Jayesh shandha - 53 Vijaya more - 27

Marketing
Definition :The management process through which goods and services move from concept to the customer. It includes the coordination of four elements called the 4 P's of marketing:(1) identification, selection and development of a product, (2) determination of its price, (3) selection of a distribution channel to reach the customer's place, and (4) development and implementation of a promotional strategy. For example, new Apple products are developed to include improved applications and systems, are set at different prices depending on how much capability the customer desires, and are sold in places where other Apple products are sold. In order to promote the device, the company featured its debut at tech events and is highly advertised on the web and on television. Marketing is based on thinking about the business in terms of customer needs and their satisfaction. Marketing differs from selling because (in the words of Harvard Business School's retired professor of marketing Theodore C. Levitt) "Selling concerns itself with the tricks and techniques of getting people to exchange their cash for your product. It is not concerned with the values that the exchange is all about. And it does not, as marketing invariable does, view the entire business process as consisting of a tightly integrated effort to discover, create, arouse and satisfy customer needs." In other words, marketing has less to do with getting customers to pay for your product as it does developing a demand for that product and fulfilling the customer's needs.

Financial services
Definition :Services and products provided to consumers and businesses by financial institutions such as banks, insurance companies, brokerage firms, consumer finance companies, and investment companies all of which comprise the financial services industry

Meaning :Financial services are the economic services provided by the finance industry, which encompasses a broad range of organizations that manage money, including credit unions, banks,creditcard companies,insurance companies, accou ntancy companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises. As of 2004, the financial services industry represented 20% of the market capitalization of the S&P 500 in the United States. The U.S. finance industry comprised only 10% of total non-farm business profits in 1947, but it grew to 50% by 2010.Over the same period, finance industry income as a proportion of GDP rose from 2.5% to 7.5%, and the finance industry's proportion of all corporate income rose from 10% to 20%. companies usually have two distinct approaches to this new type of business. One approach would be a bank which simply buys an insurance company or an investment bank, keeps the original brands of the acquired firm, and adds the acquisition to its holding company simply to diversify its earnings. Outside the U.S. (e.g., in Japan), non-financial services companies are permitted

within the holding company. In this scenario, each company still looks independent, and has its own customers, etc. In the other style, a bank would simply create its own brokerage division or insurance division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company.

Financial Services in India

Indian financial services industry has been through the toughest of the times and yet stands strong and robust among the world economies. Having a deep impact of the far-reaching changes in the Indian economy since liberalization, the new face of this industry is evolving in a strong, transparent and resilient system. Over the last few years, financial markets have witnessed a significant broadening and deepening of service baskets with the introduction of several new instruments and products in banking, insurance and capital markets space. The sector was opened up to new private players including foreign companies who embraced international best practices and modern technology to offer a more sophisticated range of financial services to corporate, retail and institutional customers. Financial sector regulators too have been visionaries to ensure that new regulations and guidelines are in tandem with global norms. These developments have given a robust boost to the development and modernisation of the financial services sector in India. Insurance Sector

Indian life insurance sector collected new business premiums worth Rs 11,742.7 crore (US$ 1.92 billion) for April-May 2013, according to data from the Insurance Regulatory and Development Authority (IRDA). Life insurers collected Rs 1, 07, 010.7 crore (US$ 17.47 billion) worth of new premiums for the financial year ended March 31, 2013. Meanwhile, the general insurance industry grew by 19.6 per cent in April-May period of FY14, wherein the non-life insurers collected premium worth Rs 13,552.46 crore (US$ 2.21 billion).

Banking Services

According to the Reserve Bank of India (RBI)s Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks, March 2013, Nationalised Banks accounted for 52.4 per cent of the aggregate deposits, while the State Bank of India (SBI) and its Associates accounted for 22 per cent. The share of New Private Sector Banks, Old Private Sector Banks, Foreign Banks, and Regional Rural Banks in aggregate deposits was 13.6 per cent, 5.1 per cent, 4 per cent and 2.9 per cent, respectively. Nationalised Banks accounted for the highest share of 51 per cent in gross bank credit followed by State Bank of India and its Associates (22.7 per cent) and New Private Sector Banks (14 per cent). Foreign Banks, Old Private Sector Banks and Regional Rural Banks had shares of around 4.9 per cent, 5 per cent and 2.5 per cent, respectively. Banks credit (loan) growth increased to 18 per cent for the fortnight ended September 6, 2013, while deposits grew by 13.37 per cent showed the data by RBI. India's foreign exchange reserves increased to US$ 277.73 billion as of October 4, 2013.

