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Author wrote this report based on hers internship experience in Bank of East Asia Beijing branch.

Author wrote this report based on hers internship experience in Bank of East Asia Beijing branch.

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Bank of east asia marketing analysis Bank of east asia marketing analysis Document Transcript

  • Bank of East AsiaMarketingAnalysis Mengyu Chen 2/8/2013
  • Table of ContentsBank of East Asia (Beijing Branch) Marketing Analysis ...................0 Introduction ........................................................................2 Commercial Bank Marketing in China .....................................2 Main Problems in China’s Commercial Banks ...........................3 Bank of East Asia.................................................................4 Bank of East Asia SWOT .......................................................4 Superior factors ..............................................................4 Weak factors ..................................................................6 Opportunity factors .........................................................7 Threat factors ................................................................8 Suggestion for their Marketing ..............................................8 Build a Customer Relationship Management (CRM) framework ....................................................................................8 Increase the interaction with customers ............................8 Provide a new lifestyle for customers ................................9Works Cited ........................................................................... 10
  • IntroductionThis article discusses the field of commercial bank marketing in China and itsmain problems. Based on the author’s internship experience in the MarketingDepartment of the Bank of East Asia, this article analyzes the bank’s marketingstrategy by using the SWOT method. Moreover, it provides recommendationsfor the Bank of East Asia to reinforce its brand image and serve its customersbetter.Commercial Bank Marketing in ChinaThe People’s Bank of China was founded in 1978. It functioned both as China’scentral bank and as the only commercial bank in China. The People’s Bank ofChina could issue currency and regulate the financial industry. The bank alsooffered banking and financial services to its customers. During this period,marketing activity was still nonexistent due to the high monopolization of thePeople’s Bank of China (China Financial Development History, 2012).After the economic reform, the government segmented the financial market intofour parts: agricultural finance, international finance, constructional finance,and commercial finance. Four state-owned banks were also established, namely,Agricultural Bank of China, Bank of China, China Construction Bank, and ChinaIndustrial and Commercial Bank. Each bank worked independently and was incharge of one part of the financial market. There was no competition among thebanks. At this point, the value of marketing concepts was still not recognized bythe banks (China Financial Development History, 2012).Since 1986, different commercial banks have come into being along withChina’s rapid economic development. Some local commercial banks becamevery competitive with the flexible regime, advanced management standards,and intensive marketing strategies (How Commercial Bank could Survive afterWTO accession, 2001). Under fierce competition, Chinese commercial banksrealized the importance of satisfying customers. The banks implemented theconcept of “Friendly Service” and spent more money on product innovation tomeet customer needs. After China’s accession to the WTO, its financial sectorunderwent profound changes. Large-scale foreign banks entered the country,which intensified the competition among banks, including the marketing ofcommercial banks.In the new competitive market environment, banks attempted to establish theirmarket position. Almost every bank created its own Marketing Department, andthe client manager system was applied by the commercial banks in China. Inaddition, the banks continued to provide innovative products to their customers.
  • After years of exploration, the banks realized that new products and servicescan easily be duplicated and that customers have limited time to determine thedifferences between products. Branding became increasingly important in thecompetition. Banks combined their respective strengths, innovated, andenhanced their marketing management to establish a public image and promotetheir corporate culture. For example, China Merchants Banks’ slogan “Changingfor you” (China Merchant Banks, 2011) intends to make customers feel that thebank endeavors to serve its customers to the best of its abilities to fulfill theirneeds.Main Problems in China’s Commercial BanksThe rapid improvement of marketing has brought China’s commercial bankingsector into the new financial marketing era. However, several problems remain.Some commercial banks—especially state-owned ones—do not place high valueto the importance of marketing. The marketing departments in those bankshave very limited influence. Many state-owned commercial banks have largecustomer resources and solid relationships with state-owned enterprises (Heng)whose brands are already well known. Even without a marketing department,these banks can still receive a great amount of business. However, theyconstantly ignore some essential details in their points of contact withcustomers. For example, customers who go to banks not only seek to increasethe value of their funds, but to obtain intangible services as well, such as asense of security and personal privacy. When banks are unable to provide theexperience that their customers expect, they will lose their customers.Some banks lack long-term marketing planning; they care more aboutshort-term interests and bank size. Banks set a sales target for every clientmanager and compare their client managers’ sales performance to generatecompetition among them. These banks seldom conduct marketing research intotheir customers. Client managers care more about how many products they soldwithout consider customers’ real needs. They consider less about providingfollow-on and new products based on economic situation as well as riskpreference.Some financial products cannot meet customer needs. In recent years, manyChinese customers have felt that some financial products are very difficult tounderstand and do not actually assist them in increasing their wealth asexpected. Numerous bank products also lack innovation and banks only imitateone another. Hence, products and services offered in the market are similar.Banks without strong brand can easily lose customers.
