Unit VIII

Marketing of Services

Marketing of Insurance & Banking Services

Concepts of Insurance & Banking Services
Marketing mix of Insurance & Banking Services
Insurance & Bank Marketing in Indian perspective

Marketing of Hotel & Tourism Services

 Concept of Hotel & Tourism Services
 Market mix of Hotel & Tourism services
 Hotel & Tourism marketing in Indian perspective

Marketing of Transport & Consultancy Marketing –

Introduction, Concept, Users, Consumer Profile
Marketing mix elements for Marketing Transport & Consultancy Marketing

Marketing of Banking Services

The beginning of the decade 1980s brought a significant change in the concept of bank
marketing. There is no doubt in it that the concept emerged even in the late 1950s but the
process could be activated only after the use of sophisticated information technologies in
the banking sector. The advent of electronic fund transfer system in late 1970s made the
ways for the induction of ATMs, Direct Deposit of Payroll, Pay by Phone, Point of Sale,
Credit and Debit Cards, Automated Clearing House, Credit Deposit Machines, Auto-
banking or so on. Thus the process of development started gaining the momentum.
Futurologist forecast some more changes and re3forms in the banking operation since the
foreign banks have made the services more competitive by promoting work culture and
welcoming techniculture.

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.
The bank is a financial institution which accepts deposits and lends that money to its
customers. As banks deal with their customers' finances, banking is a high-involvement
service. Therefore banks need to win the trust of their customers. Based on the customer
profiles, banks segment their market into retail banking, corporate banking, personal
banking etc.

What is 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.”

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”.

Concept of bank marketing

 Identifying the most profitable markets now and in future;
 Assessing the present and future needs of customers;
 Setting business development goals and making plans to meet them
 Managing the various services and promoting them to achieve the plans
 Adapting to a changing environment in the market place.

Why Bank Marketing?

The existence of the bank has little value without the existence of the customer.
Aim is not only to create and win more and more customer but also to retain them
through effective customer service. Appropriate promise to a customer through a range of
services (products) and also to ensure effective delivery through satisfaction is important.

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)

Segmentation
 How the seller’s determines which buyer’s characteristics produce the best
partitioning of the particular market?
 The seller does not want to treat all customers alike nor does he want to treat them
all differently

Segmentation
 Banks deal with individuals, group of persons and corporates
  More or less homogenous groups in terms of their needs and expectations.
 Market segments, targeting one or more segments, developing products and
marketing programs tailor-made for these segments.

Criterion for Market Segmentation in India

Agricultural Sector Industrial Sector

Marginal Tiny
2 to 5 acres Co-operative

5 to 10 acres Small-sized

10 acres and above Large- sized

Criterion for Market Segmentation in India

1. Services Sector
2. Household Sector
3. Marginal
4. Low Income
5. Middle Income
6. High Income

Market Targeting in which each segment’s attractiveness is measured and a target

segment is chosen based on its attractiveness.
Positioning which is the act of establishing a viable competitive position of the firm and
its offer in the target segment chosen.

Marketing strategies
Designed after taking into account the strengths and weaknesses of the organization.
bank with clientele from various segments could think of “market penetration” by
offering the existing range of services to existing customers.
Bank which are not facing acute competition could think of “Market Development” by
offering the existing services to new customers.
design new product range for their customers of various segments
Types of Bank Marketing or Marketing Mix in Bank

Traditional external marketing

It consists of usual four ‘Ps’ of Product, Price, Place and Promotion of marketing mix

The important element in formulation of marketing strategy is development of proper

marketing mix, so as to satisfy the needs of the target group of customers. This would
involve decisions regarding product, place, price and promotion. Decisions about product
would answer questions about the design of the services offered to suit customer needs,
the desirable hours for offering such services, the attractive names of such services and so
on. Various alternative ways to provide the basic services might have to be worked out
depending on the needs of the various target groups.

Decisions about place should answer questions about location of the prospective
customers and, therefore, location for offering such services.

