Magazine 2012
Banksb Growth With
Advertisement And Publicity
Dr. Sunita Sharma
Maniben Nanavati Womenb s College, Mumbai.
ABSTRACT
This article is divided into four sections. Section I deals with Theory of Monopolistic Competition in
which Chamberlin has classified advertising in two types: informative and manipulative. Manipulative
st
advertising affects both the revenue and cost curves. Section 2 points to the banking landscape in the 21
Century which includes new digital age, rapid globalization, building up brand equity and ethics and social
responsibility of banks. Section 3 deals with advertisement and publicity expenditure by banks in FY 2008 b
0
9 & FY 2009 b 10 and their possible impact on bank business. That leads to Section 4 which points out that
banks cannot do without advertising and sales promotion efforts which will fructify into growing business.
Section I APPLICATION OF THEORY OF MONOPOLISTIC COMPETITION:
Advertisements, according to E. H. Chamberlin are classified as Informative advertisements and manipulative
advertisements. The informative and manipulative advertisements together are called by Chamberlin as
b
selling costsb . The selling costs affect both the average revenue or demand curve and the average cost
curve and therefore the average cost curve can be U shaped. For a firm under monopolistic competition the
firmb s average revenue curve will not be perfectly elastic but downward sloping, but it will not be like demand
curve under monopoly. 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 case of banking the
selling costs are almost a fixed percentage of operating expenses. The interest income, non interest income
and operating expenses are affected by selling cost. Indian banks seem to be living in a world described by
E. H. Chamberlin, although banking is a common service. Each bank tries to distinguish itself from other
banks on the basis of the rate of interest, charges for some service and services facilities. In India, we have
a network of nationalized banks, foreign banks, old private banks and new private banks.
1
.1
Research Methodology:
As a part of Customer Relationship Management (CRM) An attempt was made to find out how much
do the banks spend on advertisement and publicity and what is its impact on the total business of the bank,
which includes deposits and advances. 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 16. The figures of 31 banks
have been taken from which two banks State Bank of Saurashtra and State Bank of Indore have been
merged with the State Bank of India. The figures have been taken for two years, that is for F.Y. 2009 and F.Y.
2
010.
st
Section 2 Banking Landscape in the Second Decade of 21 Century:
st
As the world has spun into the second decade of 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 four major developments have taken
place in marketing landscape as well as strategy: the new digital age, rapid globalization, the call for more
ethics and social responsibility and the growth of not-for-profit marketing. Banks exist for profits.
2
.1
The New Digital Age: The explosive growth in computers, telecommunication, communication,
transportation and other technologies 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. Television has enabled us to see earthquakes, cyclones, hurricanes and other
catastrophic events, where it once took weeks to correspond with others in distant places, they are now only
moments away by mobile phone or internet. The banks have now 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 speedier and cheaper e.g. a transfer of Rs. 100,000/
from one place to another costs Rs. 6 only. Money does not get blocked when it is on its way.
Internet usage has linked individuals and businesses of all types to each other and information all
around the world. It is the technology behind the New Economy. In the U.S. nearly 186 billion people access
(10)
the web in any given month. Worldwide internet has been used by billions of people. Traditional brick and
mortar banks have now become b Click b and b mortarb banks. There have also been b dot.comsb
2.2
Rapid Globalization: In an increasingly smaller world many 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:
b "
b "
b "
Should we go international?
Which markets should we enter?
How to enter those markets?
These questions were not asked before 1991 in India.
2.3 Building Up Brand Equity: Brands are more than just names and symbols. Brands represent customersb
perceptions and feelings about a product / service and its performance b 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 b Cola became larger than life
icons. They maintained their power in the market for years, even generations. They forged a deep connection
with the culture of the customers. A powerful brand has high brand equity. Brand equity is the positive differential
effect that knowing the brand has on customer response to the product or service. Customers donb t mind
paying more for the brand rather than going without it or choose a competing brand. Loyal coke drinkers will
pay a 50 percent premium and Volvo users a 40 percent premium. The value of the brand is more important
than the brick and mortar of their plants. Coca b Colab s brand was valued at $ 67 bn, Microsoft $ 61 bn.
High brand equity provides many competitive advantages. A powerful brand forms the basis for brand
equity which is based on customer equity. A brand represents a profitable set of loyal customers. Bank of
Baroda has recently adapted a new logo where the sun emits is raised. It has increased its business after it has
adopted new logo. It appears that logos of Dena Bank and State Bank of India have become stale. For
competitive advantage banks like Dena Bank and State Bank of India should change their logos.
2.4
Ethics and Social Responsibility: Corporate ethics and social responsibility have become the signe-
qua-non of 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.
Section 3 Advertisement and Publicity Expenditure by Banks:
Table No. 1 outlines advertisement and publicity made by 29 banks during the F.Y. years 2009 and 2010. Table
1
also shows advertisement and publicity expenses as a percentage of operating expenses for those two years.
