Banks in Bangladesh: Marketing with wide mission
Mrs. Jesmin Akther is a senior assistant secretary sitting in the ministry of the government. Some days ago she decided to open a FDR with any private bank. One bank offers her 3 months FDR @6.25% while another bank offered 1 year FDR @7%. The interest rate and tenor variation of two banks confused her.
After a short cost-benefit analysis, she decided to open a FDR for three months. This confusion among customers is now very common in Bangladesh because of aggressive marketing of banks and cutting edge-competition.
Banks are established for business based on spread. The rational gap between deposit and loan rate is spread which is banks profit. But banking industry of Bangladesh has got introduced with the word Marketing Division very recently because of Bangladesh Banks continuous audit objection.
The objection is that banks marketing activities must be separated from administrative activities by making separate division. So, many banks have established separate marketing division to deal with liability/deposit marketing and asset/loan marketing. However, most banks marketing division deals with liability/deposit marketing as major responsibility.
Asset marketing is still dealt by corporate & S.M.E. banking divisions. They have a logic which is that if marketing division deals with loan proposals or proposal appraisals, it will create conflict with job responsibility of Corporate Division, SME Division and Retail Division. Marketing division can be involved at best up to bringing the loan clients into banks through visit client's factory, offices and stock positions.
In some banks, marketing division deals with public relation related jobs while in others marketing division has to be content by dealing with liability of deposit. With advent of new banking products, marketing division has becoming more vocal. Marketing division of many banks have been passing times brainstorming with new banking products like agent banking, digital wallet etc.
Banks that do not have marketing division yet impose the innovative product development responsibility to other divisions. Many experienced bankers think that agent banking and digital wallet concept soon dictate banking concept of Bangladesh. However, critics of such innovative products think that businessmen and mobile companies will ultimately snatch away banks business/marketing to a greater extent by these technologies.
To exist in the market and competition banks must accept them anyway-the sooner, the better. In fact, new generation banks can easily save operational cost by adopting agent banking, digital wallet etc instead of setting up too many branches.
Recently, most banks of Bangladesh have been suffering from inadequate low cost deposit (like current and savings account) compared to high cost deposit (fixed term deposit). In case of most banks demand deposit and term deposit ratio is 1:5 or 1:6. As such, marketing division of all banks has started running for CASA accounts campaign that is current and savings accounts.
However, in last three months banks have started to experience liquidity crisis. For this, most banks have deserted CASA Campaign and started to pile up term deposit from customers again. For lack of deposit in banking sector, banks have been in critical situation to offer loan to clients. So, asset marketing has been curbed for deposit shortage.
Taking the essential advantage of so many private televisions, banks have been giving advertisement of different deposit products at lucrative rate. For deposit marketing, interest rate is the main competitive tool. New banks have been offering abnormally high interest rate to snatch away deposit of old banks (1st, 2nd and 3rd generation banks). First to 3rd generation banks weakness is their cost of fund and burden of non-performing loans for which they cannot offer abnormally high interest rate for deposit collection like new banks.
As such, First to 3rd generation banks have now pursued new strategy-cash management through getting collection accounts, pay roll accounts, no-frill accounts like school banking etc. These low cost deposits can meet their cash crisis to a greater extent.
Marketing division of the banks should also concentrate on non-interest based income particularly from non-funded business. Many companies are ready to open LC at 100 % cash margin. The marketing personnel are supposed to hunt such clients where they will have benefit without involvement of banks fund (non-funded business).
In banking sector, branch managers are usually aggressive sellers who have to run under heavy business target. Marketing division monitor the achievement of the target of these sales men. Apart from hunting deposit themselves as secondary job, marketing division of head office monitor progress of deposit and asset hunt of the branches/branch managers as primary job.
Setting up new branches, new ATMs comprise the daily activities of the marketing division of many banks. Place selection for new branch and new ATM booth set up is a very important strategic marketing decision. Only for setting up a branch in a wrong place can cause a branch to be under the banner of loss branch for several years.
