TOPIC 5

CONSUMER BEHAVIOUR AND

CONSUMER BANKING

5.1 The Study of Consumer

Behaviour
The study of consumer behaviour is the study of
how individuals make decisions to spend their
valuable resources, such as time, money and
effort, on consumption related items.
Beyond the facets of how and why decisions,
marketing researchers also consider the uses
consumers make of the goods they buy and their
subsequent evaluations.
Thus, consumer behaviour refers to the behaviour
that consumers display in searching for
purchasing, using, evaluating and disposing of
products and services that they expect will
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SATISFY THEIR NEEDS.

PEMBAHAGIAN PASARAN
Pembhgian Pasaran adalah merupakan
langkah pertama dlm membuat pemasaran
pasaran.
Kotler & Armstrong (1996) Merupakan
satu proses membahagian pasaran yg
besar & mpyi pelbagai keperluan, ciri &
gelagat kpd pasaran yg lebih kecil, yg
mana individu2 di dlm setiap segmen mpyi
keperluan, kehendak & gelagat pembelian
yg sama.
3

Market Segments
What is market segment?
-The bank or FI determine/identify their
target (groups of individual, families,
firms or organization whom is sharing
one or more characteristics or needs in
homogenous market) in a product
market in order for the bank or FI will
direct its marketing effort.

PROSES PEMBAHAGIAN PASARAN ( Market

Segment Process)
SEGMENT A

Market

Market
Segmentation

SEGMENT B

SEGMENT C

5.2 Market Segments

In developing a marketing strategy for
financial services, a bank must
determine their target in a product
market to whom it will direct its
marketing efforts.
This is known as market segmentation;
one of two pillars of marketing, in
addition to positioning.

 TUJUAN ASAS SEGMENTASI ADALAH UTK

MEMBAHAGIKAN SESUATU POPULASI KPD
KUMPULAN2 YG BERLAINAN DI MANA
INDIVIDU2 DALAM SETIAP KUMPULAN ITU MPYI
KEPERLUAN YANG SERUPA.
UNTUK MENSEGMENTASIKAN PASARAN,
BERBAGAI ASAS/PEMBOLEHUBAH DIGUNAKAN.
ANTARANYA ASAS YG DIGUNAKAN IALAH
I) DEMOGRAFI
ii) GEOGRAFI,
iii) PSIKOGRAFI &
Iv) GELAGAT.
7

The Objective of Market

Segmentation
The basic objective of market segmentation: -Divide the population into different groups (A,B
or C) but the individuals in each groups have
the similar needs.
(i.e in Banking- Consumer, Corporate, Trade Finance groups

which the individual in i.e consumer groups needs personal

loan, housing loan etc.)
The variables of market segmentation bases:a) Demographic
b) Geographic
c) Psychographic and behavioural
d) Psychographic /demographic
e) Geodemographic

 Buyers of bank services have unique needs and

wants, and each buyer is potentially a separate
market.
Banks would do well trying different segmentation
bases, alone or in combination, to find the best
way to identify a market structure.
This is better known as CUSTOMER PROFILING.

5.2.1 Demographic
Demographic segmentation divides the
market into groups based on variables
religion,
such:
race and
age,
nationality
gender,
Education
family size,
income,
occupation,
This list is not exhaustive as other variables may from
time to time be adopted as a segmentation variable. 10

 DEMOGRAPHIC VARIABLES ARE POPULAR

for segmenting customer groups as the
variables are easier to measure than other
types of variables.
The demographic characteristics are also
commonly used in conjunction with other
segmentation bases to assess the size and
potential of the target market and to reach it
efficiently.

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 Maklumat demografi penting diketahui

sebelum asas2 segmentasi yang lain
boleh digunakan secara efektif dalam
membuat penilaian saiz pasaran
Segmentasi demografi sangat
penting/popular kerana keperluan
pengguna berubah mengikut perubahan
ciri2 demografinya.
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5.2.2 Geographic
Geographic segmentation divides the market
into different geographic regions such as
States (kedah,perlis,penang,perak, etc)
Regions (NR,SR,ER & WR)
Cities (Asetar,Kangar,Spetani,Ipoh,Kelang)
Countries (Msia,Thailand,Indonesia).

