Comparative Analysis Of Icici And PNB Marketing Essay

In financial services, people are primarily bothered about security of their funds and default risks. After the year 1969, the deposits of banks increased more than 80 times as a result of the nationalization of banks. The effort to promote banking business is quite distinguished affair. At present, it has become very tricky due to the changing trends of industry, increasing competition and efficiency of regulatory environment, and the financial system. The complexity in the banking services is also an issue of vital importance. This is the time when banks are offering new and innovative services, frequently in the market. The content of promotional tools should help the customer in making most valuable decision. This can be firmly said that well-designed promotional strategies are very important to promote banking services effectively. In marketing any product or service, customer satisfaction has been given the prime importance. The most frustrating aspect of bank marketing is lack of management support, lack of inter-departmental cooperation, crisis management, government intrusion and advertising & media problems. Banking should bring out the areas requiring improvement and which further throw light on the measures to improve the quality of services. Promotional packages are very important for financial service industry. Thus the orientation of banks should be with a much wider focus in relation to consumer and market needs, and the consequent marketing strategies. The challenges put forth by the changing environment have to be effectively tackled to identify the consumer needs and providing valuable services through product innovation. In banking the temporal and spatial dimensions are perceived as more important than traditional dimensions based on outcome and process elements. Winning new customers costs 10 times more than simply holding into existing ones. The case should be taken in the marketing of financial services very seriously. While formulating marketing strategy, a bank should focus attention on:

consumer sovereignty,

attitude,

responsiveness and personal skills of bank staff,

revitalizing the marketing department,

top management support to the marketing department,

Participation of marketing personnel in key bank decisions.

Objectives

With the same perspective, the prime objectives of the study are:

(i) To know about the various promotional tools of Private and Public sectors banks in India (especially in ICICI and PNB Bank).

(ii) To make a comparative analysis of customers’ perception for promotional strategies of private and public sector banks in India (especially in ICICI and PNB Bank).

(iii) To find out the key promotional tools for banking services on the basis of customers responses.

Defining Bank

According to Oxford English Dictionary, Bank is, “An establishment for custody of money received from or on behalf of, its customers. Its essential duty is the payment of the orders given on it by the customers, its profit mainly from the investment of money left unused by them”. Banking Regulation Act, 1949 (Sec. 5(c)), has defined the banking company as, “Banking Company means any company which transacts business of banking in India”. According to Section 5B, “banking means the accepting of deposit of money from the public for the purpose of leading or investment, which is repayable on demand or otherwise and are withdraw able by cheque, draft, and order or otherwise.”

Changing strategies of Banks

1991

2015

Maintaining Profitability

Service Quality

Credit Portfolio management

Maintaining Profitability

Service Quality

Market / Customer Focus

Regional Economy

Operations/ Systems/Technology

Cost management / Expense reduction

Credit Portfolio Management

Declining Earnings / more Failures

Productivity improvement

Marketing Strategies

Strategy can be defined as the periodic changes a business must introduce to its structure and operations in order to ensure continuity in the face of environmental changes. The strategic evolution of a business can thus be understood in terms of major social institutions such as the State, the market, community or civil society and their interrelationships that may have a bearing on its working and thereby the achievement of the principle objectives of its establishment. Historians recognize moments of profound change when the balance of power or influence shifts between these institutions.

Overview of ICICI Bank

ICICI Bank is India’s second-largest bank with total assets of Rs. 3,674.19 billion (US$ 77 billion) at June 30, 2009 and profit after tax Rs. 8.78 billion for the quarter ended June 30, 2009. The Bank has a network of 1,485 branches and about 4,816 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management.

ICICI was established by the Government of India in the 1960s as a Financial Institution with the objective to finance large industrial projects. ICICI was not a bank – it could not take retail deposits; and nor was it required to comply with ICICI Bank now has the largest market share among all banks in retail or consumer financing. ICICI Bank is the largest issuer of credit cards in India. It was the first bank to offer a wide network of ATM’s and has a large network of ATM’s. ICICI Bank now has the largest market value of all banks in India, and is widely seen as a sophisticated bank able to take on many global banks in the Indian market.