It so happens that personnel other than marketing have been getting involved and ignore the issue of place marketing. Branch area selection or ATM booth area selection is not to be given to non-marketing fellows. It's a marketing responsibility where others can be there only as helping hand.
Continuous need of product differentiation and service differentiation in competitive market has enhanced responsibility of marketing employees of the banks. The day of one size fits all is over. Marketing division need to have its marketing policy. Still in banking sector, business policy is decided mostly by non-marketing personnel who cannot truly address the issue.
Banks top management responsibility is to make involve marketing division in forming any yearly and occasional/ special business policy more and more so that right job is done by the right person. Right job done by the wrong person makes the right person irresponsible. Marketing division should work for marketing, nothing else.
Product development, Marketing, public relation and advertisement should be in the same hand or at least it has to be confirmed that the job of product development, products advertisement and products sell are consistently aligned. Some branches of a bank depend on deposit -base while other branches are asset or loan based. So, different branches of the same bank might need to pursue separate marketing strategy.
How can same advertisement cover two opposite marketing directions- deposit vs asset marketing? So, separate advertisement or TVCs are needed for the same bank. Pressuring deposit-oriented branch for obtaining loan clients or loan-based branches for deposit hunt is waste of banks time and energy in most cases. Banks should also segregate their employees between desk job-oriented and marketing-jobs oriented.
Employees capable for marketing should not be pressured for desk job and vice versa. There should be also a balanced combination of operation-oriented and marketing/business-oriented employees in top management. A through operation/compliance oriented top management cannot bring business when mostly required and vice versa.
Marketing division of the bank should recommend ALCO Committees (responsible for asset-liability management and interest rate decider) of the bank to maintain deposit interest rate consistently with government savings certificate rate in order to prevent fund leakage to government savings certificate from banks. At the same time marketing division of the bank should also recommend loan interest rate hike to cover high cost deposit at the time of prime deposit necessity.
From last few years, banks have started to brand their branches and ATMs with priority to draw customers with the help of comparatively large signboard of the bank, theme color, logo etc. Such branding develops the knowledge of mass people about the existence of a certain branch of any bank. As part of branding, some bank branches choose buildings located in corner plot covering two or more road views. Such type of site selection establishes competitive edge for those banks-branches in terms place marketing.
Again, bank-branches located beside main roads are found to be more crowded by customers than bank- branches beside feeder road/ inside locality. It all depends on how much cost a bank branch is ready to incur for branding itself. Now days many bank branches have mushroomed in residential areas instead of commercial areas to get more customers or lack of commercial places. But such site selection being illegal pose threat for overall image/ goodwill of the bank.
The recent example of successful branding is Bkash, a product name which has already replaced its generic name called mobile banking. People use the term Bkash to mean fund transfer through mobile just as much as Honda Company replaced its generic name motor vehicle by successful branding. Someone was right to say: in successful branding, generic name of anything is lost in the product name and at last the product name remains.
Another issue is public relation or PR. What is PR? Pubic Relation or PR is continuation of marketing. While the word marketing is used to mean a certain product / service campaign, PR is a kind of continuous campaign in favor of the image of the organization and this goes on till the organization is closed.
For this, many banks and non-banking organization have only Public Relation Division that they think is sufficient to serve the purpose of marketing. Actually, it's a process chain where public relation department renders back up to marketing department and marketing department renders back up to sales department. So, in absence of marketing department a process gap runs between PR and sales department. For this, advertisement of many banks does not really represent their recent products/services attributes that the bank offers.
Last but not the least, many think that the concept of centralization (Banks Head Office will control everything) is highly responsible to destroy bank business in Bangladesh.
Because different places have different types of customers with which centralization cannot cope. Compliance as regulatory requirement is always expected but if it comes at the cost of business then question arises why banks are being allowed in private sector? The question arises when centralization by Head offices of banks has itself become enemies to fast business and quick marketing in different area context.
The writer is First Assistant Vice President, Business Development & Marketing Division, ShahjalalIslami Bank Ltd.
Source: https://dailyasianage.com
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