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Also the services provided by the retail loan bank cannot be easily tainted because they are intangibles, unlike tangible products which can be verified easily, services are never the same and therefore not easily patented. Services in the banking industry cannot be easily displayed and communicated and therefore its intangible, a bank cannot show customers that it’s providing the best service; customers have to test the service of other banks to understand the same. 2.
Standardized/Heterogeneous: Loan retail banking provides services that are mainly heterogeneous, though now a day many standardized processes are being followed in this Industry. This Industry is heterogeneous because even though services are bit standardized and there are set procedures for them, the service delivery and customer satisfaction depends on employee and customer actions. There Is no sure method to check that the services delivered matches to what was promised and planned.
Service quality depends on many uncontrollable factors and thus heterogeneous. 3. Production and consumption: Retail loan banking services are produced and consumed simultaneously, that is the customer participates in and affect the transaction, a customer always involves in the loan process. The customers effect each other too in this industry by referencing and acting as pop onion leaders about the service of the bank. Mass production is almost impossible in this industry and decentralization Is necessary. Also the employees affect the service outcome. . Perishable/Non-perishable: Loan retail banking provides services which are perishable, the services as such of providing loan ones done cannot be resold or returned, It Is difficult to synchronism supply and demand with services of bank. During admission time there Is a sudden urge for education loans and It becomes difficult to supply with the same employee strength. . Membership/Non- customers to have mandatory membership of the bank in the sense that they have to open an account with that bank and only then they can get the loan.
Many services like a barber does not require customers to be a member but retail loan banking industry deals with money and so it requires faith n trust from customers which it gets it from customers through membership. 6. Continuous/Discrete: Loan retail banking services are discrete, the retail loan cannot be provided continuously and that easily. Lot of search about the customers has to be done and a standard set of recesses is followed for that, all the documents have to furnish properly and in many cases the time taken for giving the loan is different.
Also if one loan is given to a customer, it’s not necessary that he will qualify for other loan also. UP;s of Retail Banking (Loans): PRODUCT In retail banking of loans, the company sells services of various loans and therefore services are their product. In India, various products under loans are housing loan, car loan, educational loan, personal loan, Loan for pensioners, loan against mortgage of property, loan against shares and debentures, etc. PRICING With a view of influencing the prospects the formulation of pricing strategy in retail banking of loans becomes significant.
The pricing in loans is in the form of premium interest rates. The three main factors used for determining the pricing of loans are Loan Amount, Processing Fee and Interest Rates. The Reserve Bank of India and the Indian Banks’ Association are concerned with the loan regulations. The rate of interest is regulated by the RIB and all other charges are controlled by the BIB. The pricing policy of a bank is considered very important important for raising the number of customers. Also the quality of service provided has direct relationship with the fees charged.
PLACE The location of the bank is another significant ‘P that ensures proper service provided by the bank. The important factors that affect determination of the location are: a) The Trade Area b) Population Characteristics c) Commercial Structure d) Industrial Structure e) Visibility f) Access PROMOTION Promotion for loans in Retail Banking is done mainly through Public Relations, Personal Selling, Word of Mouth Promotion, Internet and Tell Marketing. The Tell Marketing is done enormously through advertisement where we find banks talking bout various kinds of loans such as Home loan, Car loan, Personal loan, Education loan, etc.
Promotion is also done through advertisements in newspapers where the bank clearly flaunts which product they are advertising. PEOPLE People are one of the defining factors in a service delivery process. The bank employees are the ones who play a major role in providing the customers their sanction department employees, and the other bank employees who make the loan service easier for the customers. Lastly the customers who take loan also come under people. PROCESS Process constitutes the overall procedure that is involved in using the services offered by the bank.
Whether it is the documentation or the processing time of the loan service, each and every customer wants to have a customer friendly service. If the overall procedure is complicated then the customer may not be inclined towards using such services. Process generally involves primarily the documentation part that needs to be filled by the customers. Next is the loan processing time which must be shorter so that sanction of the loan can be done quickly. And after sanction of loan is done it is necessary to keep in mind that customers get the loans as quickly as possible.
Also banks must have a service blue print which provides the service delivery process. PHYSICAL EVIDENCE Physical Evidence refers to the overall layout of the place, such as how the entire bank is designed. Since bank services are intangible in nature thus the banks try to incorporate certain tangible elements into their offerings to enhance customer experience. The positioning of the Customer Service Executive’s desk or location of cheese depositing counter should be perfect enough to make the physical evidence of the bank count. Thus Physical Evidence refers to all those factors that make the process much easier and smoother.
