Marketing of Financial Services in India

8/12/2019 Marketing of Financial Services in India

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Jayesh shandha - 53

Vijaya more - 27


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Marketing

Definition :-

Themanagementprocessthrough whichgoods andservicesmove fromconceptto the customer. It includesthecoordinationof fourelementscalledthe4 P's of marketing:-(1) identification,selectionanddevelopmentof a product,(2) determination of its price,(3) selection of adistributionchanneltoreachthecustomer'splace, and(4) development and implementation of apromotional strategy.For example, newAppleproductsaredevelopedto includeimproved applicationsandsystems,are set atdifferent pricesdepending on how muchcapabilitythe customerdesires, and are sold inplaceswhere other Apple products aresold. Inordertopromotethedevice, thecompanyfeatured itsdebut at techeventsand is highly advertised on theweband ontelevision.Marketingis based on thinking about

thebusinessintermsofcustomer needsand theirsatisfaction.Marketing differs fromsellingbecause (in thewordsofHarvardBusiness School'sretiredprofessor of marketing Theodore C.Levitt) "Sellingconcernsitself with the tricks andtechniquesofgetting people toexchangetheircashfor your product. It is notconcerned with thevaluesthat the exchange is all about. And itdoes not, as marketing invariable does, view the entirebusinessprocessas consisting of a tightly integrated effort to

