divide

and rule. If we divide the market into different segments, the size of

Page 53: Banking Sector

market is made small and the process of study is found convenient. We

find market segmentation division and subdivision of a market based

on considerations. The bank professionals have to segment the market

in such a way that the expectations of all potential customers are

studied in a right perspective and the marketing resources are

developed to fulfill the same. The marketing efforts can be made more

proactive if the process and bases of segmentation are right.

It is essential that the bank professionals assign due weightage

to the difference that we find in the market behavior due to

geographical, age, sex, nationality, educational background, income

classes, occupation, social and other considerations. If they overlook or

underestimate key bases while segmenting, the study results can’t be

proactive to the formulation of creative marketing decisions. This

makes it essential that the bank professionals are well aware of the

criteria for market segmentation. The agriculture sector, industrial

sector, services sector, household sector are found important in the

very context. The gender segment is found important no doubt but we

can’t underestimate institutional and professional segments. Since the

banking organizations serve different sectors and segments, the

segmentation should be done carefully.

Page 54: Banking Sector

IMPORTANCE OF SEGMENTATION

Instrumental in exploring opportunities : We find market

segmentation very much effective in exploring the profitable

opportunities. It is well known to us that while segmenting, the market

is divided into different groups and sub-groups and this simplifies the

process of studying and understanding the customers in a right

perspective. If we know about the rural segment, the opportunities are

explored to the rural areas. If we know about the women segment, the

opportunities are identified in that area. If we know about the low-

income group, the opportunities are identified in that group. Thus the

segmentation helps the bank professionals in exploring the profitable

opportunities.

Instrumental in designing a sound marketing strategy : We can’t deny

that market segmentation makes it easier to formulate a sound

strategy. Since the banking professionals are aware of the changing

needs and requirements of a segment, the marketing resources can be

developed in tune with the needs and requirements of a segment. The

formulation of a package is found significant and the bank

professionals can do it successfully on the basis of market

segmentation. The promotional measures can be satisfied in the face

of receiving capacity of a particular segment. The pricing strategy can

Page 55: Banking Sector

be made operational and the sales promotion measures can be made

productive.

Helpful to the policy planners : In addition, the policy makers also

find segmentation since they are well aware of the emerging trends in

the business environment. They get detailed information about the

changing needs and requirements of a segment. The planning is an on

going process. The banking professionals transmit necessary

information to the policy planners, which simplifies the process of

making a sound policy.

Enriching the market resources : In addition to other aspects, we

find segmentation instrumental in enriching the marketing potentials.

If we know about the preference, needs, requirements, attitudes,

lifestyles it is found easier for us to develop the marketing resources

accordingly. This in a natural way makes it convenient to develop

marketing resources. The process of innovation can be activated. The

services, the promotional measures, the pricing tool and the process of

offering can be made more competitive. The development of world-

class marketing resources thus makes it convenient to influence the

impulse of prospects. The bank professionals find it easier to get the

positive results for their productive marketing efforts.

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CRITERIA FOR SEGMENTATION

Segmentation in a right fashion makes the way for profitable

marketing. This helps policy planners in formulating and innovating the

policies and at the same time also simplifies the task of banking

professionals while formulating and innovating the strategic decision.

The following criterion makes the segmentation right.

ECONOMIC SYSTEM

An important criterion for market segmentation is the economic

system in which we find agricultural sector, industrial sector, services

sector, household sector, and rural sector requiring the weight age

while segmenting.

A). AGRICULTURAL SECTOR: In the agricultural sector, there are four

categories since the needs of all categories can’t be identical.

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The mechanization of agriculture, the improved or scientific

system of cultivation, the help of nature, the magnitude of risk, the

availability of infrastructural facilities influence the level of

expectations vis-à-vis the needs and requirements. The banking

organizations are supposed to know and understand the changing

requirements of different categories of farmers.

