Marketing of financial products

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Marketing of financial products

  1. 1. “ Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. Services offered include: savings and checking accounts, mortgage loans, personal loans, debit cards, credit cards etc.”
  2. 2. <ul><li>Retail banking sector is characterized by three basic characteristics: </li></ul><ul><li>Multiple products (deposits, credit cards, insurance, investments and securities) </li></ul><ul><li>Multiple channels of distribution (call center, branch, internet) </li></ul><ul><li>Multiple customer groups (consumer, small business, and corporate). </li></ul>
  3. 3. <ul><li>HSBC First Bank to Introduce ATM: 1987 </li></ul><ul><li>Companies Came with IPO </li></ul><ul><li>New Technology : EDI, EFT helped mass Banking, </li></ul><ul><li>Completion from NBFCs </li></ul>
  4. 4. <ul><li>Higher Interest Rates </li></ul><ul><li>Low Risk of NPAs </li></ul><ul><li>Relationship Not the Sole means Of Growth </li></ul><ul><li>Need For publicity </li></ul><ul><li>Sensitivity To Pricing </li></ul><ul><li>Volume Based Strategy </li></ul><ul><li>Freebies For Customers </li></ul>
  5. 5. <ul><li>Changing Demographics </li></ul><ul><li>Technological Advancements </li></ul><ul><li>Lower NPAs </li></ul><ul><li>Liquidity In Banking System </li></ul>
  6. 6. <ul><li>Liability Products </li></ul><ul><li>Savings accounts </li></ul><ul><li>No-frills accounts </li></ul><ul><li>Current accounts </li></ul><ul><li>Fixed deposits/ Term deposits </li></ul><ul><li>Recurring deposits </li></ul>
  7. 7. <ul><li>2. Asset products </li></ul><ul><li>Housing loans </li></ul><ul><li>Personal loans </li></ul><ul><li>Education loans </li></ul><ul><li>Gold loans </li></ul><ul><li>Loans to senior citizens </li></ul><ul><li>Property and mortgage loans </li></ul><ul><li>Vehicle loans </li></ul><ul><li>Agriculture loans </li></ul>
  8. 8. <ul><li>3 . Credit cards/ Debit cards </li></ul><ul><li>Credit cards </li></ul><ul><li>Debit cards </li></ul><ul><li>4. Investment products </li></ul><ul><li>Insurance products </li></ul><ul><li>Pension plans </li></ul><ul><li>Mutual funds </li></ul>
  9. 9. <ul><li>Associated with a liability on the bank’s side </li></ul><ul><li>According to RBI’s guidelines of KYC(Know your customer), the bank segregates their customer into different risk categories </li></ul><ul><li>Documentation requirements to open an account change with the risk profile </li></ul><ul><li>In India, customer deposit accounts are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) </li></ul>
  10. 10. <ul><li>Allows a customer of the bank to save a small amount of money </li></ul><ul><li>Money can both be deposited and withdrawn from the account </li></ul><ul><li>Withdrawal is done through cheque books or withdrawal forms </li></ul><ul><li>ATM’s have reduced the dependence on traditional withdrawal systems </li></ul><ul><li>Savings money is invested in different avenues and the bank pays an interest on it </li></ul><ul><li>Specially designed savings accounts for children, women etc are a new innovation by the banks </li></ul>
  11. 11. <ul><li>A type of savings account with zero-balance or low minimum balance facility </li></ul><ul><li>In 2005, the RBI instructed the bank to introduce such accounts so as to include the poor sections of the society in the financial system as well </li></ul><ul><li>Allahabad Bank and UCO Bank have been providing such account facility for quite some time now </li></ul>
  12. 12. <ul><li>Helps the customer to perform multiple transactions in a day </li></ul><ul><li>No interest on the amount deposited in the account </li></ul><ul><li>Include cheque book facility, internet banking etc </li></ul><ul><li>Used to pay rents, utility bills, insurance premiums etc </li></ul>
  13. 13. <ul><li>Type of a time deposit </li></ul><ul><li>Deposits a fixed amount for a fixed period of time </li></ul><ul><li>Interest is paid on the money deposited at pre fixed time intervals </li></ul><ul><li>The money can be withdrawn at maturity, but if its withdrawn before that the bank pays less interest </li></ul><ul><li>FD’s many a times also linked with safe deposit locker facility </li></ul>
  14. 14. <ul><li>A type of time deposit which allows the customer to save small amounts of money with bank every month </li></ul><ul><li>Aimed at people with high expenditure in a month </li></ul><ul><li>Modest interest paid for the amount saved, quarterly, half yearly or annually </li></ul>