The presence of hospitality also brings about positive behavior from the customers to take loans from a particular bank. SERVICE ENCOUNTERS: A customer may experience Service Encounters every time he/she interacts with the service organization. There are three general types of service encounters- a) Remote Encounters b) Phone Encounters c) Face-to-Face Encounters A customer may also experience a combination of all the three encounters while interacting with the service organization. TYPES OF SERVICE ENCOUNTERS: REMOTE ENCOUNTERS: The encounter, which occurs without any direct human contact, is known as Remote Encounters.
For an example when a customer interacts with a bank through ATM system, or with a mail-order service through automated dial-in ordering. However, there is no direct human contact, but each represents an opportunity for a firm to reinforce or establish perceptions in the customer. The tangible evidence of the service and the quality of the technical process and system become the primary bases for Judging the quality. The services are delivered through technology, particularly with the advent of internet applications.
Few examples of services that are delivered through internet are such as retail purchases, airline ticketing, package ND shipment tracking, etc. All these types of service encounters can be considered as Remote Encounters. PHONE ENCOUNTERS: Phone Encounters are the most frequent type of encounters between a customer and the service-providing firm, and it happens through telephone. Almost all firms rely on general inquiry. Phone encounters are different from Remote encounters because there is a greater potential variability in the interaction in Phone Encounters.
The most important criteria for Judging quality are tone of voice, employee knowledge, and effectiveness/efficiency in handling customers. FACE-TO-FACE ENCOUNTERS: The encounter that occurs between an employee and a customer in direct contact is known as Face-to-Face Encounters. For an example, in a hotel face-to-face encounters occur between customers and maintenance personnel, receptionist, food and beverage servers, etc. The determining and understanding service quality issues in a face-to-face context is the most complex. Both verbal and non-verbal behaviors are important determinants of quality.
Even some tangible cues such as employee dress and other symbol of service like equipment’s, physical settings, and information brochure are important determinant of quality. In a face-to-face encounter the customer also play a major role in creating quality service for himself/herself through his/her own behavior during the interaction. An example would be as if a company such as MM, in a business-to-business setting direct encounters occurs between the business customers and salespeople, delivery personnel, maintenance representatives, and professional consultants. Factors that play role in customer expectation in retail banking: 1.
Pre Purchase: * The perception about the bank in the mind of customers. * Information about the bank about the services from the family members or the reference groups. Proximity of the bank from the place where the customer is residing. * The interest rate at which the bank is giving the loan. * Word of mouth communication. * Perceived service alternatives that are with the customers while choosing a bank. 2. During Purchase: * The turnaround time, which is the time in a customer, approaches the bank for loan and in which the loan is passed by the bank. * Computerized services and modern equipment of the bank. Hospitality provided by the bank to its customers. * Behavior of the employees of the bank with the customer and the competence and courtesy of the bank officials. Less paper work, prompt service and willingness to help by the employees of the bank. * Loan passed in the time in which it was promised. 3. Post Purchase: * Safety provided to the customers in transacting with the bank. * No hidden cost associated with the loan taken from the bank. * Availability of ATM machines of that bank. * All the transactions done by the customers are sending by the bank to the customer and mobile banking and SMS facility. If the customers bank provides benefits superior to other banks, then the customer feel contented. American Customer Satisfaction Index scores for the service industries are generally rower than the average for all industries. Despite the obvious improvements, there is hard evidence that customers perceive a lower quality of service overall and are less satisfied. The reasons for loan services (banking in general) may be as follows: * Offering tiered service based on calculated profitability: Banks have different collateral requirements for different kinds of customers. Increasing self-service and technology-based service: Banks have introduced many such services where the interference of employees is reduced. Examples for this kind of services are mobile banking, internet banking, etc. Customers feel that they are not much bothered about. Not all customers are comfortable with the technology like internet banking. * Glitches in technology-based services: Some malpractices that are happening in online transfer due to hacking may be an example for such causes. Customer expectations are higher due to excellent services: The best example in this regard is the service by ICC bank Tams. This has raised the bar for all the players in the industry. * Understanding to cut costs: With the confidence in technology, banks are reducing the employee base. This is leading to problems like delay in processes. * Competitive Job market resulting in less-skilled people in front-line: The best performers at any bank are promoted to higher levels and thus the point of interaction (face to face) with the client is not so competent. Gap between service promises and service delivery: Banks have huge marketing campaigns highlighting the various services, advantages, etc. They do it without being sure if they can deliver it or not. This gives a very bad impression to the customers. Consumer Evaluation Process for Services: 1. Search Attributes: * Reference from person who has already availed the service * Interest Rate * Timeliness Past Experience with the Bank * Ease with which loan can be processed 2.
