VISION:
The Journal of Business Perspective
July - December, 2001, pp. 7-14
Market-Orientation in Commercial Banks A Study of Selected Banks in Delhi D P S Verma* Hema Israney** Commercial banks in India have undergone a significant metamorphosis since the initiation of the economic reforms in 1991. Many of their archaic rules and regulations have. been replaced by transparency, greater autonomy, and market dynamism. The liberalisation policy of the Government of India has allowed the private sector units to operate and give competition to with the erstwhile monopolies of commercial banks in the public sector. Besides, the modern, sophisticated, and discerning consumers want nothing but the best from their bank(s). In order to survive the emerging competition among commercial banks to gain the largest share of the market, the importance of market-orientation is continuously increasing in the banking industry. This paper seeks to make a comparative study of the current status of market-orientation in selected commercial banks in Delhi.
Introduction Market-orientation refers to the state of a firm being oriented, or directed, towards the market. Market-orientation for a service firm, like a commercial bank, would mean, the implementation of the philosophy that the objective of the bank is to create, win, and keep the customers. No bank can exist without customers and, therefore, the customer is the central focus of all its activities. A market-oriented commercial bank better understands its customers and their needs, and then, designs and delivers the customersavvy services, in a manner better than its competitor. The increasing competition in the market, coupled with the growing consumer aspirations, is forcing the commercial banks to practice market-orientation. By tailoring and shaping their 'offerings' as per the customer needs and wants, the commercial banks seek to .provide superior business performance in the form of 'customer delight' where the customer is not only satisfied, but feels delighted by the experience of banking. The banks, thereby, are able to win customers' loyalty and develop sustainable competitive strengths over a period of time. The study is intended to measure the extent of marketorientation in the sampled commercial banks. Further, a comparison would be made to ascertain the nature of
market-orientation in each of the three major groups of commercial banks, viz., the public-sector banks, the private-sector banks, and the foreign banks.
The Concept of Market-Orientation Different dimensions and definitions of market-orientation have been put forth by the researchers and the academicians in the past (Levitt 1960, Bell & Emory 1971, McCarthy and Perrault, Jr., 1985, Houston 1986, Shapiro 1988, Narver & Slater 1990). While some have attempted to define market-orientation as referring to customerorientation, others have explained it in terms of the target market focus, coordinated marketing, consumer concern, and profitable operations. A recent definition of market-orientation by Kohli and Jaworski (1990) seems to be particularly useful as it incorporates all the basic thrusts as proposed by various scholars over a period of time. Jaworski and Kohli (1993) define market-orientation as: "organisation-wide generation of market intelligence pertaining to the current and future customer needs, dissemination of the intelligence across various departments and organisation-wide responsiveness to it".
* Professor, Department of Commerce, Delhi School of Economics, Delhi University. ** Research Scholar, Department of Commerce, Delhi School of Economics, Delhi University.
Market-Orientation in Commercial Banks - A Study of Selected Banks in Delhi
The three core constructs of market-orientation identified by the authors are: intelligence generation (IG), intelligence dissemination (10), and responsiveness (R). Intelligence generation refers to the company's efforts in gaining knowledge about the customers' current and future needs and the factors which affect the customer needs and wants. Generation of information should be followed by dissemination of such information across various departments. This component tries to ascertain the degree of inter-departmental connection within the firm. Next, the action taken by the firm in response to the generation and dissemination of market intelligence is construed as the responsiveness of the organisation. This construct measures the extent of customer-orientation of the firm in the form of its response design (RD) and response implementation (RI). A market-oriented organisation, therefore, undertakes the following activities in order to achieve its objectives:
a.
Generation of the market intelligence through collecting customer information and monitoring the business environment.
b.
Dissemination of the intelligence report into a wellknit communication system across all the departments and divisions of the firm.
c.
Designing a suitable response to any change in the environment and I or customer(s) preferences.
d.
Implementation of the response plans formulated in (c) above.
Banking Services in India: An Overview
1.
Round-the-clock banking facility on phone, Le., 'tele banking'
2.
Banking facility through Internet sites, Le., 'Net banking'
3. Free home services to open a bank account and to withdraw / deposit money by cheque/draft Le., 'home banking';
4.
Free 'autosweep' facility in the saving account where the customer has the option to sweep excess funds into the high-interest fixed deposit at any time;
5. Multi-option deposits, in which the amount is fixed for a certain period of time, but the customer has the option to withdraw at any time, a portion of the lumpsum without losing interest on the rest of the deposit;
6. Offer of 24- hour Automated Teller Machines (ATM) and 365 days service to all the customers;
7.