discover,create,arouse and satisfy customerneeds." In otherwords, marketing has less to do with getting customersto payfor your product as itdoesdevelopingademandfor that product and fulfillingthe customer's needs.
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inition/business.htmlhttp://www.businessdictionary.com/definition/business.htmlhttp://www.businessdictionary.com/definition/term.htmlhttp://www.businessdictionary.com/definition/term.htmlhttp://www.businessdictionary.com/definition/term.htmlhttp://www.businessdictionary.com/definition/customer-needs.htmlhttp://www.businessdictionary.com/definition/customer-needs.htmlhttp://www.businessdictionary.com/definition/customer-needs.htmlhttp://www.businessdictionary.com/definition/satisfaction.htmlhttp://www.businessdictionary.com/definition/satisfaction.htmlhttp://www.businessdictionary.com/definition/seller.htmlhttp://www.businessdictionary.com/definition/seller.htmlhttp://www.businessdictionary.com/definition/seller.htmlhttp://www.businessdictionary.com/definition/word.htmlhttp://www.businessdictionary.com/definition/word.htmlhttp://www.businessdictionary.com/definition/word.htmlhttp://www.businessdictionary.com/definition/Harvard-Business-School.htmlhttp://www.businessdictionary.com/definition/Harvard-Business-School.htmlhttp://www.businessdictionary.com/definition/Harvard-Business-School.htmlhttp://www.businessdictionary.com/definition/retired.htmlhttp://www.businessdictionary.com/definition/retired.htmlhttp://www.businessdictionary.com/definition/retired.htmlhttp://www.businessdictionary.com/definition/concern.htmlhttp://www.businessdictionary.com/definition/concern.htmlhttp://www.businessdictionary.com/definition/concern.htmlhttp://www.businessdictionary.com/definition/technique.htmlhttp://www.businessdictionary.com/definition/technique.htmlhttp://www.businessdictionary.com/definition/technique.htmlhttp://www.businessdictionary.com/definition/exchange.htmlhttp://www.businessdictionary.com/definition/exchange.htmlhttp://www.businessdictionary.com/definition/exchange.htmlhttp://www.businessdictionary.com/definition/cash.htmlhttp://www.businessdictionary.com/definition/cash.htmlhttp://www.businessdictionary.com/definition/cash.htmlhttp://www.businessdictionary.com/definition/values.htmlhttp://www.businessdictionary.com/definition/values.htmlhttp://www.businessdictionary.com/definition/values.htmlhttp://www.businessdictionary.com/definition/business-process.htmlhttp://www.businessdictionary.com/definition/business-process.htmlhttp://www.businessdictionary.com/definition/business-process.htmlhttp://www.businessdictionary.com/definition/business-process.htmlhttp://www.businessdictionary.com/definition/create.htmlhttp://www.businessdictionary.com/definition/create.htmlhttp://www.businessdictionary.com/definition/create.htmlhttp://www.businessdictionary.com/definition/need.htmlhttp://www.businessdictionary.com/definition/need.htmlhttp://www.businessdictionary.com/definition/need.htmlhttp://www.businessdictionary.com/definition/pay.htmlhttp://www.businessdictionary.com/definition/developer.htmlhttp://www.businessdictionary.com/definition/developer.htmlhttp://www.businessdictionary.com/definition/demand.htmlhttp://www.businessdictionary.com/definition/demand.htmlhttp://www.businessdictionary.com/definition/demand.htmlhttp://www.businessdictionary.com/definition/demand.htmlhttp://www.businessdictionary.com/definition/developer.htmlhttp://www.businessdictionary.com/definition/pay.htmlhttp://www.businessdictionary.com/definition/need.htmlhttp://www.businessdictionary.com/definition/create.htmlhttp://www.businessdictionary.com/definition/business-process.htmlhttp://www.businessdictionary.com/definition/business-process.htmlhttp://www.businessdictionary.com/definition/values.htmlhttp://www.businessdictionary.com/definition/cash.htmlhttp://www.businessdictionary.com/definition/exchange.htmlhttp://www.businessdictionary.com/definition/technique.htmlhttp://www.businessdictionary.com/definition/concern.htmlhttp://www.businessdictionary.com/definition/retired.htmlhttp://www.businessdictionary.com/definition/Harvard-Business-School.htmlhttp://www.businessdictionary.com/definition/Harvard-Business-School.htmlhttp://www.businessdictionary.com/definition/word.htmlhttp://www.businessdictionary.com/definition/seller.htmlhttp://www.businessdictionary.com/definition/satisfaction.htmlhttp://www.businessdictionary.com/definition/customer-needs.htmlhttp://www.businessdictionary.com/definition/term.htmlhttp://www.businessdictionary.com/definition/business.htmlhttp://www.businessdictionary.com/definition/marketer.htmlhttp://www.businessdictionary.com/definition/web.htmlhttp://www.businessdictionary.com/definition/events.htmlhttp://www.businessdictionary.com/definition/technology.htmlhttp://www.businessdictionary.com/definition/company.htmlhttp://www.businessdictionary.com/definition/device.htmlhttp://www.businessdictionary.com/definition/promote.htmlhttp://www.businessdictionary.com/definition/order.htmlhttp://www.businessdictionary.com/definition/place.htmlhttp://www.businessdictionary.com/definition/capability.htmlhttp://www.businessdictionary.com/definition/price.htmlhttp://www.businessdictionary.com/definition/system.htmlhttp://www.busi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Financial services

Definition:-

Servicesandproductsprovided toconsumersandbusinesses byfinancial institutionssuch asbanks,insurancecompanies,brokerage firms,consumer finance companies,andinvestment companiesall of which comprise the financialservicesindustry

Meaning:-

Financial services are theeconomic servicesprovided bythe finance industry, which encompasses a broad range oforganizations that manage money, includingcreditunions,banks,creditcardcompanies,insurancecompanies,accountancycompanies,consumer financecompanies,stockbrokerages,investment fundsand somegovernment sponsoredenterprises.

As of 2004, the financial services industry represented 20% ofthemarket capitalizationof theS&P 500in theUnited States.

The U.S.finance industrycomprised only 10% of total non-farmbusiness profits in 1947, but it grew to 50% by 2010.Over thesame period, finance industry income as a proportion of GDProse from 2.5% to 7.5%, and the finance industry's proportion ofall corporate income rose from 10% to 20%.

companies usually have two distinct approaches to this new type

of business. One approach would be a bank which simply buys an

insurance company or aninvestment bank,keeps the

originalbrandsof the acquired firm, and adds theacquisitionto its

holding company simply to diversify itsearnings.Outside the U.S.

