Description
The private commercial banks, operating in Bangladesh, constantly focus on understanding and anticipating customer needs. They already made significant progress within a very short period of their existence.
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008
Marketing of Bank Services: A Comparative Study on Some
Selected Private Commercial Banks in Dhaka City
1
Md. Shahidul Islam Zahid
2
Abstract: This paper focuses on the financial product marketing strategies adopted
by different Private Commercial Banks in Dhaka city with a view to identify what
they are now doing in this regard and what are the future prospects of marketing of
financial products. The financial service sector in Bangladesh is now quite
competitive to deal with changing environment. A number of external forces have
exerted influences on the sector, including socio-economic, regulatory and
technological factors. Changes to regulatory environment undoubtedly have had the
greatest impact on this sector. Technology has also taken on increased importance
for financial institutions especially for private commercial banks. There are now 30
private commercial banks are operating in Bangladesh & they are offering different
products but there are a few basic differences among them in terms of structure and
performance. Thus the competitions among them are increasing day by day and so
marketing of financial products is now becoming an important concern. The present
study is based on a survey on 8 randomly selected private commercial banks in
Dhaka City to identify the marketing strategies they follow at present. The study
finds that marketing strategies adopted by these banks to market their products are
not well designed and incomplete to some extent. The study finds that there is a need
to develop more effective marketing strategies suitable for long-term growth of these
banks. The study also finds that they have very vague idea about Customer
Relationship Management although they claim that they practice it.
1. Introduction
This comparative study focused on the various aspects of marketing, advertising, market
positioning, promotioning etc. of some selected private commercial banks in Dhaka city.
The private commercial banks, operating in Bangladesh, constantly focus on
understanding and anticipating customer needs. They already made significant progress
within a very short period of their existence. Many of the banks have been graded as top
class banks in the country through internationally accepted CAMEL rating. They have
already occupied an enviable position among their competitors after achieving success in
1
The article is based on a seminar lecture delivered by Professor Dr. S. M. Ikhtiar Alam,
Department of Business Administration, Jahangirnagar University, Savar, Dhaka in 2004.
2
Lecturer, Department of Business Administration, Daffodil International University, Dhaka.
60 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
all areas of business operation. Banking scenario undergoes changes time to time as this
is very dynamic industry. Private Commercial Banks are offering different financial
products with different features. They follow various strategies to market such products.
This paper will mainly emphasize on how the Private Commercial Banks market their
products.
2. Objective of the Study
The objective of the study is to identify the strategies Private Commercial Banks in
Bangladesh use to market their products. At the same time the paper focuses to gain an
understanding on issues that are important for developing marketing strategies for
financial services. We have analyzed the relative position, pricing strategies, promotional
activities etc. of the selected Private Commercial Banks operating in Dhaka city to
identify their position in the market and the competitive situation as well.
3. Methodology and Data Source
3.1. Data Sources: Both primary and secondary data have been used to prepare this
paper.
3.2. Data Collection Method
Primary Data regarding the banks’ service marketing strategies have been collected
through guided interviews of the respective banks’ executives. In this regard a structured
questionnaire with 21 questions has been used (see appendix for the questionnaire).
Secondary Data have been collected from: Different text on Marketing, Financial
Products Marketing as well as from the Brochures & reports of the selected banks for this
paper.
3.3. Sample Plan & Size
Eight banks have been selected as sample on the basis of convenience for the
questionnaire survey to find out the marketing strategies of the Private Commercial
Banks (PCBs).
4. Literature Review
The financial service sector in Bangladesh is now quite competitive to deal with changing
environment. There are now 30 private commercial banks operating in Bangladesh and
they are offering different products and services but there are a few basic differences
among them in terms of structure and performance. Thus the competitions among them
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 61
are increasing day by day and so marketing of financial products is now becoming an
important concern. This paper focus on the strategies of financial product marketing, first
of all it is important to know what a Marketing Strategy is and what are the financial
products banks usually offer.
4.1. Marketing Strategy
A Marketing strategy can be defined as the outlines of broad marketing logic by which
the business units hopes to achieve its marketing objectives and the specifics of target
markets, positioning and marketing expenditure levels. It outlines specific strategies for
each marketing mix element and explains how each responds to the threats, opportunities
and critical issues spelled out in the marketing plan.
4.2. Understanding Financial Product Consumer
Understanding customers and customer’s needs and requirements is the guiding
philosophy of marketing. A marketing orientation requires the organization to view its
business from the point of view of its customers. This demands an insight into the wider
aspects of consumer psychology and behavior, including what motivates consumers, what
their attitude and perceptions of the company and its products are, as well as an
understanding of their decision processes.
4.3. Identifying & Targeting Financial Prospects
In addition to understanding the broader pattern of financial services consumer behavior,
the development of an effective marketing strategy requires that financial institutions,
especially commercial banks need to understand the differences among customers and
their financial products requirements. This issue of customer differences can be identified
through market segmentation. The benefits of market segmentation can be an aid in
designing marketing strategy. The accuracy of a financial institution’s identification of
market segment contributes to its competitive advantage since it is one of the conditions
of developing an effective marketing strategy. A number of conditions have been noted to
affect the effectiveness of potential profitability of marketing strategy like measurability,
substantiality, accessibility, action- ability and differentiability of the target. Again
commercial banks can formulate the different segmentation on the basis of geographic
and or demographic variables.