Providing an automatic terminal in a corporate office, allowing the company to access its bank accounts directly from its business premises;
8.
Offering 'of attractive consumer durable loans, educational loans, personal loans, and housing loans at low interest rates; and
9. Provision of credit-cards and free 'demat' services to
Banking services constitute a hybrid type of "offering" by an organisation. The offer consists of equal parts of tangible 'good' (Le., the various brands of accounts, the size of lockers, the loan schemes), and intangible 'service' (Le., the ambience, behaviour of the staff, speed and accuracy of transactions, and the reliability of the bank). The commercial banks implement the marketing concept by the simultaneous use of internal marketing (from company to employees), external marketing (from company to customers), and interactive marketing (from employees to customers). Traditionally, bank offices in India have been dominated by the offices/ branches of the public-sector banks. However, with the liberalisation of the financial sector in the 1990s, the private-sector banks and the foreign banks have also set up their shops all over the country. These
8
newly set up commercial banks are offering aggressive and technology-savvy competition to the public-sector banks in the form of innovative products and services which include the following:
customers.
As a result of the introduction of competition in the banking sector, the environment in the industry is changing rapidly. Private-sector banks and the foreign banks are increasingly entering the domain of public sector banks. Moreover, the customers are no longer willing to accept the timeconsuming banking services in the public-sector banks. This trend has forced the public-sector banks to re-examine and revise their strategies to retain their existing customer base in the market. The competition among the commercial banks is getting hotter by each passing day. All the three major groups (i.e., the public- sector banks, the private-sector banks, and the foreign banks) are wooing customers towards their own respective establishments by providing customer-desired products and customersawy services.
VISION: The Journal of Business Perspective
July - December, 2001
Verma & Israney
As per the RBI statistics (1999), there were 1445 offices of commercial banks in Delhi in 1999. Also, out of the total of 82 commercial banks operating in Delhi, 27 were in the public-sector, 31 were in the private-sector, and 24 were foreign banks operating in India.
Methodology For this study, a questionnaire was prepared on the basis of the framework suggested by Jaworski and Kohli (1993). The questionnaire consisted of twenty-one statements related to the measurement of market-orientation in banks. The first six statements related to intelligence generation (IG), next four to intelligence dissemination (ID), another four to response design (RD), and the last seven to response implementation (RI), respectively. Likert's method of summated ratings was applied to find out the aggregate scores of banks. In this method, responses were obtained on a five-point scale, ranging from 1 ('strongly disagree') to 5 ('strongly agree'). The minimum score of a bank would be 21. (i.e., 21 statements x 1 (minimum score)}. Similarly, the maximum sco.re of a bank would be 105 {Le., 21 statements x 5 (maximum score)}. The possible range of market-orientation, therefore, would be from 21 to 105. If we consider the theoretical mean score of63 {Le., 21 (statements) x 3 (middle' score)}, then, any score upto 63 would imply that a bank has a below-average market-orientation, and any score above 63 would imply that a bank has an above-average marketorientation.
Symbolically, MO
= IG + 10 + RD + RI.
Table 1 presents the actual means scores of MO as well as for each of its components for the surveyed commercial banks. As shown in Table 1, the mean score for the overall marketorientation was 86.60, which was significantly higher than the theoretically expected mean score of 63. The mean score of the market-orientation for the public-sector banks was 74.93, for the private-sector banks it was 91.86, and for the foreign banks it was 96.20. The one-way analysis of variances (ANOVA) revealed significant differences among the three types of banks' market-orientation. A component-wise analysis of the market orientation scores presented almost a similar picture. The aggregate mean scores for intelligence generation, intelligence dissemination, response design, and response implementation, were 25.77, 15.80, 16.85, and 28.17, respectively, and were not in close proximity to their expected mean scores. Furthermore, there were highly significant differences in the mean component scores among the three types of surveyed banks.
Extent of Market-Orientation in Banks While the range of overall market-orientation scores for the public-sector banks was from 63 to 92, for the privatesector banks it was from 77 to 101, and for the foreign banks from 87 to 102.
The scope of the study was limited to 40 commercial banks operating in the geographical limits of the metropolitan city of Delhi. The sample was selected by using the convenience sampling method. Accordingly, 15 .each of the public-sector and the private-sector banks, and 10 foreign banks, were contacted for survey purposes. The time period in which the data was collected was from April 2000 to June 2000. The questionnaires were put up at the local head offices of the commercial banks. They were filled in by the managers or their representatives authorised to provide the information on behalf of the bank.
