Bank Marketing as a Quality Development Tool in the Greek Banking Industry

Pateraki Aggeliki

Class: PSBU

Sept 2011

Tutor: Dominic Fisher

Pre-sessional Course Program

Table of Contents
Abstract ..................................................................................................................................... 2 1. Introduction ........................................................................................................................... 2 2. The history of the Greek banking system .............................................................................. 2 3. The Integration of Marketing in banking............................................................................... 4 4. The necessity of implementing Marketing banking .............................................................. 4 5. Definitions of Bank Marketing ............................................................................................... 4 6. Peculiarities of banking services in connection with Marketing ........................................... 5 7. The marketing mix in Banking Services ................................................................................. 6 8. Structure Information of Marketing System ......................................................................... 8 9. Conclusion ........................................................................................................................... 10 10. Bibliography ....................................................................................................................... 12

Abstract
The knowledge of Bank Marketing, as a tool for achieving the strategic objectives of Greek banks, is a necessary tool to maintain the existing clientele, the possibility of promoting new products and retail banking services to existing customers. Finding new and profitable customers, and make the personal relationships between bank and customer the key points for obtaining and maintaining the competitive advantage of each bank. The purpose of this paper is to analyse the basic principles of effective promotion of banking products and services by presenting the banking marketing mix in bank services.

1. Introduction
The banking industry is a dynamic and rapidly growing segment of every economy. The internationalization of the banking system leads to big changes over the credit system and also pushes financial institutions to operate on a competitive basis with a primary focus on providing high quality services at the lowest possible cost. The increasing competition in the banking industry leads to the need for quality in service and the aim to achieve an emphasis on quality, dynamic and continuous involvement of the human factor in the whole banking service system. This paper illustrates the value and importance of marketing for banks. Firstly, it reviews the history of the Greek banking system and the basic concepts that govern it. The core of the work which is presented here follows an extended analysis of reference to the role of the Bank Marketing in banking sector. In addition, the paper analyzes the Integration of Marketing in banking and also the necessity of implementing the Marketing banking. Moreover, in this essay different definitions of Bank Marketing are given and there are some references in the peculiarities of banking services in connection with the Marketing. Finally, the paper represents the marketing mix in Banking Services.

2. The history of the Greek banking system

The history of the Greek banking system begins in 1828 with the establishing of the National Bank's brokerage, which was designed to solve financial problems. In 1834 due to lack of funding resources, which arose from foreign loans, the National Bank closed. Christopoulos, D. K., Lolos, S. E. G. and Tsionas, E. G. (2002). In 1841 the National Bank of Greece (ETE) the National Bank of Greece was created to handle private. The main work was the acceptance of deposits, the granting of commercial and residential mortgage loans and also the monopoly right to issue banknotes.

In 1864 the ETE had lost the monopoly on issuing banknotes, because the Ionian Bank, which had activity until then operated only in the Ionian Islands, commenced operations in other parts of Greece. A large number of banks were created in the second half of 19th century, and the Bank of Athens became the second largest bank in Greece. In 1928, the Bank of Greece was established as the central bank. The National Bank had lost the privilege of issuing banknotes and other activities which were related to Housing and Rural Credit. According to Provopoulos, G. and Kapopoulos, P. (2001), during the Second World War, several small banks closed and immediately after the war there were many mergers of banks (National Bank - Bank of Athens, Ionian etc.). The largest banks were nationalized and thus the majority of the banking system came directly or indirectly under State control. From 1960, the internationalization of the banking system led to a substantial increase in the number of foreign banks in Greece. This input of foreign banks continued, aided by the accession of Greece to the European Union in 1981. In 1984 there were 41 banks and special credit institutions in Greece. More specifically, 21 were Greek and 15 of them (71%) belonged to the public sector. Today the following are involved in the Greek Banking System: The Bank of Greece (Central Bank) 40 Commercial Banks (20 Greek Banks and 20 Foreign Banks) 9 Special Banking Institutions 3 Development Banks 3 Banks Building Societies 1 Rural Credit Bank 1 Postbank 1 Deposit and Loans Greek Commercial Banks Nowadays, the main purpose of Greek commercial banks is to provide services in banking system and their main work is the acceptance of deposits, lending and servicing of international trade.

3. The Integration of Marketing in banking

Under the general tendency of banks to obtain customer focus, domestic banking groups focus on the further development of marketing departments in order to gain market share in retail banking in an environment of intense competition. According to Gortsos, V. C. (1998), the role of marketing in the overall operation and management structure of a bank has been upgraded and the work is crucial to the development of profitability. Marketing gives many opportunities to banks. For

example, it helps them to develop new services and banking products that are attuned to the real needs of their customers, to sell to existing banking markets, sometimes extending their cooperation with existing customers or acquiring new customers. Also, marketing offers better working conditions for their employees, because if someone has deep knowledge of techniques for dealing with customers, that allows to deal more easily and effectively with them.
Moreover, Marketing gives the opportunity of plans for the comprehensive treatment of the needs of the bank and its customers. Also, offers services at a lower cost per customer, building technology and economies of scale. Last but not least, Marketing offers better relationships with customers in order to create bonds of mutual interest. Marketing allows banks to show profit in their annual results through the satisfaction of the needs of their customers.