4.4. Development & Management of Financial Products
The product is usually the basis on which customer satisfaction is created. As such it is
vital component of the marketing mix. The product provides the basis for competition, it
62 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
enables the organization to generate income and it can provide a tangible indication of the
strategic direction of the organization. Thus the financial institutions specially banks have
become increasingly concerned with a number of issues surrounding product strategy,
including: the process and procedure involved in the development of new financial
services and products; the factors which contribute towards the successful adoption of
new product; how to manage the product over its life to protect it from competition; how
to use branding to differentiate the product from similar alternatives; when to withdraw
an unprofitable product from the range; and how to best implement the withdrawal
process with minimal adverse effects for the banks as well as customers.
4.5. Channels of Distribution
Distribution involves a wide variety of activities culminating in the creation of three
types of utility: time, place and possession. In terms of time, distribution allows the
customer to gain access to financial service when it is convenient for them to buy. In
terms of place, distribution makes products and services available to customers in
locations which are accessible and convenient to them. With regard to possession
distribution provides the customer with access to the product for consumption or future
use. In addition to this, distribution function also provides a means of effectively
communicating with the customers, and for customers to communicate with the banks.
4.6. Pricing for Financial Products
The price of a financial product can appear in many guises: some prices are obvious,
some are not, some are based on monetary value, and others are not. For example, the
price of a financial product may be the interest rate of a loan, the notice required to
withdraw money from an account, a fee charged for advice given, commission paid to an
intermediary such as a broker, the tax paid on a interest earned on saving etc.
4.7. Communication & Promotional Activities of Financial Products
Promotion performs a number of functions and roles, including informing, persuading
and educating individual and groups, works harmony with the other elements of the
marketing mix enabling the acquisition of new customers to take place, retention of
existing customers, improvements of staff morale, and projections of a company image.
There are several ways in which banks can communicate with its customers and
prospects. The specific combination of promotional method is known as “Promotional
Mix”. The mix includes advertising, sales promotion, personal selling, publicity and
public relations, direct mail, direct response advertising.
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 63
4.8. Building & Managing Customer Relationship
Relationship marketing encompasses activities of attracting, maintaining, and enhancing
customer relationships with the organization. Building relationships with customers is
more than just a marketing function: it is an organizational philosophy that impacts on
operations and processes, employees, customer service and quality.
5. Data Analysis and Findings
As the objective of the paper is to identify the strategies to financial product marketing in
Private Commercial Banks in Bangladesh particularly in Dhaka city, we have selected
eight local Private Commercial Banks (PCBs) as sample. A questionnaire was developed
to identify the strategies regarding the financial product marketing. The questionnaire
was administered by personal interviewing process with the relevant persons. The banks
that we surveyed for the research are:
1. Arab Bangladesh Bank Ltd.
2. Bank Asia Ltd.
3. Dutch- Bangla Bank Ltd.
4. Eastern Bank Ltd.
5. EXIM Bank Ltd.
6. Prime Bank Ltd.
7. South-East Bank Ltd. and
8. One Bank Ltd.
5.1. Analytical Part of the Questionnaire
Marketing strategy is an integration of large number of factors; the questionnaire was
designed in such a way that it could cover as much variables as possible. The analyses of
data from the questionnaire are mostly descriptive. The analysis and findings are given
bellow:
5.1.1. Segmentation: Bases for segmenting financial product customer
Understanding customer and their needs and requirements are important for developing
marketing strategy. By analyses of questionnaire, it has been found that the factors
affecting in segmentation of corporate banking and consumer / personal banking are
different. The factors that banks emphasize to identify the needs and requirements are as
follows:
64 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
For corporate customer:
Financial Strength and credit worthiness
Market Positioning
Reputation & Integrity
Industries
Listed Companies
For personal banking:
Occupation
Income and Propensity to save
Attitude towards banking
Market demand
Geographic concentration
5.1.2. Measuring the Customer Needs & Satisfaction
Out of the eight banks only one bank has said they measure the satisfaction through a
written questionnaire and other two banks measure it by a simple verbal process. Others
responded that they follow up the customer and through their post service behavior, they
measure the customer satisfaction.
5.1.3. Product Differentiation Strategies
Innovation of new products is a rare case for the local PCBs in Bangladesh rather they
modify their offerings from that of their competitors. They do this by analyzing the
reports, brochure or with client interview, Central Bank’s information & regulations,
lending rate, deposit rate etc. The main criterion for differentiation is made by the pricing
policy through lowering the lending rate from their competitors. Other criteria for
differentiation are: maturity of products, market demand, and geographic concentration.
Following table shows the major common criteria for differentiation of financial products
in Private Commercial Banks:
Rank Differentiation criteria
1. Pricing policy/Interest Rate
2. Maturity of products
3. Market Demand/Trend
4. Geographic concentration
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 65
5.1.4. Promotional Tools used for Marketing of Financial Products
From the survey it has been found that banks use advertising media in a greater extent,
personal selling in a limited extent. Public relations for promotional purpose are used in
medium extent. Analysis on promotional tools used by banks shows that advertising are
widely used method of promotion than personal selling. The following table shows the
ranking on three mediums of promotion:
Rank Promotional Tools Used by Banks
1. Advertising
2. Personal selling
3. Public relations
Advertising Media: All banks use newspapers as the promotional campaign and it is used
to communicate about the new offer or any new news about the existing product and
service of the banks. TV commercials are now widely used communicating vehicle by the
banks as the survey showed. Out- door advertising media like bill-board, brochures etc
are being used by the banks in medium extent.