HISTORY OF ICICI BANKING SYSTEM

ICICI was formed in 1955 at the initiative of the World Bank, the government of India and Indian industry representatives. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses.

Until the late 1980s, ICICI primarily focused its activities on Project finance, providing long-term funds to a variety of industrial projects. ICICI Bank was incorporated in 1994 as a part of the ICICI group. ICICI Bank’s initial equity capital was contributed for 75.0% by ICICI and for 25.0% by SCICI Limited, a diversified finance and shipping finance lender of which ICICI owned 19.9% at December 1996. Pursuant to the merger of SCICI into ICICI, ICICI Bank became wholly-owned subsidiary of ICICI. Effective March 10, 2001, ICICI Bank acquired Bank of Madura, an old private sector bank, in an all-stock merger.

FIRSTS IN THE INDUSTRY:-

Introduced concept of branding in the Indian banking industry.

Process, People and Physical evidence – brought to life by ICICI.

Product Innovation – Put the ‘customer first’ in the true sense.

Cash on the celebrity fever – Introduced the concept of brand ambassadors.

Introduction of DSA’s and DST’s.

Unleashed the power of the internet – introduced the concept of net banking and e-mail marketing.

First bank to focus on retail banking as a driver for growth.

Comprehensive data centre availability & data protection solutions.

LIST OF SERVICES PROVIDED BY ICICI:-

The services provided by ICICI bank are:

Accepting deposits,

Lending money to the public,

Transfer of money,

Trustee business (underwriting),

Safekeeping,

Government business,

Venture capital (providing startup Capital €  to a new and risky Business

operations), Automated teller machine (ATM):

Phone banking, Net banking or Internet banking,

Deposit insurance scheme.

PRICING STRATEGY OF ICICI BANK:-

The pricing decisions or the decisions related to interest and fee or commission charged by banks are found instrumental in motivating or influencing the target market. The RBI and the IBA are concerned with regulations. The rate of interest is regulated by the RBI and other charges are controlled by IBA. The pricing policy of a bank is considered important for raising the number of customers’ vis-à-vis the accretion of deposits. Also the quality of service provided has direct relationship with the fees charged. Thus while deciding the price mix customer services rank the top position. The banking organizations are required to frame twofold strategies. First, the strategy is concerned with interest and fee charged and the second strategy is related to the interest paid. Since both the strategies throw a vice- versa impact, it is important that banks attempt to establish a correlation between two. It is essential that both the buyers as well as the sellers have feeling of winning.

Penetrative pricing aimed at achieving large market share

Philosophy of profit through volume

Effort to drive out competition

Price leader in retail banking product

Aggressive pricing facilitated through low cost of fund acquisition

PLACE MIX:-

This component of marketing mix is related to the offering of services. The services are sold through the branches. The 2 important decision making areas are:

Making available the promised services to the ultimate users

Selecting a suitable place for bank branches.

The number of branches OF ICICI: 1900 in India and 33 in Mumbai.

PROMOTION MIX:-

The different components of promotion help bank professionals in promotion the banking business.

Advertising: Television, radio, movies, theatres. ICICI uses this component of the promotion mix with the motto of informing, sensing and persuading the customers. The advertising professionals bear the responsibility of making the appeals, slogans, messages more creative.

Print media: Hoardings, newspaper, magazines. There are a number of devices to advertise, such as broadcast media, telecast media and the print media

Publicity: road shows, campus visits, sandwich man, Sponsorship.

Sales promotion: Gifts, discount and commission, incentives, etc. ICICI also thinks in favor of their promotional incentives both to the bankers as well as the customers. The banking organizations make provisions for incentives.