B). INDUSTRIAL SECTOR: The banking organizations are supposed to

have an in-depth knowledge of the changing needs and requirements

of the industrial sector. The large –sized, small- sized co-operative and

tiny industries use the services of the banks. The expectation of all the

categories can’t be uniform.

The banking organizations are supposed to have an in-depth

knowledge of the changing needs and requirements of the industrial

segment. The emerging tends in competition, the pressure of inflation,

the use of sophisticated technologies, and the business regulations are

some of the important aspects influencing the hierarchy of needs.

C). SERVICES SECTOR: It is an important sector to the economy where

the banking organizations get profitable business. The two categories

of organizations such as profit-making and non- profit making are

found important in the very context.

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The banking organizations need to identify the changing needs

and requirements of the services sector with the frequent use of IT and

with the mounting pressure of inflation and competition, we find a

change in the hierarchy of needs.

HOUSEHOLD SEGMENT

This also constitutes an important sector where different income

groups have different needs and requirements. In the below figure we

can see the different segments of household sector.

A). HOUSEHOLD SEGMENT: The high income group, middle income

group, subsistence level group and marginal income group have

different hierarchy of needs which influence the level of their

expectations.

B). GENDER SEGMENT: In the gender segment we find males and

females having different needs and requirements. The banking

PROFIT MAKING ORG.BANK INSURANCE, TRANSPORT HOTEL,

TOURISM, PERSONAL CARE, CONSULTANCY

ELECTRICITY PERSONAL

MULTIPLE SEGMENTS

SERVICE SEGMENT

NON PROFIT MAKING ORG. EDUCATION, HHHOSPITAL,

RELIGIOUSPOLITICAL AND SOCIAL

WELFARE.

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organizations are supposed to identify the level of expectations of both

sexes as shown in the below figure.

Housewives

Some of the women are housewives and therefore they have

different needs and requirements whereas some of them are working

ladies having different needs and requirements.

PROFESSION SEGMENT

In the profession segment, we find different categories of professions

and therefore we find a change in their needs and requirements. As

shown in the figure below:

Profession Segment Public/ Private Formal/Informal

Gender Segment Sub- Segment

Working Ladies

Technocrats

Bureaucrats

CorporateExecutivesIntellects

White - CollarEmployeesBlue – CollarEmployees

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The technocrats, bureaucrats, corporate executives, intellects,

white-collar and blue collar employees have different needs and

requirements and therefore the banking organizations should know

their expectations.

INSTITUTIONAL SECTOR

In this sector we find different categories of organizations. Some

of the organizations are known as charitable organizations, some of

them are cultural/ social organizations, some of them are industrial and

many of them are profit making and many are philanthropic and many

of them are related to trade and commerce. It is natural that the needs

and requirements vis-à-vis the level of expectations cant be identical in

all cases. To satisfy and to increase the market share it is imperative

that the banking organizations are familiar with changing needs and

requirements. The emerging trends in the social transformation

process determine the hierarchy of needs.

Institutional Segment Sub- Segment

Charitable Trusts

Individual OriginationsChamber of CommerceTrade and Commerce

Health/EducationSports Org

Philanthropic Organizations

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Complaint Handling-HDFC Bank

Whatever a service firm may do for customer, even the best

firms are going to find themselves facing complaints from customers

who feel that they are not being treated fairly. In dealing with these

situations, it is important to know how to diffuse them and then turn

them into positive experiences for all involved.

However, when it came to complaint handling, HDFC Bank turned

to the airline industry for inspiration. Impressed by the way an airline

takes care of its customers from the time they enter the airport till

they collect their luggage after landing, the bank maps the customer

flow at its branch. The first change it brought to its branches was the

'May I help you' desk at the reception to guide the customer to the

right counter. Next, it laid down efficiency parameters for each sub-

process carried out at the branch. "We are constantly fine-tuning our

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processes to reduce time taken, especially on routine tasks. We

monitor how long it takes for customer transactions as well as

complaints to get processed".

