Tactics that Accelerated Performance

Seminar on Contemporary Banking in India MGM School of Banking, Varkala, Kerala 24-25 April 2015 Tactics that Accelerated Performance: An Analysis on How Marketing Communications Helped the State Bank of India to Hold Its Head Up High in the Recession Afflicted World Economy Abhilash Sugunan Nair * Banking industry plays a vital role in Indian Financial In addition to adopting the recommendations of Market. Nationalised banks are the largest providers the Committee on Banking Sector Reforms regarding of credit in the country and also they manage to pull corporatization, in billions of money as savings deposits. Holding up also proposed that state owned banks be allowed to the concept of socialism as mentioned in the raise capital from the market in order to expand preamble to the Constitution of India, it has been their operatio s”. This liberalisation approach led to acting as a catalyst for the national development and a situation where even public sector financial the growth of the economy. They also act as the firms have to face up intense market competition. intermediary to the central government to provide Public banks are forced to develop specific financial support for the primary sector of the Indian marketing strategies for shielding themselves against economy. The diversity of the banking system the makes the industry more complex and competitive. nationalised, private and foreign banks. Those public the increasing central government competition from has other or private sector banks who are unable to control In his book, Banking Reform in India and China, Saez the economic downturn or instability would be states that "In order to accelerate the efficiency of coerced to stop functioning or merge with other state-owned banks, the central government has banks. A total of 23 banks in India have been merged proposed the increased corporatization of state with other banks for this reason between 1990 owned banks. Among the budget proposals included and 2010. by the central government in the fiscal budget for the year 2000, the government will reduce its State Bank of India: Competition and Recession minimum shareholding in state owned banks to 33%. The position of SBI as a public sector commercial bank was secure till early 90s. When the industry *Abhilash Sugunan Nair Assistant Professor Department of Mass Communication AJ College of Science & Technology University of Kerala s.abhilash@hotmail.com competition from institutions got other banks intense, SBI and financial underwent an organizational restructuring. A Business Process Re-engineering team, with McKinsey & Company as 1 consultants was formed in 2003. The project exchange objectives (Pratiyogita Darpan, 2009). were defined as increasing reserves came down to $254.21 customer satisfaction and convenience, freeing up SBI’s Strategic Tria gle : Co pa y Co petitors a d time for branch manager and branch staff to focus Customers on sales and marketing, simplifying process for employees, enhancing SBI s competitiveness in the State Bank of India, one among the major banks in market, increasing the profitability through higher Asia is the biggest commercial bank in the country. market share and improved process efficiency. This move indicated SBI s transition Its abundant financial resources (319,085.9 million in towards 2009-10) and organizational capabilities makes SBI innovativeness to achieve customer satisfaction and different from its competitors. It provides a wide to broaden its reach, especially to bring in more Y- range of banking services such as Commercial generation and high profile customers. banking, Investment banking, Retail and Private bankings, Consumer banking, Asset banking, Pension The global economic recession that affected all parts banking, Mortgages Management, Credit and debit of the globe directly or indirectly, smashed the cards etc. It has got a highly sophisticated branch economic stability of many countries such as the US. network with over 16,000 branches altogether and It created a fall in employment rate, per capita has 200,299 employees (in 2010). It accounts for 20% income and consumption behaviour and caused of the banking market share in India and one-fifth of several serious social problems. Meanwhile the economic downturn did not produce the loans. severe Developments like Employee Share Purchase Scheme, Government Pension Fund, consequences in some countries like Australia, China, General Insurance and Venture Capital Fund made India, Singapore, Canada etc. There are some the firm more authentic and reliable to its companies in the world that has not been affected customers. The status of being the market leader in by recession. State Bank of India is an example for I dia s anking industry is a competitive advantage those companies that made remarkable financial for SBI. In terms of resources and profits, State Bank growth during this period. The net profit made by SBI India is far ahead of its main rival ICICI Bank, which in 2008 was INR 6729,55,77000. It raised to INR