4. The necessity of implementing Marketing banking

The consumption habits of decisions of everyday life are affected by marketing, of course the same applies to bank customers. Banking services do not vary greatly from bank to bank, therefore the necessity of marketing becomes more pronounced. The marketing simplifies customers' lives because it provides many options with high quality and competitive terms. However, banks have difficulties because of the increased competition with other banks, the constantly changing market context, the volume and complexity of the working object.

5. Definitions of Bank Marketing

A popular definition of bank marketing is given by S. Kuppuswami (November 1986, p.20.) in the following words, "Creation and delivery of financial services suitable to meet the customer's need at a profit to the bank". This definition recognizes the imperative need to satisfy customers, the significance of both the creation and deli very aspects of bank services and underlying profit motive.

The most comprehensive definition of bank marketing is given by Deryk Weyer of Barclays Bank. He calls it as, "Consisting of identifying the most profitable markets now and in future, assessing the present and future needs of customers, setting business development goals, making plans to meet them and managing the various services and promoting them to achieve the plans - all in the context of changing environment in the market". (Sanjeev Bhatt, 1980) Harley prefers to call bank marketing responsive marketing which suggests an attuning or responding to the changing needs of custorners' society and environment". (Jha, S.M. 2000. p.49) Rajeev K Seth defines marketing orientation in such a way that, marketing orientation is basically an attitudinal disposition of a banker which enables him to anticipate customer needs and also inspires him to satisfy that need. (Rajeev K. Seth, 1997) Two ingredients of marketing orientation are: the ability to anticipate customer needs and Willingness to satisfy them.

If you want to see more widely and get away from definitions banking marketing means when a bank wins through customer satisfaction. That is, to establish links and long-term mutual interest to loyal and satisfied customers. Nowadays, all the banking executives talk about changing the culture of counter, talk about quality service and adopting a new philosophy. The philosophy of customer-oriented culture. The decision of the customer to select the best bank is not a function only of distance from home. Sometimes they prefer to go some extra kilometers away from home to ensure that they will gain the best service from the bank.

6. Peculiarities of banking services in connection with Marketing

The principles of marketing can be applied in the banking sector, taking into account the peculiarities of the supply of banking services and the differences from the disposal of industrial or consumer products. The banking agencies have, in terms of marketing some features that differentiate the products. First of all, It is immaterial as all services, which means that they are not perceived by the senses before the sale and do not require storage and transportation for disposal, such as products. Also, because of this status, the banking services cannot be sampled as the products.

The banking agencies are based on faith. This means that the client cannot know in advance what he buys, because there are not specific and clearly identified quality standards, as it happens in products. So there are no specific quality characteristics of some banking services such as the speed of service in daily transactions, the lack of bureaucracy, the kindness and willingness of employees, the ability someone quickly correct mistakes, the timely response to requests from the client and the speed to decisions. To old customers, faith is created by the previous quality of service, which they have in the bank with which they cooperate, while new customers are influenced by promotions and other sales promotion and public relations. Furthermore, a bank officer is part of the service that is offered. Instead, the seller of products may never be part of the product he sells. The quality of the banking sector is inextricably linked to the level of knowledge, skills and attitudes of staff who offer banking services. As far as the client is concerned, he is a part of the production process. This occurs with his presence, with the level of is knowledge, with his perceptual ability, with his requirements and his behaviour. On the other hand, for customers, banking services are, at first glance, identical in all commercial banks. Each bank has to find ways to establish identity and to ensure the desired image to its customers, for each offered service from it. For this purpose, each bank tries to promote the services of having regard to all the tools of marketing that could be used. Moreover, the banking agencies show great geographic dispersion. Each commercial bank considers the necessity to expand. That, depending on the capabilities of the network of branches in order to further facilitates the trade of existing customers and covers a wider market at a national level. What is more, there is a wide range of services that offered. The range of bank services covered by the specific needs of companies of different sectors (Corporate Banking), the needs of large retail customers (Private Banking) and the needs of savers (Retail Banking).