Table No. 1
Advertising and Publicity Expenditure by Banks
(
Rs. In 000b s)
Advertising & Advertising & (% Operating (% Operating
Annual
Report
Pg. No
Sr.
No.
Publicity
Expenses
Publicity
Expenses
Expenses) Expenses)
Name of the Bank
3
2
1 Mar
31 Mar
010
2009
3
1 Mar b 2010 31 Mar b 2009
1
2
3
4
SBI AND ITS ASSOCIATES
State Bank of India
1
2
3
4
5
6
206
117
65
337,72,66
5,11,14
336,76,05
4,94,32
.80
.57
1.26
.63
State Bank of Bikaner & Jaipur
State Bank of Hyderabad
STATE BANK OF INDORE
State Bank of Mysore
12,59,51
10,61,86
1.28
1.14
Merged with the parent bank
BS b 16
45
4,11,96
6,37,13
4,52,00
4,61,91
.57
.70
.68
.58
State Bank of Patiala
(11)
7
8
State Bank of Saurashtra
State Bank of Travancore
NATIONALISED BANKS
Allahabad Bank
Merged with the parent bank
79
8,59,95
3,99,25
.99
.50
9
117
129
90
21,63,79
10,49,87
44,46,22
22,43,54
14,03,05
23,82,59
17,21,55
18,25,47
11,20,57
8,86,22
14,22,87
.50
1.34
.95
1.02
1.12
1.84
10
Andhra Bank67,393
Bank of Baroda
11
39,96,92
1.29
1.17
.72
12
90
Bank of India47,47,42
Bank of Maharashtra
Canara Bank19,85,97
Central Bank of India
Corporation Bank
13
47
17,71,32
0.57
1.31
0.78
.77
14
105
165
191
98
15
15,33,22
16,47,87
1.27
.82
16
1.45
1.46
.56
1.65
17
Dena Bank10,80,44
Indian Bank10,63,15
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
Syndicate Bank
18
84
0.61
19
80
35,82,57
11,73,39
53,65
26,94,74
13,86,70
37,50
1.45
.70
1.38
.99
20
89
21
31
.07
.05
22
131
107
179
93
40,10,64
17,37,03
31,24,31
22,52,10
.84
.74
23
.85
1.25
5.99
.66
24
Union Bank of India
United Bank of India
United Commercial Bank (UCO Bank)
Vijaya Bank5,04,60
38,98,42 1,32,62,98
1.55
.84
25
9,07,42
18,87,29
8,87,63
6,47,28
19,30,26
.47
26
104
144
90
1.91
.96
1.31
27
28
IDBI Bank 45,83,56
48,37,93
2.50
3.62
IMPORTANT PRIVATE BANKS
AXIS Bank (UTI Bank)
HDFC Bank86,01,90
2
3
3
9
0
1
49
47,26,94
1,11,89,92
1,40,28,40
46,31,77
1.46
1.27
1.98
2.71
1.62
102
F 11
ICICI Bank1,10,80,10
1.94
Source: Annual Reports of Banks for 2008 b 09 and 2009 b 10.
Table No. 1 shows that in F.Y. 2009 Union Bank of India spends nearly 6% of operating expenses on
advertisement and publicity, next in the rank was IDBI Bank which spend 3.62% of operating expenses.
From the table it is obvious that IDBI bank has maintained second rank as it has accounted for 2.5% in F.Y.
2
010. Union Bank has maintained first rank in terms of amount of expenditure in F.Y. 2009. IDBI bank is
number 1 in percentage terms in F.Y. 2010. 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 that emerges from Table 1 is that, barring IDBI
bank, all other banks have spent less than 2% of operating expenses in F.Y. 2010. Perhaps this may be due
to worldwide recession which has not spared Indian banks. This leads us on to Table No. 2 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 bank branch managers
who were interviewed agreed that if there is no advertisement the bank business will suffer. Therefore,
advertisement is a must to maintain competitive advantage.
From table no. 2 following conclusions can be drawn:
1.
ICICI Bank which was No. 1 in 2008 b 09 was pushed to No. 5 in 2009 b 10 and its place was
occupied by Punjab National Bank. People say vah - vah for Punjab National Bank (P.N.B.) because it has
occupied a pride of place among banks.
(12)
2
.
Although P.N.B. spent only Rs. 31 crores and as a percentage of operating expenses advertising
constituted only 0.74%, ICICI Bank spent far more on advertising to come to the top of 31 banks. P.N.B. spent
far less than ICICI bank and obtained the second rank.
3
.
Punjab and Sind Bank has continued to occupy the lower rung of the ladder of banking but it appears
that by investing money in infrastructure projects it is trying to come up.
