Advertisement plays an important role in every sector. Since after the economic reforms of 1991 the financial sector in India has shown tremendous growth. Policies of Liberalization and Globalization have led to competition in the financial sector (Pathania, 2012). This keen competition in the market and change in the business and industries, led the Financial Institutions to offer the variety and quality of products and services to their customers. In order that the quality of services which they offer should be known to the customers the companies should advertise their products and services. Advertisement helps Financial Institutions to makes an attempt to change or reinforce the attitude of the customer, reader and viewer towards the advertised products.
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Advertising is a mass communication involving an identified sponsor, the advertiser, who normally pays a media organization, such as television network, to run an advertisement that has usually been created by an advertising agency. The basic task of advertising is to communicate information efficiently to groups of individuals that could number in the hundreds or millions. (Aaker and Myers,1975).
Many advertisements are designed to generate increased consumption of those products and services through the creation and reinvention of the “brand image”. For these purposes, advertisements sometimes embed their persuasive message with factual information. Advertising can be used to change the behavior of the reader/viewer toward the product or service, to influence public opinion, to gain political support, to support, to advance a particular idea or to bring about some effect as desired by some of the advertisers. Buyer’s attitude towards the products may be determined not merely by the products as manufactured in factories, but also by what added in the form of packaging, services, advertising, customer advice and other things that people value. Thus, the advertising plays an important economic role in the introduction of new products in the markets.(Sidhu, 2003 ).Every major medium is used to deliver these messages, including television, radio, cinema, magazines, newspapers, video games, the Internet, carrier bags and billboards (http://www.managementparadise.com).
Role of Advertisement in Financial Sector
Advertisement plays an important role in the society, and now financial sector is no exception to this. It generates the awareness between the consumers about the recent products which are being offered to them. It also creates a relationship between the company and the consumer. For example, if a bank offers the home loans at an attractive EMI’s, Fix account with more rate of interest, A post office has to offer various saving schemes, corporate loans, the financial intuitions by adopting the best mode of communication so that the people will be known to their offerings. Due to the paradigm change in the societal behavioral patterns and technology there are many new advertising opportunities which are coming like Popup ads, Flash ads, Banner ads, and email ads (often a form of SPAM), Social networking sites etc. Due to the privatization of financial sector the competition among the different Financial Institutions has increased tremendously, as each institute is trying to build its market share by offering variety of financial products designed for their targets markets. In this scenario, every institution claims uniqueness of its products and tries to impress upon the consumer that these products are best suitable for his needs. Due to strong and intense competition the advertising and other promotional strategies assumes a significant role as far as the promotion of these financial products and services are concerned.
1.2 Transformational Change in Financial Service Sector
Within our society, financial institutions are becoming more abundant. Along with this present growth, the field of marketing financial services has also grown in size and scope with new entrants every day. This era, marked by the government’s luminous hand of deregulation (defined as the act of removing regulations or restrictions from a specific entity), has expanded consumer options to the extent that commercial banking must now become an aggressively competing member of the financial services industry. The relatively stable banking environment is being altered with innovation, opportunism, and government intervention.
Increasing knowledge among societies is forcing the financial institutions to adopt international best practices to remain in business. With the changing scenario financial services advertising and marketing campaigns are crucial to gain clients and promote financial services business. Various advertising and marketing agencies cater specifically to businesses in the financial services industry.
1.3 Different Types of Financial & Banking Products and Services Advertised
Deposits – Banks accept the deposits of the public. In order to attract the savings of the people, the bank provides every sort of facility and inspiration to them and collects the scattered savings of the society
Types of accounts generally advertised
- Current account
- Saving bank account
- Fixed deposit account.
Loans – The bank just don’t keep with themselves the deposited amount of the people, rather they advance them in the form of loans to the businessman and entrepreneurs, just to earn profits for their partners. The loaner keeps some gold, silver, fixed and variable assets in the form of security with the bank.
The bank can advance loan to their customers in three ways
- Money at call
- Discounting bills of exchange.
Types of loans
- Secured Loans: Consist of
- Housing Loans
- Auto Loans
- Unsecured Loans: Consist of
- Credit card debt
- Personal loans
- Bank overdrafts
- Credit facilities or lines of credit
- Corporate bonds (may be secured or unsecured)
c) Insurance: Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment.