has achieved INR 68346300000 as their total profit in 9121,56,58000 during the first phase of global the last financial year. It is only about 75% of financial crisis in 2009. It again raised by INR the profit earned by SBI. Net profit earned by other 448265000 in the financial year 2010. The economic main competitors such as Canara Bank, Bank prosperity achieved by SBI during this period was not of Baroda and PNB are only about one third of it. only due to the reasons such as nationalisation of banks and the measures taken by Reserve Bank of A ordi g to Data o itor, SBI s a erage CASA India and the Government of India to control the [Current Accounts and Savings Accounts] growth impacts of recession in the country, but also owing during 2008-10 was around 25%, compared to 16% to the behaviour of its loyal customers. That was why growth registered by its peers. Growth in low cost SBI kept on making profit even when I dia s foreign CASA deposit base has helped the bank to reduce reliance on bulk deposits, unlike its private sector 2 competitors or foreign banks with significant emblem and the unique design of branches are other presence in India. The experience of SBI as one of the tools of marketing. In addition to this, various first banking establishments in India, plentiful offerings with the help of world wide web bring in financial resources, extensive service lines and large number of loyal customers. application of technology in everyday banking makes With the at h tagli es su h as ”Pure Ba ki g… them fittest in the industry. SBI has a large and Nothi g else”, ”The atio growing customer base. Corporate Banking Group, all the a ” a d so o SBI has a hie ed the hearts of National Banking Group, and Rural Business Group, the Indian majority. Because it has been with them the three strategic groups of SBI are meant to target as a reliable banking partner for more than five its different customer segments like corporations and institutions, small scale industries decades. To its loyal customers State Bank is the best and banking solution. On the other hand SBI provides agriculture, personal banking customers etc. In order to focus on agricultural sector developed particularised branches. they Tapping a ks o us”, ”With ou excellent banking services with the help of its have business the intelligence and customer service departments who withhold the vision statement : financial resources from the growing semi-urban ”M SBI, M Custo er first. M SBI: First i population is another objective of SBI. Mainly to satisfa tio ” . This achieve the business from Indian corporations and usto er utual trust gives a competitive advantage for SBI in the market. NRIs State Bank of India has extended its business overseas. When a customer recognizes his/her need to engage in a banking activity, the reputation of SBI alleviates Buying Decision -Making process ; SBI the effort to make an intense information research. State Bank of India has an effective marketing Its long term relationship with the Indian customers communication is an added advantage of SBI for being the mix which personal communication, sales involves usto er s promotion, est hoi e. A o e instructional material, advertisement, publicity and fro public relations and corporate design. The personal the formation of such a positive attitude from communication methodology followed by SBI with customers. Wide branch network of SBI makes it the help of customer service, training and word of easy for its customers to take part in convenient and mouth effortless has been found very effective the o pa e tio ed i puts s part ha e o tri uted a lot for banking services. Among all other for disseminating its marketing efforts. For the better alternatives, SBI is an Evoked set for its customers. If reach the a customer has direct or indirect banking experience potential customers, they rely on various advertising with SBI before, he would again go for it as a safe techniques such as TV, print, outdoor, direct mail option (retrieval set). Innovative banking schemes of and the internet. SBI has got an advanced PR SBI makes them prominent in the environment. SBI is department that and su essful i helpi g it s usto ers for carrying out other their banking transactions without physically visiting special events to promote the brand name. Websites the branches. It is achieved through a network of of those efforts organizes receptions, sponsorship towards press programmes meets and and manuals, stationary materials labelled with SBI 3 21,485 ATMs, 55.40 million debit cards across India with the Indian marketplace. State Bank of India and mobile and internet banking facilities. which can claim a tradition of two centuries (as Bank of Bengal) is well acquainted with the cultural The increase in number of SBI customers shows that customer expectation complements heterogeneity and buying culture of the Indian to the customers. It has been banking with India for five customers satisfaction. The micro financial initiatives decades (in the form of State Bank of India) with a provided by