Mutual Funds Industry in India Indias asset management companies (AMCs) have witnessed growth of 0.7 per cent in August 2013 wherein their average assets under management (AUM) stood at Rs 7.66 lakh crore (US$ 125.10 billion).

Private Equity, Mergers & Acquisitions in India

Private equity (PE) and venture capital (VC) firms remained bullish about Indias consumer goods and services sector. PE and VC investments increased by more than 46 per cent in the first half of FY14, with consumer companies in retail, e-commerce, consumer packaged goods and quick service restaurants raising US$ 609.39 million through 51 deals. Meanwhile, Indian merger and acquisition (M&A) space witnessed substantial levels of deal activity in the first nine months of 2013. There happened 377 deals amounting to US$ 23.9 billion, according to a survey by tax advisory firm Grant Thornton.

Foreign Institutional Investors (FIIs) in India

Investments in Indian markets (equity, debt and derivatives) through participatory notes (P-Notes) increased to US$ 23.74 billion by the end of July 2013, according to the data released by Securities and Exchange Board of India (SEBI). P-Notes allow high net-worth individuals (HNI), hedge funds and other foreign institutions to invest in Indian markets through registered FIIs. The FIIs investments through P-Notes registered a growth of 11.45 per cent in July 2013 as compared to 10.93 per cent in June 2013. Overseas investors infused more than US$ 2 billion in the Indian stock market in the month of September 2013. Since the beginning of 2013, they have pumped a net US$ 13.7 billion in equities. Moreover, given the higher yields offered by Government and corporate debt, the FIIs have been aggressively buying bonds since the beginning of 2013. The debt market attracted a net inflow of about Rs 25,000 crore (US$ 4.08 billion) in January-May 2013.

Financial Services in India: Recent Developments

Bangalore-based online retailer Flipkart has raised US$ 200 million from its existing investors including South African technology company Naspers Group and private equity (PE) firms Accel Partners and Tiger Global. The investors have already placed investments to the tune of US$ 181 million in the Indian e-commerce company and this fifth round of funding has marked the single-largest round of investment infusion. The funds would be used to build technology and will help the company strengthen its supply chain and human resource base. Private lender HDFC Bank is planning to launch 500 mini branches, to be handled by one to three people, across India by the end of FY14. The bank has added about 219 mini branches pan-India since 2012. The basic motive behind such a initiative by the bank is to take the formal banking experience to people in unbanked and under-banked areas. A mini branch, manned by one, two or three persons, offers the entire range of products and services including savings and current accounts, fixed deposits, recurring deposits, credit card, instant debit card and also ATM facility. Products such as two wheeler loan, tractor loan, commercial vehicle loan, agricultural and commodities loan among others are also offered.

Financial Services: Government Initiatives In order to attract more of foreign capital to Indian markets, SEBI has eased norms for overseas investors in the debt category. As per the new rulings, FIIs will be allowed to buy Government securities (Gilts) directly from the market, rather than from the monthly auction conducted by the regulator to allocate these papers.The move is expected to facilitate more dollar inflows into the country besides making the cost of acquisition of gilts cheaper for foreign investors. In a similar initiative taken earlier in 2013, SEBI had allowed FIIs to buy corporate debt (which were also allocated through auction previously). Road Ahead A report prepared by KPMG prepared in association with the Confederation of Indian Industry (CII) states that the Indian banking sector is expected to become fifth largest in the world by 2020. The report highlights that India is one of the top 10 economies of the world and with relatively lower domestic credit to gross domestic product (GDP) percentage, their lies a huge scope of growth for the banking sector. Bank credit is expected to grow at a compounded annual growth rate (CAGR) of 17 per cent in the medium term, eventually leading to higher credit penetration in the economy. Meanwhile, IRDA estimates that the insurance business in India would touch Rs 4 lakh crore (US$ 65.32 billion) by the end of FY14. The regulator is considering bringing out norms for subbrokers of insurance products as well. Exchange Rate Used: INR 1 = US$ 0.01633 as on October 18, 2013