(e.g., inJapan), non-financial services companies are permitted
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within theholding company.In this scenario, each company still

looks independent, and has its own customers, etc. In the other

style, a bank would simply create its own brokerage division or

insurance division and attempt to sell those products to its ownexisting customers, with incentives for combining all things with

one company.
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Financial Services in India

Indian financial services industry has been through the toughestof the times and yet stands strong and robust among the world

economies. Having a deep impact of the far-reaching changes inthe Indian economy since liberalization, the new face of thisindustry is evolving in a strong, transparent and resilient system.

Over the last few years, financial markets have witnessed asignificant broadening and deepening of service baskets with theintroduction of several new instruments and products in banking,insurance and capital markets space. The sector was opened upto new private players including foreign companies who embracedinternational best practices and modern technology to offer amore sophisticated range of financial services to corporate, retailand institutional customers. Financial sector regulators too havebeen visionaries to ensure that new regulations and guidelinesare in tandem with global norms. These developments have givena robust boost to the development and modernisation of thefinancial services sector in India.

Insurance Sector

Indian life insurance sector collected new businesspremiums worth Rs 11,742.7 crore (US$ 1.92 billion) for

April-May 2013, according to data from the InsuranceRegulatory and Development Authority (IRDA). Life insurerscollected Rs 1, 07, 010.7 crore (US$ 17.47 billion) worth ofnew premiums for the financial year ended March 31, 2013.

Meanwhile, the general insurance industry grew by 19.6 percent in April-May period of FY14, wherein the non-lifeinsurers collected premium worth Rs 13,552.46 crore (US$2.21 billion).


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Banking Services

According to the Reserve Bank of India (RBI)s QuarterlyStatistics on Deposits and Credit of Scheduled Commercial

Banks, March 2013, Nationalised Banks accounted for 52.4per cent of the aggregate deposits, while the State Bank ofIndia (SBI) and its Associates accounted for 22 per cent. Theshare of New Private Sector Banks, Old Private SectorBanks, Foreign Banks, and Regional Rural Banks inaggregate deposits was 13.6 per cent, 5.1 per cent, 4 percent and 2.9 per cent, respectively.Nationalised Banks accounted for the highest share of 51

per cent in gross bank credit followed by State Bank of Indiaand its Associates (22.7 per cent) and New Private SectorBanks (14 per cent). Foreign Banks, Old Private SectorBanks and Regional Rural Banks had shares of around 4.9per cent, 5 per cent and 2.5 per cent, respectively.

Banks credit (loan) growth increasedto 18 per cent for thefortnight ended September 6, 2013, while deposits grew by13.37 per cent showed the data by RBI.

India's foreign exchange reserves increased to US$ 277.73

billion as of October 4, 2013.

Mutual Funds Industry in India

Indias asset management companies (AMCs) have witnessedgrowth of 0.7 per cent in August 2013 wherein their averageassets under management (AUM) stood at Rs 7.66 lakh crore(US$ 125.10 billion).


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Private Equity, Mergers & Acquisitions in India

Private equity (PE) and venture capital (VC) firms remainedbullish about Indias consumer goods and services sector.

PE and VC investments increased by more than 46 per centin the first half of FY14, with consumer companies in retail,e-commerce, consumer packaged goods and quick servicerestaurants raising US$ 609.39 million through 51 deals.

Meanwhile, Indian merger and acquisition (M&A) spacewitnessed substantial levels of deal activity in the first ninemonths of 2013. There happened 377 deals amounting toUS$ 23.9 billion, according to a survey by tax advisory firm

Grant Thornton.Foreign Institutional Investors (FIIs) in India

Investments in Indian markets (equity, debt and derivatives)through participatory notes (P-Notes) increased to US$23.74 billion by the end of July 2013, according to the datareleased by Securities and Exchange Board of India (SEBI).P-Notes allow high net-worth individuals (HNI), hedge funds

and other foreign institutions to invest in Indian marketsthrough registered FIIs.The FIIs investments through P-Notes registered a growth of11.45 per cent in July 2013 as compared to 10.93 per cent inJune 2013.