Decisions about price should answer questions about right price for services offered,
worked out by taking into consideration the cost of such services, competitor's charges
and other factors.

Decision about promotion answers questions about communication with the customer.
After getting information on needs and location of the prospective customer and after
designing schemes to suit their needs, it is necessary to take decisions on making
schemes known to the prospective customers through proper communication media and
through proper words, so as to bring out the salient features of the scheme. Actual
delivery of the schemes at the counters and at the manager's desk also plays a vital role in
determining the success of the scheme. Expectations of the customers in post-reforms
period have been changing very fast and customers have started shifting loyalty to better
banks. It is, therefore, all the more necessary to ensure that not only the felt needs but
also the latent needs of the customers are foreseen and satisfied.

Product:
The products offered by a bank may be in the core or augmented form. The core products
offered by a bank include a savings bank account or a housing loan.

The augmented product includes services like internet banking, ATMs, 24-hour customer
service etc. These augmented services help the banker differentiate his service offering
from those of his competitors.

The products offered are the services which includes various types of bank accounts,
different types of loans, investment services, Credit cards, Demat accounts, online
banking, mobile banking and many more.

Pricing:
Buyers look for satisfaction which differs from person to person.
Keeping in view the level of satisfaction of a particular segment, the banks have to frame
the pricing strategies. The interest charged and the interest paid should have a co-relation
between them.

In the pricing of banking services, determining the interest rates plays an important role,
as these rates in turn determine the revenues and profits of the bank.

The multiple sources of revenue for today's banks include annual charges for core
services and augmented services, penalties, commissions for cross selling and charges for
payment of utility bills, apart from the differential interest rate. The basic pricing strategy
in banks is based on risk-return pay-offs. However, the competitor and customer reaction
have to be taken into consideration while initiating a price change.

Place:
The place element of the marketing mix refers to making the services available and
accessible to customers. Improvements in the availability and accessibility of services
have changed the process of banking. Technological innovations have given rise to
modern channels like the Internet, which have helped banks increase business volumes
and attract new customers.

ATMs and credit and debit cards offer convenience to customers and have also improved
the efficiency of banking operations. These changes have helped banks tackle the
challenges of services marketing.

Place refers to the establishment and functioning of a network of branches and other
offices through which banking services are delivered. Objective is to get the right product
,at right places at right time at the least cost. Extensive branch network- access to large
section of people is an important element. Proximity may play a determinant role in
selecting the bank.

Banks are coming up with extension counters, specialized branches, mobile branches,
banks acquisition and amalgamation so as to have sufficient point of contacts with the
customer. With the advent of technology other point of contacts have come up.
Such as:
 ATM
 Telephone banking
 Online banking
 Mobile banking
 Video banking etc.

Promotion:
The promotion or communication mix in banking refers to varied strategies like personal
selling, advertising, discounts, and publicity etc. used by present day banks to promote
their service offerings.
Advertising
Publicity
Sales Promotion
Personal Selling
Push and Pull Strategies

Internal marketing

People
People also play an important role, even though their role has been eclipsed by
technology in the recent past. The 5th P involves the people of the bank i.e. the
employees. Employees should also be treated as internal customers, and sort of marketing
mix should be followed. Quality Human resource can be a point of differentiation

Interactive marketing
The quality of service provided during the buyer-employee interaction. Efforts for
previous strategies will turn futile if the interaction does not take place satisfactorily.
It involves: Process (6th P) and Physical evidence (7th P)

Process
Process refers to the systems used to assist the organization in delivering the service.
It aids to the promotion of customer satisfaction. Process determines the efficiency of
banking operations and thus the service quality in a bank.
It involves:
 Speeding delivery of services
 reducing the paper work
 standardization of procedures
 customization as per individual demand
 simplicity etc.

Physical evidence
Physical evidence includes the infrastructure and buildings not only in branch offices, but
also the ATMs or other places of interaction. Even the quality of cheque books and
mailers to customers forms physical evidence.

