The Marketing of Banking Services
NATURE OF MARKETING OF BANKING SERVICES – To discuss the nature of marketing of bank services, it is necessary to define the term “marketing”, ‘bank’ and service. John Orjih (1998:74) defined marketing as a process by which the customer and the customers wants are clearly identified and understood and then satisfied by the benefits of the goods or services supplied by the organization. Again, the chartered institute of marketing defined marketing as the management process responsible for identifying, anticipating and satisfying consumers requirements profitably. Following the Oxford dictionary, “bank” is an organization that provides various financial services is the work that somebody does for an organization.
Therefore, the marketing of bank services is the activity of presenting, advertising and selling of bank’s products in the best possible way in order to satisfy consumers’ requirement profitable. Marketing of banks services is one of the services rendered by financial industry (bank). Other services include: lending to supplement working capital, fund management, leasing business, hire purchase services, debt factoring, project financing and advisory services, debt administration, issuing and marketing of primary shares or securities trusteeship, portfolio management, unit trust underwriting of securities and so on.
PURPOSE OF MARKETING BANK SERVICES
In order to make the bank’s marketing effort more meaningful and more successful more emphasis should be placed on the development of new products, further industry representation. There should be an intensify programmes of market segmentation and strategic distribution of units and lending teams in response to the changing needs of the markets as this can provide a mutt tier coverage of major companies and selected market segments of the national market which is the key to growth in the local banking market.
This situation calls for a prudent, strategic positioning and quality control of the banks loans and financial services portfolio which includes foremost corporate name as well as the formulation and implementation of a credit policy.
Another important purpose is the need to take stock of performance and compare it with existing and prospective competitors. The comparison should include overall market share, and geographical territory. Other variables such as major customers or client base, quality speed and presentation of product of services, pricing, marketing, sales, and promotion activities financial results achieve and so on.
SERVICES RENDERED BY BANKS
Banks render a wide variety of services, which help to keep the economy of a nation moving. These services vary according to the type of bank, and the type of customer in question. All the same, the service rendered by the various type of banks are closely related. However, each type of banks specializes in providing particular type of services. For example, merchant banks and some of the development banks provide more of whole and corporate banking services while commercial banks, people’s banks and community banks concentrate on retail banking services.
Wholesale banking services refer to those services that banks render to other financial institutions and conglomerates on a large-scale basis. Retail banking services include those customers directly, especially their personal customers, on small-scale basis, A times, services provided by different types of banks differ.
For example, both commercial and merchant banks accept deposit and give loans; but merchant banks accept large deposits and give huge amount of loans, while commercial banks accept small amount of loans to their customers individuals and small firms.
There are also some banking services that are not common to all banks. They are usually the exclusive right of certain particular type of banks. Example community banks in Nigeria are prohibited from engaging in sophisticated banking services, while most development banks do not accept deposits at all,
Sophisticated banking services here may include foreign exchange operations, factoring, hire purchase, leasing etc.
Banking services can easily be classified as follows;
1. Deposit, collection and safe-keeping services: These include all the deposit accepted by the banks
(a) Current Account
(b) Savings Account
(c) Fixed Deposit Account
(d) Night Safe Facilities
(e) Safe Custody.
2. Advances / Credit Extension Services:
(a) Overdraft facilities
(b) Loan – personal and business
(c) Project financing
(d) Credit cards / cheque cards
3. Corporate finance services
(a) Leasing
(b) Bills discounting
(c) Hire Purchase
4. Money transfer services:
(a) Direct debiting
(b) Cheque Collection and clearing
(c) Standing orders
(d) Telegraphic/Mail transfer
(e) On-line Computer services
(f) Bankers’ draft / cheques
(g) Deposit Card
5. International Financial Services
(1) Export and import financing
(2) Documentary letters of credit
(3) Trawellers, Cheques
(4) Travel facilities
(5) International money transfer
(6) Payment and collection of bill of ex-
(7) Change and correspondent banking
6. Other Financial and Business Advisory:
(1) Business advisory services
(2) Investment advisory services
(3) Tax advisory services
(4) Insurance service
(5) Executor ship and trust services
(6) Bank guarantee
(7) Performance bond.