  15. 15. <ul><li>An asset is what the bank holds in terms of the credit given to the customer </li></ul><ul><li>Interest rate charged are different for different products </li></ul><ul><li>Fixed interest followed for some products while a floating interest charged for others </li></ul><ul><li>The interest rate varies with the changes in the inter-bank rates like Benchmark Prime Lending Rates </li></ul><ul><li>If there is an increase in the BPLR then the customer has to pay a higher EMI and vice-versa </li></ul><ul><li>In fixed interest rates, the customer is protected against fluctuations in the interest rate </li></ul>
  16. 16. <ul><li>These form majority of the asset portfolio for a retail bank </li></ul><ul><li>Given in order to extend financial support to the people who want to construct a house </li></ul><ul><li>The amount extended depends on the expenditure involved and the repaying capacity of the customer </li></ul><ul><li>The repayment period is long term in nature </li></ul>
  17. 17. <ul><li>Is given to customers to help them meet personal expenses like marriage, travel etc </li></ul><ul><li>Depends on the customer’s ability to repay and his credibility </li></ul><ul><li>Personal loans given to salaries employees and self employed people </li></ul>
  18. 18. <ul><li>One of the most common type of loan extended by the banks </li></ul><ul><li>Under this, property assets like land, buildings, vehicles and gold etc are mortgaged </li></ul><ul><li>Interest rates fixed on the prevailing bank rates </li></ul>
  19. 19. <ul><li>Typical products include crop loans, farm equipment loans against warehouse receipts </li></ul><ul><li>Provide loans for horticulture activities, poultry, dairy, rearing of goat and sheep, sericulture etc </li></ul><ul><li>Depends on mortgaging or hypothecation in most loans </li></ul><ul><li>Loan cards have been brought by many banks which can be ATM’s or credit cards </li></ul>
  20. 20. <ul><li>Provide loans for purchase for two wheelers, four wheelers and commercial vehicles </li></ul><ul><li>Usually financed up to 85-90% of the total invoice amount </li></ul><ul><li>Repayment is made through equated monthly installments (EMI) </li></ul>
  21. 21. <ul><li>In credit cards, the amount is paid to the merchant electronically </li></ul><ul><li>The money is paid by the card user to the bank through EMI’s or in a lump sum amount </li></ul><ul><li>In Debit cards, the amount is deducted from card holder’s account and paid to the merchant </li></ul><ul><li>No interest is paid by the Debit card holder </li></ul><ul><li>Credit cards are very aggressively marketed by bank merchants </li></ul>
  22. 22. <ul><li>A fairly new category as compared to asset and liability products </li></ul><ul><li>Includes pension and mutual funds, insurance products etc </li></ul><ul><li>Provides additional liquidity to the bank to invest in other avenues </li></ul><ul><li>These products are also used as tools to retain the customers </li></ul><ul><li>These are mainly cross-sold </li></ul>
  23. 23. <ul><li>Innovation in banking </li></ul><ul><li>Affect five areas: operations, media, pricing, delivery and product </li></ul><ul><li>Tool: Customer Knowledge Management </li></ul><ul><li>Helps banks to understand customers better </li></ul><ul><li>Provides insights to what the customer expects </li></ul>
  24. 24. <ul><li>Online shoppers: Security of payment </li></ul><ul><li>Cybercrime </li></ul><ul><li>Pre approved loans </li></ul><ul><li>Research and development </li></ul><ul><li>Evaluation of new product ideas, design of plans, implementation, testing for viability and recommending implementation </li></ul>
  25. 25. <ul><li>HDFC Bank launched Netsafe virtual card in association with Visa International. </li></ul><ul><li>Safe payment mode </li></ul><ul><li>No need to disclose credit card information </li></ul><ul><li>Net safe enables to realise full value </li></ul><ul><li>Created with a pre defined limit amount </li></ul><ul><li>Can access the card through ID and password. </li></ul>
  26. 26. <ul><li>Banks segment customers using different bases. </li></ul><ul><li>HNI classify customers on different parameters. </li></ul><ul><li>NRI’s help in foreign exchange. Common products for this- remittance accounts, NRI deposits and NRI loans. </li></ul><ul><li>Eg- ICICI has tie up with Wells Fargo Bank, HSBC in Hong Kong, Me-Bank in UAE. </li></ul><ul><li>IndusInd Bank launched a product Fast-Remit through a tie up with Bank of New York </li></ul>
