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SERVICES MARKETING PROJECT

ON

STATE BANK OF INDIA

SUBMITTED BY

SHAMBHU MANDAL PGEXP/082

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Contents

1. Project Details…………………………………………………………………………1

2. Contents ………………………………………………………………………….…...2

3. Introduction …………………………………………………………………….……..3

3.1 Service……………………………………………………………………………..3

3.2 Service Marketing…...…………………………………………………………….8

3.3 Service Marketing Mix……………………………………………………………8

3.4 Service Quality…………………………………………………………………...15

3.5 Gaps Models Of Service Quality………………………………………………...19

4. Banking In India……………………………………………………………………..26

4.1 Role Of Banks In Indian Economy………………………………………………28

4.2 Classification Of Banks In India…………………………………………………29

4.3 Bank Services In India………………………………………………...…………30

5. State Bank Of India Corporate Profile……………………………………………….35

6. Customer Expectations……………………………………………………………….38

7. Consumer Buying Behaviour……………………………….………………………..40

8. Industry & SWOT Analysis………………………………………………………….41

9. Market Offering Viz Marketing Mix & Brand Positioning………………………….43

9.1 Product/Service………………………………………………………………......43

9.2 Price………………………………………………………………………………46

9.3 Place……………………………………………………………………………...49

9.4 Promotion………………………………………………………………………...49

9.5 Physical Evidence………………………………………………………………..49

9.6 Process……………………………………………………………………………51

9.7 People…………………………………………………………………………….52

10. Demand & Capacity Management…………………………………………………...53

11. Conclusions…………………………………………………………………………..54

12. Recommendations…………………………………………………………………....54

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3. INTRODUCTION

3.1.Service

A service is the action of doing something for someone or something. It is largely intangible (i.e.

not material). A product is tangible (i.e. material) since you can touch it and own it. A service

tends to be an experience that is consumed at the point where it is purchased, and cannot be

owned since is quickly perishes. A person could go to a café one day and have excellent service,

and then return the next day and have a poor experience.

According to Irons, (1997:12) pure services are intangible but they do usually add value to, or

make available, a tangible product. They do not result in transfer of ownership and may leave

only memories.

Zeithaml and Bitner (1996) claim that in the simplest terms services are deeds, processes, and

performances. Their broader definition states that services include all economic activities whose

output is not a physical product, is generally consumed at the time it is produced, and provides

added value in forms that are essentially intangible concerns of the purchaser.

Kotler (1996) defines service as an activity that one party offers another that is essential

intangible and does not result in the ownership of anything. Its production may or may not be

tied to a physical product.

Characteristics of Services

There are five characteristics to a service which will be discussed below.

1. Lack of ownership.

You cannot own and store a service like you can a product. Services are used or hired for a

period of time. For example when buying a ticket to the USA the service lasts maybe 9 hours each way , but consumers want and expect excellent service for that time. Because you can

measure the duration of the service consumers become more demanding of it.

2. Intangibility

You cannot hold or touch a service unlike a product. In saying that although services are intangible the experience consumers obtain from the service has an impact on how they will

perceive it. What do consumers perceive from customer service? the location, and the inner presentation of where they are purchasing the service?.

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3. Inseparability

Services cannot be separated from the service providers. A product when produced can be taken away from the producer. However a service is produced at or near the point of purchase. Take

visiting a restaurant, you order your meal, the waiting and delivery of the meal, the service provided by the waiter/ress is all apart of the service production process and is inseparable, the

staff in a restaurant are as apart of the process as well as the quality of food provided.

4. Perishibility

Services last a specific time and cannot be stored like a product for later use. If travelling by train, coach or air the service will only last the duration of the journey. The service is developed

and used almost simultaneously. Again because of this time constraint consumers demand more.

5. Heterogeneity

It is very difficult to make each service experience identical. If travelling by plane the service quality may differ from the first time you travelled by that airline to the second, because the

airhostess is more or less experienced.

A concert performed by a group on two nights may differ in slight ways because it is very difficult to standardise every dance move. Generally systems and procedures are put into place to make sure the service provided is consistent all the time, training in service organisations is

essential for this, however in saying this there will always be subtle differences.

TYPES OF SERVICES

There are many types of services and to understand them better, they need to be

classified. The services are broadly classified on the following basis:

CLASSIFICATION OF SERVICES BY TARGET EFFECTS

• Services aimed at physical care such as health care, beauty salons, gymnasiums

and restaurants

• Services for intangible assets such as banking, legal consultation, accounting,

brokering, insurance and securities services.

• Services aimed at the mind of the customer such as education, broadcasting,

information, entertainment and amusement.

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• Services aimed at physical possessions and tangible assets such as transport, repair

and maintenance, cleaning and janitorial, laundry, gardening and veterinary services.

CLASSIFICATION OF SERVICES BY INDUSTRY

Services can be classified on the basis of the industry as shown in the table below:

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TANGIBILITY SPECTRUM

The dichotomy between physical goods and intangible services should not be given too

much credence. These are not discrete categories.

Most business theorists see a continuum with pure service on one terminal point and pure

commodity good on the other terminal point. This continuum is known as a tangibility

spectrum.

For example, a restaurant provides a physical good (the food), but also provides services

in the form of ambience, the setting and clearing of the table, etc. And although some utilities

actually deliver physical goods — like water utilities which actually deliver water — utilities are

usually treated as services. Hence there is a pure service and there is a pure product on the other

side of the tangibility spectrum.

Below given figure shows a tangibility spectrum. In the table we can see that salt is a

pure product whereas teaching is a pure service. The fast food outlets can be considered as a

combination of services and products as food provided is tangible and service provided in terms

of hospitality and service delivery is intangible.

The airline services are not pure services and not pure products. Airline services are somewhere

in the middle of the tangibility spectrum as shown in the figure by fast food outlets.

From this we can also conclude that services are different from the products and hence

the marketing of services is also different from that of products. Let's try to understand

the marketing mix for services which is different from the traditional marketing mix

of products.

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3.2 Service Marketing

Services marketing is difficult to define. Grove & Fisk (1983, 1992) produced work based upon

the metaphor of services as theatre. How appropriate do you feel this metaphor is in defining

services and how may it help or hinder the services marketer? "A service is an act or

performance offered by one party "A service is an act or performance offered by one party to

another. Although the process may be tied to a physical product, the performance is essentially

intangible and does not normally result in the ownership of any of the factors of production"

(Gronroos, 2000 ) It can be difficult to define just what is meant by a service because most

products we buy contain a mixture of both goods and service elements. A meal in a restaurant

contains a combination of goods elements (the food) and service elements (the manner in which

the food is served).

3.3 Service Marketing Mix

The traditional marketing mix is the most basic concept in marketing and is defined as elements which organizations control and use to satisfy or communicate with customers (Zeithaml and

Bitner, 1996:23). The components of the traditional marketing mix are the four P’s: product, price, place, and promotion. Careful management of these components is essential for the successful marketing of goods and services in both long-term and short-term marketing strategies

of organizations.

Conversely, the traditional marketing mix components have been found to be too limited in their application of services. The intangibility of service offerings is not taken into consideration because the focus is on the tangibility of products. The price component overlooks the fact that

many services are produced without a price being charged to the final customers, and customers frequently use price as an indication of service quality. Equally, the simultaneous production and

consumption of service offerings make the distribution component difficult to implement and control. While the promotion component of the traditional marketing mix concerns itself with advertising, sales promotions and publicity, services marketing involves service employees and

customers in the real time marketing of services during the interaction process. The limitations of the traditional marketing mix have lead to exploitation by service marketers of additional

components which services can utilize to satisfy and communicate with customers, resulting in the adoption of the service mix. The elements off this new concept are: service offerings (product), price, distribution (place), promotions, people, physical evidence, and processes.