10~
101
99 97
95
Foreign Banks
93
II)
Q)
8
91
c
89
en Q
ii C .~
87 85
o
i
83
~
81
Q)
c;;
79
g
77
0' Q)
«
Analysis of Data
75 73 -
Public-Sector Banks
71
The major findings of the survey are presented below:
69 67
The overall market-orientation (MO) score of the sample was computed by adding up the overall scores of its components, viz., intelligence generation (IG), intelligence dissemination (ID), response design (RD), and response implementation (RI) .• VISION: The Journal of Business Perspective
July - December, 2001
65 63
1
~
3
4
5
E
7
a
9
10
11
12
13
14
15
Number of Banks
Figure 1: Extent of Market-Orientation in Banks 9
Market-Orientation in Commercial Banks - A Study of Selected Banks in Delhi
Fig. 1 shows the extent of market-orientation in the surveyed banks. Accordingly, the public-sector banks occupy the last position, the private-sector banks take the runner-up position, and the foreign banks come first, with the highest aggregate scores of market-orientation.
the options to plan the suitable response to changes in the business environment. However, they sell only those product lines which are decided upon by government.
The surveyed commercial banks were, thus found to have above-average market-orientation scores. The privatesector banks and the foreign banks were far more active in adopting the philosophy of market-orientation. However, the performance of the public-sector banks was also not that unsatisfactory since all their actual mean scores were more than their expected mean scores.
Though the vast majority of eighty-seven percent of banks reported that all the departments are well coordinated, they also admitted that customer complaints take more than one day to be resolved and that the employees are not so sensitive towards customer satisfaction. Besides, two-thirds of the banks remained undecided on whether their staff is more concerned with follOWing the rule-book orthe staff is more concerned with serving the customers. Also, around sixty percent of the banks reportedly did not give a clear agreement or disagreement to the statement that due to one or the other reason, the bank is low to implement any changes in the product lines as per the changes in customers' demands. Again, forty percent of the banks remained undecided on the issue of giving a quick response to the strategic moves of the competitors. However, market-segmentation was done by most of the banks to sell different types of products to different types of customers.
t
Interpretation of the Banks' Responses Public-SectorBanks As can be seen from Table II, the public-sector banks are only moderately market-oriented. Their response has been summarised below: Intelligence Generation
Response Implementation
Only around sixty percent of the banks agreed that they do meet their customers to find out customer preferences and systematically collect information on the strategies of the competitors. However, a large majority (seventythree percent) of banks agreed that a review of the external environment of the bank is undertaken periodically.
The response of the private-sector banks reflect that they are sufficiently market-oriented to survive the competition in the long-run. Their response is briefly described as below:
Intelligence Dissemination
Intelligence Generation
At least eighty percent of banks admitted that the customers' future needs are discussed in the internal environment of the bank. It implies that the meetings and discussions are held to decide on offering options of readymade products to the customers. They plan a product without involving the tastes and preferences of customers. Also, the only information that is disseminated to the entire bank is circulars and newsletters, which might not be a good enough medium of informing the employees about the data on patterns of customer behaviour. Besides, since only one-third of the banks agreed that inter-departmental meetings are held in every quarter of the year, intelligence dissemination in such banks is presumably erratic in nature.
Since all the banks agreed with all the six statements, the intelligence generation activities in such banks were really appreciable.
Response Design
A large majority (atleast seventy-five percent) of banks reported that managerial meetings are held regularly, marketing planning is done according to the prescribed rules and guidelines, and that these meetings do consider
10
Private-Sector Banks
Intelligence Dissemination
Again, barring the exception that around thirty percent of the banks reported indecisiveness with respect to holding inter-departmental meetings in every quarter of the year, most of the banks had excellent communication networks to disseminate data on customers to all the levels of the bank. Response Design
The private-sector banks plan their response to any changes in the customer tastes and preferences by making a regular review of the existing products and services, by holding meetings and discussions to find out what customers demand, and considering the available options in the light of statutory restrictions imposed by the government on the working of these banks.
VISION: The Journal of Business Perspective
July - December, 2001
Verma & Israney
ResponsJ Implementation These banks agreed with the practices, which indicated that they respond very quickly to any change in the business environment, and solve customer complaints within one day since all the departments are very well coordinated. They also ensure that the staff is always busy in serving the customers and are also they are highly sensitive to customer satisfaction. They follow the principle of market-seqmentation to determine the different needs and wants of different groups of customers. Also, they are never' slow to introduce changes in the products due to changes in customer tastes and preferences.