  • Bank of East AsiaIncorporated in Hong Kong in 1918, the Bank of East Asia Limited (“BEA”) is thelargest independent local bank in Hong Kong. Even with more than 130branches all over the world, Hong Kong remains BEA’s center of operation. In1920, BEA opened its Shanghai branch in Mainland China. During World War II,the Mao-led government forced foreign banks to leave the mainland; only BEAwas allowed to remain on the mainland, albeit on a limited scale (Bank of EastAsia Ltd. History, 2012).BEA’s operation in Mainland China has steadily grown over the past 30 years ofeconomic reform. Today, BEA is recognized as one of the first foreign banks toreceive approval from the China Banking Regulatory Commission to establish alocally incorporated bank in Mainland China (2007). BEA is also the first foreignbank to launch Renminbi debit cards and credit cards in Mainland China. It offersa full range of banking and financial services to customers in Mainland China,including foreign currency savings, mortgage and consumer lending, creditcards, online banking, syndication loans, and insurance products (BEA China,2013).Overseas, BEA has established branches in North America, the United Kingdom,and Southeast Asia. BEA serves American customers through its NewYork-based banking subsidiary. It has more than 220 outlets worldwide andemploys over 12,000 people (The Bank of East Asia, Limited, 2011).BEA’s mission statement is as follows: We at BEA strive to provide best in class financial services, always demanding the highest standard of professionalism and integrity of ourselves. With a commitment to quality of service, we focus on satisfying customer needs. We aim to grow, together with our customers, our shareholders and our colleagues (Mission Statement, 2013).Bank of East Asia SWOTSuperior factorsThere are numerous financial products available for different customers. BEA’sservices include retail banking, insurance and MPF services, investment services,private banking, and trust and fiduciary services. Client managers helpcustomers choose the most suitable products based on their needs. For example,BEA offers a variety of structured products linked to different underlying assetclasses for different risk appetites (The Bank of East Asia, Limited, 2011).
  • Customers have to take a risk appetite test before purchasing different financialproducts. Client managers also recommend appropriate products to theircustomers based on the test results. Likewise, customers can design their ownfinancial products linked to certain assets based on their preference in BEA.China’s commercial banks also sell various kinds of financial products, but theyseldom design the products themselves. They always purchase productsdirectly from foreign commercial banks, which may not be suitable for their owncustomers.BEA has a well-established risk management committee. The independentcentralized risk management unit, Risk Management Division, is responsible formonitoring the activities related to credit risk, market risk, operational risk,liquidity risk, interest rate risk, strategic risk, legal risk, and reputation risk.Internal auditors also perform regular audits on the business units to check theircompliance with policies and procedures. Owing to BEA’s effective riskmanagement ability, the bank can venture into innovation areas with higher riskto achieve high returns. Nowadays, commercial banks in China pay moreattention to risk management (Wenlong, 2013). BEA, with its abundantexperience in controlling risk and ensuring sufficient cash flows to meet all of itsfinancial commitments and to capitalize on opportunities for business expansion,has become very competitive in the Chinese financial sector.BEA has profound knowledge of banking expertise in both China and overseas.Along with the steady economic growth of China, Chinese customers have aburgeoning demand for foreign currency investments. BEA has introduced anumber of offshore foreign currency-denominated fixed income funds.Furthermore, the bank has a list of tradable currency pairs available to corporatecustomers making different currency-linked deposits. After noticing a growinginterest in foreign equity trades, BEA launched a night desk service for foreignequity trading in mid-2011 (The Bank of East Asia, Limited, 2011). Extendingservice hours to the close of the US market through the night desk has been wellreceived by customers. Chinese commercial banks are also attempting to extendtheir foreign-currency-related services. However, due to historical reasons, theservices of Chinese commercial banks remain in the beginning phase and thebanks still lack experience. Moreover, BEA’s foreign equity trade services areeven more superior than those of other foreign commercial banks in China. BEAoperates one of the most extensive branch networks of any foreign bank on themainland because it knows the China market very well.BEA has sufficient human resources support. Most client managers have at leasta bachelor degree related to banking knowledge. BEA regularly holds lectures toequip its client managers with the latest global economics information andimportant knowledge about different financial products. The entire BEA team issensitive to customer needs. Under the uncertainty in global financial markets,