It includes signage, reports, punch lines, other tangibles, employee’s dress code etc.
The Company’s financial reports are issued to the customers to emphasis or credibility.
Signage: Each and every bank has its logo by which a person can identify the company. It
creates visualization and corporate identity for the banks.

Tangibles: banks give pens, writing pads to the customers.

Punch lines: Depicts the philosophy and attitude of the bank. Banks have influential
punch lines to attract the customers.
Depending on customer needs for finance, the market can also be segmented into trade
finance, consumer finance, etc. For the banker to derive maximum returns and enhance
his market position the marketing mix has to be effectively managed.

The banking industry has changed drastically over the past decade. The banking reforms
and the opening of the economy to foreign and private banks have improved the working
of the public sector banks. This has resulted in improved service to the customers of the
banking industry. Increased competition and technology have enhanced the quality of
service offered to the customers and also improved the returns for bankers.

Example of formulation of a market strategy

A very good example of formulation of a market strategy under the "collective" approach
is development of the product, "Kisan Credit Cards". The target group identified for this
were farmers with the purpose of dispensation of agricultural and rural credit to them.
Agricultural credit cards and cash credit facilities which were niche-marketed and were
exclusively preserved for the privileged class of farmers were, thus, extended to the small
and marginal farmers since 1999.

Keeping this need of target group in mind, the decision on product was made. This
product decision involved questions regarding types of needs to be covered, number of
withdrawals and repayments to be permitted, basis of determination of limits, validity
period of the cards, its re-scheduling, the name of the product, and so on. The place
decision answered questions about the location where the KCCs can be obtained. This
involved all branches engaged in agricultural lending. Price decision required answering
questions on margins, collateral, interest rates to be charged for different slabs, and so on.
The promotion decisions answered questions regarding mode of advertising the KCCs so
that it becomes widely known. These methods included radio and TV commercials and
personal contacts by the employees of the bank apart from news paper insertions.

An example of marketing strategy under "selective approach" is selecting a depositor

with good track record and offering him services for "car loan", "housing loan", etc., by
personal contacts or through tele-marketing or selecting a valuable borrower, keeping
track of his interests and offering him some surprise gifts to ensure manifold increase in
his satisfaction. This approach requires thinking ahead of time to find out what customers
might need in future and fulfil these needs.

Conclusion
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 bank 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”.

Insurance

The insurance business is based on customers’ trust and confidence as it deals with the
finances of the customer. The basis for a well-planned and well-executed marketing
strategy is effective market segmentation. Insurance is broadly segmented into
individuals, institutions, industry, and trade customers. Most industry players offer
specialized services to cater to the needs of these segments.

Some marketers target niche markets and offer customized services. The scope of
insurance has increased with more private and foreign players entering the market. They
have introduced many innovative services targeted at different segments. Price plays an
important role in marketing of insurance as it determines the premium to be paid by the
customer.

Pricing of insurance products is influenced by competitor strategy and the prevailing

interest rate, but is basically determined by the risk involved. The higher the risk involved
for the marketer, the higher the price. As insurance needs to be ‘pushed'in the market, the
importance of interaction between the service deliverer and the customer increases.

Therefore, agents, brokers and employees of the company become important channels of
distribution for the service. Though unconventional channels like bancassurance, the
Internet and tie-ups with automobile marketers have emerged, the role of agents cannot
be discounted. Insurance companies have simplified their processes of service design and
delivery to offer greater convenience to customers and reduce their perceived costs.

Physical evidence can be provided to insurance customers in the form of policy

certificate and premium payment receipts. The office building, the ambience, the service
personnel etc. of the insurance company and their logo and brand name in advertisements
also add to the physical evidence. Private and foreign players entered the Indian
insurance market in 1999 after the reforms were initiated.

Their entry ushered in new competition and improved the service quality offered to the
customer. With awareness increasing, customer expectations also increased. New
distribution channels and innovative promotional strategies also evolved because of the
increased competition. All these led to the development of the insurance industry and
expanded the market in India.