Types of Insurance:
- Life insurance
- Auto insurance
- Home insurance
- Gap insurance
- Health insurance
- Accidental insurance
- Automobile insurance
- Property insurance
The globalization and privatization, which occurred in the year 1991, has changed the Indian Banking Scenario by new industrial policy. Corporate World realized stiff competition even after the economic reforms in the form of various foreign and Indian Banks as well as from Non banking Financial Companies. Due to this clutter and competition, promotion and advertising become an integral component of marketing of the financial products and services as it also serves as an important guide for the customers as far as investment portfolio management at the individual level is concerned. To increase the effectiveness investment portfolio management for the customers, Financial Service Providers are now focusing towards promotional practices. Being as the major component amongst all the promotional Strategies, advertisement plays an important role.
1.4 Recent Trend’s of Advertising in Financial Industry and Banks:
Advertising Industry trends reflect the dynamics of the advertising industry and its contribution to the economy of the country. Advertising industry trends suggested that advertising expenses with regard to magazines in the beginning of 2007 escalated by 7.1% as compared to the first half of 2006. The same period witnessed a decrease in the expenses on magazines dealing with business articles, reports and business statistics by as much as 5.2%. A survey conducted on the advertising industry trends also suggested that total amount spent on advertising pertaining all categories of media registered a reduction by 0.3% in the first three months of 2007 as compared to the last quarter of the 2006. The advertising analysis report conducted on advertising industry trends observed that approximately 19.2% was spent on magazines during the first 3 months of 2007. There was an increase by 0.9% as compared to the hike registered last year during the same time (Srinivas Vidya, 2009).
TV ad volumes of ‘insurance sector’ has seen 35 per cent rise during FY 2008-09 compared to FY 2007-08. ‘Banking – services & products’ with 44% was the topmost category under ‘banking & financial services’ sector advertising on TV followed by ‘corporate image-NBFCs’ with 8 percent and ‘securities/share broking organization’ with 7 per cent respectively during FY 2008-09.In the insurance sector, Life insurance has the maximum share in the pie followed by ‘general insurance’ and then ‘general health/accident insurance.
Print advertisements related to banking, finance and investments registered an increase of 60 per cent in the first six months of this year in terms of volumes, compared to the same period last year.
According to data released by AdEx India in the year 2007, a division of TAM Media Research, while the Education sector topped the print advertising from January to June period this year, strong volume growth was registered in ads in banking and real estate sector http://www.indiantelevision.com/tamadex/y2k7/mar/tam12.php.
Print advertising of banking, finance and investment sector increased by 60 per cent during the first half of 2010, compared to same period of 2009. ‘Public Issues’ was the top category and the State Bank of India was the lead advertiser,” according to an AdEx analysis (http://articles.economictimes.indiatimes.com).
1.5 Advertisement in banking sector
It is defined as aggregate of function directed at providing service to satisfy customer’s financial needs and wants, more effectively than the competition keeping in view the organizational objective of the bank. The bank marketing has become a very complex yet interesting subject as it requires the knowledge of economics, sociology, psychology, banking and also core marketing concept (Sasanee, 2004). In marketing, it is the customer who has the upper hand. The mantra of effective marketing bank products lies in the systematic and professional approach towards satisfying customers needs (Ojha, 2004). Thus, banks have to set up “Research and Market Intelligence” wings so as to remain innovative to ensure customer satisfaction and to keep abreast of market development (Ananthakrishnan, 2004)
Need of Bank Advertisement:-
Awareness among Customers: Modern technology has made customers aware of the developments in the economic environment, which includes the financial system. Financial needs of the customers have grown multifold into various forms like quick cash accessibility, money transfer, asset security, increased return on surplus funds, financial advice, deferred payments etc.
Quality as a Key Factor: With the opening up of the economy, fast change has been experienced in every activity, and banking has been no exemption. Quality is the watch word in the competitive world, which is market driven and banks have had to face up to this emerging scenario. In fact, it may not be out of place to reiterate that quality will in future be the sole determinant of successful banking ventures and marketing has to focus on this most crucial need of the hour.
Growing Competition: Increased competition is being faced by the Indian banking industry from within the system with other agencies both, local and foreign, offering value added services. Competition is no more confined to resource mobilization but also to lending and other areas of banking activity. The foreign commercial bank with their superior technology, speed in operations and imaginative positioning of their services has also provided the necessary impetus to the Indian banks to innovate and complete in the market place.
Technological Advances: Technological innovation has resulted in financial product development especially in the international and investment banking areas. The western experience has demonstrated that technology has not only made execution of work faster but has also resulted in greater availability of manpower for customer Contact.