The three new components address the uniqueness of three of the service characteristics. They

focus, firstly, on the inseparability of service marketers from customers, secondly, on the inability to hold service in inventory which makes it critical for the service process to flow smoothly and lastly, on the fact that a highly intangible service offering must appear tangible

(Goncalves, 1998:37). The additional components of the service mix can be fully controlled by the service organization and play a vital role in ensuring that marketing is customer focused, not

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product focused (Irons, 1997:24). The ensuing sections will provide a detailed description of the service mix.

3.3.1. Product (Service offerings):

A product is anything that an organization offers to customers that might satisfy a need, whether

it is tangible or intangible (Palmer and Cole, 1995:15). In contrast, the decisions that face service marketers concerning service offerings are very different from those related to goods. An

analysis of service offerings shows that it can be divided it into two distinct components namely, a core service offering that represents the intangible core benefits of services and a secondary service offering that represents the tangible and augmented elements of the service offerings. The

coreservice offerings are developed with customers’ benefit in mind and place theemphasis on the customers’ perception of services. The secondary service offeringsillustrate the additional

benefits that the service offers to meet customers’ additionalneeds, and serve to differentiate the offerings from those of competitors’. Thesebenefits can combine both the tangible and intangible elements of service offeringsthat facilitate the customer to comprehend the core service.

Because of its intangibility, services are difficult to control and display to

customers.Consequently, service marketers often emphasise the tangible elements of serviceofferings. The more intangible a service, the greater is the need for tangibleevidence. Tangible evidence includes packaging, brand name, corporate image,service delivery, and

service employees.

3.3.2. Price

In the determination of price, service marketers deals very much with the same price issues as

goods marketers. Subsequently, the differences presents itself when the intangible characteristic of services specifies that price becomes a quality indicator. The art of successful pricing is to establish a price level that is low enough for the exchange to represent good value to customers,

but high enough to allow service providers to achieve their financial objectives (Palmer and Cole, 1995:222). The perishable nature of services makes it important to control the demand and

supply of the service offerings. The price component is the easiest to change and normally provides the quickest results. Manipulation of the price can influence and control quantity demand. An increase in price will reduce the demand and/or cause a shift to lower usage periods.

Equally, a decrease in price will cause an increase in demand and stimulate new demand for the service (Kurtz and Clow, 1998:240).

The price of service offerings is often used by customers as an input into their expectations, purchase decisions, and evaluation of service quality. It is seen as a tangible cue in services with

a high risk and experience properties, to form expectations of the service. Price is used as an indicator of quality by customers. Thus, the assumption is formed that the higher the price of

service offerings, the more is expected of it by customers.

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3.3.3. Place (Distribution):

The distribution decision refers to the availability and accessibility of service offerings to customers. Availability from the customers’ point of view signifies that services are on hand

when they want them, while accessibility is the relative ease with which customers can conduct service processes with the service providers (Palmer, 1994:33). For pure services, the distribution decision is of little relevance, though most services involve a tangible component.

As a result, the distribution decision involves physical locations and decisions which intermediaries use to provide the services.

3.3.4. Promotions:

The promotion mix for the traditional marketing mix is usually broken down into four components namely advertising, sales promotions, public relations, and personal selling.

However, with the promotion of services, there is a greater need to emphasise the tangible elements of services such as packaging, brand name, corporate image, service delivery, and service employees (Palmer and Cole, 1995:16).

The distinctive promotional needs of services stem directly from some of the unique

characteristics of services. The intangibility characteristic of services results in customers perceiving them as high-risk purchases, with a need for tangible components as evidence of the service. The inseparability characteristic of services emphasises the fact that the promotion of

service offerings cannot be isolated from service providers. Therefore, the visible production process, especially the part played by service employees during interaction, is a critical element

in the promotion process. Berry (1989) states that the service promotion challenge is to transform invisibility into visibility, vagueness into sharpness, uncertainty into evidence and risk into benefit (Fugate, 1998: online).

The development of a promotional mix for services relies on the detailed specification of

promotion objectives to ensure that that appropriate messages are chosen and effectively channelled in a cost effective manner to reach the target market. Typical service promotional objectives are:

to develop an awareness or interest in the organization and its services to communicate the benefits of purchasing a service

to build a positive image of the organization to differentiate the organization from its competitors to remind customers of the existence of the service and the service organization (Palmer

and Cole, 1995:260).

The services promotion mix uses a combination of channels to convey messages to the target market. These messages are received from sources within the organization and externally. External sources include word of mouth communications or press editorials, while internal

communications originate from the traditional marketing mix and from the frontline employees. The combination of communication channels depends on the characteristics of the target market,

the size of the service, the nature of the service and the cost of the various channels (Palmer and Cole, 1995:260). The promotional mix of a service organization involves the transmission of

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messages to past, present and future customers. The ultimate aim is to make future customers aware of the service and influence them towards purchase.

3.3.5. People:

People as an element in the service mix include all the human actors - the firm’semployees

(internal customers), the buyers (external customers), and othercustomers - who play a part in service delivery and accordingly influence the buyers’ perception of choice in the service

environment (Zeithaml and Bitner, 1996:26). Service employees interact with customers during service delivery processes and provide cues to external customers concerning the services. Hence, it can be said that service employees’ competence, attitude, and appearance influence

customers’ perception of services. Customers often experience service employees as synonymous with the service and no matter how small or large a part they play in the actual

delivery of the service, they are still the focal point of the service for customers. It is crucial that service organizations stipulate very specifically to their employees what is expected of them during interactions with customers. To achieve the desired standards of service, service

organizations’ recruitment and training cannot be left to the human resources department only, but should form an integral part of the service mix decisions. Kheller believes that the heart of

the organization is the people and hiring the right people means hiring people with a service attitude (Irons, 1997:139). Within successful service organizations, the human resources department, and the marketing department work together to establish hiring criteria, training

needs, and promotion activities to attract and retain employees who can deliver the quality service expected by the organizations’ target market.

The marketing department plays an important role in influencing the experience that both internal customers and external customers will have. External customers choose to visit a service

organization because of the messages relayed through the service mix, or word of mouth messages communicated by other customers. External customers who encounter an unacceptable

level of service from internal customers, convey negative word of mouth messages about the service received to other customers. Consequently, it is crucial that marketing departments and human resources departments work together to ensure that the quality of service delivery by

internal customers leads to positive word of mouth messages to external customers (Gonçalves, 1998:38).

Every employee in an organization must serve other employees in some way or another. Therefore, just as external customers are needed, so are quality employees (internal customers)

needed. The responsibility lies with service marketers to involve all employees in the marketing process of an organization. A high level of employee involvement and motivation is directly

linked to an improvement in sales, profitability and customer loyalty. 3.3.6. Processes

Processes are the actual procedures, mechanisms, and flow of activities by which services are

delivered (Zeithaml and Bitner, 1996, 21). Customers judge services on the operational flow or on the actual delivery thereof. The inseparability characteristic of services requires customers to

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follow a series of extensive or complicated actions to complete the process. Often the logic of these actions escapes the customers. Whether the service process is standardised or customised,

it is used as evidence by customers to judge service quality. Standardised services will follow a production-line approach, while customised services command a greater degree of

empowerment. Nonetheless, the moment of truth where customers experience the evidence, is not a once-off event but an ongoing process.

