THE CONCEPT BANK MARKETING

In this chapter we are going to see an Overview of Bank Marketing Concept .its
features, strategies and approach in the Indian perception.

We define Bank Marketing as follows:

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 that the competitors keeping in view the organizational objectives of
the bank.
Bank Marketing activity. This aggregate of functions is the sum total of all
individual activities consisting of an integrated effort to discover, create, arouse and
satisfy customer needs. This means, without exception, that each individual working
in the bank is a marketing person who contributes to the total satisfaction to customers
and the bank should ultimately develop customer orientation among all the personnel
of the bank. Different banks offer different benefits by offering various schemes
which can take care of the wants of the customers.

 What is Bank Marketing?

Deryk Weyer of Barclays Bank call it A process, consisting of identifying
the most profitable markets now and in future; assessing the present and the future
needs of the customers; setting business development goals and making plans to meet
them; and managing various services and promoting them to achieve the plans all in
the context of a changing environment in the market.

Why Bank Marketing?

Awareness among Customers :

Modern technology has made customers aware of the developments in the
economic environment, which includes the financial system. Financial needs of the
customers have grown multifold into various forms like quick cash accessibility,
money transfer, asset security, increased return on surplus funds, financial advice,
deferred payments etc. With a wide network of branches, even in a dissimilar banking
scenario, customers expect the banks to offer a more and better service to match their
demands and this has compelled banks to take up marketing in right earnest.

Quality as a Key Factor :

With the opening up of the economy, fast change has been experienced in
every activity, and banking has been no exemption. Quality is the watchword in the
competitive world, which is market driven and banks have had to face up to this
emerging scenario. In fact, it may not be out of place to reiterate that quality will in
future be the sole determinant of successful banking ventures and marketing has to
focus on this most crucial need of the hour.

Growing Competition :

Increased completion is being faced by the Indian banking industry from

within the system with other agencies both, local and foreign, offering value added
services. Competition is no more confined to resource mobilization but also to lending
and other areas of banking activity. The foreign commercial bank with their superior
technology, speed in operations and imaginative positioning of their services has also
provided the necessary impetus to the Indian banks to innovate and complete in the
market place.

Technological Advances :

Technological innovation has resulted in financial product development

especially in the international and investment banking areas. The western experience
has demonstrated that technology has not only made execution of work faster but has
also resulted in greater availability of manpower for customer contact.

Marketing Approach in Banks

With the need for marketing in banks having evolved out of the changing
environment and constant interplay of various interdependent factors, the importance
of a systematic approach to marketing cannot be overstressed. The application of a
marketing approach in banks will therefore involve:
a.

Identifying customers financial needs and wants;

b.

Developing appropriate banking services to meet these needs;

c.

Pricing for the services so developed;

d.

Setting up suitable outsells / banks branches;

e.

Advertising to promote the services to the existing as well as

prospective customers.

 Special Features of Bank Marketing

Banking product cannot be seen or touched like manufactured products

(intangibility)

In marketing banking products, the product and the seller are in separable; they
together define the banking product (inseparability)

Banking products are products and delivered at the same time; they cannot be
stored and inspected before delivering (perishability)

Standardization of banking product is difficult (variability)

The bank marketing is than an approach to market the services profitability. It is a

device

to

maintain

commercial

viability.

The

changing

perception

of bank marketing has made it a social process. The significant properties of the
holistic concept of management has made bank marketing a device to establish a
balance between the commercial and social considerations, often considered to the
two opposite wings. A compendium of two words banks and marketing thus focuses
our attention on the following:

Bank marketing is a managerial approach to the market services.

It is a social process to sub serve social interests.

It is a fair way of making profits

It is an art to make possible performance-orientation.

It is a professionally tested skill to excel competition.

Bank Marketing In the Indian Perspective

The formulation of policies is substantially influenced by the emerging trends
in the national and international business conditions. The level of income,
expectation, and the rate of literacy the geographic and demographic considerations,
the rural or urban orientation, the chances in economic systems the frequent use of
technologies are some of the key factors governing the development plan of an
organization.
In the development sensitive welfare economy, the formulation of a sound
marketing mix is found a difficult task. The nationalization of the Reserve Bank of
India is a landmark in the development of Indian Banking system which in a true
sense paved avenues for qualitative-cum quantities improvements. This makes it
essential that the reserve Bank of India and the policy makers of the public sector
commercial banks think in favor of conceptualizing modern marketing which would
bring a radical change in the process of quality up gradation.
The first task before the public sector commercial Banks is to formulate the
marketing mix which suits the national socio-economic requirements. To be more
specific the peripheral services need frequent innovations, since this would be helpful
in excelling competition. The designing of a product portfolio is found significant to
maintain the commercial viability of the public sector banks. The banks professionals
need to assign due weightage to their physical properties. They are supposed to look
smart active and attractive.

Bank Marketing Strategies

The marketing research considered being a systematic gathering, recording
and analysis of data makes ways for making and innovation the marketing decisions.
5

The information collected from the external sources by conducting surveys helps bank
professional in different wants.
In the bank services, the formulation of overall marketing strategies is
considered significant with the view point of tapping the potentials, expanding the
business and increasing the marketing share. The increasing domination and gaining
popularity banks, the popularity banks, the profitable schemes of the non-banking
organization mounting craze among the customers for private banks have made the
task of influencing the impulse of customers a bit difficult.
The marketing research simplifies the task of studying the magnitude of
competition by opinion surveys and the feed back customers, the multi-dimensional
changes in the services mix can be made productive if it is based on marketing
research.

It is submitted that the banking system is on the threshold of a momentous era

of change and continuity in growth and development, of individual customer needs
and corporate practices, technology and competitions. The role of marketing in the
banking industry continues to change. For many years the primary focus of marketing
was public returns. Then the focus shifted to advertising and sales promotion. That
was followed by a focus on the development of a sales culture. Now the focus is on
the individual customer meeting and even anticipating his or needs and developing
trusting, long-term relationships by delivering high quality personalized service.
Marketing both as a philosophy and an activity; is expected to contribute immensely
to the realization of goals both immediate and future. All though all the elements of
the marketing concept customer satisfaction, profit integrated framework and social
responsibility must receive the greatest emphasis in the years a head.