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The bank may decide to focus on a few, paying attention to the

distinguishing characteristics associated with each location.

The needs of urban customers would differ significant from that of rural
dwellers.

Eg.
a) Area which comprises majority of the population are malay, FI will
embark/promote Amanah Saham Bumiputera loan.

b) For area which comprises the Chinese population, the bank/FI will
concentrate on saving account or Fixed deposit account.

c) For Industrial estate, FI/Bank will enhance/focus on commercial loan.

d) Housing loan well demand in urban area compared to rural area.

e) Loan for Micro credit is well demanded in rural area.

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 E.g. Town
Carrefour only opens it outlets in the main town
throughout the Malaysia.
E.g. Country
Pizza Hut in Malaysia, introduce the halal Pizza
while in USA, Pizza Hut offers non- halal product
i.e pepperoni pizza.
E.g State, urban and remote area
BSN has it branches through out all the states in
Malaysia and the branches also can be found in
town and remote area.
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5.2.3 Psychographic
Psychographic segmentation divides the market into
groups based on their social class (kedudukan dlm
masyarakat), lifestyle (gaya hidup)or personality
characteristics (perwatakan).
Psychographic factor has been identified as one factor
that influence the demographic factor in such way,
which it will reduce the important of demographic factor
in segmentation. The main reason because the customer
in the same demographic area might has different
psychographic ( age vs lifestyles)
(Faktor psikografi dikatakan boleh membuat perbezaan
demografi menjadi tidak penting, kerana pengguna dlm
demografi yg sama selalunya mempunyai psikografi yg
berbeza)
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Eg. (Social Class)

A housewife, aged 30 from upper level of social class has a
tendency to purchase the goods from a supermarket while a
housewife, aged 30 from middle or lower level of social class has a
tendency to purchase the same goods from a retail shop or mini
market or wet market.
Eg. (Life-style)
Elderly (old folks) are preferred to do banking transaction manually
(through the bank counter) compared to the youngster/teenage who
are preferred to use ATM machine due to different life-style.
Eg. (Personality Chracteristic)
Youngster prefer to ride sporty motorbike i.e Yamaha Rx-z, while the
elderly preferred Honda ex-5.
Youngster like to drive Satria Neo, Honda Jazz while the elderly
like to drive Proton Waja/Volvo.

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 Tdpt beberapa pemboleh ubah yg boleh

digunakan pemasar utk mensegmenkan
pasaran menggunakan asas psikografi
iaitu:
1) Social Class- Kelas sosial cth:
masyarakt kelas atasan memilih kws
eksklusif bagi pembelian rumah, perabut
import & kereta mewah. Sebaliknya
masyarakat kelas bawahan hanya akan
membeli rumah murah, perabut tempatan
yg lebih murah & kereta biasa.
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Psychographic variables
There are a few psychographic variables which
can be utilised by marketers as the bases for
market segmentation: a) Social class- The upper group of social class
will purchase the house in exclusive area,
decorate their houses with imported furniture
and drive exclusive cars. While the group from
middle or lower social class will purchase a low
cost house, decorate their house with local
furniture and drive the common or ordinary cars.