Banking and Non banking Financial Companies are purely service industry which satisfy the financial requirements of the customers and provide various types of banks and allied services to their clients. In case of bank customers who are such persons and organizations which require customize financial services. The different customers belong to different strata’s of the economy with different geographical locations and different profession. Hence the impact of verbal and written communication will create better understanding as per their requirements. Therefore for a company to achieve mass customization according to their customer’s requirements. There is a strong need to formulate sound marketing plan and strategy having focused towards effective promotional approach. For this a layout plan is required which is called Marketing Plan.
1.7 Marketing Plan followed by Financial Institutions.
With the need for marketing in banks having evolved out of the changing environment and constant interplay of various interdependent factors, the importance of a systematic approach to marketing cannot be over stressed (Uppal, 2010). The application of a marketing approach in banks will therefore involve:
a. Identifying customers’ financial needs and wants;
b. Developing appropriate banking services to meet these needs
c. Pricing for the services so developed
d. Setting up suitable outsells and banks branches.
e. Forecasting and research of future market needs.
f. Advertising to promote the services to the existing as well as prospective customers.
Technology enables increased penetration of the banking system, increased cost effectiveness and makes small value transactions viable. Besides making banking products and services affordable and accessible, it simultaneously ensures viability and profitability of providers. Technology allows transactions to take place faster and offers unparallel convenience through various delivery channels. Technology enhances choices, creates new markets, and improves productivity and efficiency. Effective use of technology has a multiplier effect on growth and development. The enhancement of technology in Financial sector even led to the significant change in the marketing processes of the Financial Industry.
1.8 Role of Technology in the Financial Industry
Technology is revolutionizing every field of human endeavor and activity. One of them is introduction of information technology into capital market. Information Technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets.
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The internet banking is changing the banking industry and is having the major effects on banking relationship. Web is more important for retail financial services than for many other industries. The customers can view the accounts; get account statements, transfer funds and purchase drafts by just punching on few keys.
Retail banking in India is maturing with time, several products, which further could be customized. The smart card’s i.e., cards with micro processor chip have added new dimension to the scenario. An introduction of ‘Cyber Cash’ the exchange of cash takes place entirely through ‘Cyber-books’. Collection of Electricity bills and telephone bills has become easy. Most happening sector is housing loan, which is witnessing a cut-throat competition. The home loans are very popular as they help you to realize your most cherished dream. Interest rates are coming down and market has seen some innovative products as well. Other retail banking products are personal loan, education loan and vehicles loan.
The upgradeability and flexibility of internet technology after unprecedented opportunities for the banks to reach out to its customers. No doubt banking services have undergone drastic changes and so also the expectation of customers from the banks has increased greater (Anne-Laure Mention, 2011).
Modern era is an era of innovations and hence Financial Sector is no exception to this era.
1.9 Financial Innovation
Innovation derives organization to grow, prosper & transform in sync with the changes in the environment, both internal & external. Banking is no exception to this. In fact, this sector has witnessed radical transformation of late, based on many innovations in products, processes, services, systems, business models, technology, governance & regulation. A liberalized & globalized financial infrastructure has provided had provided an additional impetus to this gigantic effort.
The pervasive influence of information technology has revolutionaries banking. Transaction costs have crumbled & handling of astronomical brick & mortar structure has been rapidly yielding ground to click & order electronic banking with a plethora of new products. Banking has become boundary less & virtual with a 24*7 model. Banks who strongly rely on the merits of ‘relationship was banking’ as a time tested way of targeting & servicing clients have readily embraced Customer Relationship Management (CRM), with sharp focus on customer centricity, facilitated by the availability of superior technology. CRM has, therefore, has become a new mantra in service management, which in both relationship based & information intensive.
To say that financial innovations, like innovations generally, are basically unforecastable improvements is not to suggest that their emergence is merely a matter of chance or of artistic creative impulse. Nowadays, of course, we can not only hold and trade gold coins, gold bullion, gold futures, and gold options but literally hundreds of other financial instruments that either didn’t exist in 1966 or existed only in rudimentary form. A partial list of major novelties would include, in no particular order: negotiable CDs, Eurodollar accounts, Eurobonds, sushi bonds, floating-rate bonds, puttable bonds, zero coupon bonds, stripped bonds, options, financial futures, options on futures, options on indexes, money market funds, cash management accounts, income warrants, collateralized mortgages, home equity loans, currency swaps, floor-ceiling swaps, exchangeable bonds, and so on and on (Miller, 1986).
A systematic combination of different advertising and promotional strategies is required to make customers aware about product and services offered by the various corporate entities. As these promotional strategies are used by the customers to enhance the knowledge information about various product and services.