Following table shows the rate of using three advertising media:
Percentage Use of Advertising Media
100% Newspapers
88% Outdoor Advertising
50% TV commercials
Personal Selling: Personal selling in the PCBs is not used in an extensive or structured
form. The role of personal selling is taken by the relationship managers but mainly by the
officers in branches. Only 25% of the banks use the personal selling strategy to market
their products. Visiting corporate clients negotiating with them for the rate, presentation,
attending client for both corporate and personal banking etc are some job done by
personal selling.
Public Relation: The trend of using public relations in marketing is growing over time. 63
% of sampled banks use public relations activities to promote the bank’s image as well as
their products.
66 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
5.1.5. Branding Image and Symbol
Brand image and symbol are used in the form of a name or symbol or a combination of
both to differentiate their offerings from those of their competitors. All banks try to use
the brand image through an attractive slogan and by providing the quality service. Only
one of the sample banks has Brand Manager. Priority Banking, Wealth Management
Counseling, etc. are some slogans used by the banks to create a brand image.
5.1.6. Pricing Policy
From the analysis of surveyed data it can be said that 75% of the banks use competitive
pricing strategy, 13% follow a mark-up pricing policy and 12% follow brand-pricing
strategies which lead to higher prices (interest rates) compared to those of their
competitors.
5.1.7. Spatial Convenience
Spatial convenience is provided by branch location and technology driven delivery
services such as ATM. To create spatial convenience branches and ATM booths should
be established near the target customers. But branches and ATM booths of local PCBs do
not consider the customers’ convenience, rather they emphasize on rent advantage.
ATM is used to provide convenience by placing them in locations like shopping mall, in
some central place of areas. Other banks are yet to take initiative to provide to provide
service through ATMs. 63% PCBs use ATM booths only in Dhaka City.
5.1.8. Database Marketing
Private commercial banks recently have started customer database for marketing purpose.
The research shows that all of the sample banks use database for marketing of their
products.
5.1.9. Internet Banking
Almost all the private banks have their own website. Internet Banking has already been
started. But the operation is not so much extended. Following are the common features of
Internet Banking:
• View account balances and transaction history
• Verify deposits
• Check loan balances
• Check loan payment information
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 67
• View interest information
• Various information regarding their products
5.1.10. Customer Relationship Management
The survey shows that customer relationship management (CRM) is not being practiced
by most of the private banks. They have vague idea about CRM. However, they try to
follow these important aspects of CRM. These are as follows:
? Customer Retention:
100% of the surveyed banks give emphasize on retaining customers on the basis of
existing customers base. Customer retention can also be made by effectively managing
customers’ complaints. The survey found that customers are retained through:
Focus on existing customers
Superior products & quality service
Providing new facility
Technological innovation
Loyalty building & Satisfaction
Quick response to customer needs and problems
? Managing Customer Complaints:
Customer complaints are identified by a number of ways: such as customer complaint
box, written form, verbal form. The interviews show that the customer complaint boxes
are generally not used by the customers. They usually make complaint about their
problems telling the relevant person in the bank. Complaints are managed by taking quick
actions.
? Relationship Managers (RMs)
The concept of Relationship Manager (RM) is being now used in the commercial banks
but the job description of RMs is not well structured as they should. The job of RM is
generally performed by the branch officers. The interviews revealed that the main job of
Relationship Managers to reach out to the customers both corporate and personal, to
make sure that the job is done in a systematic manner within the client’s time frame. The
relationship managers for corporate banking are very much important because during the
relationship the bank attempts to solve the problems of client organization and satisfy its
needs through a series of transactions.
68 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
5.1.11. Large Corporate Customers versus Small Business Customers:
The study reveals that banks understand the differences in needs between larger corporate
customers and small business customers. Small business customers are more dependent
on banks as a source of finance, compared to large corporations which usually have
multiple banking relationships and can use the bargaining power to obtain better deals.
As a result of this, small businesses tend to be more focused on price than larger
corporations which favor quality of service and relationship development.
5.1.12. Societal Marketing: A Means of Publicity:
The survey shows that a good number of private commercial banks have already been
engaged in societal marketing. They do this by engaging publicity through contribution to
the charitable issues, creating public awareness on some important issues and sponsorship
for many events, ideas and education, or charitable issues. Some of these activities are:
donation to flood affected, anti dowry movement, stipends for students, rehabilitation for
acid burned etc. Sport sponsorship is used by the banks in the live telecast of cricket and
a few games and offers a large viewing figures and opportunity of targeting a wide
audience. This broadcast sponsorship is intended to create popularity of the bank.
6. Summary of Findings
The analysis shows that financial product marketing in Private Commercial Banks
(PCBs) in Bangladesh particularly in Dhaka city is not in a structured form. The
presentation of data can be summarized as of the following findings:
? Developing an effective financial product marketing strategy is now being considered
important by local PCBs
? 75% of the banks started the segmentation of target market on the basis of
demography, geographic location, industry structure and type, size of the client-firm,
repayment ability. Others are yet to adopt a clear strategy to segment their target
market based on specific variables.
? Usually no pretest is used to market any financial product
? Innovation of new financial products is a rare case in PCBs rather they hardly
upgrade their offerings on the basis on some changes in interest rate, maturity, market
demand. They are able to upgrade their products which amount to ‘congruent
innovation’ in the ‘Innovation Adaptation Continuum (IAC)’ process.
? Any new product and existing or modified offerings are communicated largely by
newspapers, TV commercial is used in a limited form, and outdoor advertising
through billboard are widely used.