They must be guided by the dictum of Mahatma Gandhi.

A customer is the most important visitor in our promises. He is most
dependent on us. We are depending on him. He is not an interruption on our work. He
is the purpose of it. He is not an outsider on our business. He is part of it. We are not
doing him a favour by serving him. He is doing as a favour by giving as an
opportunity.

 MARKETING CONCEPTS ITS APPLICATION

TO BANKING

What is Marketing?
There are many definitions of marketing. The better definitions are focused
upon customer orientation and satisfaction of customer needs.
Marketing is the social process by which individuals and groups obtain what
they need and want through creating and exchanging products and value with others.
-Kotler.
Marketing is not only much broader than selling, it is not a specialized
activity at all It encompasses the entire business. It is the whole business seen from
the point of view of the final result, that is, from the customer's point of view.
Concern and responsibility for marketing must therefore permeate all areas of the
enterprise.
-Drucker.

When we apply marketing to the banking industry, the bank marketing

strategy can be said to include the following:
A very clear definition of target customers. The Development of marketing
mix to satisfy customers at a profit for the bank. Planning for each of the source
markets and each of the user markets (A bank needs to be doubly market oriented
its has to attract funds as well as users of funds and services).Organization and
Administration.
In an age of electronic banking, the concept of bank marketing is required to
be reviewed. A number of experts agreed with this view that marketing is unavoidably
a social concern. Thus a change in the concept of marketing paved the ways for a
change in the concept of bank marketing. It is right to say that bank marketing is
related to the product, promotion, place, pricing and people decision of the banking
8

organization which simplifies the task of restructuring or revamping their decisions in

tune with the changing business environment.

The following arguments justify the application of marketing process to

banking.

Fig.1
Understandi
ng the
customers

Justification
for applying
the
Marketing in
Banks

Formulating
and
Innovating
the Mixes

Satisfying
the
customers

Excelling
competition

application of marketing process to banking.

Marketing helps in achieving the organizational objectives of the bank. Indian

banks have duel organizational objective commercial objective to make profit and
social objective which is a developmental role, particularly in the rural area.
Marketing concept is essentially about the following few thing which
contribute towards Banks success:
1)

The bank cannot exist without the customers.

2)

The purpose of the bank is to create, win, and keep a customer.

3)

The customer is and should be the central focus of everything the banks does.

4)

It is also a way of organizing the bank. The starting point for organizational
design should be the customer and the bank should ensure that the services are
performed and delivered in the most effective way. Service facilities also
should be designed for customers convenience.

5)

Ultimate aim of a bank is to deliver total satisfaction to the customer.

6)

Customer satisfaction is affected by the performance of all the personal of the

bank.
All the techniques and strategies of marketing are used so that ultimately they

induce the people to do business with a particular bank. Marketing is an

organizational philosophy. This philosophy demands the satisfaction of customers
needs as the pre-requisite for the existence and survival of the bank. The first and
most important step in applying the marketing concept is to have a whole hearted
commitment to customer orientation by all the employees. Marketing is an attitude of
mind. This means that the central focus of all the activities of a bank is customer.
Marketing is not a separate function for banks. The marketing function in Indian Bank
is required to be integrated with operation.

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Marketing is much more than just advertising and promotion; it is a basic part
of total business operation. What is required for the bank is the market orientation and
customer consciousness among all the personal of the bank. For developing marketing
philosophy and marketing culture, a bank may require a marketing coordinator or
integrator at the head office reporting directly to the Chief Executive for effective
coordination of different functions, such as marketed research, training, public
relations, advertising, and business development, to ensure customer satisfaction.
The Executive Director is the most suitable person to do this coordination
work effectively in the Indian public sector banks, though ultimately the Chief
Executive is responsible for the total marketing function.
Hence, the total marketing function involves the following:
a) Market research

i.e. identification of customers financial needs

and wants and forecasting and researching future
financial

market

needs

and

competitors

activities.
b) Product Development

i.e. appropriate products to meet consumers

financial needs.

c) Pricing of the service

i.e., promotional activities and distribution

system in accordance with the guidelines and
rules of the Reserve Bank of India and at the
same time looking for opportunities to satisfy
the customers better.

d) Developing market

i.e., marketing culture among all the customerconsciousness Personnel of the bank through
training.

11

Thus, it is important to recognize the fundamentally different functions that

bank marketing has to perform. Since the banks have to attract deposits and attract
users of funds and other services, marketing problems are more complex in banks
than in other commercial concerns.
Indian banking is at cross roads today. With the deregulation and liberalization
process in full swing, the consequent policy changes introduced in the Indian financial
system in general and banking in particular are effecting unprecedented changes in its
functioning. With the emerging changes did spring up new challenges of commercial
viability, cost effectiveness, effective marketing strategy, etc. Market oriented policies
also gave birth to new players like foreign and private sector banks and subsidiaries
offering varied high tech and cost effective Service. There was an absolute shift from
sellers into buyers market, establishing the consumer as the key factor in the
market. The dictum as the bank exists because of its customers, has become more
pronounced and relevant in the present context. Thus, marketing constitutes the key
strategy for banks to retain good customers and also anticipate their future demands.

12

 Introduction of Market Segmentation

An organization cannot satisfy the needs and wants of all consumers.

To do so may result in a massive drain in company resources. Segmentation is simply
the process of dividing a particular market into sections, which display similar
characteristics or behaviour. There are a number of segmentation variables that allow
an organization to divide their market into homogenous groups.
The identification of market occupies a place of outstanding significance in
the banking industry. This helps in transforming the plans into action or turning the
dreams into realities. The concept Market Segmentation based on the principle of
Divide and Rule. Since the very beginning of the marketing, the market segmentation
has been practiced to get the productive result. Segmentation makes possible tailoring
of products and marketing programmes uniquely suitable for each segment.
Segmentation is a method of dividing and sub-dividing the markets into
different small segment. By segmenting, by dividing, banks find it convenient to
identify and thus banks succeed in understanding the changing needs and
requirements, likes and dislikes and the behavioural profile of customers. Of course,
no two buyers are found identical in all respects. However there are certain
characteristics shared by the large groups. The segmentation is thus a process of
understanding the market in aright perspective which simplifies the task of
formulating a creating marketing strategy.

