INTRODUCTION

Banking Industry is one of the most important service industries which touches the lives
of inillions of people. Its service is unique both in social and economic points of view of
a nation. Earlier the attitude of banking service was that it was not professional to sell
one's services and was unnecessary in the sense that traditional relationships andquality
of products were sufficient to carry forward the tasks. Before the mid 1950's the banks
had no understanding or regard for marketing.The bank building was created in the image
of a Greek Temple to impress the public about the importance of a bank. The interior was
austere and the teller rarely smiled. Bankers maintained austere dignityand they hardly
maintained friendliness.It was in the late 1950's that marketing in banking industry
emerged in the west. It emergence was in the form of advertising andpromotion concept.
At that time, personal setting could not get asignificant place. Gradually there was a
change in the attitude ofbankers, probably in time with the attitudinal change in
customers. The idea of customers' satisfaction began in the late 1950's, flourished in
1960's and became an integral part of the banking services in the1970's. But the same
trend could not be applicable, especially indeveloping countries and to be more specific
in India because of socioeconomic and political reasons.
Marketing came into Indian banks in the late 1950's not in theform of marketing concept
but in the forms of advertising andpromotion concept. Soon it was realised that marketing
transcend sadvertising and friendliness'. Till 1950 it was recognised that personal selling
was not necessary. The bankers went out of their way to avoidbeing accused of selling.
The bankers even eliminated the word'selling' and they called the function of customer
contact 'businessdev elopment function'.
The bankers' attitudes and comprehensions about marketing changed in the 1960's. They
began to realise that marketing was a lot more than smiling and friendly tellers. The idea
of customer convenience began in the late fifties and it flourished in the1960's. Bankers
were beginning to understand the concept of marketsegmentation in the late 1960's.
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The bank marketing profession changed dramatically in the 1970's. Marketing positions
in banks were created and marketing was accepted as an organisational imperative.To
understand how banking services can be marketed better, one must examine banking as a
service industry, in the content of a swiftly changing environment, redefine marketing to
suit a banker's needs,analyse how the marketing of financial services differs from that
ofother products, identify the tasks involved there in and set forth a seriesof steps for
effective bank marketing.
After nationalisation of 14 major commercial banks in 1969,banking system in India is no
longer the exclusive preserve of a few Industrial Houses or business families and
hasbecome a very important instrument of socio-economic changes. Bankers, after
nationalisation,woke up from their splendid isolation and found themselves placed in a
highly competitive and rapidly changing environment with competitionbecoming fierce
day by day. The traditional description hardly sufficestoday's needs. Due to this, banks
approaches towards customers andmarket underwent changes and focus was gradually
shifted to marketingtheir products.

ORIGIN OF THE WORD BANK

According to some economists the word Bank has been derived from the German word
BANC which means a Joint Stock Firm while others say that it has been derived from the
Italian world BANCO which means a heap or mound.

There is still another group of people who believe that word bank has been derived from
the Greek work BANQUE which means a bench. In the olden days, Jews entered into
money transactions sitting on benches in a marked place. When a banker was not in a
position to meat his obligations, the on which he was carrying on the money business was
broken into pieces and the was taken as bankrupt. Thus both the words Bank or bankrupt
are said to have origin from the word Banque.

DEFINITION OF BANK

According to Oxford English Dictionary, Bank is, An establishment for custody of

money received from or on behalf of, its customers. Its essential duty is the payment of
the orders given on it by the customers, its profit mainly from the investment of money
left unused by them.
Banking Regulation Act, 1949 (Sec. 5(c)), has defined the banking company as, Banking
Company means any company which transacts business of banking in India. According
to Section 5B, banking means the accepting of deposit of money from the public for the
purpose of leading or investment, which are repayable on demand or otherwise and are
withdrawable by cheque, draft, order or otherwise.

Different economists, banking professionals and authorities explained their viewpoint

regarding bank or commercial bank. It has been rightly said by A.K. Basu that a general
definition of a bank or banking is by no means easy, as the concepts of banking differ
from age to age, and country to country.