 2)Gaya/corak hidup- cth: seseorg yg

pentingkan kesihatannya tdk akan
keberatan utk membelanjakan
pendapatannya utk membeli vitamin,
barangan herba & sbginya. Sebaliknya
seseorg yg tdk mementingkan kesihatan
lebih rela membelanjakan wangnya utk
keperluan lain drp membeli pil2 kesihatan.
(kos tinggi & mahal!)
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 b) Life styles- Lifestyles are shaped by whether

consumers are time-constraint or money
constraint. Money constraint -Individual who is
concerned about his/her health will spend a lot
of money to buy supplementary products
compared to the individual who is less /not
concern about their health. While consumer with
time-constraint will largely used the e-banking
( e-channel) instead of go to branch for doing
the banking transaction

 3)Personaliti- sering digunakan di dlm

membuat segmentasi bagi produk
kosmetik & pakaian. Cth: pengguna yg
bersifat agresif sering dianggap
berkeinginan utk mencuba sesuatu yg
baru & luar biasa. Oleh itu rekaan
kosmetik bewarna terang & pakaian yg
unik biasanya diperkenalkan utk
pengguna jenis ini.
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 Personality- Marketers have used

personality variables to segment the
markets. They endow their products with a
brand personality that corresponds to a
target market personality eg. Brand may
wish to appear sincere (disney), exciting
(MTV), competent (Toyota)

5.2.4 Behavioural
(Segmentasi menggunakan asas
gelagat)
Buyers are divided into groups based on their
knowledge, attitudes, uses or responses to a product.
Marketers believe that the behavioural variables such as
occasions, benefits, user status, usage rate, loyalty
status, buyer readiness stage and attitude are the best
starting points for constructing market segments.
Life cycle marketing focuses on the idea that a
consumer at each different stages of life will have
different buying behaviour that can be influenced by
his/her social class and lifestyle.

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contd
Marketer usually applied the variables in
behavioural bases such as occasions, ,
benefits, user status, usage rate,
loyalty status, buyer readiness stage
and attitude as the best starting points
for constructing market segments.

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Contd.

1) Occasions- During valentines days and mothers days, the sales for flowers and
candy will be increased. and for banking, many students will open saving accounts
before the registration for channeling PTPTN Funds. While, in Bank Pertanian, many
customers will open account during the paddy season for enable the government to
channel the paddy subsidize scheme.
2) Benefits-Eg. Customer buys the colgate tooth paste with extra mint for refreshing
his/her mouth while many customers prefer Perodua Kancil which more economical
compared to the others cars (save fuel). While in banking many customers are
looking towards against the benefits offered i.e overdraft facility/current accounts for
businessman, life insurance or MRTA (mortgage Reducing term Assurance) which will
paid off the loan in the event the borrowers death or permanent disabilities and car
insurance which will cover the insurer during the accident occurred or car stolen.
3) User status- market can be segmented into nonusers, ex-users, potential users,
first time-users and regular users.
a) Non-user for housing loan-houseowner who build up or purchase house by their
own fund.
b) Ex-Users- Individual already settled the housing loan
c) Potential users- house purchasers from developers, third party or auction
d) First time- Users- House purchaser who first time buy house and apply housing
loan
e) Regular Users- house purchaser who always enjoys housing loan facility with extra
facilities i.e home-extra, renovation loan

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d) usage rates- market can be segmented into light, medium and

heavy products user. i.e smokers
i) light smokers- a few sticks of cigarettes
ii) Medium smokers- one box
iii) Heavy smokers- 2 @ 3 boxes
e) loyalty status- Consumers have varying degrees of loyalty to
specific brands, stores and companies i.e Usually banking
customers are loyal to their banks. They are rarely shift their banks
operation due to certain reasons (relationship with banks)
f) Attitude- there are 5 groups i.e enthusiastic, positive, indifferent,
negative and hostile.
g) buyer readiness stage- some are unaware, aware, informed,
interested, desired and some are intended to the products.