Foreign Benks« The response of the foreign banks shows that these banks are adequately market-oriented. These banks apply and operationalise the concept of market-orientation in their routine operations. Be it the generation of market intelligence, or the dissemination of the information to the communication network of the bank, most of these banks reported 100 percent agreement. Fifty percent of such banks were unsure whether bureaucratic hurdles and statutory restrictions influence the services provided by them or the customer preferences decide what services will be offered to them. These banks had, by and large, completely agreed with the response implementation practices also.
Conclusions The study has revealed that the selected commercial banks are considerably market-oriented. However, all the three types of banks, viz., the public-sector banks, the private-sector banks, and the foreign banks differed significantly from one another in terms of both the overall and component-wise mean scores of market-orientation. It implies that the method of operationalisation of the concept of market-orientation was not the same for all the different types of the commercial banks. It has been found that, in general, the pr~ate-sector banks and the foreign banks have greater incidence of activities representing market-orientation than the public-sector banks. Also, there is neck-to-neck competition between the private-sector banks and the foreign banks for gaining the largest share of the market by providing superior customer service. The public-sector banks are the least market-oriented among the three bank categories. The foreign banks are the most market-oriented, and The private-sector banks are highly market-oriented. Their VISION: The Journal of Business Perspective
actual mean scores are only marginally below the actual mean scores of the foreign banks. The intelligence generation is the highest in the foreign banks, with the private-sector banks are not far behind them. The intelligence dissemination component has provided interesting results. Though meetings are held to discuss the market trends, the decisions taken are based . on the agenda of the government in the public-sector banks, and on the basis of expectations of the customers in both the foreign banks and the private-sector banks. The responsiveness of the public-sector banks is not as efficient as that of both, the foreign banks and the private-sector banks. Also, their procedures to implement any strategic changes are too time-consuming. Besides, the publicsector banks are slow to respond to changes in the customers tastes and preferences. Since market-orientation is positively related to customer satisfaction and the relative competitive strength in the market, it is necessary that public-sector banks make endeavours to ensure rapid change-over to the complete adoption of marketing in their operations so as to become more market-oriented, withstand all the market challenges, and give a healthy competition to private-sector banks and foreign banks.
References 1.
Bell, Martin t., and Emory C. William, (1971) 'The Faltering Marketing Concept'. Journal of Marketing, Vol. 35 (October), pp.37-42.
2.
Houston, Franklin Se, (1986) 'The Marketing Concept: What it is and What is Not'. Journal of Marketing, Vol. 50 (April), pp. 81-87.
3.
Jaworski, Bernard .L, and Kohli Ajay K., (1993) 'MarketOrientation: Antecedents and Consequences'. Journal of Marketing, Vol. 57 (July), pp. 53-70.
4.
Kohli, Ajay K., and Jaworski Bernard J., (1990) 'MarketOrientation: The Construct, Research Proposition and Managerial Implications'. Journal of Marketlnq, Vol. 54 (April), pp. 1-18.
5.
Levitt, Theodore, (1990) 'Marketing Myopia.' Harvard Business Review, Vol. 38 (July-August), pp. 45-56.
6.
McCarthy, jerome E., and Perrault, Jr. William D., 'Essentials of Marketing'. 3rd ed. (Homewood, IL: Richard D. lrwln, Inc., 1985).
7.
Narver, John C., and Slater Stanley F., (1990) 'The Effect of A Market-Orientation on Business Profitability.' Journal of Marketing, Vol. 54 (October), pp. 20-35.
8.
Reserve Bank of India, (1990) Statistical Tables Relating to Banks In India for the Year 1998-99 (Mumbai: Reserve Bank of India).
9.
Shapiro, Benson P.,(1988) 'What the Hell is Market-Oriented'. Harvard Business Review, Vol. 66 (November-December), pp. 119-123.
July - December, 2001
11
Market-Orientation in Commercial Banks - A Study of Selected Banks in Delhi
Table 1: Market-Orientation and its Components: Mean Scores No. of Scale Items
Theoretical score range!