The researcher, because of limited time and resources will discuss on some of the above services rendered by bank. They include:
CURRENT ACCOUNTS
Current account is the normal banking account, running from day to day, a balance being shown at the end of any day on which there has been a debit or credit entry. No interest is normally allowed on current account. This account is maintained by a bank on behalf of a customer, being operated mainly by use of a cheque book. Nevertheless, the holder of a current account must be carefully checked before he is issued with a cheque book. However, two references are normally required and the referees must themselves be considered of satisfactory status. Statements of the account are usually sent to the customer monthly, quarterly or half – yearly or more often if the customer so wishes.
SAVING ACCOUNT
This account is designed to meet the need of small scale savers or customers. Today, it is the most commonly operated account in West African Banks. This account accommodates or keeps the money not required for immediate use by the owner and it is put into the bank for the purpose of gaining interest, which is generally calculated on a monthly basis but credited to the customer’s account monthly, quarterly or half-yearly or when the account is closed. On the opening of the account a passbook is issued to the customer in which all the inflows and outflows of funds are recorded. The minimum balance required to open this account depends on the individual banks. In some banks it is five hundred naira (N500) while in others it may be between one thousand naira (N1000) or as high as five thousand naira (N500).
FIXED DEPOSIT ACCOUNT
Fixed or time deposits mean money which the owner does not need for a known period say six months or three months. This account provides that the amount of such deposit payable on a certain date, or at the expiration of a specified period of time.
In Orjih (1996) “Banks accept fixed deposits for periods ranging between 3 months to 36 months, while opening such an account there is usually a written contract agreement between the bank and the customer” that neither the whole nor any part of the deposit may be withdrawn before the maturity date. The bank pays interest on the deposit but the deposit but the deposit cannot with draw any part or all the deposits till the expiration of the fixed period. Where a customer withdraws his deposit prior to the date of maturity, he will forfeit interest payment and overdraft is not allowed.
NIGHT SAFE FACILITIES
This service is predominantly offered to customers whose working hours terminate at night usually after the normal banking hours. A security safe where customers can safeguard his or her money when bank has closed is given. Banks issue wallets, which may not contain money or cheques. These are opened the next working day by the customer himself and the money is deposited in his current account. There is usually no change made for this services which is rarely common among the operating banks in the country save for those within the commercial centers like Lagos, Aba and Onitsha metropolis,
SAFE CUSTODY
This is another services rendered by banks. Majority of the banks, especially those situated in Lagos metropolis maintain a safe custody where the customers can put his documents or articles of value into his box or compartment, to which he alone has access. In this case, the bank becomes a bailee and the customer the bailor since no charge is made for service.
Ojo (1992) noted that with the recent upsurge of new banks into the industry, the hitherto free services have been subsequently commercialized including the safe custody service. He thus attributed the development to the earnest competition between banks towards profit maximization that has brought about this development. Example of banks that operate this services are Union Bank Plc, Afri Bank Nigeria Plc, etc.
LEASING
Leasing in its simplest form means the usage of an asset or properly, which belongs to another person. The term could also be described as a contractual agreement or an arrangement whereby one party, (the lease) in the return for paying an agreed rent uses a capital asset belonging to another party (the leassor). Capital assets involved are plant, machinery, and other assorted business equipment.
In fact, leasing has become universally accepted as a means of rising medium term finance for the purchase, acquisition, or renting of capital assets for a business organization. There are principally three kinds of leases. They are finance leases; operating leases and sale and lease bank. Finance lease is usually of medium term duration. Operating leasing is for manufactures, suppliers or agents of assorted equipment, while sale and lease back is an agreement of company or firm to sell its capital equipment or machineries to the finance company or bank.
LOAN SYNDICATION
Loan syndication is a practice whereby two or more lending institutions agree to provide a borrower credit for financing a large project. The advantage of this practice is that it allows the lenders to spread the risks while making it less difficult for huge projects to be funded. There is usually a lead bank which oversees the disbursement and repayment of the loan.
