Journal 2018 (Publication 2)
International Peer-Reviewed Journal
RESEARCH HORIZONS, S.R. NO. 2, VOL. 8 NOVEMBER 2018
DIGITAL AGE AND ADVERTISEMENT AND PUBLICITY
EXPENDITURE BY BANKS
Prof. Sunita Sharma*
ABSTRACT
In today’s digital age, banks not only face competition for resource mobilization, but also for
lending and other areas of banking activity. The profile of bank customers has undergone change.
Financial needs of the customers have grown multifold into various forms like quick cash
accessibility money transfer, financial advice, deferred payments etc.
The banks have continued to perform old functions of accepting deposits and giving advances,
but they also provide electronic products and investment banking services. It is in context of
customer relationship management, the researcher has attempted to review the changing banking
landscape, find out how much banks spend on advertisement and publicity and its impact on
total business of the banks. Data has been collected from primary and secondary sources.
Keywords : Banking Landscape, Selling Costs, Bank Customer Profile, Advertisement and Publicity
Expenditure.
Introduction
The profile of bank customers has changed overtime. Traditionally if a customer, for reasons of
convenience had to maintain another account, he would make the details of such an account available
to the bank. Today
·
·
·
Customers no longer have the kind of loyalty as was expected in the past.
They are more cost or price conscious and are willing to shop around.
Customer groups are changing because of longer life span, urbanization and higher income
amongst middle classes.
·
·
Attitude-wise, customers are less afraid of debts.
Customers expect a more consultative relationship and express concerns regarding
-
-
-
-
-
-
-
need for consistent and dependable performance
professionalism, skills and standards of performance
timeliness of services
cordiality and honesty
politeness and friendliness of the staff
safety, security and confidentiality of transactions.
effective and polite communication
·
Financial needs of the customer have grown multifold into various forms like quick cash
accessibility, money transfer, asset security, increased return on surplus funds, financial advice,
deferred payments etc.
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RESEARCH HORIZONS, S.R. NO. 2, VOL. 8 NOVEMBER 2018
In this digital age, competition is no more confined to resource mobilization, but also to lending and
other areas of banking activity. Advertising and Publicity expenditure becomes important for the
banks. The main objective of the banks today is customer delight, customer equity and brand equity.
Objectives
As a part of Customer Relationship Management (CRM) attempts have been made by researcher.
st
·
·
·
To review the Banking Landscape in the second decade of 21 Century.
To find out how much do the banks spend on advertisement and publicity
To find out the percentage of amount spend on advertisement and publicity of the total operating
expenses of the bank.
·
·
To know what is its impact on the total business of the bank, which includes deposits and
advances.
To explore the relationship between expenditure on advertisement and publicity and bank
business.
Research Methodology
The data has been collected from primary and secondary sources. The data of 26 Banks have been
collected on judgmental sampling basis from Annual Reports. The reference period is of changing
economic environment starting from 2008-09 till 2016-17. Figures relating to advertisement and publicity
expenditure are part of operating expenses in the profit and loss account e.g. item no. IV of schedule
1
6 deals with advertisement and publicity expenditure. Researcher also tried to find out the amount
spent by banks on advertisement and publicity as a percentage of the total operating expenses.
To know about the opinion of bank employees about advertisement and publicity expenditure done
by banks and its impact on bank business, a structured closed ended questionnaire with 10 questions
was distributed to 50 bank employees from Jogeshwari to Vile Parle, Mumbai, Maharashtra. The
selection of the sample was on the basis of convenience technique based on non-probability sampling.
st
Banking Landscape in the Second Decade of 21 Century: As the world has spun into the second
st
decade of the 21 century dramatic changes have occurred in the banking landscape. The pace of
change is so rapid that the ability to change itself has now become a competitive advantage. According
to the authors Kotler and Armstrong five major developments have taken place in marketing landscape
and challenging marketing strategy.
The Changing Economic Environment: Beginning in 2008, the United States and world economies
experienced a Great Recession, a stunning economic meltdown unlike anything since the Great
Depression of the 1930s. The financial crisis left shell-shocked consumers short of money and
confidence as they faced losses in income, a severe credit crunch, declining home values, and rising
unemployment. After two decades of overspending, consumers tightened their purse strings and
changed their buying attitudes and habits. Even as the economy strengthens, consumers continue to
spend more carefully and sensibly. The new economic realities forced consumers to bring their
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RESEARCH HORIZONS, S.R. NO. 2, VOL. 8 NOVEMBER 2018
excessive consumption back in line with their incomes and rethink buying priorities. The pain of the
Great Recession moved many consumers to reconsider their very definition of the good life, changing
the way they buy, sell and live in a post-recession society. Despite their rebounding means, consumers
are now clipping more coupons, swiping their credit cards less, and putting more in the banks.