Overseas investors infused more than US$ 2 billion in theIndian stock market in the month of September 2013. Sincethe beginning of 2013, they have pumped a net US$ 13.7billion in equities.

Moreover, given the higher yields offered by Governmentand corporate debt, the FIIs have been aggressively buyingbonds since the beginning of 2013. The debt marketattracted a net inflow of about Rs 25,000 crore (US$ 4.08billion) in January-May 2013.


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Financial Services in India: Recent Developments

Bangalore-based online retailer Flipkart has raised US$ 200million from its existing investors including South African

technology company Naspers Group and private equity (PE)firms Accel Partners and Tiger Global. The investors havealready placed investments to the tune of US$ 181 million inthe Indian e-commerce company and this fifth round offunding has marked the single-largest round of investmentinfusion.The funds would be used to build technology and will helpthe company strengthen its supply chain and human

resource base. Private lender HDFC Bank is planning to launch 500 mini

branches, to be handled by one to three people, across Indiaby the end of FY14. The bank has added about 219 minibranches pan-India since 2012.The basic motive behind such a initiative by the bank is totake the formal banking experience to people in unbankedand under-banked areas. A mini branch, manned by one,two or three persons, offers the entire range of products and

services including savings and current accounts, fixeddeposits, recurring deposits, credit card, instant debit cardand also ATM facility. Products such as two wheeler loan,tractor loan, commercial vehicle loan, agricultural andcommodities loan among others are also offered.


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Financial Services: Government Initiatives

In order to attract more of foreign capital to Indian markets, SEBIhas eased norms for overseas investors in the debt category. As

per the new rulings, FIIs will be allowed to buy Governmentsecurities (Gilts) directly from the market, rather than from themonthly auction conducted by the regulator to allocate thesepapers.The move is expected to facilitate more dollar inflows intothe country besides making the cost of acquisition of gilts cheaperfor foreign investors. In a similar initiative taken earlier in 2013,SEBI had allowed FIIs to buy corporate debt (which were alsoallocated through auction previously).

Road Ahead

A report prepared by KPMG prepared in association with theConfederation of Indian Industry (CII) states that the Indianbanking sector is expected to become fifth largest in the world by2020. The report highlights that India is one of the top 10economies of the world and with relatively lower domestic creditto gross domestic product (GDP) percentage, their lies a huge

scope of growth for the banking sector. Bank credit is expected togrow at a compounded annual growth rate (CAGR) of 17 per centin the medium term, eventually leading to higher creditpenetration in the economy.

Meanwhile, IRDA estimates that the insurance business in Indiawould touch Rs 4 lakh crore (US$ 65.32 billion) by the end ofFY14. The regulator is considering bringing out norms for sub-brokers of insurance products as well.

Exchange Rate Used: INR 1 = US$ 0.01633 as on October 18,2013


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MARKETING OF FINANCIAL SERVICES THEORETICAL

INTRODUCTION :-

The forces of deregulation, advancing technology and general

trend towards globalisation have vastly increased the competitive

pressures within the financial services market that has in turn

affected both the structure and operation of financial service

providing firms like banks. Banks are providers of financial

services, financial iritermediaries and key participants in a nation's

payment system. As such banks play a major role in the econolnyand in the financial well being of a nation. In India since 1992,

deregulation, technology, and aggressive competition fostered

more changes in the banking industry than it has experienced in

its entire history. Precisely because of competition, providing

financial services in an able manner requires an excellent

marketing orientation. Banks now operate in a situation of keen

competition in their financial service activities, whether it i:jcanvassing of deposits, extending credit line or in selling ancillary

services. With the liberalization of the banking sector and entry of

more players, banks need to beco~ne market oriented with new

and innovative schemes, at competitive prices available at the

place the customer needs them and delivered with efficiency and

quality of' service.