TELEGRAPHIC MAIL TRANSFER
In other to avoid delay in making a foreign remittance by bank draft, which goes through the mail, a telegraph or cable transfer may be obtained from a bank. Thus if a friend runs short of fund by traveling abroad, reinforcement may be sent through a bank within a few hours by making use of cable or telegraphic transfer. Bank can also remit fund abroad through mail transfer. Almost all the commercial and merchant banks in the country has a kind of telegraphic or cable transfers.
CHEQUE CLEARING
The Central Bank of Nigeria is mandated to facilitate the clearing of cheques and credit instruments for banks involved in business in Nigeria. The Bank, therefore, sets up clearing house for this purpose and monitors the cheques clearing system to ensure efficient payments mechanism within the financing system. From the time the first clearing house was established in Lagos in 1961, the Bankers clearing system has expanded to cover all the commercial banks in operation (accepts a few distressed banks). Expenses incurred in providing clearing facilities are borne by the CBN. The clearing arrangement is quite useful in promoting banking habit, particularly the use of demand deposits as a means of exchange.
BANK DRAFT
This is one of the commonest and most convenient means of transferring funds through the banking system. It could also be defined as payment instructions which a bankers makes by drawing a cheque on its own account in the branch or in another branch of the same bank. It could also means a payment instruction which a banker makes by drawing a cheque on it own account with a correspondent bank abroad (or on another account in a foreign country).
A banks customers who wishes to purchase a bank draw would normally draw a cheque on his current account with the bank. At the back of the cheque the customer indicates the name and address of the payee the amount and destination. In some banks the purchaser or applicant to fill a form (usually called bank draft application form) into which these particulars are entered. Banks also charge commission and for postages on bank drafts, but the amount of charges are also accommodated on the cheque which the applicant for the bank draft draws on his banker.
STANDING ORDERS
These are standing payment instruction normally given by customers to their bankers requesting them to make regular or periodic payments from their accounts in favour of other customers’ (in the same bank) or at other banks.
The payments are made at regular period or intervals – say monthly, quarterly, half-yearly or annually. In some banks it is called periodic payments, but the whole process is still the same. This facility is very useful for customers who wish to make regular payments to their insurance companies or to hire purchase or financial Obligation (of any)
In order for a customer to avail himself or herself of this facility, he/she must give the instruction in writing, and it must be signed in accordance with the customers account mandate. Normally banks give out specially printed standing order or periodic payment forms which the customers completes, indicating the payee and regularity of payment land period of time to be covered.
INVESTMENT SERVICES
Bankers, by nature of their position in the nation’s economy offer various types of banking services to their customers.
As a result of the strategic position occupied by the society, he is sometimes called upon to render advisory services to their customers (and sometimes) non-customer alike. But it had long been established that it was not part advice. However, times are changing, and bankers now advertise their “specialist advisory services” whereby they manage or offer investment advice, or “manage or offer investment” for a fee. However, where the banker gives a specific investment advice, the bank then incurs liability if any negligence is proved; hence the banker must exercise maximum care when giving any form investment advice to his customers and non-customers.
PROBLEMS FACING MARKETING OF BANK SERVICES
Banks are generally faced with certain problems in marketing their banking services. Among these problems are:
- Low Quality Product (Service): The quality of services provided by the financial institutions (banks) these days are of very low quality. Some patronize these financial institutions just because there are no readily available alternatives around. Cash lodgment, withdrawal, fund transfer, cheque casement etc. take much time tan necessary lack of prompt services is the talk of the day once the quality of services is below standard or taste of the customer, he tends to with draw from such institution.
- Inadequate Promotional Activities: Promotional activities like advertisement and publicity are still lacking. People have not been enlightened enough on packages available from these financial institutions. Confidence has not been restored in the case of those that have lost confidence in the financial sector. Most of the time, information to promote their activities thereof making it difficult for the impact of their promotional activities to be felt by the population.
- Inadequate Place or Channel of Service: This is one major weakness of the marketing strategy. The places where these services are obtainable have not been adequate and they tend to make the banks ineffective and inefficient Branch offices providing these services are not equitably distributed and as such needy individuals cannot receive bank service promptly. These are those who are interested in patronizing these financial institutions but cannot do so owing to lack of accessible branch net work.