Definition :A number of experts have expressed their views regarding segmentation.

Philip Kotler says, Market segmentation is the subdivision of market into

homogeneous subsets of customers where any subset may conceivably be selected on
a market target to be reached with a distinct marketing mix.

13

Stanton opines, market segmentation consist of taking the total heterogeneous

market for a product and dividing into several sub markets or segments each of which
tend to be homogeneous in all significant aspect.
In view of the aforesaid views of different marketing experts, it is observed
that market segmentation is the grouping or division or sub division of markets. It is a
device to help marketers in formulating a sound marketing mix which gets a positive
response.

Fig 1.
The concept of segmentation can be made clear with the help of above figures:-

The Traditional Approach to Market Segmentation

14

Historically, the traditional approach to segmentation attempts to segment the

market using one (or more) of four schemes.
The first scheme attempts to segment the market based on how customers and
prospects behave (behavioral segmentation).
The second scheme attempts to segment the market based on who they are
(demographic or life-phase segmentation).
The third scheme attempts to segment the market based on how much worth
they potentially hold for the organization (profitability or current value segmentation).
The fourth scheme attempts to segment the market based on what customers
think about the features of the product or service in question (attitudinal
segmentation).
Each of these four approaches to segmentation contributes an important piece
in understanding the market, yet, each of these approaches displays significant
limitations.

Why Segmentation?
When it comes to marketing strategies, most people spontaneously think about
the 4Ps (Product, Price, Place, Promotion)

extended by three more Ps for

marketing services (People, Processes, Physical Evidence).

Market segmentation and the identification of target markets, however, are an
important element of each marketing strategy. They are the basis for determining any
particular marketing mix. Literature suggests the following steps:

15

Fig.1

The importance of market segmentation results from the fact that the buyers of
a product or a service are no homogenous group. Actually, every buyer has individual
needs, preferences, resources and behaviors. Since it is virtually impossible to cater
for every customers individual characteristics, marketers group customers to market
segments by variables they have in common. These common characteristics allow
developing a standardized marketing mix for all customers in this segment.

16

 Market segmentation in banks :

In banking services the banks are expected to satisfy all type of customers like,
rural customers, urban customers, high earning and low earning customers, small
scale and large scale entrepreneurs and so on.
Hence segmentation of market if considered to be important in banking
industry. Since bank have to deal with different types on customers from field and
localities so banking industry need segmentation. A marketing plan or product launch
cannot be successful without proper segmentation. Market segmentation is perhaps
the most difficult and complex decision a bank must make when deciding its market
strategy.

Following is the table showing segmentation in banks :

Sectors

1. Agricultural Sector

Subsegment
a. 10 acre &above
b. 5 to 10 acre
c. 2 acre & below
d. Landless

2. Household Sector

Incomes : a. above Rs.1 lack P.A

b. Rs.50000 to Rs.100000
c. Rs.25000 to Rs.50000
d. below 25000

3. Institutional Sector

e.

above Rs.5000

f.

Rs.5000 to below Rs.2000

a. Religious
b. Educational
c. Charitable and clubs

4. Service Sector

a. Financial Services
b. Non-financial Services

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5. Trade and Commerce

a. Wholesalers
b. Retailers
c. Merchant Exporters

6. Industrial Sector

a. Private Sector
b. Public Sector
c. Co-operative Sector
d. Large-Scale Sector
e. Small Scale Sector
f. Tiny Sector

Importance of market segmentation to the banking

service : Like other goods manufacturing and service generating organization, banks
find segmentation of market important to the development the banking organization.
If the segmentation done in a right way, the banks finds it easier to formulate a
strategic marketing plan. The following facts testify the instrumentality of
segmentation in the banking services.
1 . Instrumental in exploring opportunities : -

It is right to mention that segmentation is very much effective in exploring

profitable and untapped or non-optimally tapped opportunities. It is wellknow that
while segmenting, the market is divided into different small group and sub-groups and
this simplified the tack of studying and knowing the market in a right prospective. If
banks know about the rural segment, the opportunities are explored in the rural areas.
Thus banks divide the market and so they know about the market which makes it
easier to identify the opportunities.

18

2 . Active in formulating a sound marketing strategy : -

The market segmentation helps the banks in formulating a sound marketing

strategy. The formulation of a strategy is found significant and the bank policy makers
and senior executives find it possible to develop the package in the face of changing
level of expectation. Package is a combination of number of services / schemes
keeping in view the changing needs and requirements of a particular segment.
Since the banks are found in a position to know the hierarchy of needs of a particular
segment, the product strategy can be formulated. In addition the promotional
measures can also finalized in the face of the receiving capacity of that segment.

3 . Helpful to policy planners : -

Whatever the policy are formulated should have a close link with the emerging
trends in the business environment. The task of formulating plan is found challenging.
The banks need sufficient information about the different segments, so that they
succeed in formulating a strategic plan for future marketing. It helps the banks in
getting the desired information for incorporating necessary improvements. The
development of personnel, installation of sophisticated information technologies,
innovation in the service mix, etc. take more time and require adequate finance.
5 . Enriching the marketing resources : The setting of a target the particular segment, there is no meaning when banks
lack marketing resources. Since the market is competitive and foreign banks are found
making the business environment more volatile, it is essential that the banks make
available the adequate resources to increase the market share for excelling
competition. So that banks needs due support to make the marketing resources
optimal to the changing business conditions.

19

 Need / factors influencing Market Segmentation : Philip Kotler has described the dilemma of the seller (especially, a seller
dealing with masses, e.g. banks) as follows:
How the seller determines which buyers characteristics produce the best
partitioning of a particular market? The seller does not want to treat all customers
alike nor does he want to treat them all differently.
Banks deal with individuals, group of persons and corporates, all of whom
have their likes and dislikes. No bank can afford to assess the needs of each and every
individual buyer (actual or potential).
Segmentation of the market into more or less homogenous groups, in terms of
their needs and expectations from the banking industry, provides a solution to this
problem.
This involves dividing the market into major market segments, targeting one
or more of this segments, and developing products and marketing programs tailormade for these segments.
In the first segmentation, the market is divided from a unitary whole, to groups
of buyers who might require separate products and marketing mix. The marketer
typically tries to identify different segments in the market and develop profiles of
resulting market segments.
The second step is market targeting in which each segments attractiveness is
measured and a target segment is chosen based on its attractiveness.
The third step is product positioning which is the act of establishing a viable
competitive position of the firm and its offer in the target segment chosen.

