7 P’S OF SERVICES MARKETING IN INSURANCE AND BANKING ...

1 | Journal of Management and Science - JMS ISSN 2250-1819 (Online) / ISSN 2249-1260 (Printed)

7 P'S OF SERVICES MARKETING IN INSURANCE AND BANKING SERVICES

G.Kalaimani Head of the Department, Department Of Business Management, Sri Vasavi College Erode

INTRODUCTION Wherever there is uncertainty there is risk. We do not have any control over

uncertainties which involves financial losses. The risks may be certain events like death, pension, retirement or uncertain events like theft, fire, accident, etc. Insurance is a financial service for collecting the savings of the public and providing them with risk coverage. The main function of Insurance is to provide protection against the possible chances of generating losses. It eliminates worries and miseries of losses by destruction of property and death. It also provides capital to the society as the funds accumulated are invested in productive heads. Insurance comes under the service sector and while marketing this service, due care is to be taken in quality product and customer satisfaction. While marketing the services, it is also pertinent that they think about the innovative promotional measures. It is not sufficient that you perform well but it is also important that you let others know about the quality of your positive contributions. Insurance marketing

The term Insurance Marketing refers to the marketing of Insurance services with the aim to create customer and generate profit through customer satisfaction. The Insurance Marketing focuses on the formulation of an ideal mix for Insurance business so that the Insurance organisation survives and thrives in the right perspective. Marketing --Mix For Insurance Companies

The to best meet the needs of its targeted market. The Insurance business deals in selling services and therefore due weight-age in the formation of marketing mix for the Insurance business is needed. The marketing mix includes sub-mixes of the 7 P's of marketing i.e. the product, its price, place, promotion, people, process & physical attraction.

The above mentioned 7 P's can be used for marketing of Insurance products and banking services, in the following manner: 1. PRODUCT

A product means what we produce. If we produce goods, it means tangible product and when we produce or generate services, it means intangible service product. A product is both what a seller has to sell and a buyer has to buy. Thus, an Insurance company sells services and therefore services are their product. In India, the Life Insurance Corporation of India (LIC) and the General Insurance Corporation (GIC) are the two leading companies offering insurance services to the users. Apart from offering life insurance policies, they also offer underwriting and consulting services. 2. PRICING

With a view of influencing the target market or prospects the formulation of pricing strategy becomes significant. The pricing in insurance is in the form of premium rates. The three main factors used for determining the premium rates under a life insurance plan are mortality, expense and interest. The premium rates are revised if there are any significant changes in any of these factors. ?Mortality (deaths in a particular area) When deciding upon the pricing strategy the average rate of mortality is one of the main considerations. In a country like South Africa the threat to life is very important as it is played by host of diseases. ? Expenses: The cost of processing, commission to agents, reinsurance companies as well as registration are all incorporated into the cost of installments and premium sum and forms the integral part of the pricing strategy.

2 | Journal of Management and Science - JMS ISSN 2250-1819 (Online) / ISSN 2249-1260 (Printed)

?Interest:The rate of interest is one of the major factors which determines people's willingness to invest in insurance. People would not be willing to put their funds to invest in insurance business if the interest rates provided by the banks or other financial instruments are much greater than the perceived returns from the insurance premiums. 3.PLACE This component of the marketing mix is related to two important facets

i) Managing the insurance personnel, and ii) Locating a branch.

The management of agents and insurance personnel is found significant with the viewpoint of maintaining the norms for offering the services. This is also to process the services to the end user in such a way that a gap between the services- promised and services -- offered is bridged over. In a majority of the service generating organizations, such a gap is found existent which has been instrumental in making worse the image problem. The transformation of potential policyholders to the actual policyholders is a difficult task that depends upon the professional excellence of the personnel. The agents and the rural career agents acting as a link, lack professionalism. 4. PROMOTION:

The insurance services depend on effective promotional measures. In a country like India, the rate of illiteracy is very high and the rural economy has dominance in the national economy. It is essential to have both personal and impersonal promotion strategies. In promoting insurance business, the agents and the rural career agents play an important role. Due attention should be given in selecting the promotional tools for agents and rural career agents and even for the branch managers and front line staff. They also have to be given proper training in order to create impulse buying. Advertising and Publicity, organisation of conferences and seminars, incentive to policyholders are impersonal communication. Arranging Kirtans, exhibitions, participation in fairs and festivals, rural wall paintings and publicity drive through the mobile publicity van units would be effective in creating the impulse buying and the rural prospects would be easily transformed into actual policyholders. 5. PEOPLE

Understanding the customer better allows to design appropriate products. Being a service industry which involves a high level of people interaction, it is very important to use this resource efficiently in order to satisfy customers. Training, development and strong relationships with intermediaries are the key areas to be kept under consideration. Training the employees, use of IT for efficiency, both at the staff and agent level, is one of the important areas to look into. Human resources can be developed through education, training and by psychological tests. Even incentives can inject efficiency and can motivate people for productive and qualitative work.