While State Bank of India has reduced its Advertising and Publicity expenditure (% of operating expenses)
from 2008 b 09 to 2009 b 10, but its total business has improved.
Out of 29 banks, ten banks are occupying rank below 20 in both the years 2008 b 09 and 2009 -10 in
4
.
5
.
terms of total business. Perhaps in future they may spend more on advertising to improve their business and
their rank in the league of banks.
Table No. 2
TOTAL BUSINESS OF BANKS
(
Rs. In crores)
2
009 b
2
008 b 09
Annual
Report Pg.
No
10Deposits +
Advances =
Total Business
Deposits +
Advances =
Total Business
Sr. No
Name of the Bank
RANKS
RANKS
-1
-2
-3
-4
SBI AND ITS ASSOCIATES
State Bank of India
1
2
3
4
5
6
7
8
140
102
43
143,603
81,281
18
28
20
128,457
69,075
16
26
19
State Bank of Bikaner & Jaipur
State Bank of Hyderabad
STATE BANK OF INDORE
State Bank of Mysore
State Bank of Patiala
STATE BANK OF SAURASHTRA
State Bank of Travancore
NATIONALISED BANKS
Allahabad Bank
126,010
106,128
Merged with the parent bank
61
38
68,415
29
21
44,293
29
20
110,899
103,593
Merged with the parent bank
62
89,344
25
74,642
25
9
105
120
78
177,660
133,801
416,079
398,252
103,618
403,986
267,490
155,936
86,806
15
19
2
143,773
103,529
335,648
332,617
86,545
15
21
3
10
Andhra Bank
11
Bank of Baroda
12
82
Bank of India
4
4
13
38
Bank of Maharashtra
Canara Bank
23
3
24
5
14
94
325,111
216,755
122,496
71,928
15
158
128
90
Central Bank of India
Corporation Bank
9
8
16
16
26
17
14
13
27
1
18
27
17
12
14
28
2
17
Dena Bank
18
74
Indian Bank
150,373
191,577
203,746
81,794
123,978
175,926
166,869
59,291
19
13
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
Syndicate Bank
20
78
21
22
22
120
101
172
72
435,931
207,432
289,355
110,510
204,920
364,463
197,417
235,237
89,929
23
11
8
11
7
24
Union Bank of India
United Bank of India
United Commercial Bank (UCO Bank)
25
22
12
23
13
26
90
169,025
(13)
2
7
135
6
Vijaya Bank
103,453
305,868
24
6
90,003
22
9
28
IDBI Bank
215,845
IMPORTANT PRIVATE BANKS
AXIS Bank (UTI Bank)
HDFC Bank
2
9
38
245,643
293,235
383,222
10
7
198,930
241,694
436,658
10
6
30
26
31
F 2
ICICI Bank
5
1
Source: Annual Reports of Banks for 2008 b 09 and 2009 b 10
Section 4: Conclusion
According to Paul Samuelson b A characteristic feature of our era is advertising. With our daily news, TV
westerns and sunday pleasure rides, we are fed large doses of carefully selected descriptions of various products.
A sizable amount of the nationb s creative talent and of its paper and vacuum tubes is devoted to sales promotion.
Defenders of advertising claim many economic advantages for it. Useful information can be brought to the
public; mass b markets are created and as a by b product of advertising expense we have a private press, a
choice of many radio and television programs, and thick magazines. So the argument goes on. The other side,
it is claimed that much advertising is self b canceling and adds little to the consumerb s valid information; that for
each minute of symphonic music, there is half an hour of melodrama. The situation would be the more debatable
were it not for the surprising fact, turned up the Gallup poll, that many people seem to like advertising. They do
not believe all they hear, but they cannot help remembering it just the same.b
According to Joel Dean b Annual advertising expenditures during the inter b war period averaged roughly
3
percent of national income. The post war average is around 2 percent.b In 1950, the post war U.S. advertising
volume passed a new high at $ 5 billion. Indian banks spend less than 2 percent of its operating expenses at the
micro b level. Few banks have a valid, theoretical or research basis for deciding upon the level of advertising
expenditure: e.g. whether they should spend Rs. 100 crore or Rs. 200 crore per year. Almost every bank
wrestles with the problem of planning its advertising budget over a period of years; deciding how this outlay
should fluctuate from year to year with changes in business conditions; and how each yearly total should be
apportioned among products, territories and classes of prospects. Yet in making these critical decisions, most
executives have to play by ear.
Measuring effects of advertising on business is a question of estimating business with and without the
outlay, everything else remaining constant. Their diffused time lag in both the intended and actual fruition of
advertising that is usually harder to judge for advertising than for changes in prices, income and other variables
that can be included in the regression equation. Banks now have data under core banking solutions (CBS). The
Indian Banks Association (IBA) can conduct advertising for some common products.
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2
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th
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(