  27. 27. <ul><li>Corporate banking- discriminatory pricing followed. </li></ul><ul><li>Offer interest rate based on: </li></ul><ul><li>1. Credit rating </li></ul><ul><li>2. Relationship with bank </li></ul><ul><li>3. Bargaining power </li></ul><ul><li>Pricing decisions influenced by- policy changes, bank rate fluctuations, perceived value from customers perspective </li></ul>
  28. 28. <ul><li>If demand for asset product is elastic, slight decrease in price, increases demand for the product </li></ul><ul><li>If demand is inelastic slight decrease in price, may not have a significant impact on volume of business. </li></ul><ul><li>Eg- countries UK and US. </li></ul><ul><li>Eg- India: interest on home loan reduced increase in demand. </li></ul><ul><li>Increase in interest rate of fixed deposits leads to increase in demand. </li></ul>
  29. 29. <ul><li>Banks free to price their liability products. </li></ul><ul><li>Can decide on the penalties to be charged. </li></ul><ul><li>Eg- in 2005, when there was liquidity crunch in India. </li></ul><ul><li>Banks increased their deposit rates. Thus the net interest margins decreased. </li></ul>
  30. 30. <ul><li>As deposit rates started increasing banks raised their lending rates by 100-125 b.p </li></ul><ul><li>As net interest margins started shrinking </li></ul><ul><li>To maintain profitability </li></ul><ul><li>Pricing for HNI’S and NRI’S </li></ul><ul><li>Discriminatory pricing </li></ul><ul><li>Customer analysis and cost analysis </li></ul><ul><li>Eg- loan given at 2% less than the normal rate </li></ul>
  31. 31. <ul><li>Overt pricing: charges that banks collects directly from its customer for its product offerings. Eg- usage of ATM- flat fee </li></ul><ul><li>Variable fee- volume and frequency of account information </li></ul><ul><li>Covert pricing: cost which are not explicitly charged to customers against products consumed. </li></ul><ul><li>Eg- the cost incurred by bank recovered by charging a customer higher price. </li></ul><ul><li>Eg- ICICI Bank offer lifetime credit cards for free to get high sales. </li></ul>
  32. 32. <ul><li>Pre-Deregulation:- </li></ul><ul><li>- Product-centric Approach, </li></ul><ul><li> - Little emphasis on Market Research, </li></ul><ul><li>Post-Deregulation:- </li></ul><ul><li> - Advertising & Sales Promotion became important </li></ul>
  33. 33. <ul><li>Reasons for advertisement in Retail Banking:- </li></ul><ul><ul><li>Services are Intangible, </li></ul></ul><ul><ul><li>Inseparability of Services, </li></ul></ul><ul><ul><li>Heterogeneity of Services, </li></ul></ul><ul><ul><li>Perishability of Services. </li></ul></ul><ul><li>Thus as a part of advertising strategy, retail banks marketers showcase concrete physical evidence, the reputation, and the documentation of service delivery. </li></ul><ul><li>The popular advertising modes in retail banking are:- </li></ul><ul><ul><li>Print Media, the Internet, Outdoor advertisement, Statement insert, Co-branding. </li></ul></ul>
  34. 34. <ul><li>Advertising Appeal:- The manner in adv is developed and expressed in anticipation of a specific customer response. </li></ul><ul><li>Types of Appeal: </li></ul><ul><li>Rational Appeal - Informational or logical appeal </li></ul><ul><ul><li>Price appeal, Quality appeal, Features appeal & Competitive appeal. </li></ul></ul><ul><li>Emotional Appeal - Portrays human emotions. </li></ul><ul><ul><li>Humor appeal, Fear appeal, Music appeal, etc </li></ul></ul>
  35. 35. <ul><li>Sales Promotion is used to attract new customers by giving offers and incentives. </li></ul><ul><li>Sales Promotion techniques used by Banks:- </li></ul><ul><li>Premiums, Gifts, Cash back offers, discounts, etc. </li></ul>
  36. 36. <ul><li>Brand can be a long-term asset, branding of financial institutions is a part of long-term strategy. </li></ul><ul><li>There are various advantages of Brand Building:- </li></ul><ul><li>Wide spread recognition and improved loyalty. </li></ul><ul><li>It decreases the customer acquisition cost. </li></ul><ul><li>Bank can charge premium prices and customer will not hesitate to pay. </li></ul>
  37. 38. <ul><li>Personal Selling is a prominent form of branch level promotion. </li></ul><ul><li>There are two approaches of personal selling:- </li></ul><ul><ul><li>Product Based Approach </li></ul></ul><ul><ul><li>Customer Based approach </li></ul></ul>
  38. 39. <ul><li>In Telemarketing information is given to customer on the Telephone. </li></ul><ul><li>40% to 50%(approx) Credit Cards and up to 25% retail loans are sold through telemarketing. </li></ul><ul><li>Negative reactions from customers. </li></ul>