 Contohnya utk mengalakkan penduduk Msia

supaya melabur dlm Amanah Saham Wawasan
2020, kerajaan telah menjlnkan kempen yang
berbeza iaitu kpd kump. yg tlh melabur, golongan
yg berpotensi utk melabur, dan golongan yg
belum melabur.
Selalunya syarikat2 kecil akan menumpukan
usaha pemasarannya ke atas pengguna sedia
ada supaya pengguna tdk mudah berpaling kpd
keluaran sykt lain. Ini kerana mengekalkan minat
pengguna sedia ada adalah lebih mudah daripada
menarik minat pelanggan baru (Kotler 1996)

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5.2.4
Psychographic/Demographic
Psychographic/Demographic profiling is
particularly useful in creating customer
profiles for service marketers.
It provides a meaningful insight for
segmenting mass markets, providing
direction as to which promotional appeals
to use, and selecting advertising media
that is most likely to reach the target
market.
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5.2.5 Geo-demographic
This segmentation scheme is based on the
notion (concept/believe) that people living close
to one another are likely to have similar financial
means, tastes, preferences, lifestyles and
consumption habits.
This technique is useful when potential
prospects can be isolated in terms of where they
live.
Mumbai-india
Damansara-kl
Bukit indah -jitra
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5.3 Maslow's Hierarchy of Needs

Maslow's hierarchy seeks to explain why people are
driven by particular needs at a particular time of their
lives.
His answer is that human needs are arranged in a
hierarchy, from the most important to the least
important.
In order of importance, they are :
physiological needs (literal requirements eg. needs for
air (breathing), food and water (metabolic)
safety needs (personal security, financial security,
health and well being, safety net against
accidents/illness)
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social needs (friendship, intimacy and

family)
Esteem needs (human desired to be
accepted and valued by others)
self-actualisation needs (what man can
be, he must be)

Add note for MH

Social Needs
-Humans need to feel a sense of belonging and acceptance, whether it comes from a
large social group, such as clubs, office culture, religious groups, professional
organizations, sports teams, gangs ("Safety in numbers"), or small social connections
(family members, intimate partners, mentors, close colleagues, confidants). Eg Harley
and Davidson Motorcycles Clubs

Esteem Needs
All humans have a need to be respected and to have self-esteem and self-respect.
Also known as the belonging need, esteem presents the normal human desire to be
accepted and valued by others. People need to engage themselves to gain
recognition and have an activity or activities that give the person a sense of
contribution, to feel accepted and self-valued, be it in a profession or hobby.
Imbalances at this level can result in low self-esteem or an inferiority complex

Self Actualization Needs

This level of need pertains to what a person's full potential is and realizing that
potential. Maslow describes this desire as the desire to become more and more what
one is, to become everything that one is capable of becoming.[

Figure 5.1 Maslow's Hierarchy of Needs

Source: Marketing, 4th ed., by Philip Kotler and Gary

Armstrong, 1997. Prentice Hall.

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5.4 Segment Characteristics in

Banking
In consumer banking or corporate banking,
the banks target the segment that adheres
to the common characteristics that typify
an "ACE" customer. These customers are
likely to be
AssetRich (the ability to pay),
Creditworthy (the willingness to pay), and
Exclusivity (possess the desire for
exclusivity).
***ACE-JAGUH/HEBAT/ORG YG PANDAI DLM SATU2 PERKARA!
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 Firstly, the competition among banks in consumer

banking is targeting customers who have the ability to
repay (the first way out), and a banker will look for assets
that can provide security (2nd way out) to the bank.
Secondly, the customer must be creditworthy
(willingness to pay).
Even for credit card customers, he must have the ability
to repay and the inclination to repay.
The third characteristic is the exclusivity desire.
A bank product should be designed in such a way that
the customer likes it because of exclusiveness eg (enrich
credit card CIMB and MAS).
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 The first two criteria also apply for

corporate customers.
However, in targeting small and
mediumenterprises, the bank will have to
assess the credit worthiness of the board
of directors because they control the
company.

