Unit 5

Marketing of banking services

 BANK MARKETING
• Bank marketing is the aggregate of functions,
directed at providing services to satisfy
customers financial (and other related) needs
and wants, more effectively and efficiently
than the competitors keeping in view the
organizational objectives of the Bank.”
 Role of marketing in banking industry
• It is said that the banking sector mirrors the larger
economy - its linkages to all sectors make it a proxy for
what is happening in the economy as a whole.
• The banking industry has developed and functioning
progressively. Customers have more opportunities for
selection to buy and use banking services and satisfy all
their demands.
• At the same time, customers expect higher standards
from banks, like more friendliness in service styles,
effectiveness in solving all their complaints, or
modernisation when it comes to equipment and tools.
• Here the terms ’Marketing’ and ’Banking’ blend together
inextricably
 Marketing Mix in Banking Sector
• Service - banks are in a period that they earn money in
servicing beyond selling money. This focus is set as they offer
their services to the masses.
• Price - The price which is an important component of
marketing mix is named differently in the base of transaction
exchange. Banks have to estimate the prices of their services
offered. While marketing mix elements other than price affect
sales volume, price affect both profit and sales volume directly.
• Distribution - The complexity of banking services are resulted
from different kinds. The most important feature of banking is
the persuasion of customers benefiting from services.
• Promotion - One of the most important element of marketing
mix of services is promotion which is consist of personal
selling, advertising, public relations, and selling promotional
tools.
• Personal Selling - Due to the characteristics of banking
services, personal selling is the way that most banks
prefer in expanding selling and use of them.
• Advertising - Banks have too many goals which they want
to achieve. They use advertising campaigns and media.
• Selling of Promotional tools - Mostly used selling
improvement tools are layout at selling point, rewarding
personnel, special gifts, premiums, contests.
• Public Relations - Public relations in banking should
provide
– Establishing most effective communication system.
– Creating sympathy about relationship between bank and
customer.
– Giving broadest information about activities of bank.
 Scope
• Internal Marketing - Especially in service sector like
external relations, internal relations also have significance.
It requires finding and keeping successful personnel. The
communication techniques carried out for customers are
also performed for the personnel in internal marketing and
this two techniques go together.
• Network Marketing – This approach takes the organization
as a sequence which involves producer and customer that
market services to each other in the organization. In this
structure, the activities of departments that compose
organization would be more focused on market.
• Relationship Marketing - It was mentioned that close
relationship was established between producer and
customer in service sector. It should be emphasized that
this fact has an importance for service sector
Market Segmentation in Banking
• Geographic Segmentation – based on location
• Demographic Segmentation – Age, Gender
• Psychographic Segmentation – Social class and
personality. Risk appetite, investment patterns,
social class etc
• Behavioral Segmentation – Based on
Knowledge, attitude, uses or response. Higher
and lower Interest rates, loyalty schemes
 Promotional programmes in Banking
• Advertising- creates brand and
product/service awareness
• Sales promotion – special offers, gifts, annual
coupons and discounts
• Public relations – appearing in media, writing
financial articles in magazines etc
• Personal selling – through internet, phone and
personal interactions
 Customer services in banks
• Customer service in banking is one of the most
important ways to keep customers coming back.
• It includes responding to customers questions
and complaints in a thorough and timely manner
and interacting with customers through face-to-
face meetings, telephone, mail, fax and email.
• Most if not all bank employees are involved in
some aspect of customer service.
 HRM in banks
• Efficient and skilled manpower can manage the
financial risks that the banks need to take on
regular basis.
• The Human Resource department is responsible
for finding such talented manpower and placing
them in right positions in the banks.
• Banking has been and will always be a "People
Business". Efficient and effective management of
the human resource in the organization turns it a
successful one.
 Importance of HRM
• Plan ahead for recruitment
• Maintaining a balance of experience in the
workforce
• Training of the manpower
• Performance management and talent spotting
• Keeping a track on the personal requirements of
the employee
• Keeping a track on retirements and resignations
 Evolution of HRD in Banking
• A significant turn around in the man management
process of banks took place with the strike in 'Bank
of India' from 20th June 1946 to 7th July 1946.
• The prominent landmarks are Sen Award of 1950,
Sastry Award of 1953, Labor Appellate tribunal
decision of 1954, and Desai Award of 1962. Mankidy
(1993) has dealt with the background as well as
implications of each award in detail.
• Industry wise uniformity in salary and other service
conditions for supervisory staffin nationalized banks
was introduced after the acceptance of the Pillai
Committee Report, (as modified by the study group
of bankers) in 1970.
• Following commissions and study groups
constituted by the govemment/Reserve Bank of
India have helped in shaping the HRM policies
and practices from time to time. Significant
among them are:
 Training and Developments in Banking
The establishment of NIBM coincided with another
significant event i.e. Nationalization of 14 major banks’ by
the Government of India on July 19, 1969
a) Induction training for clerks and junior Officers staff
b) Linking training with the overall HRM strategy.
c) Strengthening training infrastructure, coordination and
faculty.
d) Centralized control of the training activities.
e) Activities of NIBM (planning, coordination and directing the
training programs, developing cases and teaching materials,
training senior management personnel in Managers skills,
research and consultancy work) and Bankers Training College
(operational training in specialized areas, training of trainers
and working in close collaboration with NIBM).
f) Role and importance ofIndian Institute ofBankers.
 Performance Appraisal
• The Banking Service Commission 1972,
suggested that banks should introduce
scientific appraisal techniques to measure
performance, potential to shoulder higher
responsibilities and certain personality traits.
• Banks have now introduced a 360 degree
transparent appraisal system along with self
and peer group appraisal.
 MIS in Banking
• MIS is a set of combined procedures that
gathers and produces reliable, relevant, and
properly organized data that supports the
decision making process of an organization.
• It helps in:
I. The ease of doing business.
II. The quality of personnel and service.
III. The range of the financial services.
 Following points should be taken care
of MIS for a bank:
1) Customer database - The management of the bank
should create a customer database and analyze the
needs of the customers from time to time to create
suitable service package.