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 69
? Internet banking has been used in a limited form. Balance of an account or loan or
deposit can be checked and inquires are possible through online. SMS banking
through mobile phone is also a new e-product has been started recently.
? ATMs are used to provide a greater convenience to customers to withdraw money.
Q-cash and debit cards issued by banks also give the spatial convenience to the
customer by minimizing the distance of location. Besides this, Branches provide
convenience to the customer paying utility bills and mobile bills. But the branches
are located on the bases of bank’s preference rather customers’ convenience.
? Customer database are maintained by some of the banks. 100% of sample maintains
the database and they use it for marketing and Customer Relationship Management
(CRM).
? Most of the banks use a competitive pricing policy to attract and retain customers,
some banks use mark-up pricing strategy and some use brand –based pricing policy.
? Branding is now getting a huge importance in order to get a unique identity of the
bank and its products. Brand and brand mantra are being created by TV commercials,
news paper advertising, bill-boards and attractive slogans are not sufficient enough to
create brand.
? Relationship Manager is relatively a new concept for the local PCBs. 63% of the
banks already have RMs. The rest are in a process of recruiting them. But the job
description of RMs is not well structured as they should. The job of RM is generally
performed by the branch officer.
? All the banks have their own websites which acts as an information center and
promotional tool for the banks.
? Customer Relationship Management (CRM) is not being properly maintained by all
the banks. Quick response to customer problems, quality and additional service,
customer retention are the core point of CRM but these are not getting importance.
? It has been noticed that new banks are more aware in the aspects of customer
relationship management (CRM), database management, electronic banking.
? The corporate customers’ requirements are more complex than an individual
customer. Banks should be more aware of it. But banks have somewhat lacking in
this regard. They focus predominantly on what provide the business rather than what
the customer actually want.
? Banks are now engaging in societal marketing for making public relations. Publicity
for activity such as rehabilitation for acid-burned, anti dowry movement, prevention
of environmental pollution, donation to flood affected etc are the part of societal
70 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
marketing. They do these to crate a positive image on bank and its products towards
peoples’ mind.
7. Conclusion
This paper is focused on the marketing strategies of financial products in Private
Commercial Banks (PCBs) in Dhaka city with a view to identify what they are now doing
in this regard and what are the future prospects of marketing of financial products.
Marketing is being practiced by the banks is not so much structured. The research shows
that there is a great potential in marketing of financial products which will make the
banking sector more effective. The PCBs are now feeling the greater importance of
marketing because of increased competition, technological innovation and government
regulations. They are trying to create a vision of marketing with a large number of
promising issues like: Customer Relationship Management, Branding, Electronic
Banking, Tele-banking, product differentiation attributes, etc. Thus the changing
environment is creating a changing demand for marketing strategies and by developing
an effective marketing strategy banks can retain market shares and profitability as well as
competitive advantages. Finally, it can be concluded that although financial product
marketing of PCBs in Bangladesh is in an early stage, it has a good potential for
development, as banks are now aware of its importance.
8. References
1. Cetorelli, Nicola (2004). “Bank Concentration and Competition in Europe”, Journal of
Money, Credit and Banking, 543-558.
2. Channon, Derek F., (1995). Bank Strategic Management and Marketing, John Willy &
Sons Ltd., England.
3. Chowdhury, A. M., “Relative Performance of Nationalized Commercial Banks and Private
Commercial Banks, 1971-1989: A Critical Analysis”, Journal of the Institute of Bankers,
Bangladesh, Vol. 36-41, December – June 1995.
4. Cowel, Donald W.(1988). The Marketing of Services, Heinemann Professional Publishing
Ltd. Oxford.
5. Coult, H., (1982), Management in Banking, London: Pitman Publishing.
6. Government of Bangladesh (2005). Bangladesh Economic Review, Ministry of Finance,
Dhaka.
7. Harison, Tina. (2003). Financial Products Marketing, 2
nd
Edition, McGraw-Hill.
8. Kotler P. and Armstrong, G., (2000). Principles of Marketing, 10
th
Edition, New Delhi
9. Mishkin, Frederic, S. (2001). The Economics of Money, Banking and Financial Markets, 6
th
Edition. Pearson Education, Boston, U.S.A.
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 71
10. Prime Bank Limited, (2007), Consumer Credit Schemes,http://www.prime-
bank.com/consumer_credit.htm.
11. Rose, Peter S., (2005). Commercial Bank Management, International Edition, McGraw-
Hill Irwin.
12. Swamy, M. R. and Vasudevan, S. V., (1985).A Text Book of Banking, S. Chand &
Company, New Delhi.
13. Varshney, P. N., Banking Law and Practice, 19
th
Edition. Sultan Chand & Sons, New
Delhi, 2001.
14. Zeithmal, V. A., Bitner, M. J., and Gremler, D.D. (2004) “Service Marketing: Integrating
Focus Across the Firm”, 4
nd
Edition. McGraw- Hill, New York.
72 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
APPENDIX
Sample Questionnaire
Marketing of Bank Services: A Comparative Study on Some Selected Private
Commercial Banks in Dhaka City
Bank Name:
1. Do you use market segmentation for the purpose of marketing of financial
products? How?
2. Do you measure customer needs & motives for financial product marketing?
3. Do you use differentiation attribute to market a product? If yes, how?
4. What are the promotional tools you use to market the financial products?
5. What advertising media you use to promote your products?
6. How do you create and use brand image for marketing your product?
7. What is your pricing policy about the product relative to your competitors?
8. How do you add the spatial convenience (Distance) to your customer relative to
your competitors?