  • customers are now more cautious in investing and prefer to hold more assets incash equivalents than in past years (Private Banking prefers break even product,2012). To comply with their customers’ preference, BEAs Private BankingDepartment has selected industries and stocks with lower volatility.BEA pays attention to all points of contact and long-term relationship withcustomers. Besides providing customers with the best client managers, BEA alsocares about offering intangible services. BEA provides a well-decorated privateroom where its client managers can meet with their customers. They exert effortto make customers feel welcome and at home. To assist their customers inrealizing their lifetime goals, client managers in BEA also design long-terminvestment plans for the customers based on the customers’ perspective, forexample, “Children Education Plan” and “Immigration Plan.” In 2011, BEA washonored for providing the “Best Customer Services” in the Shanghai bankingindustry (The Bank of East Asia, Limited, 2011). Many client managers in someChinese commercial banks work as sale managers. They know little about thefinancial products and all they aim for is to sell as many products as possible.Hence, they introduce the products to customers without considering theirneeds.There are various innovations in the products offered by BEA. Its online bankingservice, for instance, has several unique features. BEA’s online banking systemhas won the “Best Innovation for Online Banking Prize,” and has a verycustomer-friendly interface. Customers can easily comprehend the system’sdifferent functions. In contrast, some state-owned commercial banks’ onlineservice procedures are complicated. Customers have to provide identificationinformation several times to realize a single function.There are some other innovations offered by the BEA related to its financialservices. In recent years, parking lots have become more and more expensive.BEA then launched a new mortgage lending service for parking lots whichincreased its customer resources. BEA is also the first foreign bank that wasissued its new premium credit with IC chip in China. In 2011, the BEA iPhoneapplication was made available online. The application can introduce newcustomers to new and enhanced features including "Stock Watch & Fast Trade"and MPF functions (The Bank of East Asia, Limited, 2011).Weak factorsThe Chinese people are not familiar with BEA. China’s financial market openedonly a few years ago, and thus foreign commercial banks have just entered themarket. Many Chinese customers have already accepted the services of Chinesecommercial banks, and it may not be easy for them to switch to another bank.Although BEA was founded in Hong Kong, many Chinese people in the Mainland
  • have not heard of BEA. A large number of people in the Mainland also believethat BEA is a Japanese bank. Compared to Chinese commercial banks, BEA hasless outlets and branches on the Mainland, which may limit its aim of increasingits customer resources.Marketing is not highly valued in the BEA Beijing branch. Some marketers in theBeijing branch still understand marketing as advertising and pushing sales. Inthe Beijing branch, the Marketing Department creates marketing strategiesbased in intuition, not on an analysis of their customers’ needs. BEA has lessinteraction with its customers, who have very few ways to give their feedback tothe banks. In addition, there is less cooperation among the differentdepartments. Thus, customers may receive different services with differentstandards, which may cause negative effect for BEA in building its brand.Each client manager has too much customer resources on hand. BEA allows itsclient managers to compete with one another in order to push sales and attracthigher deposits. Even though client managers desire to keep long-termrelationship with its customers, this practice results in client managers havingless energy to design the best long-term investment plan for differentcustomers, especially for BEA’s main target customers. Moreover, clientmanagers are the only people who know their customers’ detailed information.The BEA Marketing Department in Beijing does not use Customer RelationshipManagement (CRM) software to analyze customer information. Thus, the bankencounters difficulties with regard to offering the best service to meet Beijingcustomer needs.Opportunity factorsAfter China opened its banking market, both the investment market andhousing mortgage of residents boomed. BEA not only knows the Chinese peoplevery well, but has extensive experience in operating commercial banks as well.These factors make BEA very competitive in China’s banking market.Along with China’s economic growth, the Chinese have become wealthier. In2012, Chinese private assets that could be used as investments amounted tomore than $11,406 billion a 14% increase in asset value compared to that in2011. Families with more than $1 million of investment assets are concentratedin the southeastern part of China. In Beijing, more than 100,000 families haveinvestment assets of more than $1 million. These families prefer to invest infinancial products with fixed returns. In addition, trust funds are becoming moreand more popular recent years (China Wealth Report, 2013). BEA’s targetcustomers are people with high income, a target market that is growing. Thus,the bank can design additional products to fulfill their customers’ needs.
