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Consumer Preferences In The Indian Banking Industry Marketing Essay

2215 words (9 pages) Essay in Marketing

5/12/16 Marketing Reference this

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The Indian banking industry has witnessed a robust growth during the last decade. There are various public, private and multi-national players operating in the industry. Though the importance of better customer service quality is understood in the sector, there exist various other factors that customers consider while evaluating banks. In this paper, the customer preferences in the Indian banking industry are studied using conjoint analysis as a statistical tool. The three product attributes that are analyzed are bank timings, ATM network and customer service reputation. The results show that customers pay a lot of attention to the customer service reputation of the bank. The facilities of the bank regarding branch timings are also looked up by the customers. Adequate recommendations towards gaining competitive advantage are presented at the end of the paper.

Key words: Conjoint Analysis, Indian Banks, Consumer Service


Product selection is a complex decision making process involving resolving various trade-offs. For example, a basic trade-off might involve striking balance between better product features and right price. Since an ideal product consisting of the best possible product features is not always feasible, it is important to learn the customer preference for various product attributes. This information can be used by organizations in an industry during product design and improvements in the current product offering.

Conjoint analysis is an advanced marketing research tool that finds applications in developing an effective product design. It helps the researcher narrow down the product attributes that matter to the customer and quantify the importance attached to various product attributes. Hence, we can answer which attributes are the most important and which are the least important, as discussed in IBM SPSS (2012). The analysis requires the development of an appropriate questionnaire where in a respondent is required to highlight their preference towards various product attributes combinations.

Recently, the technique found applications in various industries to assist product developers and established players towards effective product design. For illustration, Conjoint Analysis is used in Measuring Consumer Preferences for Sales Promotion Schemes in FMCG Sector in Vyas (2005).

Hence, any study that contributes in understanding customer preference in an industry is critical towards the development of detailed customer profiles and effective product design. In this paper, we explore the application of Conjoint Analysis in understanding the customer preferences in Indian banking industry. The application of Conjoint Analysis in the banking industry can help us better understand the industry in the following ways:

Understanding product attributes relevant to customer- the study helps us understand the attributes that are at top of the priority list of the customers. By analyzing the weights attached to various product attributes, organizations can design their finance products in a better way.

Actionable recommendations- The recommendations of the analysis are actionable. For example, issues like interest rate and basic loan terms that are not under the control of bank are not included as a part of actionable and feasible recommendations. However, banks can work towards improving customer service location, attractive location of ATM and comfortable timings of the branches.

Applications- The applications of the study could be used in benchmarking Indian customers against their global counterparts in understanding and predicting the next evolution in the Indian banking industry. The results could be used together with Multidimensional Scaling for organizations seeking entrance in the industry or for existing players in understanding brand positioning.

Hence, the aim of this analysis is to study the Indian banking customers and find out the utilities of all the product attribute levels and their relative importance. This is done by applying Conjoint Analysis. Due to paucity of time, the study is limited to the bank customers based out of Delhi region. The respondent set is the FMS MBA students.

The study aims to find the customer preferences that are important to the customers while evaluating banks. This study is an exploratory research that can be used for future larger studies. Section 1 of the study provides a short introduction of the subject matter along with a brief background. Section 2 delves into the existing literature in the area, which has focused on the same subject matter. Section 3 describes the methodology adopted for the study, including the data collection and analysis. Section 4 discusses the results and findings of the analysis.

Literature Review

There have been various studies in the past that explore customer preference attributes in various sectors, in India and abroad. We discuss those studies where Conjoint Analysis has been used.

ÃÅ“lengi (1998) explored the customer preference in the Turkish Banking industry. They concluded that among other factors, facilities like extended loyalty programs, off-site ATMs, maximum 5-minutes waiting time in the branches are most preferred by the customers. With respect to higher order decision constructs, they also concluded that delivery channels and customer relations have the strongest influence on the respondent’s preferences.

Another study in this domain by Trchrome (2008) also explored the customer preferences in the banking industry. They concluded that customers give importance to type of bank, minimum balance requirements, online banking facilities, customer service quality, and ATM network while evaluating bank options. Of these options, customers give highest importance to balance/fees requirement at the bank (34 %), online banking facilities (24 %) and the type of bank (11 %). In line with this publication, Auruskeviciene, Salciuviene and Virvilaite (2005) explored the banking industry to quantify the marketing image of financial services. There results were as following: service quality (41%), prices of services (26%), convenience and availability (17%), variety of services (13%) as well as bank exterior and interior (3%).

As we observe from these studies, customers see a lot of factors while evaluating banks. Of these, branch timings, customer service quality and ATM positioning were explored in the present study.

There have been other studies in the sub-segments of the banking industry. Cai and June (2001) analyzed the Internet banking industry to study the change in customer preferences in this sub-segment of the industry. They found out that customer service reputation, banking service products and online systems quality matter the most to the customers in online banking. Kubica (2011) used conjoint analysis to segment young clients in the banking industry. They concluded that profiling young customers is a complex process. Png (2003) explored the specific problem of the amount that could be charged to customers for waiting time.