MARKETING OF FINANCIAL SERVICES THEORETICAL

INTRODUCTION :The forces of deregulation, advancing technology and general trend towards globalisation have vastly increased the competitive pressures within the financial services market that has in turn affected both the structure and operation of financial service providing firms like banks. Banks are providers of financial services, financial iritermediaries and key participants in a nation's payment system. As such banks play a major role in the econolny and in the financial well being of a nation. In India since 1992, deregulation, technology, and aggressive competition fostered more changes in the banking industry than it has experienced in its entire history. Precisely because of competition, providing financial services in an able manner requires an excellent marketing orientation. Banks now operate in a situation of keen competition in their financial service activities, whether it i:j canvassing of deposits, extending credit line or in selling ancillary services. With the liberalization of the banking sector and entry of more players, banks need to beco~ne market oriented with new and innovative schemes, at competitive prices available at the place the customer needs them and delivered with efficiency and quality of' service.

Marketing :lndia Banks were traditionally in the 'business of banking', namely borrowing from one market and lending to another. However, since the commencement of banking sector reforms in the early 1990s, their orientation has become the 'buslnes:; of financial services', with a much wider focus in relation to consumerlmarker needs and consequent marketing strategies. Marketing as a narrow management function, appears to be in decline. Marketing as a rllanagement philosophy and orientation, espoused and practiced throughout the corporation, is however seen increasingly as critical to the success of any organization This is reflected in a heightened emphasis on being "close to the customer", stressing customer satisfaction and customer relationship building, understanding customer value and the enhanced product offering, and the brand equity represented in a loyal customer base. Increasingly these are the domains and responsibilities of employees throughout the organization, whether it is customer service, sales, manufacturing, R&D or top management, and not just of "the marketing staff'.Bank Marketing has been defined as 'that part of management activity which seems to direct the flow of banking services profitably to selected customers.(Reekie, 1972)'Marketing of Bank's services implies the delivery (maintaining existing demand) and creation (creating of new demand) of want satisfying (ie.,right) services at right price, at right time. at right place, and to a right customer.

Bank Marketing Strategies and Mixes :The overall marketing programme of a bank may involve a large number of marketing strategies mixes. The marketing strategy includes (a) a very clear defnition of target customers, (b) the development of a marketing mix to satisfy the custonlers at a profit to the bank.. (c) plianning for each of the 'source' markets and each of the 'use' markets, and (d) organization and administration.(Jain, Alok Kumar, 1997, ) " The Bank Marketing Management System essentially should start with situation appraisal to evaluate the opportunities and threats for evolving a marketing strategy for the organisation.

Situation Appraisal :The situation appraisal must identify strengths and weaknesses and do so in terms of the results establishe'd by the situation appraisal. Some major areas to be examined are:l) Management, 2) Organisation, 3) Product lines, 4) Geographic presence, 5) Pricing Strategy, 6) Human resources and System support. Each area must be examined for efficiency, integration with the organization, and external image created. Data should first be developed on such major categories of assets and liabilities as loans, deposits, total assets and equity. Overall performance, specific effectiveness by geographical sector, and impact on each service or product offered by the by the ban must be calculated and considered. (Chorafas, Din~tris N., 1982)" Situation appraisal can lead to the forecasting of the marketing environment.

Forecasting the Marketing Environnient :Bank management must make many assumptions about the future and project the organization into that expected environment. It is .at this point that forecasting becomes important. The bank's economist, if the bank has one, will play an important role here. Assumptions must be made about many economic and financial factors that will impact the bank in the coming months. Answers must be forthcoming to such questions as the future trends of interest rates, bond yields, and the demand for credit. Will the economy be expanding or contracting? What industries will show most progress? What will happen to wage rates taxes and the social and political environments? After an evaluation of the external forces, bank management must turn to the internal qualities of the bank. Answers are required to such questions as do we have sufficient personnel in certain departments to handle adequately the expected level of activity'? Should we plan for additional branches or should we ernphasise ATMs? Is this the year to add a leasing department or introduce a credit card programme? Overall, the trends in savings of the economy are of utmost importance in forecasting the environment.