FINANCE AND BANKING IN INDIA

India is a vast country, Before 1947, undivided India was equal to Europe excluding
Russia in its area. It is situated in south of Asia. In spite of a part of Asia, it is separated
from it. It is separated by Himalayas in North India. India has vast oceans in South, East
and West. Due to its vastness it is also called sub continent. That vast country has given
different names in different times. In Vedic period, it was called Arya-V-arat. In Bir
period and ancient period, it as called Bharatvarash. Perhaps due to fame of king Bharat,
it was called Bharatvarsh. Greek called it Indus on the name of river Sindh. Iranians
called it Hindu. Chinese travelers called it Tienchu and Yintu. Ipsing called Arya Desh
and Brahmrashtra. Bible has called it Hoddu. In medieval period, it was called
Hindustan and Hind. European called it India. After Independence, it is return as Bharat
Ganrajya or Indian Republic in Indian Constitution.

EVOLUTION OF THE MARKETING CONCEPT

The Role of marketing in the banking industry continues to change. For many years the
primary focus of bank marketing was public relations. Then the focus shifted to
advertising and sales promotion. That was followed by focus on the development of a
sales culture.
Although all the elements of the marketing concept customer satisfaction, profit
integrated framework, and social responsibility will remain important, customer
satisfaction must receive the greatest emphasis in the years ahead.
The chief concerns of most bank executives still focus on legal and regulatory issues,
according to most surveys. Community banks are particularly concerned with eliminating
barriers that give unfair advantages to financial services competitors, such as credit
unions. However, another concern pertains to technology: keeping nonblank competitors
out of the payment system.
Bankers Identify Near-Team and Long Term Concerns
1991
Maintaining profitability

Service quality

Credit Portfolio Management

Maintaining profitability

Service Quality

Market / customer focus

Regional Economy

Operations/systems/technology

Cost Management / Expense reduction

Credit portfolio management

Declining Earnings/ more failures

Productivity improvement

Market / customer focus

Investment to stay competitive

Capital adequacy

Stock market value

Stock market value

Asset/liability management

Industry Overcapacity

Electronic Banking

2015

When this gateway system was first proposed, access to the Internet was very new and
few banks had the resources and knowledge to set up their own direct-access lines for
customers. Customers have shown a growing interest in online banking services, and
banks have responded by quickly putting in place proprietary sites on the World Wide
Web and offering PC banking.

Within the next five years, 93 percent of community bank executives surveyed say they
plan to offer telephone banking, and 79 percent plan to offer PC banking.

When asked which technology holds the most potential for the future, bank executives
identified call centers first. As customers continue the transition the transition into a hightech world in which they want information and answers more quickly and accurately than
ever before, call centers offer the ideal bridge. With 24-hour access to either automated
information or live operators, customers do everything from check their accounts to apply
for a loan. Bank executives also identified PC banking as having the most promise for the
future, followed by Interest access and broad function kiosks.
The first major step in the direction of marketing was initiated by the State Bank of
India in 1972, when it recognised itself on the basis ofmajor market segments, dividing
the customers on the basis of activityand carved out four rnajor market segments. They
are commercial and institutional segment, small industries and small business segment,
agriculture segment and personal and services banking segment. The new organisational
framework embodied the principle that the existence of an organisation primarily depends
up on the satisfaction of customer needs. The hallmark of the reorganised setup was
customer orientation.

It aimed at
- having a total v iew of customers needs.
- meeting the identified needs in the best possible manner.
- identification of potential customers, and
- conducting activities at the branches on the basis of carvedout
market segments instead ofjob wise.
By 1974. the environment became more demanding with the emphasis on mass banking
and canalisation of credit into priority areas and lending at differentlal rates of interest to
the weaker sections of the society. This placed strains on the profitability of banks which
led to keen competition, which is detrimental to the banking system in the
ultimate analysis. This time even though banks were talking of marketing, they were
essentially selling. A notable change during the period was related to two major
components, that is product and promotion. The other two 'Ps' that is price and place were
highly controlled by central banking authority. Banking began to offer profit security
regular incorne, retirement benefits, money for marriage of the daughter, education tor
growing children etc.
It was in the early 1980's that banks realised that marketing wasmore than that. They
started thinking in terms of product development, market penetration and market
development. Moreover banks alsoaccelerated the process of equipping their staff with
marketing capabilities in terms of both skill and attitude through internal and external
training. Through the continuous modification and rectification in banking and
implementation of financial sector reforms as per the recommendation of the committee
on Financial system the functioning of banks in India has undergone dramatic changes.
Starting from very conservative traditional banking where the service of banks was
confined to a few in the society, now due to liberalisation and privatisation, a 'U' turn has
taken place in Indian banking. The hallmark of the changed concept aimed at having a
full view ofcustomers' needs. 'That is, fulfilling the identified needs in the bestpossible
manner by required service. These splendid changes have three phases.