37

 The need for the exclusivity design of

bank products is one of the reasons why
banks adopt the account relationship
management.
The relation manager is hired
exclusively to service corporate
customers (i.e in CIMB Japanese desk
to deal with only Japanese MNC)
He is likely to know what kind of products
to provide for his customers needs.
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5.5 Segmentation Criteria

It is evident that there are several ways to
segment a market, although; not all
segmentation are effective.
In order for segments to be useful in selecting
the target market, they must fulfil the criterion of
effective segmentation.
Also the optimum number of segments must be
identified beyond which overall profits will begin
to decline.
The application of the following criterion may
help define the potential profitable market
segments.
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1) Large Or Profitable
-The segment should be large or profitable
enough to justify the expense in serving the
segment in terms of product development,
promotion, etc.
2) The Largest Homogenous Group
- The segment should preferably be the largest
homogenous group worth pursuing with a
tailored marketing programme, e.g. high
network individuals (HNWI). The customer
profile fits the ACE characteristics.
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3) Sufficiently Heterogeneous (different)

----Should be sufficiently heterogeneous
(different) in relation to other markets so
that customers will
respond differently
to some aspects of
the marketing
strategy. Otherwise, this
defeats the
purpose of the above qualifying criteria.

41

4) Measurable
The segment characteristics should be
measurable as to the size, purchasing
power; among other variables, to
determine the potential of the segment.

42

5)

Adequate stability over time

-The segments should exhibit adequate
stability over time so that the marketing
efforts will have enough time to get the
desired response from targeted
segments.

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6)

The variables must provide the direction

-The variables used to segment the market must provide directions
on how
to reach the segments, so that the
segments
could be effectively served.

THE FIRST THREE (1,2 & 3) CRITERIA

ARE QUALIFYING CRITERIA, WHILE
THE REMAINING ONES (4,5 & 6) ARE
DETERMINING CRITERIA..
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Continue!

5.6 MARKET TARGETING

5.6.1SEGMENT STRATEGIES
5.7 COGNITIVE DISSONANCE
5.8 CONSUMER BANKING
5.8.1 WHY IS THERE A SUDDEN INTEREST IN
CONSUMER BANKING?
5.8.2 PRODUCT & SERVICES
5.8.3 TECHNOLOGY IN CONSUMER BANKING
(self study!)
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5.6 Market Targeting

Market segmentation reveals a bank's
marketsegment opportunities.
The bank then evaluate the various segments and
decide on the target segment based on: a) the segment size
b) growth potential (potential growth)
c) structural attractiveness (attractiveness of the
structural)
d) The bank's objectives and resources.
Note: (Rifle Approach Vs Shot gun approach)
46

Contd..
The largest or fastest growing
segments are not always the most
attractive for banks.
Small banks may lack the skills or
resources to serve these segments, or
that these segments are very attractive to
banks with larger resources, thus making
it too competitive for the smaller banks.
47

Contd..
A segment may have the desirable size and
growth but still may not be attractive due to
low profitability.
For instance, the segment would be less
attractive if it
a) has too many current and potential
competitors
b) potential substitute products (i.e napkins vs
disposable pampers) already exist.
48

Contd..
Some segments would also be dismissed
as they are not congruent with the bank's
longterm objectives.
Although the segments may be tempting
in it self, it may divert the bank's attention
and energies away from its main goals.

49

Contd..
The bank could adopt one of three market
coverage strategies for a target segment,
consisting of a set of buyers which share
common needs and characteristics, that it
decides to serve.

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5.6.1 Segment strategies

The bank may decide to ignore segment
differences and go after the whole market
with a single offer.
The offer will focus on the common needs rather
than the differences in the needs of the
consumers.
Product designs and marketing programmes are
aimed at appealing to the largest possible
number of buyers.
This form of undifferentiated marketing provides
cost economies due to the narrow product line
and lower 'production' costs
51

Contd..
In adopting a differentiated marketing
strategy, the bank targets several segments
by designing different offers for each.
This strengthens consumers' overall
identification of the bank with the particular
product category as focus is on specific needs of
the consumers.
There will be a greater incidence of repeat sales
because the offer would better match customer
needs.
52

Contd..
The third form of market coverage
strategy, concentrated marketing is
most appealing to banks that have
limited resources.
Concentrated marketing (niche marketing)
is an excellent way for attaining a large
share of one or a few sub-segments.