- Unappealing Prices: Users of the services of the banks usually consider the prices charged by these institutions for their services not appealing. Also depositors consider the interest paid on deposits very low and unattractive when compared to the earning yield in other sectors of the economy. The inadequate pricing tend to discourage people from patronizing the bank and in turn it leads to reduced sales volume on the part of the banks.
HOW TO IMPROVE MARKETING OF BANK SERVICE
There are some lay down principles or measures to be taking in order to improve marketing of bank services. These measures include the following:
- Customer Orientation: The banks should focus on their customers while designing their marketing strategies customers needs change and a banks ability to meet those needs must change.
- Long Term Profitability: Without customers, bank would have no revenue. Marketing is directed at protecting and expanding the stream of revenue. It does so by keeping existing customers, broadening their banking relationships by cross-selling services and attracting new customers.
- Organizational Commitment: Marketing is the responsibility of every bank employee. Whether at work or in their leisure time, every employee who comes into contact with potential or existing customers is marketing the bank. Good training for all bank employees on how to interact with the public is the responsibility of a bank that wants to survive the competition in the financial sector.
- Branch Network: Extensive branch network of banks constitutes an effective retail outlet for their services. The branches should be adequately distributed to serve the populace for whom they are meant.
- Effective Advertisements: An effective advertisement should serve as a supporting instrument to the branch banking in achieving effective marketing of financial services. Outright advertisements in professional journals, magazines, radios, television jingles, coupon adverts and other are recommended.
- Automation: The operators of these financial institutions should be automated. Payment system, fund transfer system, documentation services and so on, should be handled with the use of computers.
- Correspondent Banking: In situations where it is not possible to establish branches, correspondent banking relationship should be used by banks to boost effective and speedy services for their customers.
- Time Stipulation: Time required for the delivery of each service should be specified and defined to avoid spending too much time on one particular job. The time required for each service should be ensured so as to effect implementation.
- Promotional Activities: These are those activities or steps taken by financial institutions to boost awareness and sales of their various services. These activities include: special offers to customers and distributors, conferences, exhibitions, educational courses and seminars should be included in the marketing communication efforts.
- Sales Agents and Representative: Agent and representatives should be used to reach those in the remote parts of the country.
- Increased Social Responsibilities: The banks social responsibilities to the citizens or public should be increased so as to create more awareness.
- Sales Bonanza: As is practiced in some other industries, and of the year and special bonanza is recommended so as to encourage existing customers, attract more customers and create more awareness.
- Matching Concept: High bank charges and commissions should be matched with high interest rates. Increase in bank charges and commissions should be compensated with a proportionate increase in interest rates and improved quality of bank services.
MARKETING MANAGEMENT CONCEPTS
There are five alternative concepts under which business organizations can conduct their marketing activities.
PRODUCTION CONCEPT
This is a management orientation which assumes that consumers will favour those products or services which are available and affordable, and therefore the major task of management is to pursue improved production and distribution efficiency. The organizational task is to keep improving production and distribution efficiency to attract the customers.
PRODUCT CONCEPT
The product concept is a management orientation which assumes that consumers will favour those products that offer the most quality for their prices, and therefore the organization should devote its resources to improving product quality. The task of the organization is to improve product quality as the key to attracting and holding customers.
SELLING CONCEPT
This is the management orientation that assumes that consumers will either not buy or not buy enough of the organization’s products unless the organization makes a substantial effort to stimulate their interest in its products. Here the organization has the task of organizing strong sales oriented department as the key to attracting and holding customers.
MARKETING CONCEPT
This is a management orientation which holds that the key task of the organization is to determine the needs and wants of target markets and to adapt the organization to delivering the desired satisfactions more effectively and efficiently than its competitors. The organizational task is to reach and choose target markets and develop effective offers and marketing programmes as the key to attracting and holding customers.
SOCIETAL MARKETING CONCEPT
This is the management orientation which holds that the key task of the organization is to determine the needs and wants of target markets and to adapt the organization to delivering the desired satisfactions more effectively and efficiently than its competitors in a way that preserves or enhance the consumer’s and society’s well being. Task of the organization is to serve target markets in a way that produces not only want satisfaction but long run individual and social benefits as the key to attracting and holding customers.