Through Promotion and advertising practices in Financial Services there is a need to supply and transmit the accurate information to the customers. Since Financial Industry is going through revolutionary transformation with the advancement of Information Technology. Hence the various electronic as well as technological system are now being used to communicate to the customers by providing them with the needed information as regarding Financial Service and products and thus helps in making his purchase decision easier.
2. Review of Literature
This chapter reviews the available literature on impact of advertisement on buying behavior of the respondents. This section has helped us in defining the problem of the present study as well as understanding the various aspects of buying behavior of the respondent towards the financial Service and products.
The reviews of the related literature have been divided into various sub section in order to enhance understanding and to gain more insights in the present research area.
Section A: Reviews related to the Internet impact and the Changes in the structure of the Financial Services
Clemons and Lorin (2000) opined that the Internet impact on the financial services sector the emphasized has often been placed on the direct cost-saving effects of using the Internet to provide transaction services. There had been substantial barriers to realizing much of this value. The study emphasized on the primary sectors in retail financial services: credit cards, deposit banking, mortgages, brokerage, and insurance. The study concluded that three factors – price transparency, differential pricing and disintermediation – which will play a significant role in determining how the Internet affects the retail financial services.
Schneider and Sledge (2011) analyzed the impacts and future implications of the crisis; interviewing policy experts, business executives, academics, and thought leaders; and convening small group discussions. The goal was to understand how impending changes-in demographics, the macroeconomic environment, regulation and legislation, technology, cultural paradigms, and institutional dynamics-will affect the structure of the financial services industry. After that it recommended the several ways for the long-term asset-building strategies may leverage recent trends influencing the financial services industry to accomplish this goal.
Section B: Reviews related to the Distribution of financial services
Gupta and Westal (1994) studied the relationships between pricing policy and distribution by means of distribution chains to determine the point and degree of price sensitivity trends. It also concluded that successful organizations will be those which fully understand and specialize in a limited number of sectors, and those who start with a client base and a distribution system which will not inhibit the introduction of other distribution methods so that they can become multi-product and multi-distribution organization.
Allen and Gale (1998) concluded that Relationships between intermediaries and their customers have become increasingly important in recent years. The paper argues that the need for costly ex ante information acquisition and analysis is a major barrier to the participation of investors and firms in sophisticated markets. Long-term relationships between intermediaries and their customers, in which intermediaries provide implicit insurance to customers, can be an effective substitute for costly ex ante investigation. In this way, intermediaries allow firms and investors to reap the benefits of financial markets. Relationships are easiest to sustain when the ongoing benefits to both parties are high. As a result competition may lower the benefits that can be obtained from relationships.
Ctlin (2009) recommend the various distribution channels used by banks. The most important challenge of a bank is how to efficiently reach the customer, with the right product or service, at the right time. The bank should define exactly how they are going to use each channels, which services and products in which channels, how to mix and integrate the channels and how to support the channels. To do this, they need to understand customer behavior, channels performance and the channel’s operating cost. However, managing and integrating the distribution channels within an increasingly complex and challenging operating environment has become very difficult.
Section C: Reviews related to the Promotion of Innovations in Financial Services
Askenazy et al. (2010) examined that advertising and innovation are two engines forms to escape competition through a better attraction power toward consumers or quality advantage. We propose a model that encompasses both the static and dynamic interactions between R&D, advertising and competitive environment. This model provides two main predictions. First, for a given competitive environment, quality leaders spend more in advertising in order to extract maximal rents; thus, lower costs of ads may favor R&D. Second, more competition pushes Neck and Neck to advertise more to attract a larger share of consumers on their products or services.
Rust and Lemon (2001) critically examined the aspects of e-service in effectively interacting with consumers in interactive, networked information environments like the Internet. It discussed three central changes brought about by the advent of the Internet (true interactivity with the consumer, customer-specific, situational personalization, and the opportunity for real-time adjustments to a firm’s offering to customers), as well as changes in consumer expectations regarding firm service strategies that flow from these developments. Based upon these changes in technology and consumer expectations, important elements of the e-service experience were defined. The research concluded by showing how e-service strategies will play a significant role in growing the overall value of the firm
Nitsure (2003) reviewed some of the problems in developing countries, which have a low penetration of information and telecommunication technology, face in realizing the advantages of e-banking initiatives. Major concerns such as the ‘digital divide’ between the rich and poor, the different operational environments for public and private sector banks, problems of security and authentication, management and regulation, and inadequate ‘financing of small and medium scale enterprises (SMEs) were highlighted.
