Review of literature

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Porter's (1980) segmentation analysis has plenty of value to describe competition amongst participants. This approach establishes how and by which means positions of dominance are achieved. Studies based on this methodology have been applied to banking to assess the competitive process. Finlay (2000) suggested that Market Penetration fits strategically for a firm when current markets are not saturated for the types of offer the firm is making and its present customers can be induced to buy more. And typically, when a company wants to attack the market share of the competitors, they will undertake market penetration as a way of increasing their own share in the market. Similarly, Oster (1994) contended that the size of the market share held by the firm as well as the size of the major firms in the market are important considerations. He suggests that firms with relatively small market shares can increase their market share many times over without adversely affecting the overall market share of a large market leader.

A study by Philp Robert, Haynes Paula, Helms Marilyn (1992) stated that growth through a market penetration strategy, reaching and influencing customers already served, has proved to be a less profitable course of action than expected. This strategy failed to achieve the projected growth not because of the basic plan itself, but rather due to its improper implementation. Financial service providers have typically viewed their primary customer base as males between 30 and 50 years old (Bartos, 1982). These men are seen as the primary wage earners and decision makers for financial planning in their households. Hence, this segment has been considered golden geese of the financial market. While some growth was achieved through the introduction of new financial products and services, the financial services needs of women and of consumers over 50 years of age were blurred for the financial service providers (Javalgi et al., 1990). (Schiele, 1974) suggested that a “Net” approach should be used to "catch" the youth market as they drift downstream from adolescence to adulthood. The research findings indicated that this is a simplification of reality and that a number of interrelated streams exist before young people reach the "pond of adulthood", at which they are likely to be "locked into" a financial service organisation.

Hence, in the highly competitive retail financial marketplace, it is more critical than ever to narrowly define the markets financial service provider can serve. Differentiation through claims of excellent customer service fails to provide competitive distinctiveness, particularly to key segments of the existing customer base. Many banks, over the years, have relied on intermediaries like DSAs, DSTs to reach out to the customers. Jensen-Macklin (1976) or Diamond (1984) in their studies have tried to justify the existence and effects of intermediaries. For them agents exist to reduce moral hazard and asymmetric information.

There are different means adopted by the organizations to increase the number of services availed by the customers. Cross-selling is the practice of promoting additional products and services to existing customers in addition to the ones a customer currently has (Butera, 2000). The interest in cross-selling is due to its advantages for firms. Specifically, the selling of additional services to existing customers could reduce the need to spend money on customer acquisition (e.g. advertising) and lead to a pricing advantage over competitors (Reichheld and Sasser, 1990). It is reasonable to expect that customers with strong repurchase intentions will also be likely to cross-buy from the same service provider. This is consistent with the view that it is easier to cross-sell new services to existing customers than to the new ones. Study conducted by (Day, 2000), suggested that although customers may want to engage in a relationship with a service provider, they may not want to have all their services provided by that single provider For some service categories, customers intrinsically develop a multi-brand loyalty (Jacoby and Chestnut, 1978). For example, in the banking industry most households use two or more financial providers. (Reichheld, 1996; Anderson and Mittal, 2000). Howley John, Savage Grahame (1980) in their paper titled, “Bank marketing in the Personal Sector” discuss about Cross-selling, whereby having opened a current account, customers are "sold" loans, travel facilities, insurance and other services for further banking penetration of each customer. At the same time, there is a word of caution as well saying that there's undoubtedly great potential here, but there are dangers of placing too much emphasis on peripheral activities to the overall corporate purpose of being a bank.

Raj Arora (2008) focussed on yet another important strategy to increase sales to existing customers - Price Bundling. The study points out that the intent of bundle pricing is to increase sales by offering a discount when a pre-specified bundle of items is purchased at the same time. Usually, the additional items in the bundle are those that are complementary to the main product. The assumption is that the bundle priced items offer more value and are therefore more attractive to the buyer. The seller makes the buyer aware that the buyer is getting a bargain in the bundle because if the items are purchased separately, the aggregate price far exceeds the bundle price (Yadav and Monroe, 2003). While price bundling is frequently used by marketers, its effectiveness needs more research especially when used with other marketing variables.

Murphy Ruth, Bruce Margaret (2003) stated that internet can be used to sell more existing products into existing markets. This can be achieved by using internet for increasing awareness of the firm. Bloch et al. (1996) proposed that e-commerce offers cost advantages to firms via less expensive product promotions. They also advocate that e-commerce can enable a company to implement customer focus strategies through better customer relationships. If the internet segment continues to grow and the branch banking segment shrinks, more customers will be using Internet banks and fewer customers using Branch banks (Heffernan 1996). But evidence also suggests that many companies have engaged in e-commerce activity, whether it is on a business to business or business to consumer basis (B2C), without any consideration towards a return on investment (Damanpour and Madison, 2001). One of the reasons for this may be that many businesses fear that without an Internet presence, the firm will get left behind. Hence a number of companies have turned their focus towards e-commerce, often by emulating the business module of another firm, as “me too” entities.

Stafford David, King Susan (1982) stated that Marketing strategies which have been important to recent bank development include branch rationalisation and refurbishment, and promotional activities, especially advertising. Price competition has not yet achieved major importance between the "big four" and so price structures do tend to be relatively stable and similar between banks. A similar view shared by Neven (1990) and Vives (1991) is that banks, especially retail banks, do not compete in price but in service quality.



Thus, we observe a number of important gaps in the literature. First, our knowledge is deficient on which foreign market entry modes service firms apply, and similarly, on target market selection. Next, it is also important to investigate if there are systematic differences within service industries in foreign market entry mode selection. Finally, are the internationalization theories and models developed for manufacturing industries applicable to firms in service industries? Or, is the internationalization process of services so unique that there is a need to develop separate theory to explain the internationalization of service firms?


