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Tech
It Or leave It Banker's
Choice
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Mudit Saxena |
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writer is Head, Retail Marketing, HDFC Bank |
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Indian
banking, a conservative club with exclusive membership, was
forced to open its doors to some new members in the id-’90s.
These new members—the private banks, helped by the winds
of liberalisation—changed the face of banking as we knew
it, forever.
Earlier, the banking sector had just two types of players. On
the one hand, there were the foreign banks, which were choosy
and decided who to accept as a customer. At the other extreme
were the public sector banks which catered to the masses but
which were seriously found wanting in terms of products and
services. Then there were the old private sector banks and co-operative
banks, but they were mainly community-oriented. A large number
of middle-class customers, though a tolerant lot, were looking
for a change. This was the scenario when the new private banks
stepped into the picture in 1995, HDFC Bank being the first.
Market Analysis
When HDFC Bank entered the scene, market shares were skewed
heavily in favour of public sector banks. They held 86.19 per
cent of the deposits, with the foreign banks holding |
7.14
per cent and the old private banks holding 6.67 per cent share.
Thanks Then
The public sector banks did not believe in pursuing customers,
preferring instead to wait for them to come to the banks. Given
the width of distribution, most customers had virtually no choice.
Foreign banks, meanwhile, concentrated primarily on the large
metros and the immediate vicinity of their branches. While most
foreign banks were happy waiting for their customers to come
to the branches, some American banks had begun developing Direct
Sales Agents to go to the customer’s doorstep and solicit
deposits.
Evolving Indian customer
While the banking industry was in a state of flux, the customerswere
evolving too. With liberalisation and the entry of international
brands into the country, customer expectations had begun to
change in terms of quality and service. The media boom and the
advent of several satellite channels changed attitudes further.
Indians had begun to travel internationally either on work or
for leisure and had become more discerning. No longer were they
willing to wait in long queues or tolerate condescending behaviour.
This change began to reflect itself in terms of expectations
from banks too. Players would be benchmarked against global
standards, while services would be compared to the best of other
industries as well. There seemed to be an opportunity for a
bank that served customers well at a reasonable price.
Consumer Behaviour Analysis
Research conducted amongst customers of foreign and public sector
banks revealed the following. Customers perceived banks to be
trustees of the money they had deposited with them. However,
when they dealt with public sector banks, they felt the bank
staff behaved like they were doing them a favour. On the other
extreme, the foreign banks seemed to emerge as fair-weather
friends who dealt with them with clinical efficiency. Actual
consumer statements of dissatisfaction with both segments are
detailed below: |
Reasons
for dissatisfaction with public sector banks
l I cannot stand the rush and noise. It looks like a railway
platform.
l Nobody cares whether a customer’s work is done or not.
l The whole attitude is that of a government employee.
l The whole bank is a mess with people shouting and files all
over.
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l
Their standard is to give cash in five minutes. It always takes
30 minutes.
l They do not treat you as a customer, more like a beggar.
Reasons for dissatisfaction with foreign banks
l They suddenly raised the minimum balance and asked me to either
increase the balance or go.
l The whole atmosphere is artificial.
l They look for posh people.
l They charge you for everything.
l They talk to you nicely but you know that it is unnatural.
l They are trained. Their smiles are synthetic.
Consumer
perception of the HDFC Brand
The favourable image that the parent company has amongst the
burgeoning middle class, having disbursed housing loans for
over two decades, also helped greatly.
Associations
with HDFC
l Consumers connected emotionally with the brand, as it hadhelped
them buy homes
l While they had lent money, they treated consumers with grace,
trust and professional service
HDFC Bank
could ride on this image
The Opportunity:
In the polarised banking scenario, with a large unfulfilled
need gap, a bank that offered the best of both worlds had
a ready and waiting market.
Acquisition
Strategies
An effective Acquisition Strategy is based on acquiring profitable
customers at a low cost and is based on an effective business
plan that covers a host of activities:
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Customer segmentation as an Acquisition Strategy
Research revealed that there were basically two types of customers:
those who were willing to pay for service and those who weren’t.
These customers lay in two buckets, either with public sector
banks or foreign banks . What was revealing was that there
were several customers who were willing to pay for service
but currently banked with public sector banks, as they had
no choice. This was the market that appealed to HDFC Bank
and was consciously targeted for conversion with success.
Those customers who were unwilling to pay for service with
public sector banks and those who associated with foreign
banks for the status attached to them were not targeted as
it would have been a waste of resources.
*
Value proposition as an Acquisition Strategy
Addressing the need gap, HDFC Bank decided to offer ‘international
levels of service at a reasonable price’. This proposition
was relevant to a vast and statistically significant middle-class
market. Given the fact that this was what the market was waiting
for, it met with great success and helped make acquisition
an easier task, as it addressed consumer needs.
* Pricing as an Acquisition Strategy
In 1995 there were only two pricing points for consumers.
One could choose between a foreign bank with an opening balance
of Rs 10,000 and upwards or a public sector bank at Rs 500,
with polarised levels of service. HDFC Bank decided to offer
international levels of service and technology at Rs 5,000,
thus suddenly growing the market as a huge chunk of public
sector bank customers who were willing to pay for service
found an alternative.
* Distribution as an Acquisition
Strategy
It is also important to know where your most important markets
are, and thus focus on those for best results. RBI data (July
2000), for example, shows that the top 10 cities account for
38 per cent of the all-India market in deposits. It therefore
enables us to concentrate on getting maximum market share
in those markets by offering a wide range of products and
services. Once the top ten centres were covered, focus was
shifted to the next 20 cities. This focus on the top 30 cities
covered 49 per cent of the deposit market.