20

In the process of segmentation, the market can be divided into major segments
which are gross slices of the market, or into smaller specially formed segments,
otherwise known as niches. Niche customers have a specific set of needs which the
markerter tries to address. While a market segment attracts several competitors, a
niche attracts fewer competitors and therefore, a company should clearly define its
target segment and devise strategies to target the customer, so that it has a competitive
advantage in the segment.
These concepts can be applied in personal banking by an Indian Bank.
Traditionally, Indian Banks have not had any conscious strategy for selecting
customers from the personal banking area, apart from some banks which have a
geographic concentration strategy such as concentrating on a particular region or
state. These banks will have to segment the market on certain basis, and identify
market segments or niches which they want to cater to. For example, a bank like SBI
may not be able to cater high income groups (say, managers, professional, NRIs, etc.
who earn above Rs. 4,00,000 p.a. and who want a higher quality of products / services
and who are willing to pay for them), as the services required by such a profile of
customers are entirely different from the kind of products / services SBI can offer.

The following points justify the need of Market segmentation.

Market segmentation is needed in order to concentrate attention on a specific

target market.

To adjust marketing mix as per the need and requirements of specific group.

For the introduction of strategy of divide and conquer

It is needed as it acts as a base of present customer oriented marketing

philosophy. As a result customer get better services

21

It is needed to create and innovate the products as per the needs and
expectation of customer of each market segment

Benefits of market segmentation in banking service: a) Helps in better understanding of the customers needs and wants.
b) Better targeting and position of the product.
c) Encourages two-way communication among the potential buyer and the banks
d) Maintaining effective relationship with the customers.
e) Retaining the existing customers and attracting new ones.

f) Improving service delivery standards.

g) Reducing cost / expenses on various marketing activities and increases market
share; resulting in higher profits.
h)

Improving the marketability of banks products and services.

i)

Improving banks marketing strategies.

j)

Improving banks marketing plans.

k)

Improving banks businesss marketing position.

22

 Limitations :

Too much concentration of few segments is dangerous. If the market

segments are not selected properly or marketing mix is not adjusted properly
from time to time.

Rational segmentation is difficult : -

It is difficult to have accurate market segmentation in a vast country like India

with diversity as regards demographic ,and socio-economic factors. Such
segmentation is difficult, complicated and may not prove to be accurate.

Market segmentation strategy has special drawbacks as regards Costs and

Coverage. It increases marketing costs to reach customers of different
segment.

Unpredictable consumer bahaviour : -

Human being and his behaviour is unpredictable. Therefore market segments

may prove to be wrong.

Inadequate information and data due to which rational segmentation may not
be possible. Defective / deceptive variables used for segmentation may prove
to be costly.

Changing marketing environment makes market segmentation ineffective as

the bank has no control on the external factors responsible for changes in the
market environment.
23

Conservative managements do not give much importance to the concept of

market segmentation and conduct their marketing activities as per old
methods.

Initiation of Segmentation in India :

State Bank of India was the first Indian Bank to adopt the concept of market
segmentation. In 1972, it reorganized itself on the basis of major market segments
dividing customers on the basis of activity and carved out 4 major market segments,
viz.

Commercial and Institutional,

Small Industries and Small Business Segment,

Agriculture,

Personal and Services Banking.

The objectives of this scheme were:

Deeper penetration and coverage of market by looking outwards.

Adequate flexibility of organization to accommodate growth and rapid change,

Delegation of work for releasing senior management for more futuristic tasks.

24

 Market segmentation strategy

Market segmentation as a marketing strategy is a recent development.

Segmentation is supplementary to marketing mix. By successfully segmenting the
market, evaluating the features of each of the segments and by applying a fair
combination of marketing mix, a marketing manager is likely to get good reward in
terms of sale of products, profit, and goodwill. The benefits of market segmentation
will be available only when the segmentation is introduced properly. This requires
knowledge, experience and maturity and naturally this responsibility should be given
to senior marketing executives. Market segmentation strategy is certainly useful to
consumers and marketing banks.

A bank should identify the most promising and convenient segment of

the total market and concentrate its marketing efforts on that segment for better
results. This suggests that the target market must be selected and concentrated attack
should be made on the same through the effective use of marketing mix. This is

25

described as segmentation strategies or market targeting strategies. There are three

alternative marketing strategies as noted below :

Fig.1

Mass / Undifferentiated Marketing Strategy : In mass marketing sale of one product / service to the entire market. In this
we find low cost of production since it is based on large scale economies
which make it possible to adopt a price structure which is low and uniform.
such a segmentation strategy is found suitable to the organization having a
market. The strategy relies on mass marketing and mass advertising. An
organization practicing undifferentiated marketing typically develops an offer
aimed at the largest segments in the market. When we talk about the banking
organization, we do find this strategy effective to savings accounts in the
context of response and no particular marketing mix.

26

 Multiple or Differentiated Strategy :This strategy adopted by the organizations where a number of products and
services are sold to selected market segment in order to increase overall sales. In
differentiated strategy, the cost however higher than in mass marketing. The
banking services are also found differentiated into segments. In certain services
the response of the market may be varied like term deposits of different maturities
or mix of different deposit schemes. The impulse buying of a customer is
influenced by the silent features of the concerned services hence purchasing
power or spending power is found here insignificant. Thus in banking services for
the undifferentiated market, we so not need a specified marketing mix but for
differentiated market, we essentially need both depending upon the nature of
schemes. Since the competition is found increasing, the banking organization has
been found launching a number of services/ schemes in tune with the changing
potentials and requirements of different segments. This strategy is thus found to
increase the market share so all that all the segments are tapped optimally.