1. To measure the penetration of banking products in different demographic profiles.

2. To find the neglected niches in existing markets served by the banks.

3. To identify and compare the means that public & private sector banks adopt to attract new customers in existing market.

4. To study the consumer preference regarding the means that banks adopt to attract new customers in existing market.

5. To investigate and compare the methods used by public & private sector banks to increase number of services availed by the customers.

6. To study the consumer preference regarding the methods used by banks to increase number of services availed by the customers.

7. To determine ways to increase usage rate of services consumed by the customers.


The study will be based on Primary as well as secondary data both with their well known limitations. For collection of data from customers, Stratified Random Sampling will be used. Convenience Sampling will be used for collection of data from the employees as the data will be collected as per availability and convenience. / Structured Interviews The secondary data has and will be collected from various sources such as International Journal of Bank Marketing, Indian Bankers' Association Journal, magazines, research papers, books, internet websites etc.

Scope of the study:

Two Public Sector Banks – Punjab & Sind Bank and State Bank of India have been selected for the study. ICICI Bank and HDFC Bank will form part of Private Sector Banks selected for study. Study will be carried out in different areas of Punjab.

Universe of the study:

Bank employees as well as the customers visiting the bank will be the universe of the study.


Only the employees of the bank working at “Manager” designation and above will form the sample of the study. For purpose of collection of data from customers, every third customer walking into the bank will form part of the study.

Sample size:

The respondent data will be collected from 200 customers out of which hundred customers will be taken from public sector banks and rest from private sector banks. Number of employees of banks to be contacted for information will be 40. Out of this, twenty employees will be from Public Sector Banks and rest twenty would be private sector bank employees. Hence, the number of employees from each bank will be ten.

Collection of Data:

For the purpose of collection of data, two set of questionnaires will be prepared. First questionnaire will help in knowing the strategies being adopted by the banks to increase Market Penetration and would be filled by the bankers. Second questionnaire, to be filled by the customers will be used to collect preferences of customers related to various strategies being adopted by banks to increase Market Penetration.

Analysis and Interpretation:

The analysis will be done on the basis of review of existing literature and information collected through questionnaires filled by the employees and customers of the Public and Private sector banks. Microsoft Excel and other appropriate statistical tools will be used for Data Analysis.


Chapter I - Introduction

Chapter II - Review of literature

Chapter III - Need, Objectives, Research Methodology

Chapter IV - Overview of Indian Banking System

* Public Sector Banks

* Private Sector Banks

Chapter V - Growth Strategies

* Market Penetration

* Product Development

* Market Development

* Diversification

Chapter VI - Market Penetration in Public & Private Sector Banks

Chapter VII - Data Presentation & Analysis

Chapter VIII - Findings & Conclusion





REFERENCES as on Jan 28, 2010., Jan11, 2007 as on Jan 31, 2010

Ansoff, I. (1965), Corporate Strategy, McGraw-Hill, New York, NY Title: Bank Marketing Strategies Author(s): Arthur Meidan Journal: International Journal of Bank Marketing Year: 1983 Volume: 1 Issue: 2 Page: 3 - 17

Banks to get sops for rural reach 3 Oct 2009, 0307 hrs IST, Anto Antony, ET Bureau

David Stafford and Susan King, Bank Competition and Advertising by David C. Stafford, The Advertising Association, 1982

write references of foll. Articles in Emerald –

A survey of critical factors in e-Banking

Bank marketing Strategies

P. Robert Philp, Paula J. Haynes and


International Journal of Bank Marketing, Vol. 10 No. 2, 1992, pp. 25-28

Title: Bank Marketing in the Personal Sector Author(s): John C. Howley, Grahame P. Savage

Journal: Managerial Finance Year: 1980 Volume: 5 Issue: 3 Page: 271 - 276

Ruth Murphy and Margaret Bruce, Strategy, accountability, e-commerce and the consumer, Managerial Auditing Journal, 18/3 (2003) pg 193-201

Price bundling and framing strategies for complementary products

Raj Arora University of Missouri – Kansas City, Kansas City, Kansas, USA

Journal of Product & Brand Management 17/7 (2008) 475–484

Yadav, M.S. and Monroe, K.B. (2003), “How buyers perceive savings in a bundle price: an examination of a bundle's transaction value”, Journal of Marketing Research, Vol. 30 No. 3, pp. 350-8

Butera, A. (2000), “Cross-selling: capitalizing on the opportunities”, Hoosier Bank, Vol. 87 No. 7, pp. 14-16.

Reichheld, F.F. (1996), The Loyalty Effect: The Hidden Force behind Growth, Profits and Lasting Value, Harvard Business School Press, Boston, MA.

Reichheld, F.F. and Sasser, W.E. (1990), “Zero defections: quality comes to services”, Harvard Business Review, Vol. 68 No. 5, pp. 105-11.

Anderson, E.W. and Mittal, V. (2000), “Strengthening the satisfaction-profit chain”, Journal of Service Research, Vol. 3 No. 2, pp. 107-20.

Day, G.S. (2000), “Managing market relationships”, Journal of Academy of Marketing Science, Vol. 28 No. 1, pp. 24-30.

Jacoby, J. and Chestnut, R.W. (1978), Brand Loyalty, John Wiley & Sons, New York, NY.

Schiele, G.W. (1974), "How to Reach the Young Customer", Harvard Business Review, Vol. 52, March-April, pp. 77-86. as on Feb 28, 2010