SBI is a part of their business strategy to diversified portfolio to make sure that its services are creative loyal customers in the future. It reveals the dispersed evenly all across the country. Its Indian long term orientation of the company. With all these usto ers i efforts they have achieved better financial prosperity ge eral fall i to ”De outs” of the global consumer segments which contributes 22% of and loyal customer base as can be seen on their the global share. But there are balance sheets. Both its existing and new customers developing and developed consumer segments that belong to kept on banking with SBI even during the time of ”Fu global financial crisis for the reason that they found Seekers a d Creati es” ategories. Marketing strategy and customer management of SBI as a safe place to keep their money. Capital SBI with the help of its business groups and adequacy ratio, Business per employee, Deposits and strategic business units is capable of catering advances of SBI are on a huge raise. It is an evidence solutions for all these three segments. Personal of their managerial and marketing excellence. banking services (different deposit schemes, educational loan, festival loan, car loan, housing loan Culture and Consumer Behaviour etc), Corporate banking, Rural/agricultural banking, India is one of the ancient cultures in the world that NRI stretches back more than fifty centuries. It is the other services of SBI are meant to deal with various orld s se o d largest u it ith International banking and ultural, aspects of consumer behaviour such as age, self linguistic and religious diversities, which makes them concept, group influence, social class, gender role a Pa dora s etc. o o services, for the Wester arketers. Irrespective of the Supranational, National and Unlike majority of the products and some services Subcultures the ultimate concern of an average Indian customer (except the upper do, the prevailing marketing communication strategy class) of SBI is to stitch up traditional symbols like family, before making a purchasing decision is to make sure that he gets good value for money. relationship and well being with the core message, This rather that depending on celebrity endorsement. As pertinence makes them one of the most discerning per M Cra ke s Meaning- Transfer Model (1989), consumers in the world. That is the reason why ” ultural even premium brands are forced to give away offers ea i g a e o u i ated goods or ser i e”. It is what SBI has been doing with their and discounts in order to snap up the market in marketing communication efforts for gaining and the sub-continent. Majority of the Indian population retaining valuable customers, which is a part of their are located in rural and semi-urban areas. But many organizational culture. foreign companies are reluctant to target the rural population, which reveals their inexperience to deal 4 Indian population can be classified as adolescence international presence is limited and it is amenable and couples to certain political interferences, SBI has achieved a with children, married couple without children, mammoth maturation within the national boundary. parents living with children, parents staying alone Ultimately all these advantages empowered them to and migrated families and individuals (from rural to attain profitable business deals in the recession urban) afflicted world economy. adults (unmarried), on the hara teristi s. pensioners, basis SBI s Medi-plus married of their relationship s he es like scheme, Loa for Project export finance, Easy home loans, Agricultural banking etc covers all these segments of the social spectrum including the grey market (the elderly) (Jiang, T 2010 pp.173-174). As considering certain aspects of the Indian population such as age structure (0-14 years – 30.5%, 15-64 year – 64.3%, >65 years – 5.2%) and median age (25.9 years), the significance of having a long term market orientation and generation- X centring can be recognized. Effectuation of Core banking system, Centralised payment services and IT based solutions for corporates are clear-cut examples of the market intelligence and peripheral vision of SBI. For the reason that family life cycle is a steering force in the Indian context, it is important to talk of different facets of Extended Selves like individual, family, community and group. Most of the insurance and banking services provided by SBI are designed in such a way to trickle down its benefits to the extended selves. It is vivid from the plans like SBI life- Smart shield, Saral shield, Swadhan et . SBI s arket e perie e, risk management and internal control system and customer intimacy enable them to understand and serve the market needs efficiently. The successfulness of State Bank of India during the era of global financial crisis is an ideal example of how a firm can converge its managerial and marketing competence by the virtue of customer relationship management, in order to deliver better solutions for its clients and long term financial benefits for themselves. Though its 5