  39. 40. <ul><li>It targets specific customer groups. </li></ul><ul><li>Customized presentation. </li></ul><ul><li>Information is provided in an attractive format. </li></ul><ul><li>Direct-Response :- It is a variant of direct mail where a product is first without the full detail being given, interested customers are requested to contact the Bank for full details. </li></ul>
  40. 41. <ul><li>In traditional approach Public Relations was considered to be important. </li></ul><ul><li>The new approach has changed the traditional view towards Public Relations, now PR is used as a sophisticated tool to improve image of Banks. </li></ul><ul><li>The main objective of PR is to maintain a consistently positive image in the public. </li></ul>
  41. 42. <ul><li>Distribution Channels </li></ul><ul><li>Advantage – </li></ul><ul><li>1. Reduce transaction cost & operating overheads. </li></ul><ul><li>2. Increase reach. </li></ul><ul><li>3. Avenues of promotion for banks products & offerings. </li></ul>
  42. 43. <ul><li>Traditional & important. </li></ul><ul><li>Other channels used for transactions. </li></ul><ul><li>Channel that diffrentiates. </li></ul>
  43. 44. <ul><li>Deregulation. </li></ul><ul><li>Cost reduction & better service. </li></ul><ul><li>Atm sharing. </li></ul>
  44. 45. <ul><li>Which was the first bank to introduce ATM's in India? </li></ul><ul><li>Total no of atms in India ? </li></ul>
  45. 47. <ul><li>Uses. </li></ul><ul><li>Cheapest channel of distribution. </li></ul><ul><li>Penetration rate is low. </li></ul>
  46. 48. <ul><li>It provides flexibity & convenience. </li></ul><ul><li>Mobile banking transaction includes use of phone by the customer to debit or credit their accounts. </li></ul><ul><li>Services – Checking account balance, cheque status enquiry, ordering a cheque book, payment of utility bills, transfer of funds. </li></ul>
  47. 49. <ul><li>Enables customer to carry out cashless transactions at merchant establishments where invoice amount of goods purchased is debited from customers account & credited to merchant’s bank account. </li></ul><ul><li>Nominal fee. </li></ul><ul><li>Channel became popular with consumer spending & increase in no of debit card holders. </li></ul>
  48. 50. <ul><li>DSA’s conducts marketing of financial products on behalf of the bank. </li></ul><ul><li>Banks outsource selling of liability & assets products. </li></ul><ul><li>Banks provide database of customers. </li></ul>
  49. 51. <ul><li>This channel is under severe criticism </li></ul><ul><li>Field staff is not well equipped with the information on various products of the bank. </li></ul><ul><li>They may not spend time in understanding customer’s needs. </li></ul><ul><li>Different DSA’s of same bank may keep calling the same customer. </li></ul><ul><li>Customer fears an invasion of their privacy. </li></ul>
  50. 52. <ul><li>Inbound call centers - Act as distribution-cum-service delivery channels by taking calls on product enquiries, change of address,complaints. </li></ul><ul><li>Outbound call centers – Used for telemarketing. </li></ul>
  51. 53. <ul><li>Financial institutions may form strategic alliances at the corporate level, the scope of which would include sharing the respective distribution networks at the operational level. </li></ul><ul><li>Strategic alliance between Corporation bank , Indian bank & Oriental bank of commerce includes sharing of bank branches & ATM’s, training infrastructure & even people. </li></ul>
  52. 54. The strategy of pushing new products to current customers based on their past purchase. Cross-selling is designed to widen the customer reliance on the bank and decrease the likelihood of the customer switching to a competitor.
  53. 55. <ul><li>Benefits to Banks </li></ul><ul><li>Reduction in the total cost of acquiring new customers </li></ul><ul><li>Improved customer retention </li></ul><ul><li>Insights that help offer better suited and more customized products </li></ul><ul><li>Enhanced ‘Per Customer Lifetime Profitability’ </li></ul>
  54. 56. <ul><li>Benefits to Customers </li></ul><ul><li>Reduced prices </li></ul><ul><li>Faster and easier processing </li></ul><ul><li>Customized product </li></ul>
  55. 57. <ul><li>Mindset of the executives in a bank </li></ul><ul><li>Risk of causing customer dissatisfaction </li></ul>
  56. 58. <ul><ul><li>Amreen Nathani </li></ul></ul><ul><ul><li>Shivika Nagrath </li></ul></ul><ul><ul><li>Ayushi Jalan </li></ul></ul><ul><ul><li>Pankaj Upadhyay </li></ul></ul><ul><ul><li>Yogesh Suhag </li></ul></ul><ul><ul><li>Krishanu Roy </li></ul></ul>

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