While it can be seen that conjoint analysis has been applied in the global banking industry, its applications in the Indian context is limited. Conjoint analysis application in Indian sectors such as tourism, private label brands (apparel), air freshener and automobile sectors is present.

There have been a few studies that explore the consumer preferences in the Indian banking sector. Ananth, Ramesh and Prabaharan (2011) analyze the service quality gap analysis (structured questionnaire) for Indian private banks. They conclude that there are some dimensions in the service quality that are lacking (empathy and accessibility). Komal and Rani (2012) also explore the customer preferences in the domain. The key results are that ATM service quality, internet banking services, credit cards portfolio are important factors considered while evaluating banks. Ananth and Arulraj (2011) measure the banking service quality in Tamil Nadu. They concluded that credit facility (interest rate), Corporate Social Responsibility initiatives and deposit schemes are the most appealing to the Indian consumer.

As we see, there is no significant study in the application of conjoint analysis in the Indian banking sector. Hence, the motivation behind this study to explore the consumer preferences in the Indian banking industry through Conjoint Analysis. We intend to understand the product attributes that a prospective bank customer considers while evaluating an Indian bank.


This is an exploratory study. Hence, no hypothesis is formulated. After the results of the analysis are obtained, hypothesis can be developed.

Convenience sampling is used for the study. The sample size for the study is 51 respondents. The respondents are from the Full Time and Part Time course of the MBA program at FMS Delhi. The respondents were provided with the questionnaire that requires them to rate the various product-attribute combinations on a scale of 0 to 10. The average age of the respondent set is 29.9 years (standard deviation: 6.98 years) and the average work experience of the respondents is 6.53 years.

After carefully reviewing the contemporary literature, the following factors were found relevant to our study:

Branch Hours: The time duration for which the branch is open

ATM Network: The location of the ATM network with respect to positioning near the branch or at other places

Customer Service Reputation: The customer perception of the quality of services offered to customers.

The level of these product attributes are as following:





Branch Hours

Weekdays 9-4

The branch timings are from 9 AM to 4 PM

Weekdays 9-7

The branch timings are from 9 AM to 7 PM

Weekends also

The branch is open on weekdays as well as weekends


ATM Network

At branches

The ATM is available only at branches

At branches & others

The ATM is available at branches as well as at other locations


Consumer Service Reputation


The consumer perception of the consumer services is good


The consumer perception of the consumer services is average


The consumer perception of the consumer services is poor

Table 1: Product Attributes and Levels

As we observe, there are 18 possible combinations out of these product attributes and levels. The 18 combinations or profiles are presented to the respondents in a survey. Beside the responses, other information like respondent’s age, work experience, sex and absence/presence of a bank account is also collected. Based on the collected responses, conjoint analysis is applied to find out the part worth estimates of the various product attributes.

Since the number of attributes is 3, traditional full-profile methodology of conjoint analysis is used. Based on the responses, dummy variable regression is used to find the respective part-worth functions for each respondent. These results are then aggregated to find an overall result.


The data from the 51 respondents is analyzed to find out individual, unique part worth functions. The utilities of the various product attributes are as follows:



Aggregate Utility

Standard Deviation

Branch Hours

Weekdays 9-4



Weekdays 9-7



Weekends also



ATM Network

At branches



At branches & others



Consumer Service Reputation










Table 2: Aggregate Utilities of Product Attributes and Levels

As we observe, the utilities have comparable standard deviations to the aggregate value. The importance of the various product attributes are as follows:

Product Attribute

Part Worth (%)

Branch Hours


ATM Network


Customer Service Reputation


Table 3: Part Worth of Product Attributes

As we observe, the customer service reputation (48.7 %) is the most important product attribute among the three product attributes. This reinforces the pre-existing perception that customer service reputation is a key factor that is evaluated by the prospective customers. Second, branch hours (34.2 %) as a product attribute is another important attribute that is evaluated by the customers. Positioning of ATMs is the third parameter that is used during customer evaluation (17.1 %).

These results highlight the importance of customer service reputation in the Indian banking industry. Indian banks must attempt to improve the customer perception to gain a competitive advantage. An improved service reputation assists the bank in improving the competitive position of the brand. For a new player that is seeking entry in the industry, investments must be directed to improving the customer experience and customer perception about the same.

Next important parameter is the timings of the branches. As seen, usual timings from 9-4 PM are the least preferred. Customers look forward to some sort of facility in this regard. It can either be related to longer branch timings like 9-7 PM or branches being open on weekends. Since the respondent set had people with and without work experience, option of branch hours extending after the usual 4 PM is useful to the working professional. Finally, the positioning of ATM is another important parameter evaluated by the customers. ATM location at the branches and at other places is an attractive preposition.

Since it is an exploratory study, there is a further need for a study with a bigger respondent set and product attributes that would throw deeper insights into the importance of other product attributes to the Indian consumers.

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