7. The marketing mix in Banking Services

The product marketing mix consists of the 4 Ps which are Product, Pricing, Promotions and Placement. (innear, t. c. and Taylor, j. r., 1991, p. 5-12) The extended service marketing mix places 3 further Ps which include People, Process and Physical evidence. (Kelley a. Clowe, Anthony n. Dina, 1978, page: 26-30) All of these factors are necessary for optimum service delivery. The 7Ps of marketing mix are: Product: The product in service marketing mix is intangible in nature. Service products cannot be measured. The aim is to maximize the profit. With the term

product, we mean all product features, as packaging, the size and the guarantees that are provided. (Brassington, F. and Pettitt, S. 2003, p. 25) Place: Place in case of services is determined by where the service product is going to be located. Place, includes network of branch, credit cards, ATM's, the phone banking and Home-Banking. (Baker, M 1999) Pricing: Pricing in case of services is rather more difficult than in case of products. Jobber, D. (2000). This includes the terms of cooperation and discount policy on interest and fees. Generally service pricing involves taking into consideration labor, material cost and overhead costs. By adding a profit markup you get your final service pricing. Brassington, F. and Pettitt, S. (2003) Promotion: Promotions have become a critical factor in the service marketing mix. Services are easy to be duplicated and hence it is generally the brand which sets a service apart from its counterpart. The promotional mix includes (1) personal selling, (2) sales promotion, (3) advertising and (4) public relations. Jobber, D. (2000) People: People are one of the elements of service marketing mix. People define a service. Here staff and customers are included (who contribute to the quality of services offered to their knowledge, attitudes and behaviour). Process: Service process is the way in which a service is delivered to the final customer. It is a critical component in the service blueprint, wherein before establishing the service, the bank defines exactly what the process of the service product should be reaching the end customer. Physical Evidence: The last element in the service marketing mix is a very important element. As said before, services are intangible in nature. However, to create a better customer experience tangible elements are also delivered with the service. Physical Evidence offered to the surroundings and the material elements of the offer services. According to W. J. Stanton, "Marketing mix is the term used to describe the combination of the four inputs which constitute the core of a company's marketing system: the product, the price structure, the promotional activities, and the distribution system." According to Philip Kotler, "A Marketing mix is the mixture of controllable marketing variables that the firm uses to pursue the sought level of sales in the target market." According to Hesselink & Wiele customer satisfaction is an important component of a bank because satisfied customers: Hesselink, M. and van der Wiele (2003) buy more and become more loyal purchase additional products and services

 create a positive climate for business by spreading positive comments on services and products of the bank attaches less importance to competitors' ads

give more ideas, suggestions and solutions are less expensive According to the above features of banking services, banks devise marketing strategies, creating a balance between the following basic principles of business policy that must be followed by any commercial bank.

8. Structure Information of Marketing System

The well-structured information of Marketing System is a prerequisite for developing a successful strategy and making decisions about the need of implement to the strategic marketing mix. Altman, E.I., Saunders, A. (1998) In order to configure the product mix the information required is: the degree of acceptance of new products before launching them the market trends the prediction of sales the degree of materiality of the characteristics of each product the market incentives for each product the causes of preference of competing products the desired change in quality the necessary modifications to the "packaging" of products with other the desirable characteristics of new products

Decisions on these aspects of a product are important as marketing is directly related to these aspects. Sales promotion measures will be useful but their role will be supportive. Such measures may not be effective if the product to be marketed is not of standard quality or if the brand or package is not attractive or if the product is not as per the expectations of consumers. This suggests that decisions relating to product are crucial in the marketing of a product. (http://kalyan-city.blogspot.com/2010/04/marketing-marketing-mix-4-ps-of.html) For the formulation of promotion the information required is: the socioeconomic structure of the population by geographic area and shop

the network preferences and habits of customers the format of the business, turnover, number of employees and amount of required banking, by region the prospects of development of each region the potential inhibitors of alternative networks the branch network and A.T.M 's competition and the geographical distribution the cost of full development of alternative networks, the cost savings and overall benefits of adopting them

Promotional activities are necessary for large scale marketing and also for facing market competition effectively. Such activities are varied in nature and are useful for establishing reasonably good rapport with the consumers. (http://kalyancity.blogspot.com/2010/09/marketing-marketing-mix-4-ps-of.html) For the formulation of pricing policy the information required is: cost estimates the pricing competition policy (interest rates, fees) Opinions of consumer perceived value from the value - quality products and services offered and estimated price elasticity of demand

Pricing has an important bearing on the competitive position of a product. The marketing manager may use pricing as a tool for achieving the targeted market share or sales volume. Pricing can also be used for capturing market and also for facing market competition effectively. Pricing decisions and policies have direct influence on the sales volume and profits of the firm. Market price of a product also needs periodical review and adjustments. The price charged should be high enough to give adequate profit to the company but low enough to motivate consumers to purchase product. It should also be suitable to face market competition effectively. (http://kalyan-city.blogspot.com/2010/02/marketingmarketing-mix-4-ps-of.html)