MARKETING MIX
Marketing mix is the set of controllable variables and their levels that the firm uses to influence target market. A bank has to decide, how to allocate the total marketing mix element. Bank normally focuses on the marketing mix when developing a marketing plan. The factors below defined the total relationship between a bank and a particular customer and include:
PRODUCT
Product is the most important element in the marketing mix. By a product, we mean anything that can be offered to a market for attention, acquisition, use or consumption. A product has three dimensions, the core or generic product, tangible or formal product and extended or augmented product. Banks always provide the best product customers want against their competitors.
PLACE
This is concerned with the efforts a firm or bank makes or order to get its products to the target market. It has to do with selection of distribution channel and the intermediaries, location of distribution outlets, channel management, inventory management, order processing, transportation, merchandising and sales management. Banks product must be at the right place, spot, when, and how they are needed for them to successful in today competitive economy.
PROMOTION
Marketers of financial services promote their service through the use of normal tools of promotion such as:
Advertising
Personal selling
Sales promotion
Publicity
Premiums
Public relations
Direct mail
PRICING
In setting a price, the firm must pay attention to pricing objectives, policies, and procedures. The firm can draw guidance from the theoretical pricing model of the economists. The model suggests how the firm can find the short-run profit, maximizing price when estimates of demand and cost are available. The model, however, leaves out several factors that have to be considered in actual pricing situations, such as the presence of other objectives, multiple parties, marketing mix interactions, and uncertainty surrounding like estimates of demand and cost.
When a firm considers changing its established price, it must carefully consider customers’ and competitors reactions. The firm that faces a competitors’ price change must try to understand the competitors’ intent and the likely duration of the change.
STRATEGIC MARKETING PROCESS
This is a managerial process of analyzing market opportunities and choosing marketing positions, programmes, and controls that create and support viable businesses that serve the company’s purpose and objectives. The specific step is strategic marketing process include the following:
(a) Marketing opportunity
(b) Target market selection
(c) Competitive positioning
(d) Marketing systems development
WHAT ARE SURVIVAL STRATEGIES
Strategy as defined by Chambers learner’s dictionary is the art of managing an affair, cleverly: following the Oxford dictionary, ‘strategy is the planning and directing of the whole operation of a compaign, or war; a plan, a policy.
Whereas survival according to Chambers Dictionary means ‘the state of surviving.’ Therefore, to survive means to remain alive, in spite of a disaster. In the researcher’s opinion, survival strategies are those plans mapped out by a company or an institution to remain alive. So marketing of banks services rendered by bank’s management are plans to survive the current fierce competitive nature of banking business.
TECHNIQUES FOR SURVIVAL
Ogbodo (1993:6) said that the success or failure of any bank depends on a large measure of the capability, integrity and enthusiasm of its directors and other employees. He however, stated that with competition getting tougher in a guided deregulated environment, banks have become market driven organizations. He further opined that banks should evolve strategic planning process by formulating action plans through marketing of bank financial services and products delivery. According to him, the techniques adopted for survival are:
Scientific management approach
Strategic planning
Public relations
Infrastructure ad modern technology
Banking regulations
Human resource approach
SCIENTIFIC MANAGEMENT APPROACH
The quality of the management of an institution or company determines to a great extent the quality and how much achievement such an institution can make within a given period.
In Ogbodo’s view, the poor financial conditions of some banks are directly related to the quality of their management. Furthermore, rampant board room quarrels, insider abuses, fraud and forgeries, weak internal control systems, litigation and conventions of statutory, regulations that have overtaken some banks’ management often result to distress in the banking industry as most of them are unable to cope in the present competitive environment.
Anyanwaokoro (1996:209) cited management competence as one of the factors that must be adequately maintained to avoid crises in the banking industry. He further explained that based on the “CAMEL” bank examination rating system, a bank is bound to fail unless serious corrective measure are taken if it starts having problems with the issues covered under the aforementioned acronym. According to him CAMEL stands for:
C – Capital Adequacy
A – Asset quality
M – Management Competence
E – Earning Strength
L – Liquidity Sufficiency
Ogbodo (1995:5) identified that banks as tools for survival have introduced discipline, inculcated good management qualities as well as put – in place improved credit policies and faithfully implement them.