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Bank Marketing Strategies and Mixes :-

The overall marketing programme of a bank may involve a large

number of marketing strategies mixes. The marketing strategy

includes (a) a very clear defnition of target customers, (b) the

development of a marketing mix to satisfy the custonlers at a

profit to the bank.. (c) plianning for each of the 'source' markets

and each of the 'use' markets, and (d) organization and

administration.(Jain, Alok Kumar, 1997, ) " The Bank Marketing

Management System essentially should start with situation

appraisal to evaluate the opportunities and threats for evolving a

marketing strategy for the organisation.

Situation Appraisal :-

The situation appraisal must identify strengths and weaknesses

and do so in terms of the results establishe'd by the situation

appraisal. Some major areas to be examined are:l) Management,

2) Organisation, 3) Product lines, 4) Geographic presence, 5)

Pricing Strategy, 6) Human resources and System support. Eacharea must be examined for efficiency, integration with the

organization, and external image created. Data should first be

developed on such major categories of assets and liabilities as

loans, deposits, total assets and equity. Overall performance,

specific effectiveness by geographical sector, and impact on each

service or product offered by the by the ban must be calculated

and considered. (Chorafas, Din~tris N., 1982)"Situation appraisalcan lead to the forecasting of the marketing environment.


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Forecasting the Marketing Environnient :-

Bank management must make many assumptions about the

future and project the organization into that expected

environment. It is .at this point that forecasting becomesimportant. The bank's economist, if the bank has one, will play an

important role here. Assumptions must be made about many

economic and financial factors that will impact the bank in the

coming months. Answers must be forthcoming to such questions

as the future trends of interest rates, bond yields, and the demand

for credit. Will the economy be expanding or contracting? What

industries will show most progress? What will happen to wagerates taxes and the social and political environments? After an

evaluation of the external forces, bank management must turn to

the internal qualities of the bank. Answers are required to such

questions as do we have sufficient personnel in certain

departments to handle adequately the expected level of activity'?

Should we plan for additional branches or should we ernphasise

ATMs? Is this the year to add a leasing department or introduce acredit card programme? Overall, the trends in savings of the

economy are of utmost importance in forecasting the

environment.


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Trends in Savings in Indian Economy :-

Gross Domestic Savings as percentage of GDP constituted 23.4

percent in 200-01 as against 20.9 percent in 1999-00. During the

year 2000-01, the household savings constituted 20.51 per centof GDP and the same included Financial Assets and Physical

Assets. The financial assets are further classified into currency,

deposits,claims on govt., investment in shares and debentures,

contractual savings (LIC,PF,Pension Funds etc.). An analysis of

household savings as a percentage of total assets.The financial

assets are further classified into currency, deposits, claims on

govt., investment in shares and debentures, contractual savings(LIC,PF,Pension Funds etc.). An analysis of household savings

as a percentage of total assets is given in Table


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Household Savings in Financial Assets (As % of total financial

assets)

Financial assets 98-99 99-00 00-01 01-02

Currency 10.5 8.7 6.9 9.7

Deposits 38.8 37.5 40.9 38.6

Claims on Government 13.6 12.2 15.2 17.1

Investment in Shares &

Debentures .

3.4 7.1 2.4 2.4

Contractual Savings 33.7 34.5 34.6 32.2

The bank deposits constitute 38.6 per cent in the household

savings in the year 2001-02. The same was 45.8 percent in 1980-

81 and since then has been gradually declining showing a

process of disintermediation. Financial disintermediation has

thrown open a vast challenge to banks and will have to devise

various strategies to retain their position. Marketing therefore

assumes much significance in banking and necessitates a relook

at the entire bank marketing programme starting from the

planning stage.

Marketing Planning in BanksA market plan is a written document containing the guidelines for

the business centre's marketing programmes and allocations over

the planning period.