Personal selling: Cross-sale (selling at competitors place), personalized Service. The personal selling is found instrumental in promoting the banking business. It is just a process of communication in which an individual exercise his/her personal potentials, tact, skill and ability to influence the impulse buying of the customers. Since ICICI gets immediate feedback, the personal selling activities energies the process of communication very effectively.

Telemarketing: ICICI one sterile Call center.

PROCESS MIX:-

Flow of activities: All the major activities of ICICI banks follow RBI Guidelines. There has to be adherence to certain rules and principles in the Banking operations. The activities have been segregated into various departments accordingly.

Standardization: ICICI bank has got standardized procedures got typical transactions. In fact not only all the branches of a single-bank, but all the banks have some standardization in them. This is because of the rules they are subject to. Besides this, each of the banks has its standard forms,

Customization: There are specialty counters at each branch to deal with customers of a particular scheme. Besides this the customers can select their deposit period among the available alternatives.

Number of steps: Numbers of steps are usually specified and a specific pattern is followed to minimize time taken.

Simplicity: In ICICI banks various functions are segregated. Separate counters exist with clear indication. Thus a customer wanting to deposit money goes to ‘deposits’ counter and does not mingle elsewhere. This makes procedures not only simple but consume less time. Besides instruction boards in national boards in national and regional language help the customers further.

Customer involvement: ATM does not involve any bank employees. Besides, during usual bank transactions, there is definite customer involvement at some or the other place because of the money matters and signature requires.

Overview of PNB Bank

Punjab National Bank (PNB), was registered on May 19, 1894 under the Indian Companies Act with its office in Anarkali Bazaar Lahore. The Bank is the second largest government-owned commercial bank in India with about 5000 branches across 764 cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank in the world by Bankers Almanac, London. The bank’s total assets for financial year 2007 were about US$60 billion. PNB has a banking subsidiary in the UK, as well as branches in Hong Kong, Dubai and Kabul, and representative offices in Almaty, Dubai, Oslo, and Shanghai.

Since its humble beginning in 1895 with the distinction of being the first Indian bank to have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2009 amounted to Rs 3,64,463 crore. Today, with assets of more than Rs 2,46,900 crore, PNB is ranked as the 3rd largest bank in the country (after SBI and ICICI Bank) and has the 2nd largest network of branches (4668 including 238 extension counters and 3 overseas offices).During the FY 2008-09, with 39% share of low cost deposits, the bank achieved a net profit of Rs 3,091 crore, maintaining its number ONE position amongst nationalized banks. Bank has a strong capital base with capital adequacy ratio as per Basel II at 14.03% with Tier I and Tier II capital ratio at 8.98% and 5.05% respectively as on March’09. As on March’09, the Bank has the Gross and Net NPA ratio of only 1.77% and 0.17% respectively.

PNB has always looked at technology as a key facilitator to provide better customer service and ensured that its ‘IT strategy’ follows the ‘Business strategy’ so as to arrive at “Best Fit”. The bank has made rapid strides in this direction. Along with the achievement of 100% branch computerization, one of the major achievements of the Bank is covering all the branches of the Bank under Core Banking Solution (CBS), thus covering 100% of its business and providing ‘Anytime Anywhere’ banking facility to all customers including customers of more than 2000 rural branches. The bank has also been offering Internet banking services to the customers of CBS branches like booking of tickets, payment of bills of utilities, purchase of airline tickets etc.Towards developing a cost effective alternative channels of delivery, the bank with more than 2150 ATMs has the largest ATM network amongst Nationalized Banks.

Key Areas of operation

The business operations of PNB can be broadly classified into the key income generating areas such as National Banking, International Banking, Corporate Banking, & Treasury operations.

SWOT Analysis

Strengths:-

· Brand name: PNB Bank has earned a reputation in the market over the period of time.

· Market Leader: PNB is ranked at 478 in 2008 Fortune Global 500 list, and ranked 219 in 2008 Forbes Global 2000. With an asset base of $126 billion and its reach, it is a regional banking behemoth.