Concentrated or Niche marketing :Organization concentrating on selling to a small market segment or niche is called
as a concentrated or Niche marketing. Some points make it clear that segmentation,
especially for the banking services focuses on differentiated marketing strategy. Of
late, we find a number of term deposits containing a good number of outstanding
features but normally all the features are not found in all the schemes. While
formulating a strategy for market segmentation, it is imperative that the policy
planners innovate their marketing strategies keeping in mind the segment for which
the services/schemes are to be launched. This simplifies the task of bank professional,
especially while influencing the potential customers of that segment. The motive is to
influence the profitable segment by innovating the marketing mixes. In this

27

concentrated marketing strategy, attention is concentrated on one specific target

market only. More attention is given to target consumers and more satisfaction is
offered to them.

Reason for Effective Market Segmentation Strategy

As already stated, segmentation is the basis for developing targeted and
effective marketing plans. Furthermore, analysis of market segments enables
decisions about intensity of marketing activities in particular segments.
A segment-orientated marketing approach generally offers a range of
advantages for both, banks and customers
1. Better serving customers needs and wants
It is possible to satisfy a variety of customer needs with a limited product
range by using different forms, bundles, incentives and promotional activities. Many
banks organize its products and services by customer groups. They offer the same
products to all customer groups. Nevertheless, they suggest product bundles and
supporting services that are individually tailored for the needs of each particular
group. Thus, segment-specific product bundles increase chances for cross selling.

2. Higher Profits
It is often difficult to increase prices for the whole market. Nevertheless, it is
possible to develop premium segments in which customers accept a higher price level.
Such segments could be distinguished from the mass market by features like
additional services, exclusive points of sale, product variations and the like. A typical
segment-based price variation is by region. The generally higher price level in big
cities is evidence for this.
When differentiating prices by segments, banks have to take care that there is
no chance for cannibalization between high-priced products with high margins and
budget offers in different segments. This risk is the higher, the less distinguished the
segments are.
28

3. Opportunities for Growth

Targeted marketing plans for particular segments allow to individually
approach customer groups that otherwise would look out for specialized niche
players. By segmenting markets, banks can create their own niche products and thus
attract additional customer groups.
Moreover, a segmentation strategy that is based on customer loyalty, offers the
chance to attract new customers with starter products and to move these customers on
to premium products.
4. Sustainable customer relationships in all phases of customer life cycle
Customers change their preferences and patterns of behavior over time.
Organizations that serve different segments along a customers life cycle can guide
their customers from stage to stage by always offering them a special solution for
their particular needs.
For example, ICICI Bank provides various product to all members in a family,
like savings account to teenagers, pension plans for retired persons, education loan for
the bright future of child, savings account for house wives, etc.

5. Targeted communication
It is necessary to communicate in a segment-specific way even if product
features and brand identity are identical in all market segments. Such a targeted
communications allows stressing those criteria that are most relevant for each
particular segment .

6. Stimulating Innovation

29

An undifferentiated marketing strategy that targets at all customers in the total

market necessarily reduces customers preferences to the smallest common basis.
Segmentations provide information about smaller units in the total market that share
particular needs. Only the identification of these needs enables a planned development
of new or improved products that better meet the wishes of these customer groups. If
a product meets and exceeds a customers expectations by adding superior value, the
customers normally is willing to pay a higher price for that product. Thus, profit
margins and profitability of the innovating banks increase.
7. Higher Market Shares
In contrast to an undifferentiated marketing strategy, segmentation supports
the development of niche strategies. Thus marketing activities can be targeted at
highly attractive market segments in the beginning. Market leadership in selected
segments improves the competitive position of the whole organization. It strengthens
the brand and ensures profitability. On that basis, organizations have better chances to
increase their market shares in the overall market.

As much as strategies are good, bank should avoid using one strategy for all
products or marketing applications effective segments or marketing applications
effective segments. A strategy will vary according to what are the marketing
objectives. In the case of attracting new customers who have no history with the bank.
The bank will come up with a wedge product strategy where they give customers of
other banks a chance to sample some of its products or services for the time being and
this will enable them to cross-sell more profitable products to them and create a long
lasting relationship with them.

30

 Criteria for Successful Segmentation

In this chapter we are discussing about the which sectors, banks are going to
segment and how sub segment .
Segmentation in a right fashion makes the ways for profitable marketing. This
helps policy planner in formulating and innovating the policies and at the same time
also simplifies the task of bank professionals while formulating an innovating the
strategic decisions. The banking organization also segment market and for the same
they are supposed to assign due weightage to the following criteria which would help
them in many ways. The following criteria make possible rig segmentation.
The banking organization need to segment and sub-segment the sextors where
they succeed in exploring the business potentials or say the profitable opportunities.
An important criterion for market segmentation the economic system in which
we find agricultural sector, industrial sector, services sector, household sector,
institutional sector and rural sector requiring of weightage while segmenting.

1. Agricultural Sector :
the agricultural sector assumes a place of outstanfing significance and the
banking organization may find profitable opportunities if they segment this market
into different categories In the agricultural sector, there are four category rise since
the needs of all the categories cants be identical.

31

(Fig.1)
The mechanization of agriculture, the improved or scientific system of
activation, the help of nature, the magnitude of risk, the availability infrastructural
facilities influence the level of expectations vis--vis the needs and requirements. The
banking organizations are supposed to know and under stand the changing
requirements of different categories of farmers.

2. Industrial Sector :
The banking organizations sub serves the interests of the industrial sector. The
large-sized, small-sized co-operative and tiny industries use the services of banks. The
expectations of all the categories cants are uniform.

(
fig.2)
The banking organizations are supposed to have indepth knowledge of the
changing needs and requirements of the industrial segment.

32

3. Services sector :
It is an important sector of the economy where the banking organizations get
profitable business. The two categories of organizations such as profit-making and
not-for-profit making are found important in the very context.

(fig.3)
The banking organizations need to identify the changing needs and
requirements of the services sector. With the frequent use of information technologist
and with the mounting pressure of inflation and competition, we find a change in the
hierarchy of needs.

4. Household Sector :
This is also constitutes an important sector where different income group have
different needs and requirements. In below figure we find the different segments of
the household sector.

33

(fig.4) Household Segment

The high income group, middle income group, low income group, substance
level group and marginal income group have different hierarchy of need which
influence the level of their expectations.
Gender Segment: In the gender segments, we find male and female having different
needs and requirements. The banking organizations are supposed to identify the level
expectations of both sexes.