The bank's 'moments of truth' surveys too are modeled after the

airline industry's satisfaction surveys. These are given to customers

just before they exit a branch after a transaction.

HDFC Bank introduced changes for consumer convenience,

starting with the reception area and with good reason. A traditional

branch has always been an infrequent user's nightmare: cryptic boards

are placed on counters leaving one as confused as ever, bank officials

sit behind wire-meshes making it impossible to seek any guidance, and

the long queues are frustrating, all the more so when you realize you

stood in the wrong long line. But HDFC branch models are trying to

address this confusion, as well as the jail-like counters.

HDFC believes that unless they change to create convenience for

that customer, and add to his brand experience, they will fail to

capture the loyalty they're trying so hard to earn. And unless they

achieve this loyalty and increase their share of the customer's wallet

substantially, the majority of their retail customers will continue to be

unprofitable for them.

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COMPLAINT RESOLUTION MODEL (CRM)

HDFC bank takes complaint not as a mere complaint but as an

issue. They have got this unique CRM technique where in if there is

any complaint either by an employee or a customer in any branch; it

will be looked into and resolved in 24 hours. Within 24 hrs, if the

branch manager does not handle the complaint it goes to the higher

authority. And then again if the same complaint is not handled in 12

hours by the higher authority it goes to the Managing Director. Once if

it reaches the MD, either the branch manager is sacked or necessary

action is taken against him.

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CASE STUDY-I

Phase I

The reason why the customer decided to open an account with

ABC Bank was their constant boasting of being the best online trading

bank in India. So one day the customer called their customer center to

open an account. The lady was very polite and after talking with her for

some 5 minutes, she told the customer that one of their

representatives will visit her soon. She gave the lady her office address

and asked her to send the person to her office. The next day the

customer gathered all the necessary documents to open an account. It

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took exactly a week for their representative to turn up and on her

inquiring about the delay, he gave her a silly reason, like he was busy

with many more clients and so could not come on the promised date.

She felt that the employees attitude towards the customers depend

upon their mood on that particular day.

Phase II

Within a month the customer got a letter from the bank saying

that her account has been activated. So the next day she went to her

nearest branch to deposit a cheque. As she entered inside, it was over

crowded with people in each and every corner; most of them were the

employees themselves. In most of the branches that she had visited in

last 5 months, she had got the feeling that the branches were over

employed.

Phase III

After going through all this she decided to use their Phone

banking facilities, and it’s did not turn out any better than Central

Railway Inquiry. Every hour you find some different people to answer

your query, and most of the time you are put on HOLD.

Phase IV

They used to claim that their trump card was the ATM. To some

extent it was ok but what the customer noticed is that most of the

ATMs are located in a very isolated place and its down during evening

time.

The Finale

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Here is something that made the customer to finally say

GOODBYE to ABC. Initially they told her that their share trading service

is free, so she did most of her trading through ABC direct. The service

was not of much help. Just a week from then, she got a mail asking her

to pay for using share-trading service. Again she got in touch with the

concerned person and informed them about the mail and also that she

was no more interested in continuing her account in ABC. Then they

informed her that this mail is not for current year it’s the advance

payment for the coming year. In the end she had to pay them for the

service, which she never utilized. She stopped using ABC Bank and

asked all her colleagues never to have an account with the bank after

her experience.

ANALYSIS OF THE CASE

As can be seen in this case, there is a definite failure in the

service delivery. Now apply the different dimensions of service quality

to this particular case and find out reasons for the failure.

RATER

Reliability: The lady assured the customer that the representative would

visit her the next day. Instead he took a week to turn up. Also instead

of apologizing to the customer, he gave the excuse that he was busy

with other clients and so he could not attend to him. In a service

industry the customer is the king and you should make each customer

feel special. As can be seen, the attitude of the employees in the bank

is indifferent. In fact, the customer concludes his review by saying that

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the employee’s attitude towards the customer depends on their mood.