9. Do you maintain customer database in marketing financial product?
10. Does your bank practice Customer Relationship Management?
11. If yes, how does your bank manage Customer Relationship? Explain various steps
involved in this process.
12. How do you use Internet banking or Electronic Banking as a competitive
advantage?
13. What factors do you consider important for developing & maintaining customer
relationship?
14. What specific job do the relationship managers perform for marketing the financial
products?
15. How do you manage customer complaints?
16. What are your strategies to retain customers?
17. How do you measure customer feedback about the product offered?
18. What are your strategies to market your products by personal selling?
19. Do you use direct marketing technique to promote your products? If yes, how?
20. Does your bank engage in societal marketing for the purpose of marketing?
21. What kind of societal marketing are you involved in?
doc_939840060.pdf
The private commercial banks, operating in Bangladesh, constantly focus on understanding and anticipating customer needs. They already made significant progress within a very short period of their existence.
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008
Marketing of Bank Services: A Comparative Study on Some
Selected Private Commercial Banks in Dhaka City
1
Md. Shahidul Islam Zahid
2
Abstract: This paper focuses on the financial product marketing strategies adopted
by different Private Commercial Banks in Dhaka city with a view to identify what
they are now doing in this regard and what are the future prospects of marketing of
financial products. The financial service sector in Bangladesh is now quite
competitive to deal with changing environment. A number of external forces have
exerted influences on the sector, including socio-economic, regulatory and
technological factors. Changes to regulatory environment undoubtedly have had the
greatest impact on this sector. Technology has also taken on increased importance
for financial institutions especially for private commercial banks. There are now 30
private commercial banks are operating in Bangladesh & they are offering different
products but there are a few basic differences among them in terms of structure and
performance. Thus the competitions among them are increasing day by day and so
marketing of financial products is now becoming an important concern. The present
study is based on a survey on 8 randomly selected private commercial banks in
Dhaka City to identify the marketing strategies they follow at present. The study
finds that marketing strategies adopted by these banks to market their products are
not well designed and incomplete to some extent. The study finds that there is a need
to develop more effective marketing strategies suitable for long-term growth of these
banks. The study also finds that they have very vague idea about Customer
Relationship Management although they claim that they practice it.
1. Introduction
This comparative study focused on the various aspects of marketing, advertising, market
positioning, promotioning etc. of some selected private commercial banks in Dhaka city.
The private commercial banks, operating in Bangladesh, constantly focus on
understanding and anticipating customer needs. They already made significant progress
within a very short period of their existence. Many of the banks have been graded as top
class banks in the country through internationally accepted CAMEL rating. They have
already occupied an enviable position among their competitors after achieving success in
1
The article is based on a seminar lecture delivered by Professor Dr. S. M. Ikhtiar Alam,
Department of Business Administration, Jahangirnagar University, Savar, Dhaka in 2004.
2
Lecturer, Department of Business Administration, Daffodil International University, Dhaka.
60 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
all areas of business operation. Banking scenario undergoes changes time to time as this
is very dynamic industry. Private Commercial Banks are offering different financial
products with different features. They follow various strategies to market such products.
This paper will mainly emphasize on how the Private Commercial Banks market their
products.
2. Objective of the Study
The objective of the study is to identify the strategies Private Commercial Banks in
Bangladesh use to market their products. At the same time the paper focuses to gain an
understanding on issues that are important for developing marketing strategies for
financial services. We have analyzed the relative position, pricing strategies, promotional
activities etc. of the selected Private Commercial Banks operating in Dhaka city to
identify their position in the market and the competitive situation as well.
3. Methodology and Data Source
3.1. Data Sources: Both primary and secondary data have been used to prepare this
paper.
3.2. Data Collection Method
Primary Data regarding the banks’ service marketing strategies have been collected
through guided interviews of the respective banks’ executives. In this regard a structured
questionnaire with 21 questions has been used (see appendix for the questionnaire).
Secondary Data have been collected from: Different text on Marketing, Financial
Products Marketing as well as from the Brochures & reports of the selected banks for this
paper.
3.3. Sample Plan & Size
Eight banks have been selected as sample on the basis of convenience for the
questionnaire survey to find out the marketing strategies of the Private Commercial
Banks (PCBs).
4. Literature Review
The financial service sector in Bangladesh is now quite competitive to deal with changing
environment. There are now 30 private commercial banks operating in Bangladesh and
they are offering different products and services but there are a few basic differences
among them in terms of structure and performance. Thus the competitions among them
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 61
are increasing day by day and so marketing of financial products is now becoming an
important concern. This paper focus on the strategies of financial product marketing, first
of all it is important to know what a Marketing Strategy is and what are the financial
products banks usually offer.
4.1. Marketing Strategy
A Marketing strategy can be defined as the outlines of broad marketing logic by which
the business units hopes to achieve its marketing objectives and the specifics of target
markets, positioning and marketing expenditure levels. It outlines specific strategies for
each marketing mix element and explains how each responds to the threats, opportunities
and critical issues spelled out in the marketing plan.
4.2. Understanding Financial Product Consumer
Understanding customers and customer’s needs and requirements is the guiding
philosophy of marketing. A marketing orientation requires the organization to view its
business from the point of view of its customers. This demands an insight into the wider
aspects of consumer psychology and behavior, including what motivates consumers, what
their attitude and perceptions of the company and its products are, as well as an
understanding of their decision processes.