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The objective of a marketing plan can be stated concisely,

as to:

i) Define the current business situations (and how we got there)

ii) Define problems and opportunities facing the business

iii) Establish objectives

iv) Define the strategies and programs necessary to achieve the

objectives

v) Pinpoint responsibility for business center objectives

vi) Establish tlme tables for achieving objective

vii) Encourage careful and disciplined thinking

viii) Establish a customer/competitor orientation.(Lehmann,

Donald R., Winer, Russell S., 1988)


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In India too in the beginning of 1990s most banks in India had

established Marketing Departments and the range of marketing

activities in these banks have also increased considerably

Every year Bank managers prepare their performance budgets for

deposits, advances, profits etc. These budgets are nothing but

marketing plans envisaging the stepping up cf deposits by a

certain percentage. Similarly the marketing plan for credit includes

the different categories and sectors of advances to be stepped up

in theensuing year.(Joshi, Navin Chandra, 1991)

One imperative in rnarket planning is to make sure that profits are

properly safeguarded. Emphasis must be placed on market

planning as a system. It is the methodology that is important, not

a specific marketing plan. Plans can change; methodology, if it is

correct, evolves slowly.(Chorafas, Dimtris N.,1982)


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The entire planning process in banks should also consider

the various elements of the Marketing Mix.

Marketing Mix

One of the most basic concepts in marketing is the marketing mix,

defined as the elements an organization icontrols that can be

used to satisfy or communicate with customers. The traditional

marketing nlix is composed of the four P's: product, price, place

(distribution), and promotion. (E.Jerome McCarthy and William

D.Perreault,Jr., 1993) ' Money is the classical undifferentiated

product and the only way that those dealing in the commodity can

secure any competitive advantage is through the range and

quality of service.

One of the key requirements of branch locations is that it

provides convenient access to customers. The branch must be in

a customer catchment area in order to sustain business and

profitability levels. In addition, the location must provide premises

at a reasonable cost and size to allow the business function.

Product

A vital component of marketing mix, the product or service is the

basis on which customer satisfaction is created. A product is

anything that can be offered to a market for attention, acquisition,

use or consumption that might satisfy a want or a need'.(Kotler, P

and Armstrong G (1997)


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Bank's Products

Price :-

Price competition involves using low prices as a competitive toolto attract customers. It can result in price war as competitors

continually try to beat each other's prices. While price

compe1.ition provides an effective means of acquiring new

customers, it generally does not support customer loyalty

programs: price-cutting encourages customers to become price-

sensitive and to switch for better prices. Non-price competition

involves emphasizing unique or distinct features of the productthat set the financial institution apart from its competitors. It might

involve focusing on customer service or on technology in terms of

innovative form of delivery. Non-price competition should provide

some value to the customer and works well when customers are

less price-sensitive. Traditionally price was not used as a key

competitive weapon in the banking sector in India due to the

administered rate system. But liberalization of financial sector haschanged the scenario and customers too have become more

price sensitive. Since financial institutions have begun to

emphasize price and use it as a competitive tool, consumers have

become less loyal and have increased their switching behaviour

in searching for the best deal. In order to successfully implement

non-price competition banks need to be able to identify unique

features or benefits of the product and emphasize a brand image.

The lack of branding and product differentiation in financial

services makes non-price competition very difficult to employ.

Products are very similar and easily copied.


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Place:-

Place, channel of distribution, or marketing channel, describes the

groups of individuals and companies which are involved in

directing the flow and sale of products and services from theprovider to the eventual customer. Channels can be broadly

defined as 'direct' or 'indirect. Direct channels involve the

movement sale of products directly between the provider and the

customer as in the traditional branch network, wherea:; in the

case of indirect channels products flow via intermediaries or

middlemen. The traditional rnethod of distribution for banks ha,s

been via the branch network. Yet new channels are emerging notmerely as suitable alternatives, creating a threat to the future role

of branch networks and undermining the competitive position of

banks in using the branch network as a competitive advantage

Whichever channel is used, the distribution channel is not a short

term tactical issue as the cost of acquiring customers is

inextricably linked to long term customer retention policies. In the

personal sector, branch networks traditionally provided a veryeffective means of processing numerous transactions resulting

from large cash based and cheque based society


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Promotion :-

Promotional efforts must be stimulating and motivating enough togenerate interest in and promote a positive attitude towards the

bank and its products so that they will be considered favourably in

comparison with competitors. Promotion achieves this by working

in harmony with other elements of the marketing mix, enabling the

following lo be achieved.