The main ingredients of services processes are the people who participate in it. Services are of an integrated nature and the organization’s employees continuously fuse with the external

customers. The production and consumption usually takes place at the same time and research into customers’ attitudes towards service organizations suggests that customers see a service as an integral process in which they are intensely involved (Irons, 1997:37). The difference between

service processes and manufacturing processes are that:

the customers are participants in the service processes, service processes are difficult to structure, the outcome of services is dependent on internal and external factors,

the output of service processes leaves only promises and memories and service processes play an integral part in customer satisfaction (Gonçalves, 1998:39).

As a rule, services cannot be fixed to a definite time span, because depending on the nature of the service, it can take anything from a moment to months to complete. A service can be a well-

defined process, where all participants are aware of the process but a service can also be ill-defined or not obvious to the participant in the process. Services that offer high degrees of

customisation are usually ill-defined. When service processes progress smoothly, they are hardly noticed by the customers, who are under the assumption that the process will occur without any problems every time it is performed. However, when the service process is not completed

successfully, both the internal and external customers are frustrated and distrustful of the service organization. The success of service processes depends on the loyalty and trust- relationships

organizations can build with customers. Marketing and the other organizational functions should work together to determine the needs of the internal and external customers and satisfy those needs by designing and refining effective and efficient customer-friendly service delivery

processes (Gonçalves, 1997:41).

The actual service delivery process can be performed in three locations namely, • the customer’s environment, • at a store or an office or

• electronically or via telecommunications.

Management have a great deal of control over the last two service delivery processes.

A service can also be performed on customers, objects, and technological equipment. Knowing

this helps to understand the perceived risk for customers attached to the service purchase. Service organizations must consider the importance of communication strategies, appearance,

skills, and attitude of service employees. The physical evidence of delivery processes, such as the delivery vehicles, print matter and delivery employees must also support a service

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organizations’ image. The perishability characteristic of services influences the service delivery process through the difficulty it presents in managing supply and demand. Supply and demand

cannot be readily adjusted but techniques such as flexible service hours, price advantages for customers who buy during low demand periods, special offers that can only be redeemed during

slack time, and refinement of delivery processes, can provide solutions to service organizations.

3.3.7. Physical evidence

The environment in which the service provider delivers the service and where the customers and

the organization interact, as well as any tangible component that facilitates performance or communication of the service, is referred to as physical evidence (Zeithaml and Bitner, 1996, 26). Service organizations need to provide tangible evidence of the service to develop an image

in the mind of current and prospective customers. Often physical evidence overlaps with the promotion and distribution mix of the service mix. All tangible representations of services, such

as brochures, letterheads, business cards, report formats, signage, equipment, and physical facilities where service are rendered, represent the physical evidence of services.

Physical evidence provides service organizations with excellent opportunities to send strong, consistent, and positive messages regarding the nature of service offerings to customers. Physical

evidence is most successful if it is integrated throughout the organization, meaning that it should be included in an organizations’ strategic planning. Once it has been accepted by management, it is the responsibility of the marketing department to implement it throughout the entire

organization.

DIFFERENT PHYSICAL EVIDENCE IN DIFFERENT SERVICE SETTINGS

There are essentially three types of encounters between the customer and the service provider.

These are:

• The remote encounter: This type of encounter does not bring the two parties face to face but

they may be in touch through letter, e-mail, mail order, delivery machines such as ATM, etc.

Railway reservations through Internet, theatre booking, enquiries, etc. are some examples of this

type of encounters.

• The indirect personal encounter: This type of encounter occurs on telephone, on Internet, etc.

The two parties are not in face to face contact but have some means of instantaneous

communication. The examples are after sales service phone numbers and helplines for credit

cards and bank accounts.

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• The direct personal encounter: This is the most common encounter for the services provision.

The customer is in face to face contact with the service provider. The appearances of the

employees, uniforms, settings, etc. all contribute to the perception of the service quality.

Internal and external environment and tangible elements together constitute the physical

evidence of a service.

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3.4 SERVICE QUALITY

Quality is defined as "Degree to which a set of inherent characteristic fulfils requirements" by

ISO 9000.

Quality is also defined as “Fitness for use” by Joseph M. Juran. Fitness in this definition is

defined by the customer.

Quality can also be defined in simple words as “Conformance to Requirements” as defined by

Philip B. Crosby. The difficulty with this is that the requirements may not fully represent what

the customer wants; Crosby treats this as a separate problem. Quality has particular parameters

or dimensions of measurement. The quality of a product can be measured on the basis of certain

parameters or dimensions as follows:

1. Performance

2. Features

3. Reliability

4. Conformance

5. Durability

6. Serviceability

7. Aesthetics

8. Perceived Image, reputation, brand name, etc.

The dimensions of service quality are different from that of product quality. The determinants of

service quality are as follows:

1. Reliability

2. Assurance

3. Tangibles

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4. Empathy

5. Responsiveness

Initially there were 10 dimensions of service quality which were then reduced to only 5

dimensions later. Assurance is a combination of competence, courtesy, credibility and security.

Empathy is a replacement of access, communication and understanding the customer. Hence the

previous model of 10 dimensions is reduced to model of 5 dimensions.

SERVICE QUALTIY DIMENSIONS

The service quality dimensions are already listed earlier and now let us try to understand each

and every dimension in detail.

RELIABILITY – DELIVERING ON PROMISES

Reliability is the ability to perform the promised services dependably and accurately. Normally

this may be turned as “No excuses” service delivery. In its broadest sense, reliability means that

the company delivers on its promises – promises about delivery, service provision, problem

resolution and pricing. One company that effectively communicates and delivers on the

reliability dimension is Federal Express (FedEx). Federal Express a courier service organization

has positioned itself as a reliable organization in terms of handling and delivering the packages.

All firms need to be aware of customer expectations of reliability. Firms that do not provide the

core service that customers think they are buying fail their customers in the most direct way.

ASSURANCE – INSPIRING TRUST AND CONFIDENCE

Assurance is defined as employees’ knowledge and courtesy and the ability of the firm and its

employees to inspire or convey trust and confidence. This dimension is likely to be particularly

important for services that the customer perceives as involving high risk and/or about which they

feel uncertain about their ability to evaluate outcomes, for example, banking, insurance, and

brokerage, medical and legal service.

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Airlines need to provide an assurance to the customers as flying is considered as a high risk as

compared to railways or road transport. Also ships and cruises have to provide an assurance to

the customers.

TANGIBILITY – REPRESENTING THE SERVICE PHYSICALLY

Tangibles are defined as the appearance of physical facilities, equipment, 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. While tangibles are often

used by service companies to enhance their image, provide continuity, and signal quality to

customers, most companies combine tangibles with another dimension to create a service quality

strategy for the firm.

EMPATHY – TREATING CUSTOMERS AS INDIVIDUALS

Empathy is defined as the caring, individualized attention the firm provides its customers.

Empathy means treating the customers as individuals. The essence of empathy is conveying,

through personalized or customized services, that customers are unique and special. Customers

want to feel understood by and important to firms that provide service to them. Building

relationships is the key factor and helps in building the service quality.

RESPONSIVENESS – BEING WILLING TO HELP

Responsiveness is the willingness to help customers and to provide prompt service. This

dimension emphasizes attentiveness and promptness in dealing with customer requests,

questions, complaints and problems. Responsiveness is communicated to customers by the

length of time they have to wait for assistance, answers to questions, or attention to problems.

Responsiveness also captures the notion of flexibility and ability to customize the service to

customer needs.

MOMENTS OF TRUTH

Each and every point where a customer comes in contact with the service organization is known

as a service encounter. These points of contact create an image or impression in the customers

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mind about the service provider. This service encounter is also known as “moment of truth”.