• Customer — individuals, company, institutions, etc.

• Operator — housewife, employee, the officer of the
organization. The range of service — savings, credit
checking and payment, other financial services.
• Class of customers — income group, corporate bodies,
etc.
• Working hours — morning, afternoon, evening, etc.
2) Service to the account holders
The customers need constant advice on the status and its
operations.
The MIS should give following reports to the management:
• The non-moving account.
• The account was having the balance of more than, say
Rs.50, 000.
• The account was going down below minimum balance.
• The regular payments not made.
• The routine credits not arrived.
• The defaults on loan repayment.
• The delays on crediting cheque amounts.
• A sudden rise and fall in the account movement.
3) Service for business promotions
• It is necessary to study the trend in the business
industry and solicit the customers from the
upcoming and growing business sector.
• The MIS should concentrate on data collection
from various sources to analyze and conclude
the future corporate strategy.
• Such information will help the banker to move
out to talk to the customer to obtain business
for the bank.
• Such support will also reduce the risk of the
account going into the red and bad debt.
4) The index monitoring system
• One more feature of the MIS is to monitor the
variety of indices and ratios related to banking
operations, which are internal to the banking
business.
• Some of these ratios fulfill the legal needs like the
Cash Reserve Ratio (CRR)/ Statutory Liquidity Ratio
(SLR); some meet the policy needs like the priority
sector ratio to total advances and so on.
• It is necessary to build the MIS applications to
support the bank manager in making decisions to
keep different norms and ratios within the
acceptable limits.
• He should also get support through Decision
Support Service to handle the problem of not
meeting these legal standards.
5) Human resource upgrade
• With computerization, the service may become faster or
quicker, but still, it requires a human touch and skill.
• It is, therefore, necessary to upgrade the expertise and
knowledge of the bank employees to offer proper service to
the customers.
• The financial service business is becoming competitive and
offering an excellent, distinctive service is the only solution
to improve the business prospects.
• The customers of the bank expect the service to be
delivered in a smooth, problem-free, efficient and timely
manner.
• The managers in the bank have the service as well as the
financial goals to achieve. It is, therefore, necessary to set
the internal standards, accuracy, responsiveness and
timeliness.
• The MIS measures these standards and gives feedback on
achievement or non-achievement.
 Asset/liability Management
• ALM can be defined as a mechanism to address the risk faced
by a bank due to a mismatch between assets and liabilities
either due to liquidity or changes in interest rates.
• Liquidity is an institution's ability to meet its liabilities either by
borrowing or converting assets.
• Apart from liquidity, a bank may also have a mismatch due to
changes in interest rates as banks typically tend to borrow
short term (fixed or floating) and lend long term (fixed or
floating).
• A comprehensive ALM policy framework focuses on bank
profitability and long term viability by targeting the net interest
margin (NIM) ratio and Net Economic Value (NEV), subject to
balance sheet constraints.
• Significant among these constraints are maintaining credit
quality, meeting liquidity needs and obtaining sufficient capital.
Thank You