Customer acquisition - Promotion has a key role in building

awareness of the company and its products to new customersand, in the case of switching customers, outlining the key benefits

offered in comparison to competitors.

Customer Retention - Promotion has an important role to play in

building and maintaining customer loyalty and cross selling

additional products to customers as the need arises or as they

enter the appropriate life stage.

Staff Morale - Promotion and Communication can provide support

for staff and serve to boost the image of the company and its

products and services.

Corporate Stability - Promotion serves as a statement of

confidence and stability to the wider audience. It sends out the

message that if the company can afford to advertise it is credible

and immutable.


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Relationship Marketing and Information Technology

Information technology enhances the practical value of

relationship marketing through the efficient performance of key

tasks:-

Tracking the buying patterns and overall relationships of existing

customers

Customising services, promotions, and pricing to customer's

specific requirement!;

Coordinating or integrating the delivery multiple services to the

same customer

Providing two-way communication channels: company to

customer, customer to conlpanli

Minimising the probability of service errors and breakdowns

Augmenting core service offerings with valued extras

Personalising services encounters as appropriate.(Berry,1995)

Technology may be used to identify and build a database of

current and potential customers, deliver differentiated messages

based on consumers characteristics and preferences, and track

each relationship to monitor the cost of acquiring the consumer

and the lifetime value of the resulting purchases. (Compulsky and

Wolf, 1990) "

Technology may be used to minimize or even eliminate contact

between customers and employees and also to simplify service

delivery, improve productivity,


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Customer Satisfaction

If the ultimate goal is to maximize customer satisfaction, it is

essential to understand what it 1s that icustomers want from a

bank. This new focus on understanding and meeting the needs ofeach customer has come ti3 be known as one- to-one marketing.

Research ha:< shown that customer expectations for quality

service can be categorized into iive areas: responsiveness,

assurance, empathy, reliability, and tangibles. (Leonard L Berry,

David R. Bennet, and Carter W Brown, 1989) Customer

satisfaction is not an end itself.

Benefits of Customer Satisfaction and Sewice Quality

Customer

Satisfaction (and

Service Quality)

Encourages repeat

patronage and loyalty

Positive word of mouth

Lowers cost of

Attracting new customers

Insulate Customers

From competition

an create sustainable

nhances/Prornotes

dvantage

Reduces future

Failure costs


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Customer Loyalty

The attachment an individual has towards a company andlor its

products /services is shaped by two dimensions: degree of

preference (the extent of the customer's conviction about itsproduct or service) and degree of perceived product differentiation

(to wl-iat extent the individual distinguishes the company and its

products /services from alternatives)

Attachment and behaviour that leads to loyalty segments

BEHAVIOUR

Loyalty Segments

High

Attachment

Low False

Attachment

The more relationships a bank has with a customer, the more

loyal the customer will be. The more will be the inertia to move to

another bank. Customer loyalty essentially rests on building and

developing relationship with the customers.

True Loyalty Latent Loyalty

False Loyalty No Loyalty


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Relationship Development :-

Commitment and trust are 'keys' in developing relationshipbecause they encourage marketers to (i) work at preserving

relationship investments by cooperating with exchange partners

(customers) (ii) resist attractive short term alternatives in favour of

the expected long term benefits of staying with existing partners

(customers), and (iii) view potentially high risk actions as being

prudent because of the belief that their partners will not act

opportunistically.

Benefits of Relationship Development :-

There are a number of benefits associated with the retention of

existing customers, and the developmerit of long-term satisfying

relationships

It takes time to mak~: money from customers- manycustomers are not immediately profitable.

Sales, marketing and set-up costs are amortised over a

longer customer lifetime.