9. Conclusion
The financial system in Greece and throughout Europe, facing these two decades continuous changes in the promotion and provision of services. The liberalization of the banking systems of government interventionism led banks to gradually change attitudes and made them increasingly competitive. Procedures in providing services simplified and banks began to play a key role in the economic life of the country, with the aim to increase the profitability. Nowadays, the banking Marketing evolves and undergoes changes in practices, structures, processes and systems which are geared to the customer, who is the only guarantee of success. This is also the only reason for their existence and is the only way that contributes to the survival of banking groups. For many modern bank customers, the bank branch is no longer just a place of handling some banking transactions, but also an environment of financial solutions to complex dilemmas. The banking sector is the driving force in international and European economies. The last twenty years, the Greek banking system has made significant progress towards customercentric approach, using more advanced techniques for marketing. The Marketing sector is important because (http://kalyancity.blogspot.com/2010/11/marketing-marketing-mix-4-ps-of.html) marketing plays an important role in the satisfaction of human wants by maintaining regular supply of goods to consumers. It provides better life and welfare to people by satisfying their wants and also by providing useful goods and services which can make their life happy and enjoyable. Also, Marketing is important to marketing firms as they earn profit by conducting marketing activities. The firm can achieve its objectives through successful conduct of marketing activities. Even new product can be introduced for consumer satisfaction and sales promotion. Marketing function, if performed successfully, leads to specialization, division of labor and efficient performance of production function climaxing in economic stability. Marketing improves the standard of living of the society: Continuous production improves the skill of the workers. In addition, marketing process provides new varieties of quality goods to customers. It facilitates production as per the needs of consumers and supplies such production to consumers. This raises the standard of living of the people. Moreover, marketing creates new demand for goods and thereby encourages production activities. This leads to the creation of massive employment opportunities. Thus, marketing is the kingpin that sets revolving of the whole economy.

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Furthermore, marketing develops new ways of life in the society. It makes the society progressive and dynamic. National economic policy is successfully implemented through marketing. It not only expands the home market but tries to establish a sound base for exports. The marketing firms receive continuous feedback about demand for products and services through marketing. Marketing is beneficial to producers and consumers. They get goods as per their needs and manufacturers get more profit and consumer support. Marketing facilitates price control by the manufacturers. It brings proper balance between demand and supply and this ensures price stability. Marketing is one major revenue generating source of a firm. It raises the turnover and profit of a business unit. A firm's survival, growth and stability are dependent on its ability to market the products efficiently. Marketing is a major activity of every business enterprise. If the marketing is not efficient, there will be losses and the whole firm will come in danger. This suggests that marketing is a risky activity with equal chances of getting profit and incurring losses. It is the successful marketing which supports all other activities of a business unit.

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10. Bibliography
Berry, l. L., Futrell, c. M. & bowers, m. R., bankers who sell: improving selling effectiveness in banking, Homewood Illinois, dow jones Irwin, (1985), page: 10 - 25. Kinnear, t. C. And Taylor, j. R., marketing research: an applied approach, 5th edition, Dryden press, Chicago, Illinois, (1991), page: 5 -12. Schiffman, l. G. & Kanuk, l. L., customer behavior, 5th edition, prentice hall international, (1994), page: 102 -115. Martin, t., financial services direct marketing, mc graw hill, london, (1995), page: 91 - 101. Levitt t., marketing myopia, Harvard business review, July august (1960), page: 50. Mishkin, f., the economics of money, banking, and financial markets, 3rd edition, HarperCollins college publishers, new york, (1992), page: 45. Hesselink, m. And van der wiele (2003) mystery shopping: in-depth measurement of customer satisfaction, erim report series research in management, ers-2003-20-org, march. Kuppuswami, s. The banker, November 1986, page.20. Sanjeev bhatt, bank marketing, the economic times, September 1, 1980. Jha, s.m. service marketing, Himalaya publishing house, Mumbai, 2000. Page:49. Rajeev k. Seth, marketing of banking services, Macmillan India ltd. New Delhi, 1997. Gortsos, V. C. (1998). The Greek banking system, ant. N. Sakkoulas, Athens Mary Ann Pezzullo American bankers association, marketing for bankers 1993 R. Eric Reidenbach, Robert e. Pitts prentice-hall, bank marketing: a guide to strategic planning 1986 Kelley a. Clowe, Anthony n. Diina, basics in bank marketing research bank marketing association (u.s.) bank marketing association, 1978 Bank marketing dr s m jha himalaya publishing house 2000 / 1st edition http://www.marketing91.com/service-marketing-mix/ (Access 19 August 2011) http://www.bankofgreece.gr (Access 17 August 2011) http://en.wikipedia.org (Access 17 August 2011) Organization for Economic Co-Operation and Development (O.E.C.D.): http://www.oecd.org. (Access 20 August 2011) http://kalyan-city.blogspot.com (Access 19 August 2011)

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