Consumers have become uneasy with debt and excess spending and skeptical of materialistic values.
Consumers are moving from mindless to mindful consumption. Today, the banks have to use a
different approach to reach today’s more pragmatic consumers.
The Digital Age: The explosive growth in digital technology has fundamentally changed the way we
live – how we communicate, share information, learn and access. Digital technology has a major
impact on the ways banks conduct and compete for customers, where it once took days or weeks to
receive news about important world events, we now see them as occurring near us, where it once
took weeks to correspond with other in distant places, they are now only moments away by mobile
phone or internet. The banks now have core banking solutions for different products. The banks are
now using National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement System (RTGS)
which have made money transfers astoundingly speeder & cheaper. The traditional brick and mortar
banks have now become ‘click-and-mortar’ banks. The digital age has provided marketers with
exciting new ways to learn about and track customers and create products and services tailored to
individual customer needs. Digital technology has also brought a new wave of communication,
advertising, and relationship- building tools – ranging from online advertising and video-sharing
tools to online social networks and smartphone apps. The digital shift means that marketers can no
longer expect consumers to always seek them out. The new digital world makes it easy for consumers
to take marketing content that once lived only in adverting or on an outline brand site with them
wherever they go and share it with friends. The most dramatic digital technology is the Internet. By
2
020, many experts believe, the Internet will be accessed primarily via a mobile device operated by
voice, touch, and even thought. Online marketing is now the fastest-growing form of marketing.
Rapid Globalization: As they are redefining their customer relationships, marketers are taking a
fresh look at the ways in which they relate with the broader world around them. Banks are now
connected globally with their customers and other banks. Competition is cold and cruel and there is
survival of the fittest. The questions which the banks ask are as follows
·
·
·
Should we go international?
Which markets should we enter?
How to enter those markets?
These questions were not asked before.
Sustainable Marketing – The Call for more Social Responsibility: Marketers are re-examining
their relationships with social values and responsibilities. Corporate ethics and social responsibility
have become hot topics for almost every business. Environmental movement has become stronger
and stronger. Banks also view socially responsible actions as an opportunity to do well by doing
good to the community around their locations. They seek ways to profit by being more civic minded
and caring.
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RESEARCH HORIZONS, S.R. NO. 2, VOL. 8 NOVEMBER 2018
Building Up Brand Equity: Brands are more than just names and symbols. Brands represent
customers perception and feelings about a product / service and its performance – everything a
product or service means to a customer. In short brands exist in the minds of the customers. The real
value of a strong brand is its power to capture consumer preference and loyalty. Some brands like
Coca-Cola have become larger than life icons. They forged a deep connection with the culture of the
customers. A powerful brand has high brand equity. Customers don’t mind paying more for the
brand rather than going without it or choose a competing brand. High brand equity provides many
competitive advantages. A powerful brand forms the basis for brand equity which is based from
customer equity. A brand represents a profitable set – of loyal customers. Bank of Baroda, Syndicate
Bank, Indian Overseas Bank, Canara Bank, The United Commercial Bank have recently adopted
new logo. The banks have increased their business after adopting new logos.
Findings
Advertising and Publicity Expenditure by Banks: Table 1 outlines advertisement and publicity
expenditure made by 26 banks during F.Y. 2009, 2010, 2014, 2015, 2016 and 2017. Table 2 shows
advertisement and publicity expenses as a percentage of operating expenses for six years. State
Bank of India (SBI) has spent highest amount on advertisement and publicity. SBI continues to
spend the highest amount on advertisement and publicity among banks in 2017 followed by ICICI
Bank, HDFC Bank, Axis Bank, Andhra Bank, Union Bank of India and Punjab National Bank. Table 2
shows that in FY 2009 United Bank of India has spent nearly 6 percent of operating expenses on
advertisement and publicity followed by IDBI Bank which spent 3.62 percent of operating expenses.