Trends in Savings in Indian Economy :Gross Domestic Savings as percentage of GDP constituted 23.4 percent in 200-01 as against 20.9 percent in 1999-00. During the year 2000-01, the household savings constituted 20.51 per cent of GDP and the same included Financial Assets and Physical Assets. The financial assets are further classified into currency, deposits,claims on govt., investment in shares and debentures, contractual savings (LIC,PF,Pension Funds etc.). An analysis of household savings as a percentage of total assets.The financial assets are further classified into currency, deposits, claims on govt., investment in shares and debentures, contractual savings (LIC,PF,Pension Funds etc.). An analysis of household savings as a percentage of total assets is given in Table

Household Savings in Financial Assets (As % of total financial assets) Financial assets
Currency Deposits Claims on Government Investment in Shares & Debentures . Contractual Savings

98-99 10.5 38.8 13.6 3.4 33.7

99-00 8.7 37.5 12.2 7.1 34.5

00-01 6.9 40.9 15.2 2.4 34.6

01-02 9.7 38.6 17.1 2.4 32.2

The bank deposits constitute 38.6 per cent in the household savings in the year 2001-02. The same was 45.8 percent in 198081 and since then has been gradually declining showing a process of disintermediation. Financial disintermediation has thrown open a vast challenge to banks and will have to devise various strategies to retain their position. Marketing therefore assumes much significance in banking and necessitates a relook at the entire bank marketing programme starting from the planning stage.

Marketing Planning in Banks

A market plan is a written document containing the guidelines for the business centre's marketing programmes and allocations over the planning period.

The objective of a marketing plan can be stated concisely,

as to: i) Define the current business situations (and how we got there) ii) Define problems and opportunities facing the business iii) Establish objectives iv) Define the strategies and programs necessary to achieve the objectives v) Pinpoint responsibility for business center objectives vi) Establish tlme tables for achieving objective vii) Encourage careful and disciplined thinking viii) Establish a customer/competitor Donald R., Winer, Russell S., 1988) orientation.(Lehmann,

In India too in the beginning of 1990s most banks in India had established Marketing Departments and the range of marketing activities in these banks have also increased considerably Every year Bank managers prepare their performance budgets for deposits, advances, profits etc. These budgets are nothing but marketing plans envisaging the stepping up cf deposits by a certain percentage. Similarly the marketing plan for credit includes the different categories and sectors of advances to be stepped up in theensuing year.(Joshi, Navin Chandra, 1991) One imperative in rnarket planning is to make sure that profits are properly safeguarded. Emphasis must be placed on market planning as a system. It is the methodology that is important, not a specific marketing plan. Plans can change; methodology, if it is correct, evolves slowly.(Chorafas, Dimtris N.,1982)

The entire planning process in banks should also consider the various elements of the Marketing Mix. Marketing Mix One of the most basic concepts in marketing is the marketing mix, defined as the elements an organization icontrols that can be used to satisfy or communicate with customers. The traditional marketing nlix is composed of the four P's: product, price, place (distribution), and promotion. (E.Jerome McCarthy and William D.Perreault,Jr., 1993) ' Money is the classical undifferentiated product and the only way that those dealing in the commodity can secure any competitive advantage is through the range and quality of service. One of the key requirements of branch locations is that it provides convenient access to customers. The branch must be in a customer catchment area in order to sustain business and profitability levels. In addition, the location must provide premises at a reasonable cost and size to allow the business function. Product A vital component of marketing mix, the product or service is the basis on which customer satisfaction is created. A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or a need'.(Kotler, P and Armstrong G (1997)

Bank's Products
Price :Price competition involves using low prices as a competitive tool to attract customers. It can result in price war as competitors continually try to beat each other's prices. While price compe1.ition provides an effective means of acquiring new customers, it generally does not support customer loyalty programs: price-cutting encourages customers to become pricesensitive and to switch for better prices. Non-price competition involves emphasizing unique or distinct features of the product that set the financial institution apart from its competitors. It might involve focusing on customer service or on technology in terms of innovative form of delivery. Non-price competition should provide some value to the customer and works well when customers are less price-sensitive. Traditionally price was not used as a key competitive weapon in the banking sector in India due to the administered rate system. But liberalization of financial sector has changed the scenario and customers too have become more price sensitive. Since financial institutions have begun to emphasize price and use it as a competitive tool, consumers have become less loyal and have increased their switching behaviour in searching for the best deal. In order to successfully implement non-price competition banks need to be able to identify unique features or benefits of the product and emphasize a brand image. The lack of branding and product differentiation in financial services makes non-price competition very difficult to employ. Products are very similar and easily copied.