Such points of contact thus form moments of truth for a service provider. This concept was used

and formulated by Jan Carlzon who was the CEO of SAS (Scandinavian Airline Services) during

the period 1981-1993.

For example, among the service encounters a hotel customer experiences are checking in to the

hotel, being taken to a room by a bell person, eating a restaurant meal, requesting a wake-up call,

and checking out. In a hospital context, a study of patients revealed that encounters with nursing

staff were more important in predicting satisfaction than were encounters with meal service or

patient discharge personnel. Side from common key encounters, there are some momentous

encounters that like the proverbial “one bad apple” simply ruin the rest and drive the customer

away no matter how many or what type of encounters have occurred in the past.

The Disney Corporation estimates that each of its amusement park customer experiences about

74 service encounters and that a negative experience in any one of them can lead to a negative

overall evaluation. Mistakes or problems that occur in early levels of the service cascade are

particularly critical, because a failure at one point results in greater risk for dissatisfaction at each

ensuing level.

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3.5 GAPS MODEL OF SERVICE QUALITY

The service quality has five dimensions as explained earlier. Also the service quality has a gaps

model in which we can understand different types of gaps in the service quality which can be

filled or closed so as to provide a zero defect service. Different people have developed different

model for the gaps in service quality. The most extensively used and accepted gaps model of

service quality is known as SERVQUAL.

SERVQUAL model consists of five gaps in the service quality. One of the five gaps is customer

gap and the other four gaps are service provider gaps. The central focus of the gaps model is the

customer gap, the difference between customer expectations and perceptions. Hence this gap is

also known as Expectations Gap. Firms need to close this gap – between what customers expect

and receive – in order to satisfy the customers and build long term relationships with them.

The four provider gaps are as follows:

1. Gap 1 – Knowledge Gap

2. Gap 2 – Standards or Design Gap

3. Gap 3 – Delivery Gap

4. Gap 4 – Communications Gap

Measuring gap between expected service and perceived service is routine customer feedback

process that is practiced by leading service companies, Customer satisfaction is dependent on

minimizing the four gaps that are associated with delivery of the service. The market research

gap is the discrepancy between customer expectations and management perception of these

expectations. Gap 1 arises from management’s lack of full understanding about how customers

formulate their expectations based on a number of sources: advertising, past experience with the

firm and its competitors, personal needs, and communication between management and 33 its

contact employees, and reducing the number of levels of management that distance the customer.

The design gap results from management inability to formulate target levels of service quality to

meet perceptions of customer expectation and translate these into workable specifications. Gap 2

may result from a lack of management commitment to service quality or a perception of the

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infeasibility of meeting customer’s expectations; however, setting goals and standardizing

service delivery task can close the gap. The conformance gap occurs because actual delivery of

the service does not meet the specifications set bay management. Gap 3 can arise for a number of

reasons, including lack of teamwork, poor employee selection, inadequate training, and

inappropriate job design. Customer expectations of the service are formed by media advertising

and the other communication from the firm. Gap 4 is the discrepancy between service delivery

and external communications in the form of exaggerated promises and lack of information

provided to contact personnel.

Communication Market Research

GAP 4 GAP 1

Conformance Design

GAP 3 GAP 2

Customer

Perception

Customer

Expectation

Managments

Perceptions of

Customer

Expectations

Service

Standards

Service

Delivery

Managing

the Evidence

Understanding

the customer

Conformance Service Design

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CUSTOMER GAP OR EXPECTATIONS GAP

The difference between customer expectations and customer perceptions creates the customer

gap. While customer perceptions are subjective assessments of actual service experiences,

customer expectations are the standards of, or reference points for, performance against which

service experiences are compared. Customers perceive that they get what they think they will

and should. In practice, a customer gap typically exists.

The Gap 5 shown in the following figure of service quality is customer gap or expectations gap

GAPS MODEL OF SERVICE QUALITY

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KNOWLEDGE GAP – NOT KNOWING WHAT CUSTOMERS EXPECT

This gap is the difference between customer expectations of service and company understanding

of those expectations. Management perceptions about the customer expectations can be different

from the customer expectations. There can be many reasons behind this gap. Some of them are as

follows: Provider may not interact directly with customers, be unwilling to ask about

expectations, or be unprepared to address them.

The key factors leading to this type of gap are as follows:

• Inadequate marketing research orientation

o Insufficient marketing research

o Research not focused on service quality

o Inadequate use of market research

• Lack of upward communication

o Lack of interaction between management and customers

o Insufficient communication between contact employees and managers

o Too many layers between contact personnel and top management

• Insufficient relationship focus

o Lack of market segmentation

o Focus on transactions rather than relationships

o Focus on new customers rather than relationship customers

• Inadequate service recovery

o Inevitable service failures

o Not understanding the importance of service recovery

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STANDARDS/DESIGN GAP – NOT HAVING RIGHT STANDARDS/DESIGN

The difference between company understanding of customer expectations and development of

customer driven service designs and standards is known as the standards gap or the design gap.

Customer driven standards are different from the conventional performance standards that most

services companies establish in that they are based on pivotal customer requirements that are

visible to and measured by customers.

The key factors leading to this type of a gap are as follows:

• Poor service design

o Unsystematic new service development process

o Vague, undefined service designs

o Failure to connect service design to service positioning

• Absence of customer defined standards

o Lack of customer defined standards

o Absence of process for setting service quality goals

o Absence of process management to focus on customer requirements

• Inappropriate physical evidence and servicescape

o Inappropriate tangibles and physical setting

24 | P a g e

DELIVERY GAP – NOT DELIVERING TO SERVICE STANDARDS

This type of gap is the difference between the service standards or the service design and the

service delivery. It is the discrepancy between development of customer driven service standards

and actual service performance by company employees. Thus even when standards accurately

reflect customers’ expectations, if the company fails to provide support for them – if it does not

facilitate, encourage and require their achievement – standards do no good.

The key factors leading to this type of gap are as follows:

• Deficiencies in human resource policies

o Ineffective recruitment

o Poor employee-technology job fit

o Inappropriate evaluation and compensation systems

• Failure to match supply and demand

o Inappropriate customer mix

o Over reliance on price

• Customers not fulfilling roles

o Customer lack knowledge of their responsibilities

o Customers negatively affect each other

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COMMUNICATIONS GAP – PROMISES DON’T MATCH PERFORMANCE

The difference between service delivery and the service provider’s external communications is

known as the communications gap. Promises made by a service company through its media

advertising, sales force, and other communications may potentially raise customer expectations

that serve as the standard against which customers assess service quality. The discrepancy

between actual and promised service therefore has an adverse effect on the customer gap.

The key factors leading to this type of gap are as follows:

• Lack of integrated services marketing communications

o Not including interactive marketing in communications plan

o Absence of strong internal marketing program

• Ineffective management of customer expectations

o Not adequately educating customers

• Over promising

o Over promising in advertising

o Over promising in personal selling

o Over promising through physical evidence cues

• Inadequate horizontal communications

o Insufficient communication between sales and operations

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4. BANKING IN INDIA

Banking in India originated in the last decades of the 18th century. The first banks were The

General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790;

both are now defunct. The oldest bank in existence in India is the State Bank of India, which

originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of

Bengal. This was one of the three presidency banks, the other two being the Bank of

Bombay and the Bank of Madras all three of which were established under charters from the

British East India Company. In India, currently there are 25 public sector banks and 30 private

sector banks.

We can divide banking history into three parts.