MARKETING APPROACH
Banking industry is essentially a service industry which provides various types of
banking and allied services to its clients. Bank customers are such persons and
organizations that have surplus or shortage of funds and those who need various types of
financial and related services provided by the banking sector. Naturally, the need of each
individual group of customers is distinct from the needs of other groups. It is, therefore,
necessary to identify different homogenous groups and even sub-groups of customers,
and then with utmost precision determine their needs, design schemes to suit their exact
needs, and deliver them most efficiently.
It should be 'bottom to top' approach with customers at the grass-roots level as the
focal point for working out various products / schemes to suit the needs of different
homogenous groups of customers. Thus, bank marketing approach, in general, is a group
or "Collective" approach.
Customers Relationship Management, on the other hand, is an individualistic
approach which concentrates on certain select customers from the homogeneous groups,
and develops sustainable relationships with them for adding value to the bank. This may
be termed as a "Selective" approach.
Thus, bank marketing concept, whether "collective" approach or "selective"
approach, is a fundamental recognition of the fact that banks need customer oriented
approach. In other words, bank marketing is the design and delivery of customer needed
services worked out by keeping in view the corporate objectives of the bank and
environmental constraints.
http://articlesng.com/marketing-concept-banking-service/

The following chart gives an overview of the Two Pronged Approach to Bank
Marketing

BANK MARKETING

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.

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.
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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.

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
customers

financial

i.e.

identification

needs

and

wants

of
and

forecasting and researching future financial market

needs and competitors activities.

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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 customer-consciousness Personnel

of the bank through training.

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.

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PRINCIPAL ASPECTS OF BANK MARKETING

1) Customer Oriented Services - Services offered by the banks are to be worked out in
such

manner

that

they

fulfil

the

needs

of

the

customers.

Traditionally, bankers have been accustomed to think in terms of what banks can offer
and not what customers want. However, bank marketing concept requires them to change
this orientation, and start working out schemes and services by keeping changing
customer needs as the focus of their new and novel products.
2) Design and Delivery of Such Services - The word design implies that good marketing
services need to be properly designed and painstakingly crafted so as to suit a particular
well-defined group of clients. They do not just emerge effortlessly.. The quality of
delivery is to be ensured not only through focused advertisement, but also through proper
customer services offered at the bank's retail outlets. Customer satisfaction is a dynamic
process and it is necessary to keep pace with rising expectations of the customers.
Further, the development of IT and spread of Internet are opening up newer mechanisms
of customer contact and services.
3) Corporate Objectives Of Bank - The corporate objectives of the bank are to be
worked out within the broad framework of the national policy. The corporate objectives
are of two types, Short Term and Long Term.
The Short Term Objectives could be of the type: a. Increasing profitability of the bank next year,
b. Widening customer base by offering new services,
c.Increasing growth rate of credit next year, etc.
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The Long Term Objectives could be: a. To rise to number one position in five years,
b. To become the universal bank over the period of next 3 years, etc.
Once the corporate objectives are clearly spelt out, various schemes can be designed
to fulfill the needs of the customers within the framework of the chosen corporate
objectives. Further, the resources made available for systematic marketing efforts are also
constrained by policies, vision and attitudes of the management.
4) Environmental And Other Constraints - Environmental and other constraints play
an important role in bank marketing decisions. Generally, the environmental constraints
fall into four categories: Economic, Cultural, Legal and Political.
A thorough understanding of local and national economy is essential for taking
effective decisions about what product to be offered, where it is to be offered, at what
price it is to be offered, and how it is to be offered?
Banking schemes which are suitable for a developed economy might not be
suitable for a developing economy. It is essential to have intimate knowledge of income
pattern of potential customers, population growth, nature of industrial and trading
activities, extent of agricultural development, employment levels, wage structures, and
other relevant factors, in order to make decisions about services to be offered.
The cultural environment in which the bank operates also has a bearing on bank
marketing decisions. This includes attitude of local people about saving, borrowing and
spending, and also their traditions and values. The schemes suited for urban sector would
be different from those suited for rural sector.
Legal and political environment mainly constrains the decisions about the price of
product to be offered and the place for offering the product. For example, price of
deposits and various types of advances is constrained by the interest rate policies of the
regulator
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Thus, the knowledge of environmental constraints is an essential factor in

the designing and delivery of various types of customer-oriented schemes and
services