(Fig.5)
Some of the women are housewives and therefore they have different need and
requirements whereas some of them are working ladies having different needs and
requirements.

5. Profession :
In the profession segments, we find different categories of professions an
therefore we find a change in their needs and requirements.

34

(fig.6) Profession wise Segmentation

The technocrats, bureaucrats, corporate executives, intellects, white and blue
collar employees have different needs and requirements and therefore the banking
organizations should know their expectations.

6. Institutional sector :
Organizations, institutions, industries, business, or say, the large-sized
customers is an important market segment for the banking organization. In the
following figure.7 we find different sub-segments in the category institutional sector.
This the most profitable segment of banking organization.
Some of the organizations are known as cultural organizations, some of them
are not for profit making, some of them are charitable and some of them are related
to trade and commerce. The emerging trends in the social transformation process
determine the hierarchy of needs.

35

(fig.7) Institutional Segment

Markets segmentation thus simplifies the task of understanding the

customers/prospects. The bank professional find it convenient to formulate and
innovate the marketing mix of world class which simplify the process of excelling
competition.
In the Indian perspective where we find agrarian economy contributing
substantially to the transformation of national economy, it is pertinent that the banking
organizations assign due weightage to the rural sector of the economy where we find
tremendous opportunities.
The urbanization is likely to gain the momentum and villages, outskirts of big
towns and cities are to be developed on a priority basis. Almost all the organizations
are to get tremendous opportunities there. The marketing resources if of innovative
nature would make the ways for capitalizing on the same profitably.

36

Hence this is found essential to know the changing needs and requirements of
the different segments. The launching of new products and services or an overriding
priority to the innovation process cannot be meaningful unless the banks succeed in
rating the exact level of expectation of different segments.

Bases of Market Segmentation :

In this topic we are discussing on what bases banks can segregate their customers .

37

When we divide any class or a subject, it is done on certain grounds. The base
is created after considering the various fields and the characteristics of students, merit
and so on. Similarly marketing segmentation is done on certain consistency that exists
within the group.
Marketers use segmentation bases, or variables, which are characteristics of
individuals, groups, or organizations, to divide total market into segments.
Markets can be segmented using a single variable, such as age group, or
several variables, such as age group, gender, and education. Although it is less
precise, single-variable segmentation has the advantage of being simpler and easier to
use than multiple-variable segmentation. The disadvantages of multiple segmentation
are that it is often harder to use than single-variable segmentation; useable secondary
data are less likely to be available; and as the number of segmentation bases increases,
the size of individual segments decreases. Nevertheless, the current trend is toward
using more rather than fewer variables to segment most markets. Multiple-variable
segmentation is clearly more precise than single-variable segmentation.

So in order to make sure that the product, offerings reach the right consumers
and customers it is necessary that we understand the base of segmentation.

Geographic :
Nations
States
Regions
Cities
World
M-Size
Density

38

 Climate

Demographic :
Age
Family Size
Family life cycle
Gender income
Occupation
Education
Religion
Generation
Nationality
Social Class

Psychographic :
Life Styles
Personality
Values
Behavioral :
Occasions

Benefits

User Status

Usage Rate

Loyalty Status

Readiness Stage
39

Attitude Toward Offerings

Stages for segmentation :

While segmenting, it is essential that the bank are familiar with the different
stages to be covered for right segmentation since this would simplify the task of
sensitizing the marketing efforts vis--vis would make the business profitable. Now
we are going through the different stages of segmentation.

40

1.

Conducting the Research :

The first stage in the segmentation process is to conduct research which

analyses the market to identify the group of customers within the overall market who
share needs and have certain behavioural properties or features in common which
distinguish them from groups of customers. The research is done with help of
variables (bases) which helps to conduct the research efficiently. The research would
answer to the questions and so the banks bear the responsibility of intensifying the
research.

2. Identify the Profitable Segment :

Market research would help the banks in knowing the segments containing the
most

buyers or the most profitable buyers. It is most important that the most

profitable segment should not be too large in size. The concept of market
segmentation is equally applicable to the banking or the other service generating
organization also. The banking organization like Hong Kong bank and the IndusInd
bank have been found treating each class in the same way as the manufacturing
organization treating their products. If banks are succeed in identifying the profitable
segment, the task of bank professionals would be simplified considerably.

3. Establishing the position of their service / schemes :

41

The third stage in the market segmentation process is to establish the position
of their products / services / schemes in the market relative to those of rival banking
organizations. The product position is found different in both categories of banking
organization public sector commercial banks and the private banks. It is important
that the competing banking organization assign due weightage to the positioning
strategy adopted by the competitors.

4. Tailoring the Marketing efforts :

This stage of segmentation is related to the channelising of marketing efforts
in the face of the needs and requirements of the profitable segment. Profitable
segment draw the attention because the marketing resources can be made optimal to
the expectation of that segment. Since the banks are aware of the potential customers
and they know about their expectations, it is natural that whatever the strategic
decision they make re found creative in nature.

5. Target Markets are Identified :

Finally, the target markets are identified and the resources are developed
accordingly. The development of marketing resources in tune with the expectation of
the target markets simplifies the task of satisfying the customers since thay find the
services in tune with their expectations. The bank would attempt to sort out the
untapped prospects since it is not essential that whatever the strategies they adopt are
successful in sensitizing all the prospects or the potential customers.

42

6. Adopting the Rifle- shot Approach :

If the banks fail in motivating the prospects, they may think in favour of the
rifle- shot approach. This approach is related to aim the target market in such a way
that even the untapped potential customers are motivated. Here banks find innovating
the marketing resources essential and the innovation process should keep in mind the
reason which resulted into the failure of their efforts taken earlier.

From the above stages we found that, the first stage occupying a place
of outstanding significant since it is the quality of banks research determines the
magnitude of banks success. It is due mainly to the fact that the mast profitable
segment is found of the smallest size. The profitable segment is to be tapped
optimally so that the marketing resources or inputs used in the process are one
hundred- percentage productive. It is in this topic that we find a study of the different
stages of segmentation essentials.