In 2017 ICICI Bank spent 1.95 percent of operating expenses on advertising and publicity followed
by SBI and Bank of Baroda, Punjab and Sind Bank has spent the lowest amount in terms of percentage
of expenditure as well as in terms of amount of expenditure. It was a weak bank and completely
owned and controlled by government. The broad conclusion which emerges from Table 2 is that all
the banks have spent less than 2 percent. Perhaps this may be due to the effects of great recession
which began in the year 2008.
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RESEARCH HORIZONS, S.R. NO. 2, VOL. 8 NOVEMBER 2018
Table 1 shows advertising and publicity expenditures by banks
Table 1 Advertising and Publicity Expenditure by Banks
(
Year 2009, 2010, 2014, 2015, 2016, 2017)
(
Rs in 000’s)
Source: Annual Reports of Banks for 2008-09, 2009-10, 2013-14, 2014-15, 2015-16, 2016-17.
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RESEARCH HORIZONS, S.R. NO. 2, VOL. 8 NOVEMBER 2018
Table 2 shows advertising and publicity expenditure of total operating expenses
Table 2 Advertising and Publicity Expenditure as Percentage of Total Operating Expenses by
Banks (Year 2009, 2010, 2014, 2015, 2016, 2017)
(In Percentage)
(
%
(%
(%
(%
(%
(%
Operating
Expenses)
Operating
Operating
Operating
Expenses)
31 Mar –
2015
Operating
Expenses)
31 Mar –
2016
Operating
Expenses)
31 Mar –
2017
Sr.
No.
Name of the Bank
Expenses) Expenses)
31 Mar – 31 Mar –
2010 2014
31 Mar –
2
009
SBI AND ITS ASSOCIATES
State Bank of India
1
2
1.26
0.63
0.80
0.57
0.77
0.74
0.73
0.92
0.74
0.98
1.29
State Bank of Bikaner & Jaipur
Merged
with SBI
3
4
State Bank of Hyderabad
State Bank of Travancore
1.14
0.50
1.28
0.99
0.88
0.63
0.60
0.45
Merged with SBI
0.68
Merged
with SBI
NATIONALISED BANKS
Allahabad Bank
5
6
7
8
9
1.02
0.95
1.12
0.72
1.84
0.78
0.82
1.65
1.46
0.56
1.38
0.99
0.05
0.74
1.25
5.99
0.66
0.96
3.62
1.37
0.50
1.17
1.29
1.31
0.57
0.77
1.45
1.27
0.61
1.45
0.70
0.07
0.84
0.85
1.55
0.84
0.47
2.50
1.02
0.79
0.89
-
0.73
0.56
0.93
-
0.60
0.53
0.93
0.43
0.13
0.55
0.48
0.19
0.68
0.25
0.25
0.52
0.10
0.55
0.59
1.09
0.32
-
-
Andhra Bank
0.39
1.19
0.51
0.15
0.35
-
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
0.63
1.08
-
0.73
0.60
0.45
0.14
0.85
-
1
1
1
1
1
1
1
1
1
1
2
2
2
2
0
1
2
3
4
5
6
7
8
9
0
1
2
3
Central Bank of India
Corporation Bank
Dena Bank
0.74
1.12
-
0.15
0.77
0.21
0.11
0.51
0.09
0.59
0.53
1.04
-
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
Syndicate Bank
0.72
1.05
0.17
0.06
0.78
1.06
-
0.24
0.87
0.16
0.07
0.76
1.06
0.31
0.54
1.03
Union Bank of India
United Bank of India
Vijaya Bank
0.64
1.21
-
IDBI Bank
0.59
0.84
IMPORTANT PRIVATE
BANKS
2
2
2
4
5
6
AXIS Bank
1.62
1.98
2.71
1.27
1.46
1.94
1.19
1.19
1.77
1.00
1.34
1.40
0.92
1.52
1.66
1.15
1.06
1.95
HDFC Bank
ICICI Bank
Source: Annual Reports of Banks for 2008-09, 2009-10, 2013-14, 2014-15, 2015-16, 2016-17.
This leads us to Table 3 which analyses the ranks of the banks on the basis of total business.
Although there are many factors which affect total business, advertisement and publicity has a definite
impact on total business. Some bankers who were interviewed by the researcher agreed that if there
is no advertisement the bank business will suffer. Therefore, advertising is a must to maintain
competitive advantage.