Place :Place, channel of distribution, or marketing channel, describes the groups of individuals and companies which are involved in directing the flow and sale of products and services from the provider to the eventual customer. Channels can be broadly defined as 'direct' or 'indirect. Direct channels involve the movement sale of products directly between the provider and the customer as in the traditional branch network, wherea:; in the case of indirect channels products flow via intermediaries or middlemen. The traditional rnethod of distribution for banks ha,s been via the branch network. Yet new channels are emerging not merely as suitable alternatives, creating a threat to the future role of branch networks and undermining the competitive position of banks in using the branch network as a competitive advantage Whichever channel is used, the distribution channel is not a short term tactical issue as the cost of acquiring customers is inextricably linked to long term customer retention policies. In the personal sector, branch networks traditionally provided a very effective means of processing numerous transactions resulting from large cash based and cheque based society

Promotion :Promotional efforts must be stimulating and motivating enough to generate interest in and promote a positive attitude towards the bank and its products so that they will be considered favourably in comparison with competitors. Promotion achieves this by working in harmony with other elements of the marketing mix, enabling the following lo be achieved. Customer acquisition - Promotion has a key role in building awareness of the company and its products to new customers and, in the case of switching customers, outlining the key benefits offered in comparison to competitors. Customer Retention - Promotion has an important role to play in building and maintaining customer loyalty and cross selling additional products to customers as the need arises or as they enter the appropriate life stage. Staff Morale - Promotion and Communication can provide support for staff and serve to boost the image of the company and its products and services. Corporate Stability - Promotion serves as a statement of confidence and stability to the wider audience. It sends out the message that if the company can afford to advertise it is credible and immutable.

Relationship Marketing and Information Technology

Information technology enhances the practical value of relationship marketing through the efficient performance of key tasks:Tracking the buying patterns and overall relationships of existing customers Customising services, promotions, and pricing to customer's specific requirement!; Coordinating or integrating the delivery multiple services to the same customer Providing two-way communication customer, customer to conlpanli channels: company to

Minimising the probability of service errors and breakdowns Augmenting core service offerings with valued extras Personalising services encounters as appropriate.(Berry,1995) Technology may be used to identify and build a database of current and potential customers, deliver differentiated messages based on consumers characteristics and preferences, and track each relationship to monitor the cost of acquiring the consumer and the lifetime value of the resulting purchases. (Compulsky and Wolf, 1990) " Technology may be used to minimize or even eliminate contact between customers and employees and also to simplify service delivery, improve productivity,

Customer Satisfaction
If the ultimate goal is to maximize customer satisfaction, it is essential to understand what it 1s that icustomers want from a bank. This new focus on understanding and meeting the needs of each customer has come ti3 be known as one- to-one marketing. Research ha:< shown that customer expectations for quality service can be categorized into iive areas: responsiveness, assurance, empathy, reliability, and tangibles. (Leonard L Berry, David R. Bennet, and Carter W Brown, 1989) Customer satisfaction is not an end itself.

Benefits of Customer Satisfaction and Sewice Quality

Insulate Customers Encourages repeat From competition patronage and loyalty

Can create sustainable Enhances/Prornotes Advantage

Customer Satisfaction (and Service Quality)

Positive word of mouth

Lowers cost of Reduces future Failure costs Attracting new customers

Customer Loyalty
The attachment an individual has towards a company andlor its products /services is shaped by two dimensions: degree of preference (the extent of the customer's conviction about its product or service) and degree of perceived product differentiation (to wl-iat extent the individual distinguishes the company and its products /services from alternatives)

Attachment and behaviour that leads to loyalty segments BEHAVIOUR Loyalty Segments

High Attachment Low False Attachment

True Loyalty False Loyalty

Latent Loyalty No Loyalty

The more relationships a bank has with a customer, the more loyal the customer will be. The more will be the inertia to move to another bank. Customer loyalty essentially rests on building and developing relationship with the customers.