Criteria for an Effective Segmentation :

In processing the marketing activities , of course there are a number of steps

and stages but of all, find segmentation significant since right segmentation simplifies
the task banks and makes the marketing efforts sensitive. This gravitates our attention
on effective segmentation. An important task before the banks is to have effective
segmentation which makes ways for an optimal utilization of the marketing resources.
43

It is against this background that we find effective segmentation to be discussed in

detail. Kotler says that any worthwhile effort for market segmentation must satisfy the
following four conditions :
Measurability :By Measurability in the market segmentation, the degree to which the size and
purchasing power of the segments can be measured. No doubt in it that there
are certain segmentation variables which cant help us in the measurement
process. In a true sense, this refers to the extent to which the size and
purchasing power of the segment can be fair to a point that is measured. If
banks fail in measuring the size and purchasing power of a segment, it is
natural that banks fail to assess the business potentials of that segment.

substantiality :

This is refers to the degree to which the segment are large and profitable. It is
essential that a segment belongs to the largest homogeneous group. If the size
is very small even banks find it full of potentials, the market would hardly be
profitable. Banks cant negate that substantiality is a relative term. In the
banking business we find some the small segments with tremendous
potentials. Thus we cant say that substantiality would be an essential criterion
since banks can develop mix or a package even for the small segment and
make the business profitable.

Accesssibility :

This is related to the degree to which the segments can effectively or smoothly
be reached and served of cource, banks find it essential consideration for
effective segmentation since even if market is profitable and bank can reach to
that market smoothly, the bank professionals are found helpless to capitalize
on the opportunities.

44

Actionability :

This is meant the degree to which effective programmes can be formulated for
attracting and serving the customers. Hence banks emphasis on the potentials
of customers in quick expendition of the formulation process. If the banking
organization faces the problem of under staffing, the actionability would be
affected adversely.
This above conditions needs to be formulating effectively in which
marketing resources and efforts are found more sensitive.

Market segmentation for Mobile Banking :

It is absolutely true that mobile banking is experienced different from one market
to another. It is often the source of a lot of confusion when different people discuss
mobile banking from different contexts. Before we discuss mobile banking it is
therefore important to first define the markets that one target when deploying mobile
banking.
The most obvious first segmentation of the market for mobile banking is to look at
those consumers with a strong, existing relationship with banks, and those that do not

45

have a relationship with a bank. This segmentation should range from some-one
without any banking relationship (some-one that does not have a bank-account and
also never had one), to (on the extreme right) a sophisticated user of banking services.
This would typically be some-one with a relationship with more than one bank, have
multiple bank accounts and/or credit cards.). Another dimension should be an
indication of the degree in which a consumer is connected to other consumers. Some
consumers because of their work or role in society have a bigger need to interact with
a more diverse group of consumers, others are much more localised in their
interaction.
In looking at the different segmentations, one would be able to identify
an individual that are typically employed in a low income position or survives off
grants, pensions or money sent from family working in the city or abroad. Lifes
routine is predictable for this individual with activities organised around the work and
family. The rural citizen would typically live in a low cost abode. Credit worthiness is
low with access to expensive micro lending as a source of lending only. All
transactions are in cash and almost no savings exist. This is an individual that either
living in a village in some rural area or in slums in or around cities. These people are
the masses that turn the economy with their labour. Their need for banking services is
limited to small savings, money remittance and some electronic payments. They
usually get access to these financial services in a very expensive way, often with high
risks as all of their transactions are in cash. They are often referred to as the bottom of
the pyramid, but yet they are active in the economy and represent a large portion of
the population in many countries and can be reached by mobile banking with the right
product or service.
Another segment would consist of individuals that are much more affluent.
They are the people that always have the latest gadgets and are more expansive in
their exposure to financial products. They typically have the latest phones, have more
than one bank relationship and travel extensively for work and pleasure. Their assets
include stocks and bonds and they use the Internet extensively to transact
electronically. They are often aware of transactional risks associated with card
transactions and the Internet and are often uncomfortable about their exposure to
fraudulent activities. In addition to providing more control and improved security,
46

mobile banking also delivers an alternative mechanism for the Power User to pay.
Transactions not usually available can now be performed. Some of the transactions
that the Power User requires and now becomes available are person to person
payments, proximity payments, enhanced security for card-not-present transactions
to name a few. All of these features are available in some format or another.
It is clear that different market segments would require vastly different mobile
banking offerings.

Case study

Introduction

47

Barclays is a global bank. It provides a range of financial services in 56

countries. Barclays provides retail banking services to customers, whether they are
individuals or businesses. It offers a broad range of financial products and services
including current accounts, savings accounts and general insurance.

Within the UK, Barclays communications are designed to help customers Take One
Small Step to managing their money better every day. Different kinds of customers
represent distinct markets for Barclays. The market for personal banking services is
very competitive. Personal customers have a choice of banks on the high street or on
the web to assist them in managing their finances. For example, they can have their
salaries paid into accounts, pay bills through the bank or save money to
gain interest on their savings. There is also a competitive market for business banking
services. Businesses require different services such as credit management, payments
for suppliers or loans and overdrafts to help them to survive and grow. For example,
an expanding business may need a mortgage to buy a new building.

Market segments

Each market is capable of being further sub-divided into segments. A market

segment is a part of a whole customer group that shares particular characteristics.
These include such factors as age, life stages, geography or occupation. Within the
market of personal banking, the segments could include categories such as students,

48

graduates, new to work, mature, and families. By identifying different market

segments, organizations can ensure they are providing products or services to meet the
needs of these customers.
In addition to this, appropriate promotional techniques can be used to reach
the people in the separate segments. Through segmentation, Barclays has been able to
devise appropriate banking offers for customers in different segments. This approach
is helping Barclays to improve its market share of the student accounts market.
Barclays believes students constitute a very important market segment for the
business. Students may be choosing a bank for the first time and Barclays hopes to
retain these customers. By focusing on the specific needs of this segment, Barclays
hopes to attract more student customers and keep them in the long term. Using market
research has enabled Barclays to identify the right product offer that will meet their
needs.
The case study shows how market research enabled Barclays to improve its
student account offer.

Purpose of market research

The purpose of market research is to gather data on customers and potential

customers. The collected data aids business decision making. This therefore reduces
the risks involved in making these decisions. In order to create a
product proposition that would attract new student accounts, Barclays needed to
understand fully the needs of this target market.