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RESEARCH HORIZONS, S.R. NO. 2, VOL. 8 NOVEMBER 2018
Table 3 shows the total business of banks
Table 3 Total Business of Banks (Year 2009, 2010, 2014, 2015, 2016, 2017)
(
Rupees in Crore)
2
008-09
2009-10
2013-14
Deposits +
Advances =
Total
2014-15
2015-16
2016-17
Deposits + Deposits +
Deposits + Deposits + Deposits +
Advances
=Total
Ran-
king
Name of the Bank
Advances
Total
Advances
= Total
Advances
= Total
Advances
= Total
=
Business
Business
Business
Business
Business
Business
SBI AND ITS ASSOCIATES
StateBank of India
1,28,457
69,075
1,43,603
81,281
12,40,898
1,31,031
2,87,819 31,94,422 36,15,829
1
State Bank of Bikaner & Jaipur
2,91,834
1,68,748
Merged
with SBI
State Bank of Hyderabad
State Bank of Travancore
1,06,128
74,642
1,26,010
89,344
3,37,433
4,50,382
3,18,538
Merged with SBI
1
65,56,001.81
1,68,123
Merged
with SBI
NATIONALISED BANKS
Allahabad Bank
1,43,773
1,03,529
3,35,648
3,32,617
86,545
1,77,660
1,33,801
4,16,079
3,98,252
1,03,618
4,03,986
2,67,490
1,55,936
86,806
6,37,080
4,71,658
3,46,519
5,30,574
3,58,352
3,10,673
3,59,974
3,39,673
2,67,318
9,33,820
2,40,590
8,04,506
4,49,679
3,60,916
1,91,481
3,14,654
3,68,119
3,85,777
1,45,803
15
16
17
5
Andhra Bank
Bank of Baroda
17,67,969 20,49,109 9,57,808
15,18,914 17,90,238 8,72,194
Bank of India
Bank of Maharashtra
Canara Bank
3,75,531
3,37,684
2,50,230
18
6
3,25,111
2,16,755
1,22,496
71,928
13,19,822 15,25,665 8,37,284
Central Bank of India
Corporation Bank
DenaBank
8,15,358
6,15,201
3,50,569
2,86,634
4,09,057
6,37,421
2,64,041
4,50,539
4,95,422
2,82,451
2,98,057
4,25,090
6,81,839
2,92,554
4,56,337
3,45,493
2,03,242
3,10,918
3,97,241
1,63,500
1,56,527
11
14
21
17
13
12
22
3
Indian Bank
1,23,978
1,75,926
1,66,869
59,291
1,50,373
1,91,577
2,03,746
81,794
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
Syndicate Bank
1
54,65,660.5
3,64,463
1,97,417
2,35,237
89,929
4,35,931
2,07,432
2,89,355
1,10,510
1,03,453
3,05,868
16,82,578 9,65,377 10,41,197
7,19,180
9,98,539
2,256
8,44,365
8,28,618
2,52,498
4,18,839
9,01,158
4,68,185
6,10,074
1,87,813
2,14,426
4,81,613
4,67,626
6,64,857
1,97,442
2,27,559
4,59,363
9
Union Bank of India
United Bank of India
Vijaya Bank
8
20
19
10
90,003
3,72,583
8,56,882
IDBI Bank
2,15,845
IMPORTANT PRIVATE
BANKS
AXIS Bank
1,98,930
2,41,694
4,36,658
2,45,643
2,93,235
3,83,222
12,53,478
1,19,615
6,96,742
7,87,448
7
2
4
HDFC Bank
ICICI Bank
12,06,305 15,16,190 11,10,672 11,98,208
12,53,479 11,19,701 8,56,690 9,54,271
Source: Annual Reports of Banks for 2008-09, 2009-10, 2013-14, 2014-15, 2015-16, 2016-17.
From Table 3 we can draw following conclusions
1. ICICI Bank which was no. 1 in 2008-09 was pushed to no. 4 in 2016-17, and its place was
occupied by SBI followed by HDFC Bank.
2
. Although the advertisement and publicity expenditure by SBI as a percentage of operating
expenses constituted only 1.29 percent, ICICI Bank spend 1.95 percent of operating expenses
on advertisement and publicity, but is far behind SBI with respect to total business.
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RESEARCH HORIZONS, S.R. NO. 2, VOL. 8 NOVEMBER 2018
3
4
5
. The banks with respect to total business, which occupy the lower rung of the ladder are – Punjab
and Sind Bank, Dena Bank, United Bank of India, Vijaya Bank and Bank of Maharashtra.
