The Hindu Business Line : Value Showcasing — New mantra to boost retail banking

Banking, insurance and mutual funds products, which were offered as standalones earlier, are now being brought together seamlessly to deliver a holistic package. New value propositions are now designed to make retail-banking services better for both the customers and the institutions.

Financial convergence has changed the face of retail banking from a plain vanilla product-centric approach to a customer-centric delivery model. Banking, insurance and mutual funds' products, which were earlier offered as standalones, are now gelled together seamlessly to deliver a holistic package.

New value propositions have been designed to change the entire retail-banking paradigm.

Almost all banks market products and services with innovative value spaces, of course, with technology advantage, for multiple need satisfaction and thereby, enhance customer experience.

The additional agenda of creating needs, translates into better marketing efficacy. The billion-dollar question is whether all the value offerings are reaching the different customer segments.

Value showcasing and packaging will effectively address banks' objectives to reach and expand customer segments and to carve additional market share in the retail space. Of course, the bottomline is improving the core as well as the fee-based income from retail banking domain.

The concept is very relevant for public sector banks that are offering very attractive value propositions matching the other players, covering the entire spectrum of financial services at a competitive cost/price factor for their huge customer base.

Showcasing and packaging various value propositions will go a long way in effective customer reach across segments and enlarge the scope of retail banking strategies.

Value Showcasing

The basic premise of Value Showcasing is to create the best match between the need pyramid of the customer and the value pyramid of the bank.

Structuring the pyramid right to match the relevant need requirements will translate into better customer satisfaction at one end and cross selling success for the bank at the other end.

Value, in simple terms, means offering additional benefits to core products such as liability, asset and other service products. Value additions are basically offered for improving the customer experience of the service and hence enhanced loyalty. Value propositions take different forms with different price structures. While some are offered free, some come with a price tag.

Value structuring has to be different across customer segments. One value may occupy a top slot in the value pyramid for one customer segment while the same may be at the bottom for another segment. In simple terms, the value perception differs across segments.

Value strategy

Value showcasing includes:

Developing a value strategy

Reducing values in simple, deliverable and practicable format.

Structuring value grids packing values that are really relevant to different customer segments.

Identifying customer segments and different value packs.

Developing a holistic pricing model for value packs.

Showcasing the value to the target segments.

Educating internal customers first and making them showcase the values to external customers.

Communicating the benefits of value pack to the proposed segments.

Convincing customers and closing the sale.

Delivering the value promises and making the customers experience and enjoy the benefits of the value pack.

Products and pricing

Today, banks are offering value additions in the form of insurance products as standalone or hybrid-linked products both in the life and general insurance space. They also offer different mutual fund products to their customers.

This is in addition to their regular value offerings such as ATM, debit card, credit card, bill payment services, e-banking, mobile banking, demat services and wealth management solutions.

All the value offerings may not be relevant for all the segments. The top of the pyramid approach will be relevant for the top-end customers and banks will be comfortable in that value zone. But the real test lies in structuring value packs for the middle and bottom of the pyramid.

There is a huge potential to be unlocked in the mid and lower end segment especially atthe bottom of the pyramid. Pricing is the most sensitive part in this segment.

A competitive and right pricing strategy will be the key determinant in successfully implementing the value strategy.

Public sector banks with their huge network of rural, semi urban and Tier-III cities have to unlock the potential in this segment by offering core values and add on values relevant to the type of branch.

For instance, structuring a group life cover for the accountholders for a reasonable sum assured at an attractive price for the rural, semi urban and Tier III branches will be a real value for the segment, as the insurance coverage on their own will be relatively less because of the higher premium commitment than the group cover.

Offering the same amount of cover in a metro segment may not really mean much from the value perspective as in this segment, individual coverage will be relatively more. This value offering is basic lunch for the rural segment but only a snack for the metro segment.

Health cover

Likewise, though a health cover value offering may not be that relevant in rural segment because of the mindset and cost, it offers tremendous value benefits to the metro segment.

Banks can score by cashing in on the huge opportunities in this value segment by offering group health products. Distribution of mutual fund schemes is another big value opportunity for the banks.

This value offering is relevant for the semi urban, urban as well as the metro branches. But the distribution channel has to be very effective so as to benefit the customers.

In today's market scenario, success will beckon those who showcase the right value grid to the relevant target segment.

The Benefits

Value showcasing showers benefits to both the banks and the customers.

The customer, apart from experiencing the core product, enjoys additional value offered by the bank, leading to increased satisfaction level, thereby increasing loyalty factor. Satisfied customers' referrals bring additional customers into the banks' fold, thus resulting in customer base expansion.

Increase the fee-based income for the bank and cross-selling opportunities.

As a retail banking push, public sector banks, which have geographical and locational advantage have to develop strategies to cash in on this potential in a big way.

It is after all, value for money, value for the customers and money for banks in the form of fee-based income.

(The author is a Post-Doctoral Research Fellow in Bank Management and Senior Manager in Indian Overseas Bank, Retail Banking & Marketing Department, Central Office, Chennai. His views are personal. He can be reached at doctorsethu@gmail.com)