· Wide Distribution Network: Excellent penetration in the country with more than 10000 core branches and more than 5100 branches of associate banks (subsidiaries).

· Diversified Portfolio: PNB Bank has all the products under its belt, which help it to extend the relationship with existing customer’s Bank has umbrella of products to offer their customers, if once customer has relationship with the bank.

· Government Owned: Government owns 60% stake in PNB. This gives PNB an edge over private banks in terms of customer security.

· Low Transition Costs: PNB offers very low transition costs which attracts small customers.

· Continued effort to increase low cost deposit would ensure improvement in NIMs and hence earnings.

Weaknesses:-

· The existing hierarchical management structure of the bank, although strength in some respects, is a barrier to change.

· Though PNB cards are the 2nd largest player in the credit card industry, it has the highest nonperforming assets (NPAs) in the industry, which stand out to be at 16.28 % (Dec 2007).

· Modernization: PNB lags with respect to private players in terms of modernization of its processes, infrastructure, centralization, etc.

· PNB is currently operating at a lowest CAR (8%). Insufficient capital may restrict the growth prospects of the bank going forward.

· Delay in technology up gradation could result in loss of market shares.

· Management indicated a likely pension shortfall on account of AS-15 to be close to Rs50bn

· Contribution of retail credit to total bank credit stood at 26%. Significant thrust on growing retail book poses higher credit risk to the bank.

Opportunities

· Global expansion: PNB already has expanded globally and start its operations internationally in 32 countries like Australia, Bangladesh, etc…. and has more plans of expansion in other global markets.

· Growing retail & SMEs thrust would lead to higher business growth.

· Micro Finance: there is a lot of growth opportunity in the area of micro finance.

· Strong economic growth would generate higher demand for funds pursuant to Higher.

· Corporate demand for credit on account of capacity expansion.

Threats

· Advent of MNC banks: Large numbers of MNC banks are mushrooming in the Indian market due to the friendly policies adopted by the government. This can increase the level of competition and prove a potential threat for the market share of PNB bank.

· Consumer expectations have increased many folds in last few years and the bank has not been responsive enough to meet them on time.

· Private Banks has started venturing into the rural and semi-urban sector.

· Stiff competition, especially in the retail segment, could impact retail growth of PNB and Hence slowdown in earnings growth.

· Slow down in domestic economy would pose a concern over credit off-take thereby impacting earnings growth.

· The changing interest rates and the changing policies of RBI.

Generic strategies adopted by PNB

Institution for advanced learning: to provide state of the art training in financial products to middle level and senior level executives.

Internal consultant/change agent: to act as a catalyst for change in attitudes and orientation of banking staff and to provide expertise and consultative support.

Feedback supplier: to capture and structure feedback from trainees and from the market.

Think tank: to provide expert and inform suggestions, model business strategies, analysis of market developments from a banker perspective.

Research and development role: to carry out research on contemporary subjects that is relevant to the banks short term and medium term and operational needs and policy for mulation.

Overlapping staff training centers: to validate and closely monitor the staff training centers in seven circles attached to the academy.

Centralization and Decentralization

It has a well defined system for decision making process. The financial decisions are taken at various levels by different officials depending upon their positions and also through committee approach. The centralized credit processing cells are being formed at certain centers for sanction of personal segment loans and under PNB segments. Its branches source the applications and forward them to the respective credit processing sale for their consideration.

Regarding the sanction of loan each officer of the bank considers the loan proposal sand takes a decision in terms of scheme of delegation of powers, on merits of proposal. If the bank needs to purchase any kind of equipment like computers or software branch managers are required to take permission from high authority. So in term of decision making centralization is high and low decentralization wherein the managers have some powers to take decision but at a limited base.

The Restructuring

To overcome the intense competition from private and foreign banks, PNB planned a major organizational restructuring exercise.

The key aspects involved

Redesigning of branches,

Providing alternate channels;

Focus on a lean structure and

Technological up gradation.