This shows tremendous inconsistency in service delivery.

Assurance: Here the staff has failed to live up to its promise. Instead of

coming in a day as promised, the representative came after a week.

He didn’t even apologize for his mistake. As a result the customer was

inconvenienced. The customer was angry that the bank made false

promise just to woo customers. Also she was told that the share

trading service was free. Afterwards she was made to pay for the

service, which she had hardly used.

Tangible: The tangible cues here will be the facilities that they provide,

like the phone banking and the ATM. The customer here describes the

ATM service as okay. She says that it works only sometimes. She

compares their phone banking facility to the central railway enquiry,

where every hour different people come to answer his query and most

of the time he was put on hold.

Empathy: From the case, it seems that they are not understanding

towards the customer grievances. All the branches this customer has

gone to have been very crowded. There was no effort on the part of

the employee’s to help this customer. Also in the case of their phone

banking, they make the customer wait for long periods of time without

answering their query.

Responsiveness: In the case of this customer, the bank and its staff were

not able to respond quickly. When the particular representative was

not able to reach the next day, the bank should have sent another

representative in his place. Also they should not have charged this

customer for using the share trading service, especially since it was a

mistake on their part.

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Service Recovery

Service recovery pertains to the actions taken by an organization

In response to a service failure. When a customer complains he

expects 3 types of fairness.

Outcome fairness: In this case the customer decided to use the share

trading service as she was told it was free. She did not find the service

of much help. In the end she had to pay for a service, which she hardly

used. The bank should not have charged the customer for this service

especially since it was a mistake on their part.

Procedural fairness: When the customer entered the bank to deposit a

cheque, she found it overcrowded. There was no effort made by any of

the employees to help this customer. Using the phone banking facility

was also not of much help.

Interaction fairness: After promising the customer that the representative

would come the next day, he came after a week. After committing this

mistake, he made no effort to apologize for it. Instead he gave the

excuse that he was too busy with other clients to attend to him.

Fish-Bone

CUSTOMER EQUIPMENT FRONT PROCEDURE

DELAY IN SERVICE

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OTHERS MATERIAL SUPPORTING INFORMATION

Equipment: - Phone banking system of ABC Bank was really bad. Every

hour there was a new person on the phone and most of the time the

customer had to wait as the phone was kept on hold. The customer

had some difficulty using the ATM machines, as they were located on

isolated places, which was very inconvenient for the customer to

access. Secondly, during the evening time they were not working. The

customer had been told about that the share trading facility was free

but later on they charged for the next year’s trading in advance. So,

there was certainly a failure in equipments.

Material: The material aspect of HDFC bank would be its ATM and

Phone Banking services that are described by the customer as a “total

flop” and a waste of time. This shows a complete material failure, as

the services are not up to the extent of the customer’s perception and

expectations.

Front line staff: The customer has rated employee’s attitude towards

him as ‘depends upon the mood’. In a service industry this is not

acceptable, whatever might be the mood his attitude towards the

customers should be good. The front line staff’s job is to make the

work easier for the customer and not to complicate further which is not

the case in this particular case study.

Supporting Activities: The supporting staff in this case would include the

front desk receptionist who fails to act in haste and inform the same to

the concerned representative. Also, the customer is not informed

about the different service charges, which the back office should have

notified by sending some mails or notifications

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Procedure: In the second phase the customer went to the bank to

deposit cheque, she found out that the place was very crowded and

there were no proper signboards for the counters to guide her.

Information: In phase 1, the customer was told that the bank

representative would be coming to his place in a day’s time. But these

representatives came after a week. So there was wrong information

given on the part of the customer. Again in the final phase, the

customer was not given any information about the next year’s share

trading charges and charged her in advance.