Section D: Reviews related to the Customer satisfaction and behavior with electronic service encounters
Beckett et al. (2000) studied a model which attempt to articulate and classify consumer behavior in the purchasing of financial products and services. The theoretical insights generated by this model were then used to examine qualitative research data gained from focus group discussions on consumers’ attitudes to their financial providers and their financial products. The research findings have demonstrated that consumers’ purchasing behavior is greatly influenced by the type of financial product being purchased. Finally, these findings were examined for the potential insights they provide to bank providers attempting to identify appropriate strategies which are conducive to increased customer retention and profitability.
Massad et al. (2006) examined that Customer relationship management is an integral component of business strategy for on-line service providers. The paper investigated the aspects of on-line transactions in electronic retailing that are most likely to satisfy or dissatisfy customers, thereby increasing or decreasing the likelihood of building and maintaining relationships with them.
Bilal et al. (2011) studied the factors of customer loyalty and their relationships with the banking industry in one of the developing countries, which is Pakistan. Then analyzing the relationship among different factors, a model for the customer loyalty is proposed at the end of the research. A questionnaire is designed and validated, the data which is gained from the 316. Perceived quality, satisfaction, trust, switching cost and commitment is the factors which influence the loyalty of the customers. These factors also influence each other as well. The relationships of different factors with each other are also studied and the SPSS software is used to analyze the data gathered from the respondents.
Section E: Reviews related to the Role of Advertising in Adoption of Mobile Financial Services
Mylonopoulos and Donkidis (2003) examined the mobile business. They further discussed that how it will or should grow in the future, is not only unknown but indeterminate and secondly it explained the challenge which is related to the fast pace of change, the uncertainty, and the complexity of developments in mobile business.
Dass and Pal (2011) analyzed the adoption of mobile financial services. The research paper provides a Meta analysis of the existing academic literature on MFS and determines the strength of the factors and their linkages through a scoring model based on the type of publication. The presence of factors like mobility, perceived convenience and relative benefits among the strong determinants show the importance of factors that can prove MFS to be more beneficial for the consumers when compared to the existing channels of accessing financial services. Perceived financial cost and perceived risk (which includes privacy and security concerns) about MFS were found to be the major barriers towards its adoption.
Section F: Reviews related to the competitive marketing by financial institutions
Masocha et al. (2011) analyzed the extent of technological utilization in various competitive marketing practices of a financial institution in today’s inexcusable 21st century competitive business environments to gain a wider understanding of how financial institutions use technology to manipulate and influence their value offering. On this backdrop, the study investigated the impact of technology on competitive marketing by various banks in South Africa. The paper further investigated the effects and the extent of technological adoption in various marketing practices of a financial institution.
Ekerete (2005) examined the extent of the marketing activities of merchant banks in Nigeria with a view to assessing the suitability or appropriateness of their current marketing practices. The research was carried to assess the level of involvement of Nigerian merchant banks in marketing activities. An attempt will also be made to analyze the recent developments in the marketing activities of the banks. Critical marketing factors in the industry will be identified and the level of preparations of the merchant banks to meet the challenges ahead will be evaluated. Data were obtained mainly from primary sources through interviews and questionnaire. Hypotheses were tested using Spearman Rank Correlation Coefficient and Kendall Coefficient of Concordance. The results, among other things, showed a significant positive relationship between marketing budget of the banks and their profitability. Based on the results of the study, the researcher recommended a better equipped, functional and result oriented marketing department for the banks. Also, better information flow between banks and their customers with greater emphasis on efficient service delivery.
Section G: Reviews related to the Sales promotion and consumer behavior in financial institutions
Ekankumo and Henry (2011) examined the relevance of sales Promotion strategies of the banking industry in Nigeria generally, and Bayelsa State specifically. It also attempted to evaluate the extent and relative impact of sales promotion on the development, growth, and survival of banks. To fulfill the above said objectives total 15 banks was randomly selected with 278 respondents who were marketers structured questionnaires were admitted and results gathered were analyzed using tabulation and single percentage method. The summary of the result was that sales promotion is aptly adopted by majority of banks in Yenagoa, and it subsequently recommended that the widest possible understand of the strategy has to be communicated to all levels of the organization to provide the detailed promotional plan of the banks.
Lindholm (2008) examined sales promotion and consumer behavior in the context of financial Services. The influence was studied by observing the credit card purchases before, during and after the promotional periods. Sales promotion is studied in the context of the opening offer and during the birthday promotion. The subject was of interest for the case company as they had challenged the Finnish credit card markets by introducing new product features aimed at persuading customers to use credit card as a daily payment method. The initiative was reinforced by a set of sales promotion activities, which were the focus of this research. The researc
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