6. PROCESS: The process should be customer friendly in insurance industry. The speed and

accuracy of payment is of great importance. The processing method should be easy and convenient to the customers. Installment schemes should be streamlined to cater to the ever growing demands of the customers. IT & Data Warehousing will smoothen the process flow. IT will help in servicing large no. of customers efficiently and bring down overheads. Technology can either complement or supplement the channels of distribution cost effectively. It can also help to improve customer service levels. The use of data warehousing management and mining will help to find out the profitability and potential of various customers product segments.

3 | Journal of Management and Science - JMS ISSN 2250-1819 (Online) / ISSN 2249-1260 (Printed)

A. Flow of activities: all the major activities of banks follow RBI guidelines. There has to be adherence to certain rules and principles in the banking operations. The activities have been segregated into various departments accordingly. B. Standardization: banks have got standardized procedures got typical transactions. In fact not only all the branches of a single-bank, but all the banks have some standardization in them. This is because of the rules they are subject to. Besides this, each of the banks has its standard forms, documentations etc. Standardization saves a lot of time behind individual transaction. C. Customization: There are specialty counters at each branch to deal with customers of a particular scheme. Besides this the customers can select their deposit period among the available alternatives. D. Number of stores: numbers of steps are usually specified and a specific pattern is followed to minimize time taken. E. Simplicity: in banks various functions are segregated. Separate counters exist with clear indication. Thus a customer wanting to deposit money goes to deposits` counter and does not mingle elsewhere. This makes procedures not only simple but consume less time. Besides instruction boards in national boards in national and regional language help the customers further. 7. PHYSICAL DISTRIBUTION:

Distribution is a key determinant of success for all insurance companies. Today, the nationalized insurers have a large reach and presence in India. Building a distribution network is very expensive and time consuming. Technology will not replace a distribution network though it will offer advantages like better customer service. Finance companies and banks can emerge as an attractive distribution channel for insurance in India. In Netherlands, financial services firms provide an entire range of products including bank accounts, motor, home and life insurance and pensions. In France, half of the life insurance sales are made through banks. In India also, banks hope to maximize expensive existing networks by selling a range of products.

The physical evidences include signage, reports, punch lines, other tangibles, employee`s dress code etc. A. Tangibles: banks give pens, writing pads to the internal customers. Even the passbooks, chequebooks, etc reduce the inherent intangibility of services. B. Punch lines: punch lines or the corporate statement depict the philosophy and attitude of the bank. Banks have influential punch lines to attract the customers. Banking marketing consists of identifying the most profitable markets now and in future, assessing the present and future needs of customers, setting business development goals, making plans-all in the context of changing environment. Conclusion

In India, banks hope to maximize expensive existing networks by selling a range of products. It is anticipated that rather than formal ownership arrangements, a loose network of alliance between insurers and banks will emerge, popularly known as bank assurance. Another innovative distribution channel that could be used are the non-financial organisations. We can`t deny the fact that if foreign banks are performing fantastically, it is not only due to the sophisticated information technologies they use but the result of a fair synchronization of new information technologies and a team of personally committed employees. The development of human resources makes the ways for the formation of human capital.

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4 | Journal of Management and Science - JMS ISSN 2250-1819 (Online) / ISSN 2249-1260 (Printed)

PROFITABILITY ANALYSIS OF SELECT PRIVATE SECTOR BANKS IN INDIA

Haridayal Sharma Assistant Professor, P.G. & Research Department of Commerce, D.G.Vaishnav College,

Chennai-600106.