Company Profile

ICICI Bank is India's second-largest bank with total assets of over

Rs. 1 trillion and a network of about 540 branches and offices and over

1,000 ATMs. ICICI Bank offers a wide range of banking products and

financial services to corporate and retail customers through a variety

of delivery channels and through its specialized subsidiaries and

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affiliates in the areas of investment banking, life and non-life

insurance, venture capital, asset management and information

technology. ICICI Bank's equity shares are listed in India on stock

exchanges at Chennai, Delhi, Kolkata and Vadodara, 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 Bank was originally promoted in 1994 by ICICI Limited, an

Indian financial institution, and was its wholly owned subsidiary. ICICI's

shareholding in ICICI Bank was reduced to 46% through a public

offering of shares in India in fiscal 1998, an equity offering in the form

of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of

Bank of Madura Limited in an all-stock amalgamation in fiscal 2001,

and secondary market sales by ICICI to institutional investors in fiscal

2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the

World Bank, the Government of India and representatives of Indian

industry. The principal objective was to create a development financial

institution for providing medium-term and long-term project financing

to Indian businesses. In the 1990s, ICICI transformed its business from

a development financial institution offering only project finance to a

diversified financial services group offering a wide variety of products

and services, both directly and through a number of subsidiaries and

affiliates like ICICI Bank. In 1999, ICICI become the first Indian

company and the first bank or financial institution from non-Japan Asia

to be listed on the NYSE.

After consideration of various corporate structuring alternatives

in the context of the emerging competitive scenario in the Indian

banking industry, and the move towards universal banking, the

managements of ICICI and ICICI Bank formed the view that the merger

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of ICICI with ICICI Bank would be the optimal strategic alternative for

both entities, and would create the optimal legal structure for the ICICI

group's universal banking strategy. The merger would enhance value

for ICICI shareholders through the merged entity's access to low-cost

deposits, greater opportunities for earning fee-based income and the

ability to participate in the payments system and provide transaction-

banking services. The merger would enhance value for ICICI Bank

shareholders through a large capital base and scale of operations,

seamless access to ICICI's strong corporate relationships built up over

five decades, entry into new business segments, higher market share

in various business segments, particularly fee-based services, and

access to the vast talent pool of ICICI and its subsidiaries. In October

2001, the Boards of Directors of ICICI and ICICI Bank approved the

merger of ICICI and two of its wholly owned retail finance subsidiaries,

ICICI Personal Financial Services Limited and ICICI Capital Services

Limited, with ICICI Bank. Shareholders of ICICI and ICICI BANK

approved the merger in January 2002, by the High Court of at

Ahmedabad in March 2002, and by the High Court of Judicature at

Bombay and the Reserve Bank of India in April 2002. Consequent to

the merger, the ICICI group's financing and banking operations, both

wholesale and retail, have been integrated in a singularly.

CASE STUDY-II

The Customer’s Association with the Bank

     The customer became an ICICI bank customer in 1998 when he

became an NRI customer. Things were rather mundane and normal.

Compared to the other big nationalized banks and Citibank, the

customer felt ICICI Bank was the best and got some great feedback

from friends and relatives alike. His initial relationship was excellent.

Page 73: Banking Sector

This continued till 2001. All the facilities were of the highest grade.

Their email follow-ups, request resolution, customer service and

everything they served were of the highest grade. They also baffled

him by calling him overseas with regard to certain transactions and

request. So, he would have given a 5 star rating in 1998. But it did not

continue for long.

What has changed since then?

This bank grew leaps and bounds ever since the IPO in 1998 as

well as the NYSE listing in 2000. The numbers of customers were huge

and the merger with Bank of Madura added to the woes of the service.

As there is a saying “Quality is inversely proportional to Quantity”,

ICICI bank yielded to this very true philosophy. The customer sent a

letter to their NRI center regarding a change of address for his NRI

account. This took considerable amount of time since ICICI misplaced

the letter twice and he head o mail the letter again. This frustrated and

infuriated the customer. Then, they sent a courier to the customer but

at the wrong address. They sent one to the wrong address, and other

one to the right address but with the wrong password for the bank

account.