HDFC bank also consciously decided to have a ‘Centralised
Processing Unit (CPU)’ that took care of all back-office
functions and thus left branches to concentrate on selling.
This allowed the bank to set up smaller branches at a lower
cost
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Technology as an Acquisition Strategy
‘Harnessing enabling technology to provide convenience
and
quality service through multiple channels at value for money
price points’ has been the bank’s mission from inception.
To this end the bank invested in open systems and a scalable
architecture that allowed it to ramp up easily and handle the
rapidly growing volume of customers, apart from reducing costs.
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Product range as an Acquisition Strategy
A complete range of products, from a basic savings account
to value-added services, loans, NRI and depository services,
enables the bank to straddle the full product spectrum that
fulfills any financial need. Thus we provide a customer the
choice to start a relationship with several options.
Products Value-added services
Savings Accounts Internet Banking
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Current
Accounts PhoneBanking, MobileBanking, ATMs
Loans cars, Personal, LAS
Demat International Debit Card
NRI Services Bill Payment through channels
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Choice of Channels for servicing as an Acquisition Strategy
HDFC Bank offers multiple channels to customers to access
their bank. There are customers who prefer to deal with the
bank by coming to branches...and we have 126 of them in 46
cities. There are others who prefer to bank from electronic
channels like ATMs, phone, Internet or even the mobile. This
choice helps in acquiring customers with varying behaviour
patterns.
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Value propositions as an Acquisition Strategy
Different segments have different needs, and to offer a value
proposition that appeals to each of these segments, the bank
has launched various products. Younger, tech-savvy customers
who are comfortable with direct banking channels like ATM,
mobile phone, Internet and debit card can open a Freedom Account
with just Rs. 1,000. Those who seek the familiarity of branch
banking can avail of the basic savings account at Rs. 5,000.
While High Networth Customers (HNW) are invited by the bank
to start a relationship through the Preferred Account when
their relationship size exceeds Rs. 5 lakh.
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People as an Acquisition Strategy
While one may talk of technology, access channels and products,
one simply cannot ignore the human element. A human face and
personal relationships are still imperative for growth. Therefore,
getting the right kind of people at the right positions becomes
crucial. At HDFC Bank, we have people who understand servicing,
and our front-office staff belongs to various service sectors
such as travel, hospitality, credit cards, etc.
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Data Management as an Acquisition Strategy
To enable the bank to understand the customer and consequently
service him better, we have invested huge amounts to implement
a data-warehousing and data-mining solution. This helps us
analyse customer behaviour and thus develop relevant products
and services for prospects.
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Cross-Selling as an Acquisition Strategy
With a wide network and multiple channel access, customers
deal with the bank in several ways. Each interaction is an
opportunity to cross-sell another product. After all, historically
it has always been cheaper to sell to an existing customer
than to acquire a new one. More banks are also leveraging
routine communication such as account statements to carry
marketing messages and cross-sell products while driving down
communication costs.
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Micro Marketing as an Acquisition Strategy
Given the nature of the banking sector, customers always operate
in a micro market which revolves around their residence. As
bank branches are spread across the city, each branch vies
for customers with competition in the vicinity. This also
varies within a city and most certainly between larger metros
and smaller metros due to the difference in competitive presence,
service benchmarks and customer expectations. Acquiring customers
requires different propositions and consequently every branch
needs to draw up its own marketing plan. There also needs
to be tight co-ordination of all sales channels — DSAs,
phone, DM, Mass media etc, for greater efficiency and optimum
results.
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Alliances as an Acquisition Strategy
Several corporates focus on the same type of customer even
though they may not be competing in the same business category.
For example an ISP, a car manufacturer, a cellular services
provider, or a computer seller may be targeting the same SEC
A customer. There is great merit in leveraging customer bases
and making joint offers to customer bases and acquiring them.
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Internet as an Acquisition Strategy
While one may talk of various strategies and products etc.
one needs to be alert to the changes that the Internet is
bringing about. It has already challenged established paradigms,
and will also force us to change our thinking. The medium
obviously affords a wide reach and it is a boon, especially
in reaching out to our NRI customers. Also, the interactivity
of the medium offers an opportunity to have a one-to-one dialogue
with the customers and get their feedback instantaneously.
As and when webcams become a norm in most homes, one can also
envision a virtual relationship manager (like Anna Nova the
virtual webcaster).
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Mergers an Acquisition Strategy
However, finally, organic growth has its limitations. Toady’s
dynamic environment is forcing organisations to grow and reap
the benefits of economies of scale at speeds hitherto unheard
of. HDFC Bank set the tone for another first in the banking
industry by acquiring TimesBank and overnight grew its customer
base by over 3 lakh in 38 branches. With this precedent, mergers
might just become the norm for rapid growth and customer acquisition
in the banking industry.
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Conclusion
Liberalisation has really changed the banking industry. It is
no longer enough for banks to just manage money efficiently;
they also have to manage customers, who now have a wide choice
of alternatives.
The future promises to be even more exciting, interesting and
challenging, thanks to technology. |
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| No
longer will banks, or any large organisation, treat customers
as a group and segment them into just some demographic and psychographic
profiles. The Internet has enabled us to talk to each customer
as an individual, with different needs and requirements. Products
will need to be developed to meet those needs, and services
will become the crucial diffrentiator. For years, customers
were part of the banks’ Fixed Assets; now they have moved
into the Current Assets category, and it will be a task keeping
them there. |
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