. The SBI advertising and publicity expenditure (percentage of operating expenses) has remained
almost the same in 2017 (compared to 2009) but its business has improved.
. Out of 26 banks, 7 banks are occupying rank below 15 in all the six years, in terms of total
business. Perhaps in future, these 7 banks may spend more on advertising to improve their
business and their rank in the league of banks.
Table 4 shows correlation between advertising and publicity expenditure and total business
made by banks
Table 4 Correlation between Advertising & Publicity Expenditure and Total
Business of Banks
Year
Correlation Value
2
2
2
2
2
2
009
010
014
015
016
017
0.24
0.67
-0.10
0.27
0.82
0.91
A Pearson Product Moment Correlation Analysis was conducted to determine the relationship between
advertising and publicity expenditure by banks and bank business for 6 years as shown in Table 4.
From the results we can derive that the year 2009, 2010, 2015, 2016 and 2017, the increase in
advertising and publicity expenditure by banks lead to increase in total bank business. The year
2
009 and 2015 show low positive association, year 2010 shows moderate positive association. For
the year 2014, a low negative association was found. The year 2016 and 2017 shows strong positive
association.
The above analysis reveals that the banks can increase their business by increasing their expenditure
on advertising and publicity.
Opinion of Bank Employees : The analysis of the questionnaires revealed the following
1
2
3
. The media most popularly used by banks for advertising is newspaper, hoardings and television.
Today online advertising is becoming popular. Movie, radio and theatre are not much popular
media for advertising for banks.
. All the respondents said that banks advertise their financial products – business loan, gold loan,
credit cards etc. other products advertised by banks include personal loans, life insurance
educational loans etc.
. 85 per cent respondents believe that there is a positive relationship between advertisement
expenditure by banks and bank business. According to them, good advertisements attract
customers.
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4. 96 percent of respondents said that banks give contract for advertising to advertising agencies.
5
. On questioning the respondents about what is more important to a bank, number of customers
or value of business or both 32 percent respondents said that it is number of customers which is
more important, 30 percent said it is value of business which is important while 38 percent said
that both customers and value of business are important to a bank.
6. 72 percent respondents agreed that using celebrities for advertisements helps to improve bank
business.
7
. 68 percent of respondents said that advertising is not a wasteful expenditure, while 32 percent
were of the opinion that advertisement and publicity by banks was a waste and did not contribute
towards bank business. They mentioned manipulative advertisements.
8
. On being questioned that should India not follow the policy of communist countries, where banks
do not advertise banking products, 77 percent respondents disagreed and said that the bank
business will fall if banks don’t advertise.
9. 78 percent respondents disagreed to the suggestion of collective advertising by banks, as the
product differentiation among banks is very little.
1
0. The opinion of respondents was asked, about saving in resources, if advertising and publicity
expenditure is not done by banks separately. Indian Banks Association (IBA) being given the
responsibility of educating customers of banks about various bank products. 72 percent
respondents agreed to the above suggestion.
Conclusion
The informative and manipulative advertisements together are called by Chamberlin as ‘Selling Costs’.
The selling costs affect both the average revenue / demand curve and the average cost curve. For a
firm under monopolistic competition the firm’s average revenue curve will be downward sloping. The
selling cost, if it is a fixed percentage of sales / output, will be U shaped, but the distance between
the average revenue curve and average cost curve will narrow. In the case of banking the selling
costs are almost a fixed percentage of operating expenses on advertising and publicity (Table 2).
The interest income, non-interest income and operating expenses are affected by selling cost. Further
research will be required to show further relationship between them.
Indian banks seem to be living in a world described by E.H. Chamberlin. Banking is a common
service, and each bank tries to distinguish itself from other banks on the basis of rate of interest,
charges for some services and service facilities.
According to Paul Samuelson, “A characteristic feature of our era is advertising and publicity
expenditure. A sizeable amount of the nation’s creative talent is devoted to sales promotion”. Defenders
of advertising claim many economic advantages of it. The study shows that there is a positive correlation
between advertising and publicity expenditure by banks and bank business. Therefore, the banks
can spend more on advertising and improve their rank in the league of banks. The IBA can conduct
advertising for some common products, as was suggested by some high-ranking officials of the
banks.
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*
Head, Dept of Commerce, Maniben Nanavati Women’s College, Vile Parle (W), Mumbai – 400 056
Email: [email protected], Mob: 9323225065
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