49

Firstly, students provide an opportunity for developing a long-term

relationship. As the student market segment increases each year in September/October
as the university term starts, Barclays has an annual opportunity to target new student
customers who need an account and who might not yet have chosen a bank.
Secondly, the use of this data highlighted that in the years after opening their
accounts, Barclays was able to establish a valuable long term relationship with
students. This meant that students could now be seen as an extremely important
market segment, and attracting new student customers became a significant
opportunity.

Barclays designed a programme of market research. The purpose of this was to

establish

what

students

really

needed

from

bank.

In

this

way

it

could offer appropriate products and services which would add value to students.

50

 Types of market research

Barclays began a process that involved both primary and secondary research.
Primary research
Primary research involves finding out new information. It finds the answers to
specific questions for a particular purpose. These enquiries may take the form of
direct questioning. For example, it may include face-to-face surveys, postal or online
questionnaires, telephone interviews or focus groups. This type of direct contact with
people is valuable as it gives specific feedback to the questions asked.. Although
primary research can be expensive and time-consuming, the up-to-date and relevant
data collected can give organisations a competitive advantage

For example, Barclays found from the questionnaire that 81% of students surveyed
held a savings account and 32% an investment savings account (ISA).
Secondary research
Secondary research focuses on existing information. It uses published data that
previous research has already discovered. This covers a wide range of materials, such
as:

market research reports

sales figures

competitor marketing literature

Government publications, e.g. national statistics.

51

Secondary research may be quicker to carry out but may give less specific outcomes
for the topic in question. This part of Barclays research revealed that student accounts
in 2009 amounted to 0.4 million out of a total market of 5.4 million new accounts.

Research findings
Numeric data gives a factual basis for planning - a snapshot of a situation. On
the other hand, qualitative information can find out the things that really matter to
consumers.
Research outcomes

Students relied heavily on different forms of credit. These included an easily

manageable bank overdraft to finance their time at university

Students wanted and often needed to own high-tech gadgets and electrical
goods, such as laptops

Students wanted to have separate accounts to manage their student borrowing

and spending

Any incentives offered would not alone motivate students to choose that
product. They were expected as part of any deal.

This insight was a real help to Barclays when considering the most
attractive proposition for students. Its objectives were to attract new student accounts.
It also wanted to retain students as customers for life in a profitable relationship that
met their financial needs.

Barclays could now start to put together an offer that would embrace the main
concerns of the target market.

52

 Implementation and evaluation

In 2009, Barclays set up a working group to oversee the setting up of the new
student proposition. It used the insight from the research to establish the key features
and benefits of the student account. These features are valid for the life of students
studies:

No monthly fee to keep costs down for students

An interest-free overdraft facility of up to 2,000 from starting the account.

Previously this started at 500 in the first year and increased through the years
of study. This extension helps students manage their finances.

Mobile banking and a network of local branches for ease of access to

accounts.

Having developed a student banking proposition that Barclays felt confident

would appeal, it began to communicate the message and promote the new student
offer. An innovative marketing plan was launched which involved:

a word-of-mouth campaign through 100 voices which encouraged students

to share their experiences of managing money whilst at college or university

Promotional literature available in branches nationwide. This proved useful

information for Barclays colleagues as well as for students and their parents to
take away

online advertising through barclays.co.uk

Direct mail to prospective students through the summer before going to

university.
53

 Conclusion
The Barclays student account proposition shows how it is crucial for a
business to listen to its market. To do this effectively means targeting specific market
segments to discover their needs.
Barclays new student account proposition was an insight-led approach.
Using carefully constructed and phased market research, the bank was able to
gain an overall insight into the thinking of students. In the early stages of the research,
it was discovered that the student segment provided an opportunity to develop a longterm relationship. It was found that students were not necessarily here today, gone
tomorrow. If the bank made a valuable and relevant offer, students were likely to
remain lifelong customers.
Barclays initial target was to increase the overall number of student accounts
by 25%. This target was exceeded with an increase of 34%. As a result, Barclays
increased its market share of the student market, moving from third to second among
the top four market leaders.
The process of meeting customer needs is an ongoing one. Barclays has a
continuing plan for re-evaluating its student proposition to ensure it remains relevant
to the target audience.

54

VISIT REPORT
I had visited to ICICI bank and HDFC Bank to gather the information about
my project Market Segmentation. I had visited ICICI bank at and HDFC bank. I asked
many questions which will help me to complete my project. I met Ms.Roshani Salion,
branch manager of ICICI bank at dombivali and Mr. Singh branch manager of HDFC
bank at kalyan branch.
HDFC Bank is a young and dynamic bank, with a youthful and enthusiastic
team determined to accomplish the vision of becoming a world-class Indian bank.
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build
sound customer franchises across distinct businesses so as to be the preferred provider
of banking services for target retail and wholesale customer segments, and to achieve
healthy growth in profitability, consistent with the bank's risk appetite.
HDFC Bank offers a wide range of commercial and transactional banking
services and treasury products to wholesale and retail customers. The bank has three
key business segments: Wholesale Banking Services, Treasury and Retail Banking
Services.
Indias second largest bank ICICI bank, 614 branches and extension counters.
2200 ATMs.Biggest private sector bank in India. Most valuable bank in India in
terms of market capitalization described by the competitors and industry expert in one
word Aggressive
Both the banks are succeeding in segmenting the market. They segment the
market to gain identifiable profit from the various segments. ICICI bank mostly
segregates the Industrial sector because they think this sector is most profitable.
And targets them by providing the multiple products and services which is suitable to
that particular segment. HDFC Bank and ICICI Bank offer corporate credit cards and
advisory services for their SME clients.
ICICI bank uses various bases for segmentation. Like occupation - Different
products for different occupational segment identified. Income - Minimum balance
serves as an income segment barrier. Geographical - Concentrated on Tier 1 & Tier 2
Cities trying to extend reach. Age - Different products like student account.
One thing is same that both the banks thinking that segmentation are very
expensive. But they do segmentation to tap the potential customers into actual for
longer period of time.
55

ICICI bank and HDFC bank are now trying to target the rural customers .they
started introducing products and services for the rural people.
This two banks really doing good job by segmenting the market. I am very
thankful to the managers who provided such an important data about Market
Segmentation Banks.

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