Snippets from mail correspondence that took place between the

customer and the banking personnel are provided as follows providing

us with an insight:

If doing an address change should take such a long time and if your processes are

so sterner and baseless with a mediocre customer-care follow-up, I definitely need to

reconsider my options. I had opened an account in ICICI though I had quite a few

options for an NRI account, in hope of having an excellent customer service.

I’ll have to rethink if my decision was correct. I have received similar complaints from

Page 74: Banking Sector

my friends as well stating that the ’’Quality of ICICI has gone down with Quantity’’, I

would definitely like to talk to some manager for NRI Services, for the same

matter.  Revert to me, if you still have any queries.   

 Mr. XYZ

The Reply

NRI Cell <[email protected]> wrote: Dear Mr. XYZ, We apologize for the delay in our response. With reference to your mail we would like to informyou that we have not received your letter for address change.Blah Blah Blah………

In this letter instead of requesting the customer for sending the

letter again and apologizing to him, the bank authority says that the

customer hasn’t send any letter at all thus making it a CRITICAL

INCIDENCE for the customer.

Customer’s Final Conclusion of the Bank

All things considered, the ICICI bank is far ahead of many of the

nationalized banks. As an NRI customer and a person used to excellent

banking for quite sometime, I feel that this bank has some mediocre

facilities and service. I will be reevaluating the opinion at a later point. I

am just having an account after many unpleasant services and

incidents.

Will the customer recommend ICICI Bank to anyone? A big NO at least

for the time being until the bank makes efforts to upgrade their

services.

Case Study Analysis: RATER

R: Reliability

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The Case Study shows that the bank was extremely reliable and

trustworthy initially. But after the surge and swelling of customers,

inefficiency has crept in r to the bank. The bank is unreliable only on

the basis of the service that it provides, but when the question of

financial reliability arises the bank seems to be in very sound and

secure.

A : Assurance

The customer Mr. XYZ was rest assured about the fact that the

bank was very professional in its approach. But after the bank

conducted the mistakes of sending the password at the wrong address

and then sending the wrong password at the right address made sure

that the bank lost the dignity of being a financial institution that

provides assurance. This had a deep impact on the customer.

T: Tangibility

As we can see when the customer Mr. XYZ wanted to change the

address for his NRI account he had to send 3 mails to the bank out of

which 2 of them were lost by the company, later on the first

confirmation was sent at the wrong address and the second

confirmation was sent at the right address with the wrong password.

The whole process took around 2 months, which is a very long time to

take by any standards.

E: Empathy

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The bank was very co-operative and sympathetic towards

customers before the phase of their IPO, the best example of this

would be that the company also called its NRI customers overseas for

certain transactions this showed that the bank was indeed very good

towards its customers, but after the IPO, the bank just lost all loyalty it

earned, it took the bank almost 2 months to change the address and

when the customer Mr. XYZ wrote a mail to the bank for its mediocre

service provided the bank in reply blamed the customer for its mistake.

Thus, ICICI Bank performs miserably on this count too and thus loses

the customer.

R: Responsiveness

The company lost this quality after the IPO. The company took

almost 2 months to change the address and only after sending 3 mails

was the job done, the bank management was also very unresponsive

in apologizing to its customers.

BIBLIOGRAPHY

Page 77: Banking Sector

SERVICES MARKETING– M.K.RAMPAL & S.L.GUPTA

SERVICES MARKETING–VALARIE.A.ZEITHAML & MARY JO BITNER

SERVICES MARKETING–CHRISTOPHER LOVELOCK

MARKETING MANAGEMENT–PHILIP KOTLER

BUSINESS TODAY (JULY 31’ 2005)

ANALYST (MARCH 2003)

www.icici.com

www.hdfc.com

www.indianoverseasbank.com

THE TIMES OF INDIA

BUSINESSWORLD