4.3. Identifying & Targeting Financial Prospects
In addition to understanding the broader pattern of financial services consumer behavior,
the development of an effective marketing strategy requires that financial institutions,
especially commercial banks need to understand the differences among customers and
their financial products requirements. This issue of customer differences can be identified
through market segmentation. The benefits of market segmentation can be an aid in
designing marketing strategy. The accuracy of a financial institution’s identification of
market segment contributes to its competitive advantage since it is one of the conditions
of developing an effective marketing strategy. A number of conditions have been noted to
affect the effectiveness of potential profitability of marketing strategy like measurability,
substantiality, accessibility, action- ability and differentiability of the target. Again
commercial banks can formulate the different segmentation on the basis of geographic
and or demographic variables.
4.4. Development & Management of Financial Products
The product is usually the basis on which customer satisfaction is created. As such it is
vital component of the marketing mix. The product provides the basis for competition, it
62 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
enables the organization to generate income and it can provide a tangible indication of the
strategic direction of the organization. Thus the financial institutions specially banks have
become increasingly concerned with a number of issues surrounding product strategy,
including: the process and procedure involved in the development of new financial
services and products; the factors which contribute towards the successful adoption of
new product; how to manage the product over its life to protect it from competition; how
to use branding to differentiate the product from similar alternatives; when to withdraw
an unprofitable product from the range; and how to best implement the withdrawal
process with minimal adverse effects for the banks as well as customers.
4.5. Channels of Distribution
Distribution involves a wide variety of activities culminating in the creation of three
types of utility: time, place and possession. In terms of time, distribution allows the
customer to gain access to financial service when it is convenient for them to buy. In
terms of place, distribution makes products and services available to customers in
locations which are accessible and convenient to them. With regard to possession
distribution provides the customer with access to the product for consumption or future
use. In addition to this, distribution function also provides a means of effectively
communicating with the customers, and for customers to communicate with the banks.
4.6. Pricing for Financial Products
The price of a financial product can appear in many guises: some prices are obvious,
some are not, some are based on monetary value, and others are not. For example, the
price of a financial product may be the interest rate of a loan, the notice required to
withdraw money from an account, a fee charged for advice given, commission paid to an
intermediary such as a broker, the tax paid on a interest earned on saving etc.
4.7. Communication & Promotional Activities of Financial Products
Promotion performs a number of functions and roles, including informing, persuading
and educating individual and groups, works harmony with the other elements of the
marketing mix enabling the acquisition of new customers to take place, retention of
existing customers, improvements of staff morale, and projections of a company image.
There are several ways in which banks can communicate with its customers and
prospects. The specific combination of promotional method is known as “Promotional
Mix”. The mix includes advertising, sales promotion, personal selling, publicity and
public relations, direct mail, direct response advertising.
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 63
4.8. Building & Managing Customer Relationship
Relationship marketing encompasses activities of attracting, maintaining, and enhancing
customer relationships with the organization. Building relationships with customers is
more than just a marketing function: it is an organizational philosophy that impacts on
operations and processes, employees, customer service and quality.
5. Data Analysis and Findings
As the objective of the paper is to identify the strategies to financial product marketing in
Private Commercial Banks in Bangladesh particularly in Dhaka city, we have selected
eight local Private Commercial Banks (PCBs) as sample. A questionnaire was developed
to identify the strategies regarding the financial product marketing. The questionnaire
was administered by personal interviewing process with the relevant persons. The banks
that we surveyed for the research are:
1. Arab Bangladesh Bank Ltd.
2. Bank Asia Ltd.
3. Dutch- Bangla Bank Ltd.
4. Eastern Bank Ltd.
5. EXIM Bank Ltd.
6. Prime Bank Ltd.
7. South-East Bank Ltd. and
8. One Bank Ltd.
5.1. Analytical Part of the Questionnaire
Marketing strategy is an integration of large number of factors; the questionnaire was
designed in such a way that it could cover as much variables as possible. The analyses of
data from the questionnaire are mostly descriptive. The analysis and findings are given
bellow:
5.1.1. Segmentation: Bases for segmenting financial product customer
Understanding customer and their needs and requirements are important for developing
marketing strategy. By analyses of questionnaire, it has been found that the factors
affecting in segmentation of corporate banking and consumer / personal banking are
different. The factors that banks emphasize to identify the needs and requirements are as
follows:
64 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
For corporate customer:
Financial Strength and credit worthiness
Market Positioning
Reputation & Integrity
Industries
Listed Companies
For personal banking:
Occupation
Income and Propensity to save
Attitude towards banking
Market demand
Geographic concentration
5.1.2. Measuring the Customer Needs & Satisfaction
Out of the eight banks only one bank has said they measure the satisfaction through a
written questionnaire and other two banks measure it by a simple verbal process. Others
responded that they follow up the customer and through their post service behavior, they
measure the customer satisfaction.
5.1.3. Product Differentiation Strategies
Innovation of new products is a rare case for the local PCBs in Bangladesh rather they
modify their offerings from that of their competitors. They do this by analyzing the
reports, brochure or with client interview, Central Bank’s information & regulations,
lending rate, deposit rate etc. The main criterion for differentiation is made by the pricing
policy through lowering the lending rate from their competitors. Other criteria for
differentiation are: maturity of products, market demand, and geographic concentration.