53

5.7 Cognitive Dissonance

Cognitive dissonance theory advocates that
discomfort or dissonance occurs when a
consumer holds conflicting thoughts about a
belief or an attitude.
For instance, when consumers have made a
commitment to buy a product, particularly an
expensive item such as an automobile, they
often begin, to feel cognitive dissonance when
they think of the unique, positive qualities of the
brands not selected.
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Contd..
When cognitive dissonance after a purchase or
purchase commitment, it is called postpurchase
dissonance.
Because purchase decisions often require some
amount of compromise, postpurchase
dissonance is quite normal.
Nevertheless, it is likely to leave consumers with
an uneasy feeling about their prior beliefs or
actions a feeling they tend to resolve by
changing their attitudes to conform with their
behaviour.
55

Contd..
Possible postpurchase experience has
significant ramifications for marketers, who have
to build postpurchase strategies into their
promotional campaigns.
What makes postpurchase dissonance relevant
to marketing strategies is the premise that
dissonance propels customers to take cognitive
steps to reduce the unpleasant feelings created
by rival thoughts.
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Contd..
In addition to such consumerinitiated tactics to
reduce postpurchase uncertainty, a marketer
can relieve consumer dissonance by including
messages in its advertising specifically aimed at
reinforcing consumer decisions, offering stronger
guarantees and warranties, increasing the
number and effectiveness of its services, or
providing detailed brochures on how to use its
products correctly.
57

Contd..
Segmentation is one of two main pillars of
marketing. Segmentation identifies the
target market and provides a profile of the
target customers.

58

5.8 Consumer Banking

Consumer banking refers to the provision of financial
services to individuals and small companies.
The customer base mainly consists of individuals
from all walks of life students, clerks, factory
workers, professionals and company executives.
Thus consumerbanking products range from the
allinone deposit accounts to flexible personal loans.
The examples include educational loans, housing
loans, lifestyle loans, club membership loans and
margin financing on stocks.
These are commonly advertised and promoted in the
newsprint media.

59

5.8.1 Why is there a sudden

interest in consumer banking?
There are three main reasons that account
for the banks' entry into this market sector.
1.Firstly, banks realise that economic
development has brought about a growing
middle class with strong purchasing power
and certain affluence. They want the
comfort and prestigious things in life and
they are confident of earning more.
60

Contd..
2.

Secondly, banks are also experiencing

shrinking profit margins from their
corporate
banking. Thus, they might find it easier to levy
higher charges on retail clients. Banks
generally price 2% to 3% higher in lending
rates on consumer loans than corporate loans
( corporate customers take advantage of their
financially sound status. Many banks are
chasing for them to channel their transactions)
61

Contd..
3.

Thirdly, consumer banking provides a

steady source of fund to the bank. Not
only is there stability in deposit growth,
retail deposits are often a cheaper
source of fund. It helps the bank to
lower the cost of funds and therefore
further improve interest margins. This
leads to higher profitability.
62

5.8.2 Products and services

Since the 1980s, basic consumer banking
facilities, such as cash and cheque
deposits and withdrawals, have
undergone tremendous changes from
limited branch operation hours to
extension of business into offoffice hours
to 24hours selfservice ATM electronic
banking services.
63

Contd..
The emergence of home and telephone
retail banking delivery systems have also
brought about greater convenience to'
thecustomers. Joint marketing effort
between retailers and banks is common.