(1) Post Independence

(2) Nationalization

(3) Liberalization

Post Independence: - India's independence marked the end of a regime of the Laissez-faire for

the Indian banking. The Government of India initiated measures to play an active role in the

economic life of the nation, and the Industrial Policy Resolution adopted by the government in

1948 envisaged a mixed economy. This resulted into greater involvement of the state in different

segments of the economy including banking and finance. The major steps to regulate banking

included:

The Reserve Bank of India, India's central banking authority, was nationalized on

January 1, 1949 under the terms of the Reserve Bank of India (Transfer to Public

Ownership) Act, 1948

In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of

India (RBI) "to regulate, control, and inspect the banks in India."

The Banking Regulation Act also provided that no new bank or branch of an existing

bank could be opened without a license from the RBI, and no two banks could have

common directors.

Nationalization: Despite the control of RBI, Indian banks continue to operate by private person

except SBI. By the 1960s, the Indian banking industry had become an important tool to facilitate

the development of the Indian economy. At the same time, it had emerged as a large employer,

and a debate had ensued about the nationalization of the banking industry. The Government of

India issued an ordinance and nationalized the 14 largest commercial banks with effect from the

midnight of July 19, 1969. 6 more commercial banks nationalized in 1980

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Liberalization: In the early 1990s, the then Narasimha Rao government embarked on a policy

of liberalization, licensing a small number of private banks. These came to be known as New

Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation

banks to be set up), which later amalgamated with Oriental Bank of Commerce. This move,

along with the rapid growth in the economy of India, revitalized the banking sector in India,

which has seen rapid growth with strong contribution from all the three sectors of banks, namely,

government banks, private banks and foreign banks. The next stage for the Indian banking has

been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all

Foreign Investors in banks may be given voting rights which could exceed the present cap of

10%,at present it has gone up to 74% with some restrictions. Currently banking in India is

generally fairly mature in terms of supply, product range and reach-even though reach in rural

India still remains a challenge for the private sector and foreign banks.

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4.1 ROLE OF BANKS IN INDIAN ECONOMY

A proper financial growth is important for economic growth of developed and developing

economy. Commercial banking sector should be well regulated & efficient because it is the

financial backbone of households. Banks plays various roles:

Capital Formation: Generally rate of saving is low in underdeveloped country because of deep

rooted poverty but even if proper mechanism there for savings of domestic household that capital

can be available to use for entrepreneurs for productive purpose.

Innovation: Entrepreneurs do various innovations to generate job and improve the quality of life

of the citizens. These innovations which need fund for efficient operation are provided by banks.

Banks provided credit for innovative firm.

Finance for Priority Sector: Commercial bank generally hesitate to give credit to these

underdeveloped sector because these loan may become NPA. Due to RBI regulation these banks

take risk & provide growth opportunity to these sectors by providing and giving credit.

Cheap Money Policy: Bank sucks or pumps money according the requirement of the economy.

Like in recessionary pressure cheap money flows but in inflationary interest rises to tackle

liquidity in the system.

ROLE OF RBI

Monetary Policy.

Regulator & Supervisor of Financial System

Manager of Exchange Control

Issuer of Currency

Development Role

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4.2.CLASSIFICATION OF BANKS IN INDIA

Public sector Private sector

Cooperative Development

SBI & Associates

Axis

Rani Laxmibai urban Co-op Bank,

RRD

Bank of Baroda

ICICI

Mehsana Urban Co-Op Bank Ltd.

IFCI

Dena Bank

HDFC Surat Peoples Coop Bank Ltd.

IDBI

Canara Bank ING Vyasa

Kalupur Commercial

Coop.Bank Ltd.

NABARD

UCO Bank HSBC

The Kapol Co-

operative Bank Ltd.

Syndicate Bank Standard Chartered

Adarsh Co-Operative

Bank Ltd.,

Vijaya Bank Kotak Mahindra

Sanmitra Sahakari Bank Ltd.,

Examples of banks in India.

RBI

Commercial

Public Sector

Private sector

Indian Foreign

Cooperative

Short term

credit

AgricultureUrban credit

Long term

credit

Development

EXIM Agriculture Industrial

30 | P a g e

4.3 BANK SERVICES IN INDIA

There have been various services provided by bank in India to customers .We can classified into

5 categories based on the target segment & the money used by the customers. There has been

various sub categories in every broad category.

(A) Personal Banking:

There has been various products/service available in personal banking sector. We would like to

discuss these services one by one.

(1) Accounts & deposits

Types of Deposites

Features

Dream Deposit Term deposit plan that enable the customer to

realize their dream at every stage of life

Fixed Deposit

Give attractive returns to customers

Recurring Deposit

The smallest of customer saving into large one.

Saving Account It is providing 4 percent interest acc to RBI guidelines. Customer can avail the experience

of banking through ATM, Mobile, Internet

Salary Account

Customers can take advantage of efficient payroll system

Bank Service

PersonalWealth

managementNRI Banking

Corporate Banking

Business Banking

31 | P a g e

(2) Loans

Type of Loan

Home loan

Personal loan

Commercial Vehicle loan

Car loan

Loan against security, Gold, Ornaments etc.

Other different types of loans are also provided by loans to meet the various requirements of the

customers

(3) Cards

Type of Cards Feature

Debit Card These cards offered by banks which has wide acceptance at various banks ATM, Various

shopping malls gives wide variety of convenience to customers. They work on the principle of pay now buy latter.

Credit Card These card works on the principle of buy now pay latter. It has enhanced the buying

power of the consumers.

(4) Investments:

Banks offer personalized solution to their customers based on their fund capacity and risk

appetite of the particular customers to deliver greater returns.

Banks offer various investment products like bonds, GOI bonds, Mutual funds, IPO, Insurance

product etc.

32 | P a g e

(B) Wealth Management

It is the different function in banks that give the wealth management services to HNI, manage

their portfolio. It is the team of experts on investment, banking loans, property services etc.

which provide expertise advice to their client and manage their portfolio to maximize the return.

(C) Corporate Banking

This service can be divided into various heads for the corporate client.

.

Corporate Banking

Commercial

CMSGlobal Trade

Service

Global Market

Forex DeskDerivative

Desk

Investment Banking

Project Finance

Structured Finance

33 | P a g e

Service Features

CMS(Cash Management Service) Banks provide full range of receivable &

payables services to meet company’s

complex cash management service

Global Trade Service This service designed to meet a range of

short term to medium term trade financing

requirement to seize new business

opportunity.

Forex Desk Banks propose immediate offers for cash,

tom, spot & forward rates depending on

company’s requirement

Derivative Desk Banks offer complete interest rate risk

management services through derivative

product.

Investment Banking Banks offer M & A advisory, underwrite the

IPO of companies through alone or forming

syndicate.

Project Finance Banks provide funds for various projects to

companies operating in different sectors

based on the attractiveness of the projects &

sectors.

Structured Finance It enables the corporate clients to access fund

through cost efficient structures. Banks

provide investment opportunities in various

debt securities.

34 | P a g e

(D) Business Banking

Service Features

Current Account & Service Benefit is provided by speedy payment &

collection.

Business Loan For SME sector, timely finance to leverage on

business opportunity

Trade service Various services like Letter of credit, Bank

guarantee, Export bill negotiation etc. are

provided by banks

Advisory Service Banks provides niche & exclusive investment

banking service to SME sector. It manages

capital raising and special situation solutions.

