Marketing – An Introduction | PAPER IV – RETAIL BANKING & WEALTH MANAGEMENT | Module C: Support Services – Marketing of Banking Services/Products

Module C: Support Services – Marketing of Banking Services/Products

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Marketing – An Introduction

Marketing is the process of identifying, anticipating, and satisfying customer needs profitably. In the context of banking, it involves promoting financial products and services to existing and potential customers. The traditional focus on selling has shifted towards customer relationship management, building trust, and delivering consistent value.

Key Concepts:

• Needs and Wants: Banks must understand what customers truly need (e.g., secure deposits) versus what they want (e.g., mobile banking access).
• Customer Orientation: Emphasizes building long-term relationships with customers rather than focusing only on transactions.
• Value Proposition: Offering unique features like low fees, high interest, or excellent customer service to differentiate from competitors.

Marketing in Retail Banking

Retail banking deals directly with individual customers. Banks design specific marketing strategies to attract, retain, and engage these customers. Segmentation, targeting, and positioning are key in understanding customer behavior and tailoring financial products.

Important Aspects:

• Segmentation: Dividing customers by demographics (age, income), psychographics (lifestyle), and behavior (usage pattern).
• Targeting: Selecting specific segments to serve, like youth banking or senior citizen plans.
• Positioning: Creating a distinct image in the customer’s mind, e.g., ‘Safe Bank for Senior Citizens’ or ‘Smart Banking for Youth.’

Marketing Mix in Retail Banking (7Ps)

The traditional 4Ps (Product, Price, Place, Promotion) are expanded to 7Ps in service marketing, especially for banks:

1. Product: Loans, deposits, cards, insurance.
2. Price: Interest rates, fees, charges.
3. Place: Branches, ATMs, online platforms.
4. Promotion: Advertisements, sponsorships, digital marketing.
5. People: Staff behavior, training, empathy.
6. Process: Loan approval system, account opening time.
7. Physical Evidence: Branch layout, brochures, online interface.

Mathematical Examples (Medium-Hard)

1. If a bank offers a recurring deposit with a monthly installment of ₹2,000 for 2 years at an interest rate of 6% p.a., what will be the maturity amount?
2. A marketing campaign costs ₹1,20,000 and attracts 1,500 new customers. What is the cost per acquisition?
3. Bank XYZ offers a loan at 10% interest with quarterly compounding. What is the effective annual rate (EAR)?
4. A bank increases its branch count from 500 to 650 in 3 years. What is the CAGR (Compound Annual Growth Rate)?
5. If a savings account interest rate is 4% p.a. compounded annually, what will be the value of ₹25,000 after 5 years?
6. Bank ABC’s marketing budget is ₹50 lakh. If 40% is spent on digital, 35% on print, and the rest on events, what is the amount spent on events?
7. Loan disbursal time reduced from 10 days to 4 days. What is the percentage decrease?
8. If 70% of customers prefer mobile banking and the bank has 2 million customers, how many use mobile banking?
9. A customer deposits ₹5,000 monthly in a bank at 6.5% p.a. for 3 years. What is the total interest earned?
10. A bank gets ₹10 crore from 1,000 high-value customers. What is the average account balance?

MCQs (Medium Difficulty) with Answers

1. Which of the following is not part of the 7Ps in marketing of banking services?
   a) Product
   b) People
   c) Physical Evidence
   d) Portfolio
   Answer: d) Portfolio
2. In retail banking, segmentation helps in:
   a) Pricing strategies
   b) Uniform product design
   c) Targeting specific customer groups
   d) Increasing branch locations
   Answer: c) Targeting specific customer groups
3. Which of the following is an example of ‘Place’ in marketing mix?
   a) Rate of Interest
   b) Online Banking
   c) Relationship Manager
   d) Brochures
   Answer: b) Online Banking
4. The concept of creating a unique image of the bank in the customer’s mind is known as:
   a) Targeting
   b) Positioning
   c) Segmentation
   d) Customization
   Answer: b) Positioning
5. What is the term for the total cost divided by the number of new customers acquired?
   a) Conversion Cost
   b) Break-even Point
   c) Cost per Acquisition
   d) ROI
   Answer: c) Cost per Acquisition
6. Which of the following is part of physical evidence in service marketing?
   a) Interest Rate
   b) Online Portal Interface
   c) Staff Training
   d) Bank Charges
   Answer: b) Online Portal Interface
7. Customer relationship management in retail banking primarily focuses on:
   a) Maximizing profit
   b) Regulatory compliance
   c) Building long-term customer loyalty
   d) Increasing transaction fees
   Answer: c) Building long-term customer loyalty
8. Which element of 7Ps includes ATM installation and mobile app availability?
   a) Product
   b) Place
   c) Promotion
   d) People
   Answer: b) Place
9. Bank's email marketing to prospective customers is an example of:
   a) Place
   b) Process
   c) Promotion
   d) People
   Answer: c) Promotion
10. Which of the following affects customer perception the most in service delivery?
    a) Product features
    b) Physical environment
    c) Price
    d) Location
    Answer: b) Physical environment