MARKETING MIX FOR BANKING SERVICES

Understanding the customer is crucial and it is around this the entire gamut of marketing
activities revolve.Along with segmentation, judicious combination of 'Ps' is essential to
satisfy customers. But when it comes to service marketing the context is different. In
service marketing the human factor has an overriding role to pla~y. Again, due to
intangible nature of service products, tangibilising them becomes important. Furthermore,
due to the presence of the human factor producing quality product is crucial. Such a
combination is termed as marketing mix. Framing a market mix for service industry like
bank is a laborious task. The level of customer satisfaction is not static among bank
customers.
The level of satisfaction will vary with the changing level of standard. It also
changes to different customer segments according to their respective attitudes and
aspirations. The multi-faceted development in the socioeconomic fabrics has made it
urgent that Indian banks reframe their marketing mix. Due to increasing competition from
other financial institutions, made it necessary that Indian commercial banks review the
line of banking service. channels of management pricing strategies and promotional
stages. Investors started to invest their savings in other avenues of investment, earning 50
to 100 per cent of returns. Furthermore co-operative banks and other non-banking
financial institutions also offer attractive dividend in return. Thus it is high time to think
about reframing marketing mix of banking service.
THE FIRST 'P' PRODUCT

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First among the PS of bank marketing is product mix. Product stands for both goods and
service combination offered to the public to satisfy their needs. In tlhe highly regulated
banking industry all offered the same type of products. Actually the bank takes little time
and no additional investment to develop a financial product or service. But the
drawback is that no brand can be marketed with unique selling proposition for long
because it can be copied immediately. Thus it is better to focus on some selected ideas
relating to products, which haveimmediate operational utility as well as feasibility on
banks.

THE SECOND 'P' PRICE

Price in the case of service, different terms are used for different services like fees for
legal service, fare for transport service, commission agency services, premium for
insurance service, interest for the use of money.
Two characteristics, which have great impact on determining the prices of services
are perishability and intangibility.
Price determination of the banking products or services is subject to regulation either by
the Government or by the Reserve Bank of India. It is a unique feature of the bank price
that the products are mostly designed by the banker while the price is determined by the
RBI and Government of India Due to this, there is uniformity in the price of bank product
through out India

THE THIRD 'P' PLACE

The most important element in distribution strategy relate to this issue of location of the
banks to render their service. Distribution means delivery of the products or service at the
right time and at the right place. The place where the banking products or service are
delivered is an important element in bank marketing.

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Banks in India have been experimenting with a few strategies relating to place:. That is,
extending their reach through means other than branch expansion as well. The first such
strategy is the concept of extension centre, satellite office etc
The first such strategy is the concept of extension centre, satellite office etc. Secondly, the
concept of special counters for certain customer segments for example, for
pensioners, non-resident Indian, etc. Thirdly mobile office is also a part of current
banking practice. Through this, the banker came to the doorstep of the customers.
Fourthly, technology has also been deployed by banks for implementing their place
strategy. Home banking and ATM are in Indian banking. Fifthly, a recent innovation is
that of strategic alliance. This trend has been set up in motion mainly by the newly set-up
private banks in order to overcome the draw back arising out of the limited branch
network. Some of these banks entered into strategic alliance with already established
banks having wide branch network. One such alliance is between Global Trust Bank and
Vijayabank.
Figure below is given in novation in place strategy.

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THE FOURTH 'P' PROMOTION

The promotion is to inform and remind individuals and persuade them to accept,
recommend or use of a product service or ideaz. Promotion is a demand stimulating aid
through communication. Any marketing promotion campaign has two objectives. 'They
are to inform the prospective customer and then to persuade him. Due to the inherent
intangible nature of services, the customer of banking service relies more on subjective
impression rather than concrete evidence.

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When a bank comes out with a new product, it makes its target customer segment aware
of it only through marketing promotion. It may be in various forms like press
advertisement, sales campaign, word of mouth,personal interaction directly mailing
The bank must try to understand the real needs and aspirations of the society and provide
such product or services which will satisfy their assets. Marketing strategy should be
designed to suit not only the present market but also the potential future market.

THE FIFTH 'P' PROCESS

The process is crucial to the bank marketing strategy. It gives value to the buyer and an
element of uniqueness to the product. It is very significant because it provides
competitive advantage to the bank.
The importance of process in bank marketing strategy is based on 'value chain concept'
given by Michael Porter. The concept basically stresses close attention to all the
organisational activities which go into marketing the final product to the customer. In the
banking context, a typical value chain would encompass all activities right from the
productconceptive stage down to its marketing at branch level.