STRATEGIC PLANNING
In First Bank’s Business and Economic Report, (May, 1998) it was stated that, to survive today, and possibly remain in business tomorrow, intensive planning must be the focus of any organization that is aspiring to meet the challenges of the modern time. Strategic planning was defined in the report as a managerial process of developing and maintaining a balance between the organization goals and abilities and its changing environment. Strategic planning is essentially people oriented, hence it involves everybody and in particular those whose inputs would assist in the achievement of the target set by the bank. It is the strategic planning done and implemented by the management of a company that assists them to achieve whatever goals set.
PUBLIC RELATION
Ikechukwu and Ekwo (1996: 34) stated that some public relations experts look at the practice of public relations as a strategy for overall corporate survival and more narrowly as a marketing support system or tool. Public relations is defined as a philosophy and function of management, which evaluates public attitudes, identifies the policies of an individual or organization with public interest and executes a programme of actions to earn public understanding and acceptance (PR, News , 1947). Secondly, public relations is defined as a promotional activity that aims to communicate a favourable image of the product or its marketer and to promote goodwill (Shewem, 1987, 491).
The First Banks Business and Economic Report (1998) pointed out that the need for good public relations in the marketing of financial services cannot be over-emphasized. It observed that good public relations has helped most banks to increase higher profit – spinning business at reasonable margins. It is however through good public relations that some banks offer other services and new products to their customers.
INFRASTRUCTURE AND MODERN TECHNOLOGY
Nigerian banks have no alternative but to embrace the new information technology in order to achieve increased efficiency and competitive advantage (The Nigeria Banker, January June 1998:8).
Ogwuma Stated in the Nigerian Banker (1998:11), that given the role technology has played in the modernization of the banking sector, especially in terms of development of new banking products, marketing services and the payments system, as well as strategic management in the emerging marker economies, there is no doubt that the future of the Nigerian banking industry will be technology driven.
However, he further said that a critical future role of technology in Nigeria’s banking development is to reduce further the waiting time in banks. Notwithstanding the huge cost of providing necessary infrastructural facilities for efficient and effective performance, banks have gone a step further to introduce sophisticated computer equipment to cope with today’s competition. Such a move has become imperative because management and analysis of bank’s risk are based on the proper processing of information. The use of information technology in the efficient delivery of financial services is now a banking norm, (First Bank’s Business and Economic Report May, 1998).
It was further revealed that those financial services previously considered the exclusive preserve of the more development economic can be transacted with ease. The electronic fund transfers services using the Automated teller machine and the overnight cash withdrawal services are among the latest innovations.
BANKING REGULATIONS
Policies formulated by the supervisory authorities operating in the Nigerian financial system often adopted by banks to address a pressing issue. Though those made by the central bank of Nigeria are meant to control banks activities, they often affect the volume of business done by banks. The instability of these policies makes the policies more harsh on banks as they are often confused of what to do. It was stated in the IBN report that a successful implementation of the policies will lead to a more mature competitive environment in which more attention will be paid to services costs and market orientation.
HUMAN RESOURCES
Ogbodo (1995:6) reported that the growing competition has intensified staff turnover, in addition to increase in deposits and number of customers. The establishment of new banks or even branches has encouraged free movement of labour in the banking industry as bankers move from one bank to another in search of higher pay. He further said that banking is increasingly moving to an all graduate profession as emphasis is on delegating increased powers to knowledgeable and skilled manpower on the lower cadres as a way of ensuring quicker turn-around time in order to cope with the intense competition in the market place. He however, said that to achieve this aim, banks now employ graduate professionals, and through their individual staff development programme, train both new and old employees so as to withstand the rigorous of today’s competitive environment.
In the research opinion, skilled and competent manpower helps a bank to achieve its aim of satisfying its customers both big and small while making its profit. Any well-packaged product can meet it target audience needs if the sellers of the products approach the customers well and portray the product according to the management aim.
—This article is not complete———–This article is not complete————
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“THE MARKETING OF BANKING SERVICES
(A CASE STUDY OF FIRST BANK OF NIGERIA PLS)”
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The Marketing of Banking Services
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