Following table shows the major common criteria for differentiation of financial products
in Private Commercial Banks:
Rank Differentiation criteria
1. Pricing policy/Interest Rate
2. Maturity of products
3. Market Demand/Trend
4. Geographic concentration
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 65
5.1.4. Promotional Tools used for Marketing of Financial Products
From the survey it has been found that banks use advertising media in a greater extent,
personal selling in a limited extent. Public relations for promotional purpose are used in
medium extent. Analysis on promotional tools used by banks shows that advertising are
widely used method of promotion than personal selling. The following table shows the
ranking on three mediums of promotion:
Rank Promotional Tools Used by Banks
1. Advertising
2. Personal selling
3. Public relations
Advertising Media: All banks use newspapers as the promotional campaign and it is used
to communicate about the new offer or any new news about the existing product and
service of the banks. TV commercials are now widely used communicating vehicle by the
banks as the survey showed. Out- door advertising media like bill-board, brochures etc
are being used by the banks in medium extent.
Following table shows the rate of using three advertising media:
Percentage Use of Advertising Media
100% Newspapers
88% Outdoor Advertising
50% TV commercials
Personal Selling: Personal selling in the PCBs is not used in an extensive or structured
form. The role of personal selling is taken by the relationship managers but mainly by the
officers in branches. Only 25% of the banks use the personal selling strategy to market
their products. Visiting corporate clients negotiating with them for the rate, presentation,
attending client for both corporate and personal banking etc are some job done by
personal selling.
Public Relation: The trend of using public relations in marketing is growing over time. 63
% of sampled banks use public relations activities to promote the bank’s image as well as
their products.
66 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
5.1.5. Branding Image and Symbol
Brand image and symbol are used in the form of a name or symbol or a combination of
both to differentiate their offerings from those of their competitors. All banks try to use
the brand image through an attractive slogan and by providing the quality service. Only
one of the sample banks has Brand Manager. Priority Banking, Wealth Management
Counseling, etc. are some slogans used by the banks to create a brand image.
5.1.6. Pricing Policy
From the analysis of surveyed data it can be said that 75% of the banks use competitive
pricing strategy, 13% follow a mark-up pricing policy and 12% follow brand-pricing
strategies which lead to higher prices (interest rates) compared to those of their
competitors.
5.1.7. Spatial Convenience
Spatial convenience is provided by branch location and technology driven delivery
services such as ATM. To create spatial convenience branches and ATM booths should
be established near the target customers. But branches and ATM booths of local PCBs do
not consider the customers’ convenience, rather they emphasize on rent advantage.
ATM is used to provide convenience by placing them in locations like shopping mall, in
some central place of areas. Other banks are yet to take initiative to provide to provide
service through ATMs. 63% PCBs use ATM booths only in Dhaka City.
5.1.8. Database Marketing
Private commercial banks recently have started customer database for marketing purpose.
The research shows that all of the sample banks use database for marketing of their
products.
5.1.9. Internet Banking
Almost all the private banks have their own website. Internet Banking has already been
started. But the operation is not so much extended. Following are the common features of
Internet Banking:
• View account balances and transaction history
• Verify deposits
• Check loan balances
• Check loan payment information
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 67
• View interest information
• Various information regarding their products
5.1.10. Customer Relationship Management
The survey shows that customer relationship management (CRM) is not being practiced
by most of the private banks. They have vague idea about CRM. However, they try to
follow these important aspects of CRM. These are as follows:
? Customer Retention:
100% of the surveyed banks give emphasize on retaining customers on the basis of
existing customers base. Customer retention can also be made by effectively managing
customers’ complaints. The survey found that customers are retained through:
Focus on existing customers
Superior products & quality service
Providing new facility
Technological innovation
Loyalty building & Satisfaction
Quick response to customer needs and problems
? Managing Customer Complaints:
Customer complaints are identified by a number of ways: such as customer complaint
box, written form, verbal form. The interviews show that the customer complaint boxes
are generally not used by the customers. They usually make complaint about their
problems telling the relevant person in the bank. Complaints are managed by taking quick
actions.
? Relationship Managers (RMs)
The concept of Relationship Manager (RM) is being now used in the commercial banks
but the job description of RMs is not well structured as they should. The job of RM is
generally performed by the branch officers. The interviews revealed that the main job of
Relationship Managers to reach out to the customers both corporate and personal, to
make sure that the job is done in a systematic manner within the client’s time frame. The
relationship managers for corporate banking are very much important because during the
relationship the bank attempts to solve the problems of client organization and satisfy its
needs through a series of transactions.
68 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
5.1.11. Large Corporate Customers versus Small Business Customers:
The study reveals that banks understand the differences in needs between larger corporate
customers and small business customers. Small business customers are more dependent
on banks as a source of finance, compared to large corporations which usually have
multiple banking relationships and can use the bargaining power to obtain better deals.
As a result of this, small businesses tend to be more focused on price than larger
corporations which favor quality of service and relationship development.
5.1.12. Societal Marketing: A Means of Publicity:
The survey shows that a good number of private commercial banks have already been
engaged in societal marketing. They do this by engaging publicity through contribution to
the charitable issues, creating public awareness on some important issues and sponsorship
for many events, ideas and education, or charitable issues. Some of these activities are:
donation to flood affected, anti dowry movement, stipends for students, rehabilitation for
acid burned etc. Sport sponsorship is used by the banks in the live telecast of cricket and
a few games and offers a large viewing figures and opportunity of targeting a wide
audience. This broadcast sponsorship is intended to create popularity of the bank.
