Business Development strategies to improve personal finance products

Business Development strategies to improve personal finance products1What is a strategy Strategies are means by which organization objectives will be achieved, under changing environmental situations

STRATEGY IS A PLAN OF ACTION TO ACHIEVE A VISION2Levels of Strategy3Corporate StrategyBusiness Level Strategy F

FunctionfFFunctional StrategytegyCorporate Level Strategy - Corporate Policy(Business & operational) - Corporate targets for different Business units and different schemesBusiness Level Strategy - At the level of business units, actions plans for different lines of business to meet corporate objectives/targets

4Functional Level Strategy Branch Managers/ Marketing Managers to run a functional activity within the overall corporate policy and business level approaches - Marketing - Distribution channels - Customer Service5Market StructureMarket Leader (about 30 to 40% market share)Market Challenger (about 25 to 25% market share)Market follower (about 15 to 20% market share)Market nicher (about 10% share)6 Strategies of Market LeaderExpanding total marketDefending existing Market ShareExpanding Market ShareMarket Maker/ Market Mover make rates competitive vis-a-vis other playersMore innovative products and intensive and creative advertisement7Strategies of Market ChallengerAttacking the market leader at your areas of influenceIdentify markets not served by Market LeaderBring in superior products, better technology, delivery channelsIncreased advertisements8Strategies of Market followerHold on to the current customer baseIncrease market share. Status-quo is not growthExploit distinctive advantage of location, loyal customersBring variation in the products9Strategies of Market nicher

Create exclusive and special customers with custom made products (e.g. Home Stay vs regular hotels)This strategy could be highly profitableSpecialisation in small segmentE.g. Urban Coop Banks10Marketing Strategy for Banks

The strategic decisions are greatly influenced by Changing Situations. Two decades ago Banks would not venture into Housing Loans or Loans against Consumer durable terming it as inflationary. Today they are the most important components of Personal finance productsCompetition from New generation private sector banks and foreign banks is mainly responsible for the PSBs to go for retail finance products aggressively11 Business Development StrategyHow the strategy works? - Promotion of BusinessPersuasion - Change of attitude of customers - negative to positiveInformation to customers Information on the product from different view pointsRecall value Repeated contacts to maintain continuity of efforts and to kindle interestReinforcing Converting interest into action sales takes place12Dimensions of Promotion Strategy

Advertising - proper media - proper message - creativity to be unique(receiving capacity of target audience to be kept in mind) - repetitive advertisement - cost effectiveness - based on the feedback message to be modified13Dimensions of Promotion Strategy contd

Public RelationsAn exercise of conveying impression of past deeds and future plansIt is an art of planning two-way communication and image building - Public meetings/seminars - Press meet/Press coverage - financial news - CSR activities - Community relations - Sponsorship - Annual reports - lobbying with VIPs/Opinion Makers14Dimensions of Promotion Strategy contdSales Promotion - Incentives to Customers - Gifts/ discounts/ contests - Incentives to staff - monetary/non monetary - Personal Selling (involves effective communication which requires pre sale preparations, ready for questions and ability to convince customers) - at the counter - door-to-door - in small groups of different segments - word of mouth - goodwill of existing customers15What are the Personal Finance Products? Personal finance Products could be classified into 4 groupsLiability ProductsCredit/CardsAsset ProductsThird Party Products16Liability ProductsVarious types of Savings Bank AccountsCurrent AccountsRecurring DepositsFixed Deposits of different types

17CardsCredit Cards - Visa - Master - Amex - RupayDebit CardsSpecial multi-purpose cardsForeign Travel Cards (chip based, pre funded balance in foreign currency)Prepaid Gift cards183rd Party Products

These are not products reflected in the Banks Balance sheet. These are sold for fees. These are fee-based productsLIC PoliciesGeneral Insurance PoliciesMediclaim Insurance policiesSale of Mutual Funds19Asset Products

Home LoansCar / Two wheeler loansGold LoansEducation LoansLoans against Rent ReceivableLoan against PropertyLoan to PensionersPersonal LoansLoan against NSC/LIC Policies/SharesLoan against Reverse Mortgage20Key characteristics of Personal finance products (asset products)

These are facilities targeted to individual customersFocused towards mass market segment covering large number of customersThese kind of loans are high yieldingCredit risk is diversified over large number of borrowersThe loans are schematic in nature and does not require elaborate credit skills for the staffThe success lies in generating large volumes of business.Thus these are essentially, IT backed products for sales, service and follow up21Key characteristics of Personal finance products (asset products). contdTo generate large volume, advertisements in different media, on a sustained basis is requiredThis sector is highly price sensitive. Hence very competitive terms have to be quoted for customer acquisition and customer retentionDelinquencies are high in unsecured retail loans like credit card receivablesServices of large field sales force is essential, which is normally outsourced22Infrastructure requirementA good IT package for sourcing the account and the follow up. Because of the large volume of business, individual attention to each account is very difficultDedicated Marketing ManagersAppoint a team of DSAs. Nearly 60% to 70% of the business is canvassed by the field sales forceOutsourced agency for due diligence of borrowersRecovery Agents for follow up of accountsRepossession agencies for seizure and sale of assets.Centralised loan processing centers for quicker TAT and developing specialisation and effective marketing. E.g Retail factories of BOB, Rapid Retail Centers in IOB, Personal Banking Branch in SBI23Specific Strategies for Home Loan and Vehicle LoansTie up with reputed builder, so that processing the loan application becomes quicker and documentation easier. A concession in process charges may be announced.Conduct Home Loan Melas bringing different builders and customers together.Putting up stalls of the Bank at various Real estate exhibitions. Placing DSAs at different Car show rooms for customer acquisitionLaunch short duration Campaigns with special interest rate/ concession in processing chargesRegular Advertisement campaign24Direct Selling Agents (DSAs)A concept pioneered by Foreign Banks, nurtured by new generation Pvt sector Banks; now adopted by all BanksDSAs are agencies appointed by Banks for sourcing business, for a feeDSAs are primarily used for sourcing Retail Loan and credit card business.DSA appoints their own field staff and telemarketing staffThere are many instances of miss-selling, causing Reputational risk to the Bank

25Direct Selling Agents The direct selling agents should be appointed as per the guidelines of RBI and they should sign an agreement of code of conduct

26Dedicated Marketing ManagersThese specialist officers are recruited to handle the following:Market intelligencePotential sourcingProduct / Corporate presentationsRight selling to the correct target groupSales conversionCRMManaging DSAs27