Experience Attributes: * Courtesy of the employees * Knowledge Level of the employees * Responsiveness (Query Handling) * Explanation of the process and documentations * Terms and Conditions of the loan * Hospitality at the Branch of the bank * Convenience of the customer was taken into consideration Terms and Conditions 3. Credence Attributes: * Brand Name * Flexibility of the * Hidden costs involved Converting Credence Attributes to Experience Attributes: * Transparent Process * Financial Reports should be shared with the customers on quarterly basis
GAPS Model: GAP 1 : The gap between consumer expectation and management perception Long time for loan sanctioning: For a customer a quick service is the most important aspect, but management might feel that interest rates are more important from the banks perspective. GAP 2: The gap between management perception and service quality specification Government norms and policies: Even if the Bank knows that sanctioning time should be reduced there are policies from government like SKY norms which restrict them.
GAP 3: The gap between service quality specification and service delivery Casual Approach: Most employees are casual in heir approach and put their own priorities above that of the bank. GAP 4: The gap between service delivery and external communication Undue promises: Most bank professionals make undue promises Just to meet their sales targets which might have a negative repercussion on the banks reputation. GAP 5: The gap between expected service and experienced service Abstract specifications: There are no specific deadlines that customers have in their mind.
Hence it brings about the customer’s perception into play which might vary from individual to individual. SERVICE QUALITY GAPS MODEL AUDIT a) CUSTOMER GAP: How well did the bank understand the expectations of customer? Does the customer give importance to interest rates or collateral or time of sanction or anything else? * How well does the bank understand the perception of service? Is any kind of feedback mechanism present to know the customer perception? B) PROVIDER GAP 1- THE LISTENING GAP: * Market Research Orientation: Do banks have a formal process to know the factors that customers consider to borrow?
If yes, can these factors be taken into consideration by the bank? There are certain factors like strict SKY norms, interest rates which are under government intro and cannot be changed as per banks wish. * Upward Communication: Are the point of interactions with the customers skilful enough to understand the customer needs? Is the hierarchy flat enough to encourage the point of interaction to discuss all these matters with the bank manager? * Relationship Focus: Are the salesmen interacting with the employees trained to be customer centric rather than product centric?
Do they try to know what the customer wants from loan or do they Just list the benefits of the loan plans that they have? * Service Recovery: Does the bank have an exhaustive list of what all can be the service failures? Like if the disbursement is late, a student might lose admission or a flat would be sold out) c) PROVIDER GAP 2- THE SERVICE DESIGN AND STANDARDS GAP: * Systematic Service Design: Is there a step-wise process that the bank follows to develop service? * Presence of Customer-Defined Standards: Does the process of service design take into consideration the factors that were enlisted using market research? Appropriate Physical Evidence and Service scope: Are the tangibles in the bank like furniture, counters and infrastructure appropriate to the service offering and attractive? (A bank offering loans for some capital intensive industry cannot afford to have low cost furnishings). D) PROVIDER GAP 3- THE SERVICE PERFORMANCE GAP: * Effective Human Resource Policy: Are the employees knowledgeable, skilful and fully aware of the loans? Does bank recruit, train and appraise the employees such that all the teams are consistent with each other and with the vision of the bank? Effective role fulfillment by the customers: Does the bank clearly mention the roles and responsibilities of the customers? (In banks it may be submission of documents for SKY norms, submitting an application for renewal of loan, etc. ). * Effective Alignment with service intermediaries: How well are the objectives of intermediaries aligned with that of the banks? (In case of vehicle loans, the objective of the dealer should be same as that of the bank. Also the services provided must be consistent). Alignment of demand and capacity: What is the demand for different kinds of loans and how much is the bank able to satisfy it? E) PROVIDER GAP 4- THE COMMUNICATION GAP * Integrated Service Marketing Communication: Are all the channels of communication from the bank giving same kind of information about the bank? Is the bank overprinting? (For an example, “No collateral on education loans” might be the inn in an ad-campaign but the bank might not be able to provide such loans to students of all institutes. ) What is the level of coordination between among departments in the bank? Pricing: Does the bank charge so high for service that it creates high expectations among the customers? Does the banks charge match with customers’ perception about the bank? (ICC charges very high for its services than any other bank. So there are over expectations towards Sick’s services). Factors that influence Desired and Predicted Services: Expectations play a very crucial role in customer evaluation of service attributes and emissions, so the marketer should understand these factors in order to shape them.