Expected mean score
Actual Mean Score Agregative result
Public Sector Banks
Private Sector
Foreign Banks
Probe (F. value)3
29.40
.00
Intelligence Generation (IG)
6
6.30
18
25.77
21.33
27.80
Intelligence Dissemination (10)
4
4.20
12
15.80
14.60
16.00
17.30
.00
Response Design (RD)
4
4-20
12
16.85
15.33
17.73
17.80
.00
7
7-35
21
28.17
23.66
30.33
31.70
.00
21
21-105
63
86.60
74.93
91.86
96.20
.00
Response Implementation (RI) Market-Orientation (MO) 1 Notes:
'Responses were obtained on a 5-point Likert scale. with 1 standing for 'strongly disagree', and 5 for 'strongly agree'. 2'fhe theoretically possible range has been determined by multiplying the lowest and the highest responses (viz.• 1 and 5, respectively) by the number of items in a scale. "Ihe 'F' values pertain to the one-way analysis of variance (ANOVA)
Table 2: Nature of Market-Orientation in Banks Statement
Response (Percent) Public-Sector Banks
Private-Sector Banks
Foreign Banks
A*
UO**
DA***
A
LD
DA
A
LD
DA
53
33
14
100
-
-
100
-
-
46
27
27
100
-
-
100
-
-
33
47
20
93
07
-
100
-
-
80
13
07
100
-
-
100
-
-
60
33
07
100
-
-
100
-
-
73
20
07
93
07
-
100
-
-
80
20
-
93
07
-
100
-
-
Intelligence Generation
1. 'In our bank, we meet with customers atleast one a year to find out what products and services they would require in future'
2. 'Studies are made in our bank to know as to why people invest in our bank.'
3. 'We conduct customer survey atleast once in a year to assess their overall valuation of our bank.'
4. 'We often talk with our customers in order to learn how to serve them better:
5. 'We systematically collect information on our competitors' strategies.'
6. 'We periodically review the likely effect of changes in our business environment (e.g., technology, legis'ation) our customers.' Intelligence Dissemination
"1. 'Persons in different departments of our bank spend time discussing customers' future needs.'
8. 'When something important happens to our major customers or markets, the entire organisation Contd...
12
VISION: The Journal of Business Perspective
July - December. 2001
Verma & Israney
comes to know about it in a short period of time.'
(
47
40
13
93
07
-
100
-
-
93
07
-
100
-
-
100
-
-
33
40
27
66
27
07
90
10
-
11. 'Marketing planning is done in our bank only after all the information about customers has been collected, tabulated, and accordingly analysed by the planners.'
80
20
-
100
-
-
100
-
-
12. 'The management of our bank makes a periodic review of all the services and products offered to our valuable customers (to ensure that they are in tune with the needs and wants of our customers),'
93
07
-
100
-
-
100
-
-
13. 'Several departments of our bank get together periodically to plan suitable response to any change in the business environment.'
80
20
-
100
-
-
100
-
-
14. 'The product line we sell depend more on bank management's politics and government rules than on customer preferences.'
20
53
27
-
27
73
10
50
40
15. 'The activities of various departments in the bank are well coordinated.'
87
13
• -
100
-
-
100
-
-
16. 'Whenever a customer is dissatisfied, the complaint is solved within 24 hours.:
33
40
27
93
07
-
100
-
-
17. 'Irrespective of their nature of job, all employees in our bank are highly sensitive to customer satisfaction.'
40
53
07
93
07
-
100
-
-
18. 'In the present setup, the staff in our bank gets more concerned with -adherinq to rules and regulations than serving customers.'
20
66
14
-
20
80
-
30
70
19. 'For one reason or the other, we are slow to introduce changes in our products and services as per the changes in customers' needs and wants.' ..........
33
60
07
07
20
73
-
-
100
I---
9.
-
'Data on customer satisfaction is communicated to all levels inn the bank on a regular basis through circulars, news letters etc.'
10. 'We conduct inter-departmental meetings atleast once every three months to discuss market trends and developments.'
-
Response Design
Response Implementation
20. 'Our bank follows market segmentation to develop and promote different types of products Contd...
VISION: The Journal of Business Perspective
July - December, 2001
13
Market-Orientation in Commercial Banks - A Study of Selected Banks in Delhi
. and services to serve different customer groups.' 21. 'If a major competitor launches a campaign targeted at our customers. we implement the optimal response immediately.'
87
13
-
100
-
-
100
-
-
46
40
14
100
-
-
80
20
-
Note: *A : Agree with the statement. **UD : Neither agree no disagree with the statement (l.e.• undecided). ***DA: Disagree with the statement.
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VISION: The Journal of Business Perspective
July - December, 2001