Business Banking

Current Account Service

Business Loans Trade ServiceAdvisory Service

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5. STATE BANK OF INDIA (SBI) CORPORATE PROFILE

State Bank of India(SBI) is the country’s largest commercial Bank in terms of profits, assets,

deposits, branches and employees. State Bank of India has an extensive administrative structure

to oversee the large network of branches in India and abroad. The Corporate Centre is in

Mumbai and 14 Local Head Offices and 57 Zonal Offices are located in important cities spread

throughout the country. The Corporate Centre has several other establishments in and outside

Mumbai, designated to cater to various functions.

Operations:-

SBI provides a range of banking products through its network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). SBI has 14 regional hubs and 57 Zonal Offices that are located at important cities throughout India.

Domestic presence:-

SBI had 14,816 branches in India, as on 31 March 2013, of which 9,851 (66%) were in Rural and Semi-urban areas. In the financial year 2012-13, its revenue was INR 200,560 Crores (US$ 36.9 billion), out of which domestic operations contributed to 95.35% of revenue. Similarly, domestic

operations contributed to 88.37% of total profits for the same financial year.

International presence:-

As of 28 June 2013, the bank had 180 overseas offices spread over 34 countries. It has branches of the parent in Moscow, Colombo, Dhaka, Frankfurt, Hong Kong, Tehran, Johannesburg,

London, Los Angeles, Male in the Maldives, Muscat, Dubai, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, and Singapore, and representative

offices in Bhutan and Cape Town. It also has an ADB in Boston, USA.

The Canadian subsidiary, State Bank of India (Canada) also dates to 1982. It has seven branches, four in the Toronto area and three in the Vancouver area.

SBI operates several foreign subsidiaries or affiliates. In 1990, it established an offshore bank: State Bank of India (Mauritius). SBI (Mauritius) has 15 branches in major cities/towns of the

country including Rodrigues.

In 1982, the bank established a subsidiary, State Bank of India (California), which now has ten branches – nine branches in the state of California and one in Washington, D.C. The 10th branch

was opened in Fremont, California on 28 March 2011. The other eight branches in California are located in Los Angeles, Artesia, San Jose, Canoga Park, Fresno, San Diego, Tustin and Bakersfield.

36 | P a g e

SBI SHARE HOLDING PATTERN

59.41

3.54

10.23

12.97

4.353.38

6.12

Sales

President of India

GDRs

Non residents

Fis Including insurance co's

Mutual funds

Domestic Co's

others includes resident

37 | P a g e

(A) Banking subsidiary

(B) Foreign subsidiary

SBI International (Mauritius) Ltd.

(C) Non banking subsidiary

SBI Capital Markets Ltd

SBI Funds Management Pvt. Ltd

SBI Factors & Commercial Services Pvt. Ltd

SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)

SBI DFHI Ltd

SBI General Insurance Company Limited)

(D) Joint Venture

1. SBI Life Insurance Company Ltd (SBI LIFE)

2. SBI General Insurance Company Limited

SBI AFFILIATES

Banking subsidiary

Foreign subsidiaries

Non banking subsidiary

Joint venture

Banking Subsidiary

SBBJ SBH SBM SBP SBT

38 | P a g e

6. CUSTOMER EXPECTATION

High

Low

(1) Minimum Tolerable Expectation: After contacting several existing customers (Retail)

of SBI, we realized that some of them have very less expectations. They have opened the

saving account because it is India’s largest public sector bank & their money is safe.

Though many of them don’t expect service as good as that provided by other private

bank, but came to SBI for many loans like Teaser Loan as its interest rate is least in the

industry.

(2) Acceptable Expectation: Many customers expect that bank employees will listen to their

problem & serve them in a adequate manner.

(3) Experienced Based Expectation: Many customers believe that most of the time SBI

provides good & fast service but when the staff is on less & during rush hours, due to

higher load they have to wait longer period than usual.

(4) Normative Expectation: Many customers, especially students who have taken education

loan, believe that its interest rate charges are more than what many PSB offer so they

expect that SBI will provide the various installments at the right time without much delay

in various procedures. Many corporate customers believe that they are providing crores

of rupees business to SBI so the bank will provide loan & credit for their future business

expansion easily.

(5) Ideal Expectation: Everyone says that you name any product/service in the banking

sector and you will find it at SBI. So many customers open their current and saving

Ideal

Normative

Experience Based

Acceptable Expectation

Minimum Tolerable Expectataion

39 | P a g e

account at SBI because they are looking for a one stop banking service at SBI. It provides

insurance, mutual fund and all other the services based on the customer’s requirement.

Expectations of customer:

Minimum waiting time (approximately 5-7 min)

Automatic update on new products/services/schemes.

Floating rate should be most competitive in the industry.

Highest risk free rate of return.

Simplicity of documentation procedure.

There should not be any hidden fee & charge.

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7. CONSUMER BUYING BEHAVIOR

1) Need recognition: SBI is providing its service to retail customers as well as corporate

clients. For a retail client there need is safety of their money. Retail customer are looking for

risk free growth of their saving. Corporate client is looking that SBI will manage their cash

flow requirement in such a way that SBI will deploy the idle fund in the most efficient

manner. Meet their requirement of the short term fund in cost effective manner.

2) Information Search:

Information is available in the following ways

a. Internet: The official website of SBI and other government sites promoting Indian

banking. Customers can also give their contact number to the agent so that an SBI

employee can contact him back.

b. Bank Branches: SBI & its associates gas the largest network through bank branches.

So the customer can visit any of the bank branches to gather information.

c. Friends\Colleagues: People who have already availing SBI services.

The customer then gathers information for the following parameters:

a) Price (interest rate) b) Convenience (Distance) c) Timeliness of service

Other factor like reliability, assurance responsiveness etc. can also play important role.

3) Evaluation of alternatives:

There are more than 50 banks operating in India currently. So the customers can select a

particular bank based on their requirement like HDFC bank has the specialization in

providing home loan and ICICI is the largest private sector bank.

Customers can do a comparative analysis of various services provided by different banks

based on information available on the internet etc.

4) Purchase decision:

For purchasing a service, the customer has to open a saving & current account most of

the time. It may be possible that for credit card they may not required to open account.

All the terms & conditions are signed after mutual agreement & RBI norms.

5) Consumption of service:

Customers can avail the service consistently as long as they wish to.

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8. STRATEGY

Industry Analysis

The total assets size of the banking industry rose by more than five times between March 2000

and March 2010 - from US$ 250 billion to more than US$ 1.3 trillion - a Compound Annual

Growth Rate (CAGR) of 18 per cent compared to the average GDP growth of 7.2 per cent during

the same period. CAR stands around 14 percent which is higher than 8 percent based on BASEL

requirement. According to the central bank's WSS, Indian bank loans increased by 19.9 per cent

year-on- year (y-o-y) as of July 1, 2011. Deposits rose by 18.4 per cent from a year earlier.

SWOT ANALYSIS:

STRENGTH

Strong regulatory system

Economic growth

Relative insulation from

external market.

India is becoming the IT

hub.

Credit Quality of bank

Extensive reach

OPPORTUNITY

Only 40 % residents have access to

banking services.

Growing per capita income.

Liberalization of ECB norms.

WEAKNESS

Quality of service is not upto the

mark in rural sector.

Refusal to dilute stake in PSB

Weak sales & marketing team of

PSB compare to foreign bank.

THREAT

Increasing NPA.

Increasing dependency on global

banking system.

Threat from cyber attack.

Rising inflation

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Segmentation

Various aspects on the basis of which SBI is doing segmentation are

1) Based on Tenor

2) Based on Geography

3) Based on SEC

4) Based on volume (Retail V/s Corporate V/s Govt.)

5) Based on sector(Priority Lending)

Targeting

SBI is targeting the retail segment as well as the corporate and government business. Retail

segment has very less value per account compared to the corporate segment. It has different

products available to meet different consumer segment needs.