INTRODUCTION A private sector Indian bank is one having its registered office in India, and majority of its shares are held by private parties. India is the largest country in South Asia with a huge financial system characterized by many and varied financial institutions and instruments. The banking system in India, like those in most developing economies, is characterized by the coexistence of different ownership groups, public and private, and within private, domestic and foreign. The Indian banking sector continues to witness domination by the public sector banks. Over the last decade, the banking sector has witnessed the entry of many new private sector banks, resulting in momentous changes. A noteworthy aspect of the private sector banks is their ability to command a proportionately higher share of net profit, even though they have a lower share in terms of customer deposits. Private sector banks are oriented toward niche banking, unlike the public sector banks, which meet the mass banking requirements. The strategies adopted by the private sector banks are more in tune with those of the foreign banks, where emphasis is given to establishing superior benchmarks of efficiency, focusing on niche customers, providing impressive customer service and bringing about operating efficiencies by using high-end technology. Like the foreign banks, the private sector Indian banks recruit the finest manpower, employ state-of-the-art technologies and are oriented towards building a strong brand image. Even though the private sector Indian banks do not have an extensive range of branch networks, the emerging trends indicate that they pose a great competition to the public sector banks because of their increasing market share. The paper aims at analysing the profitability of select private banks across the select period. REVIEW OF LITERATURE In India, research on the performance and efficiency of Indian banking industry is limited in the existing literature. Rammohan and Ray (2004) compared performances of 58 public sector, private sector and foreign banks for the period 1992-2000, using a revenue maximization efficiency approach. Das (1997) estimated the technical, allocative and scale efficiency of scheduled commercial banks for various pre-reform and reform years. The study considered net interest income and interest income of banks as the two outputs. In his study, Das computed the efficiency measures for the public sector commercial banks. The results indicate that the State Bank Group, in general, improved in terms of overall efficiency during the 26 year period. Das found that inefficiency was technical in nature, which showed that there is underutilization or wastage of resources rather there being allocative inefficiency. Pal, Mukherjee and Nath (2000) studied the efficiency of 68 major Indian commercial banks for the year 1999. They took 27 public sector banks, 20 private sector banks and 21 foreign sector banks for their study. They also identified weak banks. Five output variables were taken. They were: deposits, net profits, advances, non-interest income and spread. Similarly, five input variables taken were net worth, borrowings, operating expenses, number of employees in the country and number of bank branches in the country. Uppal (2006) analyzed the profitability of four major bank groups, i.e., SBI and its associates, Nationalized banks, New private sector banks and foreign banks in the post-reforms era and concluded that there is a significant difference in the profitability of various major bank groups. Ballabh (2002) examined various techniques to increase the employees` productivity.

5 | Journal of Management and Science - JMS ISSN 2250-1819 (Online) / ISSN 2249-1260 (Printed)

PARAMETERS FOR STUDY Profitability of the banks was analysed using selected parameters based on review of literature. Ten parameters in the form of ratios dealing with the profitability of a bank are

i. Interest Spread ii. Adjusted Cash Margin(%) iii. Net Profit Margin iv. Return on Long Term Fund(%) v. Return on Net Worth(%) vi. Return on Assets Excluding Revaluations vii. Interest Expended / Interest Earned viii.Other Income / Total Income ix. Operating Expense / Total Income x. Selling Distribution Cost Composition HYPOTHESES The hypothesis developed were H01: The select private sector banks do not differ in terms of the specified profitability parameters. H02: There is no significant change in the profitability parameters of the private sector banks during the select period. METHODOLOGY Private sector bank that are listed and part of BSE BANKEX were identified. The period of study for analyzing the profitability of private sector banks was restricted to five years ranging from April 2006 to March 2011. The necessary data for computation was obtained through the website of the concerned bank and other websites offering financial information. For certain banks past data was not available, such banks were not considered for the study. Finally, based on availability of complete data, following four private sector banks are studied for a period from April 2006 to March 2011. i. Axis Bank ii. HDFC Bank iii. ICICI Bank iv. Kotak Mahindra bank STATISTICAL TOOLS Apart from the basic univariate analysis like Arithmetic Mean, Standard Deviation, percentage analysis and ratios, bivariate analysis in the form of Analysis of Variance (ANOVA) is also used. LIMITATIONS The study has the following limitations

i. The study is restricted only to large private sector banks listed on BSE 30 sensex, and the mid size private sector banks were excluded due to time and cost constraints.

ii. Four of the large private sector banks were considered due to non availability of data.

iii. The study period is restricted to five years. iv. Select profitability parameters were used to analyse the profitability of these

banks and other aspects such as efficiency, Networth etc were not considered. ANALYSIS Analysis of select parameters was done in the form of analysis of variance (ANOVA). First, ANOVA is applied to find the significance of difference in profitability based on select parameters across the sample banks. The analysis is given in Table1.

Table 1: ANOVA of Profitability parammeters across selected banks

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