THE SIXTH 'P' PEOPLE

Banking is a labour intensive industry.The human factor plays a pivotal role in the
running of the business Men unlike machine have varying attitudes, moods,
heterogeneous cultures,feelings and above all, different aspirations.
Each employee in a bank irrespective of his position in the bank hierarchy is both a
recipient and provider of service. Unless each employee extends support to his colleagues
and also receives support from them, workflow will get obstructed and the victim will be

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the customer. In other words to satisfy a customer,people who participate this must be
right and apt ones.

THE SEVENTH 'P' - PHYSICAL EVIDENCE

Physical evidence is the strategic tool for the bank marketer.Banking products are
intangible. Tangibilising the intangible commodity is a major challenge to the bank
marketer. One among the important methods is the upkeep of branch premises and
interior decor. Another strategy is imaginative designing of bank stationery used by
customers. Product packaging could be another tangibrlisation strategy and marketers
called it as a separate 'P' of marketing strategy

MARKETING STRATEGIES IN THE BANKING SECTOR

Promotion and marketing in general is a big part of any bank of financial institution.
They rely on their promotional material in order to sustain their reputation, which to a
bank is everything. This comes through in many ways, especially when dealing with
financial and insurance policies. They take special care when creating graphs, logos and
other visualizations.
Not only is the information supposed to reassure the potential customer, the content,
layout and colours are also supposed to illicit trust and loyalty. Slogans, branding and
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campaign advertising is often very conservative and well thought out so that they do not
damage their trustworthiness. Getting the business of younger people and younger urban
executives is now a more competitive business, as they know that people tend to stick
with one bank once they have settled on their choice.
AN ANALYSIS OF BANKING COLOURS
This choice of logo, branding and promotional colours seem to be fairly uniform when it
comes to French banks. Blue, red and green are often seen, indicating that those colours
help convey a value. Blue may be seen with Banque Populaire, La Banque Postale, LCL,
Crdit du Nord, Crdit Agricole, and CIC. The colour red is seen with HSBC, Societe
Generale, and Caisse d'Epargne. Green is seen with credit Agricole, BNP Paribas and
CIC. You may also notice how black is often seen within their brand literature and
typography.
THE MEANINGS BEHIND DIFFERENT COLOUR USAGE
These colours are meant reassuring, thoughtful and reliable, with the possible exception
of red. In the west, red symbolizes power, danger and firepower, whereas in the east it is a
lucky colour. Black on the other hand may be interpreted as ambivalent. Black is a
symbol of luxury, but since the global economic downturn, it is also one of austerity.
This may be why the logo for the Socit Gnrale is very striking since it transmits a
message of austerity and power.
BANKING THAT IS SUITABLE FOR ALL
Banque Postale and LCL both use a combination of yellow and blue logos and branding
colours, which are unlike most banks. It is plausible to assume that they have done this to
show that their banking services are available for all. Blue is often associated with trust,
whilst yellow is associated with happiness and acceptance.
BANKING BASED ON PERCEPTION
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The trust you have in your bank is all based on perception, as is the idea that one colour
means something, which is best shown by the vast difference between what red means in
Anglo-Saxon countries and what it means in China.
ING Direct use their initials and the image of a lion, which is fairly unusual for a bank.
The lion obviously represents power and respect, but few banks have logo images and
initials side-by-side. Visual images that go beyond text or initials are not uncommon if
you look at different banks around the world. In the fight for marketing superiority, they
are often willing to leverage every opportunity they can find, which includes the use of
graphic symbols.
SYMBOLS BEING USED IN LOGOS
The four stars of BNP Paribas symbolize the values or the "pillars" of the bank, which
are: commitment, ambition, creativity and responsiveness. Caisse d'Epargne use a
squirrel that is built into its initials within the logo. The squirrel is often associated with
the idea of saving, as many childrens stories talk about how the squirrel saves his nuts
for the winter.

IS

VISUAL IDENTITY A TOOL POWERFUL ENOUGH

WITHIN

CONSUMER-ORIENTED STRATEGY?
The global economic crisis was caused by banks, meaning that the cute gift-wrapping is
not enough any more. People are not very forgiving given the fact that banks have helped
to bankrupt countries, put billions out of jobs, and have needed government bailouts with
taxpayer money. This may be why banks are trying to create the image that they are on
the consumers side, and why some have even started using celebrity figures to promote
their banks and banking services

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