A business process reengineering (BPR) team was constituted in June 2003 with McKinsey & company as consultants. The BPR’s basic goal was to create an operating architecture that would facilitate service delivery of international standards.

New Products and Services:-

Apart from restructuring, PNB launched several innovative, value-added products and services to project a customer friendly image. It launched a special service for corporate customers called ‘telebanking and remote login’ to support transactional requests. This facility would be available at 593 branches, and remote login at 269 branches. The banks trade finance solutions, called EXIMBILLS, were intended to handle trade finance transactions efficiently and enhance the range of services provided to corporate and network branches.

In March 2004, PNB announced that it would introduce ‘anywhere banking’ facility for its customers over 9000 branches across India in the next two years. All the branches in Mumbai would provide this facility by December 2004. PNB also launched different customized loan programs to cater to various sections of society depending on income levels and repayment capabilities. Interest rates and repayment periods were tailor-made to suit the customer groups.

Alliances and Tie-Ups

To boost its business, PNB entered into several alliances and tie-ups with automobile, insurance, mutual fund, project finance and medical equipment companies.

The Marketing Initiatives

PNB carried out various marketing initiatives to enhance its reach. They included

Segregating and targeting existing high value customers,

Cross sales of other products,

Setting up call centers and outbound sales force to secure new customers.

Plans were also made to utilize database marketing to pursue large and medium sized corporate, government and trade finance customers.

Database marketing was expected to draw increased revenue from cross selling, lower costs and increased customer loyalty. PNB also introduced various other ways of reaching out to customers like extension of hours of work (PNB increased daily working hours by two hours and Sunday banking was introduced) and

Aggressive marketing through print and television media.

Analysis of Marketing Strategies Adopted by ICICI Bank and PNB Bank:-

Table 1: Promotional Strategies by PNB and ICICI Bank:-

Promotional Tool

Punjab National Bank

ICICI Bank

Advertising on Television

Yes

Yes

Advertising in Newspapers

Yes

Yes

Personal Selling / Personal Contact

No

Yes

In Journals and Magazines

Yes

Yes

Tele Calling by Sales Persons

No

Yes

Outdoor Advertising Hoardings etc

Yes

Yes

Schemes/ Gifts/ Prizes for Customers

No

Yes

Public Relations/ Events/ Programmes

Yes

Yes

Online Marketing/ E-Mail

Yes but few

Yes

Pamphlets/ Propaganda

No

Yes

Letter/ Mail/ with relevant aMaterial

No

Yes

Publishing News in Newspapers

Yes but few

Yes

Explanation

The above table shows the different Marketing Strategies used by Punjab National Bank and ICICI Bank.

There was difference of promotional Strategies used by these Banks. Some promotional strategies are used by both these banks like: advertising on television and News papers, in Journals and Magazines, outdoor advertising Hoardings, Public relations/ events/ programmes.

Some promotional strategies are not used by both the banks like: Personal selling/ Personal contact, tele calling by sales persons, schemes/ gifts/ Prizes for customers, online marketing/ Email, publishing news in news papers.

Suggestions

Skilled human resources are one of the most important pre-requisite for the efficient management of a large and diverse retail credit portfolio. Only highly skilled and experienced manpower can withstand the rigour of administering a diverse and complex retail credit portfolio. So it is advisable to Punjab National Bank that it should employee highly skilled and efficient employees for the betterment of the services.

Conclusion

ICICI Bank has excellent staff members in terms of behavior in comparison to the staff members of PNB.

Services of ICICI Bank are much better than PNB.

The main reasons for satisfaction are competitive rates and true commitment.

The reasons for dissatisfaction are hidden charges.

ICICI Bank follows a centralized system, so as to bring synchronization in the decision making process which helps the organization to create better strategies so as to focus on the overall functioning and growth prospects of the bank.

At the same time it can be concluded that they need to focus on the human resources in order to achieve the maximum market share.