  • Threat factorsTo protect the businesses of Chinese commercial banks, the banking market inChina was not fully opened, and several government policies still limit theactivities of foreign commercial banks in China. The different investmentphilosophy has also made some financial products unfit for the Chinese market.Moreover, the lack of sufficient branches has limited the development of foreignbanks. For example, BEA was the first foreign bank to issue its own credit cardin China’s banking market. However, compared to Chinese commercial banks,the number of BEA’s credit card holders is very few (Foreign Banks in China,2012). From the perspective of Chinese customers, foreign commercial bankshave very expensive service fees. Owing to this misconception, many customersin China are wary of choosing financial products from foreign commercial banks.Suggestion for their MarketingBuild a Customer Relationship Management (CRM) frameworkBEA’s Beijing branch can build a CRM data warehouse which all client managersand departments can access to retrieve their customers’ detailed information.In addition, different department should have more collaboration. In this way,the entire bank can understand its customers better. When customers go todifferent departments or transact with different client managers for differentservices, the bank can easily assist their customers in confirming their accountinformation and help them to realize different financial activities by referring tothe customers’ detailed information. Thus, the bank can fulfill the customers’requirements more effectively.The application of CRM in commercial banks can also help the bank to develop amarket-oriented strategy for the local market as well as to innovate in productsand services to meet customers’ needs, especially Beijing customers’ needs.The application can help the BEA Beijing branch to make customer-centeredstrategies and help the bank to increase customer loyalty and contributions.Increase the interaction with customersAlthough BEA has tried different approaches to build its brand image, many of itsChinese customers are still not very familiar with the brand. BEA can tryincreasing its interaction with customers to reinforce its brand. Using socialmedia is an effective way to interact with its customers and promote itsbusinesses. Microblogging is currently the most influential social media in China.
  • BEA can open an official account on its social media website to post the latestnews or activities. It can answer customers’ questions and “listen” to customers’ideas to learn more about them. For instance, BEA organizes social activitiessuch as wine tasting for its loyal customers. The bank can post photographs ofthe activities on its social media website to interact with customers.In addition, BEA can improve the interaction function of its smartphoneapplications. For example, the bank can design a chat area in the applicationallowing customers to upload their needs to the customer service center andwhere an operator can answer customer questions anywhere and anytime. Thebank can also use the application to introduce new products and/or makeupgrades based on their customers’ investment preferences and personalinformation. In this way, the customers will feel that the bank does not pushinformation their way, but rather provides only the information the customersneed. This could also help client managers save energy to design follow-up plansfor different customers. The client managers could concentrate more on banks’target customers.Provide a new lifestyle for customersIn recent years, the wealthy Chinese have become increasingly careful abouttheir quality of life (China Wealth Report, 2013). BEA can attempt to provide anew lifestyle for its customers to improve their quality of life. For example, it canprovide basic financial services and various social activities for its loyalcustomers to help them enjoy their life and increase their happiness. Somewealthy people in Beijing spend too much time for work and seldom have timeto spend with their families. BEA can organize activities such as “travelling withthe family” to help wealthy people enjoy their beautiful lives. These activitiescan enable BEA to establish a good relationship with its customers. Theactivities can also bring business opportunities for BEA. The bank can, forexample, collaborate with hotel and travel agencies.
  • Works CitedHow Commerical Bank could Servie after WTO accession. (2001). Date: 2013/1/16/,cite: SINA: http://finance.sina.com.cn/news/1999-12-21/15728.htmlChina Merchant Banks. (2011/6/10/). Date: 2013/1/16/,cite: Hexun Bank: http://bank.hexun.com/2011-06-10/130420622.htmlBank of East Asia Ltd. History. (2012). Date: 2013/1/15/,cite: Funding Universe: http://www.fundinguniverse.com/company-histories/bank-of-east-asia-ltd-history/China Financial Develpoment History. (2012/5/8/). Date: 2013/1/16/,cite: http://wenku.baidu.com/view/15f4be44336c1eb91a375d88.htmlForeign Banks in China. (2012/12/15/). Date: 2013/1/20/,cite: Stockstar: http://finance.stockstar.com/MS2012121500000421.shtmlPrivate Banking prefers break even product. (2012/10/22/). Date: 2013/1/10/,cite: Howbuy: http://www.howbuy.com/news/2012-10-22/1718524.htmlBEA China. (2013). Date: 2013/1/15/,cite: Bank of East Asia: http://eng.hkbea.com.cn/dyxx/dyjj/dyzg/index.shtmlChina Wealth Report. (2013/1/). ChinaEcnomicWeekly.Mission Statement. (2013). Date: 2013/1/15/,cite: Bank of East Asia: http://eng.hkbea.com.cn/dyxx/dyjj/smxy/index.shtmlHengWei. Study on State-Owned Commerical Banks Marketing Strategies. Date: 2013/1/17/,cite: http://www.seiofbluemountain.com/upload/product/200911/2007qyczhy2z1a8.pdfThe Bank of East Asia, Limited. (2011). Annual Report 2011.WenlongLou. (2013/2/2/). Commercial Banks Transformation. Date: 2013/2/5/,cite: Xihua: http://news.xinhuanet.com/fortune/2013-02/02/c_124312813.htm