6. Summary of Findings
The analysis shows that financial product marketing in Private Commercial Banks
(PCBs) in Bangladesh particularly in Dhaka city is not in a structured form. The
presentation of data can be summarized as of the following findings:
? Developing an effective financial product marketing strategy is now being considered
important by local PCBs
? 75% of the banks started the segmentation of target market on the basis of
demography, geographic location, industry structure and type, size of the client-firm,
repayment ability. Others are yet to adopt a clear strategy to segment their target
market based on specific variables.
? Usually no pretest is used to market any financial product
? Innovation of new financial products is a rare case in PCBs rather they hardly
upgrade their offerings on the basis on some changes in interest rate, maturity, market
demand. They are able to upgrade their products which amount to ‘congruent
innovation’ in the ‘Innovation Adaptation Continuum (IAC)’ process.
? Any new product and existing or modified offerings are communicated largely by
newspapers, TV commercial is used in a limited form, and outdoor advertising
through billboard are widely used.
Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 69
? Internet banking has been used in a limited form. Balance of an account or loan or
deposit can be checked and inquires are possible through online. SMS banking
through mobile phone is also a new e-product has been started recently.
? ATMs are used to provide a greater convenience to customers to withdraw money.
Q-cash and debit cards issued by banks also give the spatial convenience to the
customer by minimizing the distance of location. Besides this, Branches provide
convenience to the customer paying utility bills and mobile bills. But the branches
are located on the bases of bank’s preference rather customers’ convenience.
? Customer database are maintained by some of the banks. 100% of sample maintains
the database and they use it for marketing and Customer Relationship Management
(CRM).
? Most of the banks use a competitive pricing policy to attract and retain customers,
some banks use mark-up pricing strategy and some use brand –based pricing policy.
? Branding is now getting a huge importance in order to get a unique identity of the
bank and its products. Brand and brand mantra are being created by TV commercials,
news paper advertising, bill-boards and attractive slogans are not sufficient enough to
create brand.
? Relationship Manager is relatively a new concept for the local PCBs. 63% of the
banks already have RMs. The rest are in a process of recruiting them. But the job
description of RMs is not well structured as they should. The job of RM is generally
performed by the branch officer.
? All the banks have their own websites which acts as an information center and
promotional tool for the banks.
? Customer Relationship Management (CRM) is not being properly maintained by all
the banks. Quick response to customer problems, quality and additional service,
customer retention are the core point of CRM but these are not getting importance.
? It has been noticed that new banks are more aware in the aspects of customer
relationship management (CRM), database management, electronic banking.
? The corporate customers’ requirements are more complex than an individual
customer. Banks should be more aware of it. But banks have somewhat lacking in
this regard. They focus predominantly on what provide the business rather than what
the customer actually want.
? Banks are now engaging in societal marketing for making public relations. Publicity
for activity such as rehabilitation for acid-burned, anti dowry movement, prevention
of environmental pollution, donation to flood affected etc are the part of societal
70 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
marketing. They do these to crate a positive image on bank and its products towards
peoples’ mind.
7. Conclusion
This paper is focused on the marketing strategies of financial products in Private
Commercial Banks (PCBs) in Dhaka city with a view to identify what they are now doing
in this regard and what are the future prospects of marketing of financial products.
Marketing is being practiced by the banks is not so much structured. The research shows
that there is a great potential in marketing of financial products which will make the
banking sector more effective. The PCBs are now feeling the greater importance of
marketing because of increased competition, technological innovation and government
regulations. They are trying to create a vision of marketing with a large number of
promising issues like: Customer Relationship Management, Branding, Electronic
Banking, Tele-banking, product differentiation attributes, etc. Thus the changing
environment is creating a changing demand for marketing strategies and by developing
an effective marketing strategy banks can retain market shares and profitability as well as
competitive advantages. Finally, it can be concluded that although financial product
marketing of PCBs in Bangladesh is in an early stage, it has a good potential for
development, as banks are now aware of its importance.
8. References
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72 Marketing of Bank Services: A Comparative Study on Some Selected Private Commercial Banks
APPENDIX
Sample Questionnaire
Marketing of Bank Services: A Comparative Study on Some Selected Private
Commercial Banks in Dhaka City
Bank Name:
1. Do you use market segmentation for the purpose of marketing of financial
products? How?
2. Do you measure customer needs & motives for financial product marketing?
3. Do you use differentiation attribute to market a product? If yes, how?
4. What are the promotional tools you use to market the financial products?
5. What advertising media you use to promote your products?
6. How do you create and use brand image for marketing your product?
7. What is your pricing policy about the product relative to your competitors?
8. How do you add the spatial convenience (Distance) to your customer relative to
your competitors?
9. Do you maintain customer database in marketing financial product?
10. Does your bank practice Customer Relationship Management?
11. If yes, how does your bank manage Customer Relationship? Explain various steps
involved in this process.
12. How do you use Internet banking or Electronic Banking as a competitive
advantage?
13. What factors do you consider important for developing & maintaining customer
relationship?
14. What specific job do the relationship managers perform for marketing the financial
products?
15. How do you manage customer complaints?
16. What are your strategies to retain customers?
17. How do you measure customer feedback about the product offered?
18. What are your strategies to market your products by personal selling?
19. Do you use direct marketing technique to promote your products? If yes, how?
20. Does your bank engage in societal marketing for the purpose of marketing?
21. What kind of societal marketing are you involved in?
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