64

Contd..
Personal loan products, e.g. residential loans,
car loans, margin financing, and study
assistance schemes, are neatly tailored to match
individual needs.
Citibank even allows its customers to choose
their own repayment terms.
In addition, it also takes the initiative to
consolidate accounts such that credit balance in
the deposit or investment product account would
automatically be transferred to offset the debit
balance in the loan accounts.
65

Contd..
"Allinone" deposit products are one of
the many innovative packages.
In Singapore, Hong Kong Bank attempts
to attract customers from different levels of
income group by implementing a
multitiered interest rate ( eg. FDR rates
for customer tier 1 will be higher than Tier
2 customers) to its Prime account
holders.
66

Contd..
Credit cards, free gifts, lucky draws and frequent
flyer programmes are not unusual as
promotional gimmicks to gain market share.
With the liberalisation of the Employees
Provident Fund and increased public education
in financial investment, it is possible that in
future consumers interest will shift to
nondeposit investment instruments.
New consumer banking products and services
will be offered by banks.
67

5.8.3 Technology in consumer

banking
In the past, customers could only withdraw cash over
the counter at bank branches.
Today, they can withdraw cash at ATMs outside bank
branches, supermarkets, petrol kiosks and bus
terminals at their own convenience.
Bank transactions through ATMs are processed on line
and linked to the bank's central mainframe where
customer records are updated almost instantaneously.
Besides cash withdrawals, consumers can also request
for account balances, new cheque books, transfer
funds across accounts and even apply for new shares
on the screen.
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Contd..
Home and telephone banking also helps
consumers to execute their requests.
One typical example is Citibank's 24hours
phone banking system.
It is a telecommunication system directing
customer enquiries to a specific banking officer
or banking facilities, not through a receptionist,
but through a centralised computer processing
unit.
Advances in technology make telephone banking
more userfriendly and thus there will be a push
for more electronic products in banking
69

Contd..
As technology is taking consumers into a
cashless society, credit cards, debit cards,
stored value cards and smart cards are
commonly used to settle purchases for
groceries, air tickets, petrol, bills for meals at
restaurants, making telephone calls and even
taking public transportation.
Such purchasing habit has become a major
concern to banks so much so that those banks
who do not follow the trend would seem
antiquated and may lose out in the consumer
banking battle.
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Contd..
The bricksandmortar distribution system
will be playing a less important role in the
future.
This is largely because branch network is
costly to maintain and more risky (exit
price is involved).
However, it will continue to be an essential
step in establishing physical footholds in
new markets.
71

Contd..
The business activities carried out at the counter
will also be different, with more new products
being offered.
The major function of the branch will soon be
replaced by more consultation and advisory
services for financial planning, investment, tax and
legal matters.
A new generation of skilled and knowledge based
employees will be stationed in the branch to
answer customer enquiries.
Banks have also upgraded the appearance of
banking halls to keep up with the customer
expectations and to induce an atmosphere of trust
72
and confidence.

Contd..
McCoy et al (1994) reported a market
research which showed that consumers'
choice of distribution channel is dependent
on market segment and geography.
Thus, banks need to have a thorough
understanding of their existing consumers'
wants and preferences before committing
any heavy investment in developing new
delivery systems.
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Contd..
A study conducted by the Bank Administration
Institute in 1993 further highlighted that 95% of
selfservice oriented consumers would prefer
doing banking facilities outside of the branch to
inhouse branch services.
The mix-channel users felt more comfortable
with slightly more branch service and equal
basis on selfservice channels.

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Contd..
All these changes to bank delivery systems have
become a race for market competence and
survival.
Customers are demanding greater convenience,
flexibility and accessibility.
Changing lifestyles and spending patterns have
led to the need for more appropriate distribution
channels too.
As consumers become more computer literate,
they become more sensitive to the speed of
product delivery.
Thus, increased emphasis is given to
automation of delivery systems.
75

Contd..
On the supply side, significant economic growth
has contributed to the increase in middle class
and a more affluent customer base.
Singapore, Hong Kong, Japan and Australia
enjoy a high level of retail banking products and
services.
Changes in the mix of delivery systems are
further supported by the existence of established
infrastructure and communication networks.
76

Contd..
The compliance with bank capital adequacy
requirements (CAR) has compelled banks to be
more efficient in their deployment of funds.
Every dollar lent must be accounted for in terms
of risk and return.
Therefore, consumer banking with its high
interest margin and feebased income provides
an attractive alternative to generate high returns.

77