Positioning

SBI has positioned itself as a Banker to Every Indian. One can be assured that any banking

service will be available with SBI. Further, being a Public Sector Bank, it also promulgates a

strong Trust among its clients. SBI has positioned itself as a mass marketer in the consumer

mind. One can name any banking service and it will be available with SBI. All the banking

products/ services are available with SBI to satisfy different customer segment need.

43 | P a g e

9. MARKET OFFERING VIZ MARKETING MIX & BRAND POSITIONING

9.1 PRODUCT / SERVICE

SBI has its presence in various domains.

(A) Personal Banking

State Bank of India offers a wide range of services in the Personal Banking Segment. Various

services in personal banking domain include:

SBI term deposit

SBI recurring deposit

SBI home loan

SBI education loan

SBI car loan

SBI personal loan

SBI loan for pensioners

Loan against mortgage of property

Loan against shares & debentures

(B) Agriculture

State Bank of India Caters to the needs of agriculturists and landless agricultural labors through

a network of 8750 rural and semi-urban branches.

(C) International Banking

SBI DOMAIN

Personal Banking

Agriculture Internationa l Corporate SME Services

44 | P a g e

The services include corporate lending, loan syndications, merchant banking, handling Letters of

Credit and Guarantees, short-term financing, collection of clean and documentary credits and

remittances.

(D) Corporate Banking

SBI is a one shop providing financial products / services of a wide range for large , medium and

small customers both domestic and international.

Working capital financing

Term loan

Deferred payment guarantee

Corporate loan

Export credit.

(E) SME

The Bank has financed over 8 lakh SSI units in the country. It has 55 specialized SSI branches,

99 branches in industrial estates and more than 400 branches with SIB divison.

(F) Services

State Bank Vishwa Yatra Foreign Travel Card

State Bank Vishwa Yatra Foreign Travel Card is available in six Foreign Currencies

viz. US Dollars (USD), Pound Sterling (GBP), Euro (EUR), Canadian Dollar (CAD) and

Australian Dollar (AUD), Japanese Yen (YEN).

Broking Service

SBI Capital Markets Ltd. has expanded its retail broking network to help investors carry

out their broking transactions with confidence.

ATM

State Bank offers the convenience of over 43,000+ ATMs in India, the largest network in

the country. This means that customer can transact free of cost at the ATMs of State

Bank Group and wholly owned subsidiary viz. SBI Commercial and International Bank

Ltd., using the State Bank ATM-cum-Debit (Cash Plus) card.

Internet Banking

45 | P a g e

www.onlinesbi.com

The Internet banking portal SBI, enables its retail banking customers to operate their

accounts from anywhere anytime, removing the restrictions imposed by geography and

time. It's a platform that enables the customers to carry out their banking activities from

their desktop, aided by the power and convenience of the Internet.

Using Internet banking services, customers can do the following normal banking transactions

online

Funds transfer between own accounts.

Group transfer to accounts in State Bank group

Inter banks transfer to accounts with other banks.

Online standing instructions for periodical transfer for the above

Credit PPF accounts across branches.

Request for opening new accounts.

Request for closure of loan accounts.

Request for issue of cheque book.

Utility bill payments.

RTGS / NEFT

RTGS stands for “Real Time Gross Settlement”. It is an electronic payment system in

which payment instructions between banks are processed and settled individually and

continuously, on a real time basis, throughout the day. It is available for transaction

value of Rs.2.00 Lacs and above.

NEFT stands for “National electronic fund transfer”. It is another electronic payment

system in which payment instructions between banks are processed and settled on

deferred net settlement (DNS) basis at fixed times during the day. There is no minimum

or maximum stipulated transaction value for using this facility.

E-RAIL – To Book Railways Ticket Online.

The facility has been launched wef 1st September 2003 in association with IRCTC. The

scheme facilitates Booking of Railways Ticket Online.

E-PAY

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Bill Payment (e-Pay) will let customers to pay their telephone, mobile, electricity, insurance

and credit card bills electronically over our Online SBI website.

If customer’s biller presents bills online, customer can also give SBI AutoPay instructions

and SBI will pay the bills as and when it falls due.

SAFE DEPOSIT LOCKER

For the safety of customers valuables SBI offer its customers safe deposit vault or locker

facilities at a large number of branches. There is a nominal annual charge, which depends on

the size of the locker and the centre in which the branch is located.

9.2 PRICE

The pricing decisions or the decisions related to interest and fee or commission charged by banks

are found instrumental in motivating or influencing the target market.

The RBI and the IBA are concerned with regulations. The rate of interest is regulated by the RBI and other charges are controlled by IBA.

The pricing policy of a bank is considered important for raising the number of customers’ vis-à-vis the accretion of deposits. Also the quality of service provided has direct relationship with the

fees charged. Thus while deciding the price mix customer services rank the top position. The banking organizations are required to frame two- fold strategies. First, the strategy is

concerned with interest and fee charged and the second strategy is related to the interest paid. Since both the strategies throw a vice- versa impact, it is important that banks attempt to

establish a correlation between two. It is essential that both the buyers as well as the sellers have feeling of winning.

Pricing Bank Products Starts With Three Basic Questions.

1. What rate does the bank need to meet its financial objectives?

The answer is, “it depends.”

Some considerations for loan and deposit pricing are:

ROA or ROE objectives

Related income taxes

Earning assets to total assets

Equity-to-asset ratio

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Cost to service earning assets being funded or deposits funding an earning asset

Pricing for the activities and risks associated with the product

Rate tiers based on product balances

Asset and liability mix

Another element to consider in the pricing of earning assets is the risk of loss. Most notably, this is relevant in loan pricing. Many banks assign a risk weighting to individual loans over a certain size or based on loan type and assign a credit risk charge based on those ratings.

Customer relationships are difficult to assign a value to in the pricing process. Customers will

generally press for some price concessions in consideration of other relationships they have with the bank.

Asset and liability mix also impacts pricing results. Generally speaking, banks operating with higher loan-to-asset ratios are able to afford to pay more for deposits. Likewise, banks can

afford to be more competitive on certain deposit products if they have fewer maturities in a particular timeframe or less total outstanding balances in a product line.

2. What is the market rate for the core product?

Customers have more distribution channels available to them today than at any other point in history. In the past 10 years, the number of bank locations has increased 20%. Of course, there are the mortgage bankers, the Internet, and a host of other financial service providers competing

for your customer’s loan and deposit business.

The point is, the competitive marketplace always ensures that if a financial institution is charging too much for loans or paying too little for deposits, its share of the market will likely dwindle as existing and prospective customers find alternative providers. You can do all the math you want

to determine required pricing points, but if your pricing is uncompetitive, your market share will shrink.

3. What would the bank have to do to sales and operations to make its rates the most

competitive in its market?

Pricing is a key issue for the associates who sell bank products to your customers. The fact is, lenders want the lowest rates, and people dealing with depositors want to pay the highest rates. You need the right balance of fee income, strategies to reduce operating costs, and a healthy

asset and liability mix to change your required pricing.

48 | P a g e

Home Loan

Loan amount Upto Rs.30

lacs

Above Rs.

30 lacs to

Rs. 75 lac

Above Rs.75 lac

to Rs.5 Cr.

Above 5 cr.

Interest rate

during

1styear

8.75% 8.75% 10% 10.25%

Interest rate

during 2nd & 3

rd year

9.50%. 9.50% 10% 10.25%

Interest rate

from 4th year

onwards

9.75% 10.00% 10% 10.25%

Car Loan

Loan amount Below Rs.5 lacs Rs.5 lacs and above

Interest rate during

1styear

9.25% p.a. 9.25% p.a.