Relationship Development :Commitment and trust are 'keys' in developing relationship because they encourage marketers to (i) work at preserving relationship investments by cooperating with exchange partners (customers) (ii) resist attractive short term alternatives in favour of the expected long term benefits of staying with existing partners (customers), and (iii) view potentially high risk actions as being prudent because of the belief that their partners will not act opportunistically.

Benefits of Relationship Development :There are a number of benefits associated with the retention of existing customers, and the developmerit of long-term satisfying relationships It takes time to mak~: money from customers- many customers are not immediately profitable. Sales, marketing and set-up costs are amortised over a longer customer lifetime. Repeat customer often costs less to service. It allows cross-selling opportunities, leading to increased customer expenditure over time. It stops competitors knowing then It allows for inter -- generational relationships. Satisfied customers provide referrals and may be willing to pay a price prermium

Top Challenges Facing Financial Services in 2013

At this time of year, when the perennial lists of top issues for the new year appear, it will be useful to remember that the financial services industry is challenged on many fronts, all of them to some degree intertwined, and all of them critical to restoring the health and sustainable growth of the industry. Financial institutions of all shapes and sizes are in a period of strategic transformation, and must necessarily attend to a wide range of issues simultaneously -- some more visible and fast-moving, others more fundamental and long-term -- in their recovery from the crisis of the past five years. Rather than isolate a small group of "top" issues, therefore, as if they were the only or most important challenges financial institutions should address next year, another perspective suggests that there are several dimensions in which one can present and discuss these interdependent challenges. An advantage of this perspective is that it reveals the relative degrees of urgency, breadth and impact among the numerous issues facing the industry. All need attention, but to different tenors and timeframes. The first and most visible dimension (though not necessarily the most important) includes the current or hot issues in the industry media and conferences. They typically revolve around the latest technology or political/regulatory trend, and while often urgent, are not always strategic. They tend to be the relatively fast-moving issues that change from year to year. The list for 2013 will include: -- incorporating mobile banking as a regular delivery channel

-- developing a strategy around social media -- coming to permanent resolution with the regulatory issues of 2012, such as Dodd-Frank, Basel and the CFPB -- dealing with the economic aftermath of the fiscal cliff, whichever way it turns out A second dimension of issues is more complex and more regular, involving those recurring financial and competitive industry issues that financial institutions deal with every year. Now, however, they are in a new economic context as the industry emerges from the financial crisis: -- how to come to a new level of growth and sustainable profitability in an environment of low interest rates -- rebuilding asset quality and strengthening their capital adequacy -- where to develop new and reliable sources of revenue -- enriching and increasing the business value of customer relationships, at a time when customer behaviors expectations are more demanding -- restoring public confidence in the industry -- how to deal with aggressive and innovative non-bank competitors -- embedding a risk management culture into the fabric and habit of daily operations

and

A third dimension concerns the ever more critical need for financial institutions to transition their technology architectures to next-generation capabilities, putting in place the enablers for all the issues listed above. Banks, thrifts and credit unions now need to approach technology no longer as an expense to be managed down, but more as an investment for future growth. By focusing less on specific systems and applications, and more on enterprise-wide capabilities, they need to address such challenges such as: -- implementing fully digital banking -- filling manual gaps and delivering straight-through, efficient business processes -- enterprise-level integration and management of data -interactive customization of products and services to meet customer demands -- transparency in costs, compliance and prices While of course there are always going to be emerging technologies that capture our fancy and media attention (right now its probably mobile banking), these are really only the superficial toys that reflect the deeper and more significant trends in the financial services industrys reliance on technology. The emerging technologies of importance are therefore those that will enable the flexibility, adaptability, integration, standardization and efficiency that the transformation described above will demand. in effect, therefore, there will be only one overriding challenge for financial institutions in 2013 how to stay disciplined and remain attentive to all of the above issues simultaneously.

Customers for financial services are changing in terms of their wants, needs, desires, expectations and problems and financial service providers have to understand who their customers are, what they prefer, why they buy, who makes the decision and how the consumer uses the product and service. In conformity with these changes, there should be changes in the Bank's services, training, attitudes and images, marketing strategies and patterns of organization and control. New technology driven products blended with the traditional ones and personalized service will enable banks to extend a variety of financial services under one roof