Repeat customer often costs less to service.

It allows cross-selling opportunities, leading to increased

customer expenditure over time.

It stops competitors knowing then It allows for inter -- generational relationships.

Satisfied customers provide referrals and may be willing to

pay a price prermium


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Top Challenges Facing Financial

Services in 2013

At this time of year, when the perennial lists of top issues for thenew year appear, it will be useful to remember that the financialservices industry is challenged on many fronts, all of them tosome degree intertwined, and all of them critical to restoring thehealth and sustainable growth of the industry. Financialinstitutions of all shapes and sizes are in a period of strategictransformation, and must necessarily attend to a wide range of

issues simultaneously -- some more visible and fast-moving,others more fundamental and long-term -- in their recovery fromthe crisis of the past five years.

Rather than isolate a small group of "top" issues, therefore, as ifthey were the only or most important challenges financialinstitutions should address next year, another perspectivesuggests that there are several dimensions in which one canpresent and discuss these interdependent challenges. Anadvantage of this perspective is that it reveals the relativedegrees of urgency, breadth and impact among the numerousissues facing the industry. All need attention, but to differenttenors and timeframes.

The first and most visible dimension (though not necessarily themost important) includes the current or hot issues in theindustry media and conferences. They typically revolve around

the latest technology or political/regulatory trend, and while oftenurgent, are not always strategic. They tend to be the relativelyfast-moving issues that change from year to year. The list for2013 will include:

-- incorporating mobile banking as a regular delivery channel


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-- developing a strategy around social media

-- coming to permanent resolution with the regulatory issues of2012, such as Dodd-Frank, Basel and the CFPB -- dealing with

the economic aftermath of the fiscal cliff, whichever way it turnsout

A second dimension of issues is more complex and more regular,involving those recurring financial and competitive industry issuesthat financial institutions deal with every year. Now, however, theyare in a new economic context as the industry emerges from thefinancial crisis:

-- how to come to a new level of growth and sustainableprofitability in an environment of low interest rates

-- rebuilding asset quality and strengthening their capitaladequacy

-- where to develop new and reliable sources of revenue

-- enriching and increasing the business value of customerrelationships, at a time when customer behaviors andexpectations are more demanding

-- restoring public confidence in the industry

-- how to deal with aggressive and innovative non-bankcompetitors

-- embedding a risk management culture into the fabric and habitof daily operations


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A third dimension concerns the ever more critical need forfinancial institutions to transition their technology architectures tonext-generation capabilities, putting in place the enablers for allthe issues listed above. Banks, thrifts and credit unions now need

to approach technology no longer as an expense to be manageddown, but more as an investment for future growth. By focusingless on specific systems and applications, and more onenterprise-wide capabilities, they need to address suchchallenges such as:

-- implementing fully digital banking

-- filling manual gaps and delivering straight-through, efficientbusiness processes

-- enterprise-level integration and management of data --interactive customization of products and services to meetcustomer demands

-- transparency in costs, compliance and prices

While of course there are always going to be emergingtechnologies that capture our fancy and media attention (rightnow its probably mobile banking), these are really only thesuperficial toys that reflect the deeper and more significant trendsin the financial services industrys reliance on technology. Theemerging technologies of importance are therefore those that willenable the flexibility, adaptability, integration, standardization andefficiency that the transformation described above will demand.

in effect, therefore, there will be only one overriding challenge for

financial institutions in 2013how to stay disciplined and remain

attentive to all of the above issues simultaneously.


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Customers for financial services are changing in terms of their

wants, needs, desires, expectations and problems and financial

service providers have to understand who their customers are,

what they prefer, why they buy, who makes the decision and howthe consumer uses the product and service. In conformity with

these changes, there should be changes in the Bank's services,

training, attitudes and images, marketing strategies and patterns

of organization and control. New technology driven products

blended with the traditional ones and personalized service will

enable banks to extend a variety of financial services under one

roof


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Documents

Marketing of Financial Services in India