Interest rate during 2nd &

3 rd year

10.25% p.a. 10.25% p.a.

Interest rate for 4th &

5th year

11.25% 11.00%

Interest rate for 6th &

7th year

11.25% 11.00%

All the interest charge & fee are nationalized and same in all the branches. Further detail is

available on following website. (www.sbiindia.com)

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9.3 PLACE

It is widely distributed bank in India with 26,500 bank branches including those of associate

banks. It is trying to provide banking services to masses. It has already opened some of the

branches outside India to provide service to foreign travelers & NRI.

This component of marketing mix is related to the offering of services. The services are sold through the branches. The important decision making areas are: making available the promised

services to the ultimate users and selecting a suitable place for bank branches.

Why they select this place as branch?

The selection of a suitable place for the establishment of a branch is significant with the

view point of making place accessible.

The safety and security provisions

Convenient to both the parties, such as the users and the bankers

Infrastructure facility

Near to station and located on s. v. road well crowded area.

Market coverage

9.4 PROMOTION

SBI is using different- different medium to promote its services to target market

Personal Communication

Instructional Material

Advertisement through Television, radio, movies, theatres, hoardings, newspaper,

magazines

Sales promotion: gifts, discount and commission, incentives, etc.

Publicity: road shows, campus visits, sandwich man, Sponsorship

Personal selling: Cross-sale (selling at competitors place),personalized service

Telemarketing: SBI one source Call center (mind space)

Public Relation

9.5 PHYSICAL EVIDENCE

Physical evidence is the material part of a service. Strictly speaking there are no physical attributes to a service, so a consumer tends to rely on material cues. There are many examples of

physical evidence, including some of the following:

Internet/web pages

Paperwork

Brochures

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Furnishings

Business cards

The building itself (such as prestigious offices or scenic headquarters)

The physical evidences also include signage, reports, punch lines, other tangibles,

employee’s dress code etc.

Signage: each and every bank has its logo by which a person can identify the company. Thus

such signages are significant for creating visualization and corporate identity. Financial reports: The Company’s financial reports are issued to the customers to emphasis or

credibility.

Tangibles: bank gives pens, writing pads to the internal customers. Even the passbooks, chequebooks, etc reduce the inherent intangibility of services.

Punch lines: punch lines or the corporate statement depict the philosophy and attitude of the bank. Banks have influential punch lines to attract the customers.

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9.6 PROCESS

Processes to avail various services are standardized across the branches. The customer has to

follow particular procedure to avail those services. Also, the employees have to follow certain

pre-defined procedure to provide those services to the customers.

Flow of activities: all the major activities of SBI banks follow RBI guidelines. There has to be

adherence to certain rules and principles in the banking operations. The activities have been segregated into various departments accordingly.

Standardization: SBI bank has got standardized procedures got typical transactions. In fact not only all the branches of a single-bank, but all the banks have some standardization in them. This

is because of the rules they are subject to. Besides this, each of the banks has its standard forms, documentations etc. Standardization saves a lot of time behind individual transaction.

Customization: There are specialty counters at each branch to deal with customers of a particular scheme. Besides this the customers can select their deposit period among the available

alternatives. Number of steps: numbers of steps are usually specified and a specific pattern is followed to

minimize time taken.

Simplicity: in SBI banks various functions are segregated. Separate counters exist with clear indication. Thus a customer wanting to deposit money goes to ‘deposits’ counter and does not mingle elsewhere. This makes procedures not only simple but consume less time. Besides

instruction boards in national boards in national and regional language help the customers further.

Customer involvement: ATM does not involve any bank employees. Besides, during usual bank transactions, there is definite customer involvement at some or the other place because of

the money matters and signature requires.

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9.7 PEOPLE

All people directly or indirectly involved in the consumption of banking services are an important part of the extended marketing mix. Knowledge Workers, Employees, Management

and other Consumers often add significant value to the total product or service offering. It is the employees of a bank which represent the organisation to its customers. In a bank

organization, employees are essentially the contact personnel with customer. Therefore, an employee plays an important role in the marketing operations of a service organisation.

To realize its potential in bank marketing, SBI become conscious in its potential in internal marketing - the attraction, development, motivation and retention of qualified employee-

customers through need meeting job-products. Internal marketing paves way for external marketing of services. In internal marketing a variety of activities are used internally in an active,

marketing like manner and in a coordinated way. The starting point in internal marketing is that the employees are the first internal market for the

organization. The basic objective of internal marketing is to develop motivated and customer conscious employees.

A service company can be only as good as its people. A service is a performance and it is usually difficult to separate the performance from the people. If the people don’t meet customers' expectations, then neither does the service. Therefore, investing in people quality in service

business means investing in product quality.

People are the most important part of the whole service delivery process. In the case of services,

people are on both sides i.e. the service providers and the customers. SBI has employee base of

around 2 Lac. Any new employee - a clerk or a probationary officer is been given proper training

for 3-6 months. New joiners are trained through various procedures to deliver services to

customers. It depends on the customer what kind of services he wants to avail from the bank and

his cooperation in following the whole process and making it easier for the employee to service

him, thereby making him an important part of the whole process.

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10. DEMAND & CAPACITY MANAGEMENT

1) As various banking service are seasonal & unpredictable, so matching capacity with demand

efficiently becomes a cumbersome task. The important step which SBI does is to separate bank’s

factory like transaction (like check encashment, withdrawal etc) which are more standardized

than personalized ones (like opening new account, loan application etc). Factory like

transactions are more predictable based on the no of account & past trends. Matching

infrastructure capacity (people, process, system) for factory transaction is the very first step.

2) Bank changes working hour to meet the varying demand, but when overtime crosses the

particular limit bank manager request for more personnel from headquarter.

3) On the job multi skill development program for employee to meet supply in peak hour.

4) Mobile van used by SBI to meet demand from rural area. It reduces the load on the bank

branch.

5) Dollar value per employee is the index used to standardize the no of employee per branch.

6) When

Credit growth rate > Deposit rate (Bank Increase interest rate)

Credit growth rate < Deposit rate(Bank reduce interest rate)

7) SBI has the maximum number of ATMs (25,000 as on 31 March, 2011) to reduce load on

bank branch.

8) SBI has been continuously recruiting Clerk & Probationary Officer to meet the manpower

requirement at various branches.

9) More & more automation is done to reduce the load on manpower & efficient use of

infrastructure (Automatic note counting machine).

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11. CONCLUSIONS

SBI is at the top of consumer’s share of mind & share of heart in Indian banking sector. It has the

largest network of bank branches across the India which enables it to deliver its service in

various geographic areas. SBI is the market leader and others follow what SBI does. SBI has

different targeting strategy for various product/ service based on its target segment. As it has

captured more than 20% share of market it can leverage on its economies of scale and economies

of scope. Consumer perceive SBI as the one stop shopping where they can meet the all the

banking service requirement. Consumers perceive SBI as the safest bank due to its government

holding & large customer base.

12. RECOMMENDATIONS

Following few points which would help SBI in improving its consumer satisfaction which in turn

would also improve its consumer perception.

SBI bank branches should improve to its physical infrastructures (interiors as well

exteriors) to make it comparable to the private bank. Though it is the gradual and slow

process, so SBI can start with urban cities first.

Bank should recruit more personnel to reduce average waiting time per customer. Also, it

would increase the ratio of no of employees per 1000 customers.

Promotion on Electronic media is less when compared to private banks. Bank can

increase expenditure on this to improve its brand building further.