Sources of Desired Service Expectations: Customers’ expectations is shaped by personal needs for example if the customer has gone to deposit money in the bank and left his shop under some one’s guidance, he would like a prompt service and his this will be his personal need the marketer should educate customers on ways the service addresses their needs. Personal Service Philosophy: Personal service philosophy influence the desired service expectation, if the customer themselves have worked in a bank then they have strong service philosophy.
A marketer should use market research to profile personal service philosophies of customers and use this information in designing and delivering services. Derived service expectation: Desired service expectation influence the desired service expectation which occurs when customers are driven by another person or group of people. For example if a man goes to get an education loan for his son to be admitted in an MBA college after 5 days. He carries the expectation made by his son that my father will ensure that the loan process is over before five days so that he can get admission easily without any aisle.
Sources of Adequate Service Expectations: Perceived Service alternative: Perceived service alternative are other service providers from whom the customer can obtain service. For example if a customer has got a saving bank account with HEAD bank and he knows that there is one more bank which can provide the same service at low cost then his adequate service expectation will go up. A marketer should be fully aware of competitive offerings, and where possible and appropriate, match them.
Situational factors: When a customer’s goes to a bank during rain, famine or at time of any other natural assister situation his adequate service level expectations goes down. A marketer should use service guarantees to assure customers about service recovery regardless of the situational factors that occur. Predicted Services: Predicted services are those set of factors that affect the desired adequate service level. This toe of service expectation can be viewed as expectation made by a bank customer about what is likely to happen during an impending transaction or exchange.
A marketer should tell customers when service provision is higher than what can normally be expected so that predictions of future service encounters will to be inflated. Explicit Service Promises: If a bank customer is told either by advertisement, personal selling, contracts and other communication that he will receive this minimum standard of service, this will affect his predicted service expectations and his adequate service level will go up. A marketer should make realistic and accurate promises that reflect the service actually delivered rather than an idealized version of the service.
Implicit Service Promises: If the customer is doing service with a bank that is charging premium form his customers for their service it ill affect his predicted service level and his adequate service level will go up. A marketer should ensure that price premiums can be Justified by higher levels of performance by the company on important customer attributes. Word of Mouth Communication: Word of mouth communications is very important in services that are difficult for customers to evaluate before purchase and before having direct customers, he can spread negative word of mouth about it.
A marketer should simulate word of mouth in advertising by using testimonials and opinion leaders, identify influences and opinion leaders for the service and concentrate marketing forts on them and use incentives with existing customers to encourage them to say positive things about the service. Past Experience: If a customer is associated with a bank and is satisfied with the service he will have more expectations from a new bank in which he is going to be associated with. A marketer should use marketing research to profile customers’ previous experience with similar services.
CUSTOMER PERCEPTIONS OF QUALITY: Perceptions are always considered relative to expectations. Because expectations are dynamic, evaluations may also shift over time-from person to person and from ultra to culture. What is considered quality service or the things that satisfy customers today may be different tomorrow. * Reliability * Responsiveness * Assurance * Empathy * Tangibles TRANSACTION VERSUS CUMULATIVE PERCEPTIONS: Customers’ perception about a service based on single, isolated, transaction specific encounters may be called as Transaction Perceptions.
A retail banking customer will have a perception of how he was treated in a particular encounter with an employee in a branch and will form a perception of that transaction based on elements of the service experienced during that transaction. A customer also develops an overall perception of a company based on all his or her experience and this is termed as Cumulative Perception. The above mentioned bank customer will also have overall perceptions of the bank based on all his encounters over the time such as multiple in-person encounters at the bank branch, online banking experiences, and experiences using the banks Tams across many cities.
At an even more general level, the customer may have perceptions of banking services or the whole banking industry as a result of all his experiences with banks and everything he knows about retail banking. The transaction perceptions gets accumulated over time and results in cumulative perceptions and customers’ loyalty often results from cumulative perceptions and not from the transactional ones. CUSTOMER SATISFACTION: Satisfaction is the customer’s evaluation of a product or service in terms of whether that product or service has made the customer’s needs and expectations.
Failure to meet needs and expectations is assumed to result in dissatisfaction with the product or service. As depicted in the above figure, customer satisfaction may result out of the followings: Product Features: he product- for instance the schemes, the bank rates, etc. Service Features: These include the consumer’s perception towards the service provider’s reliability, responsiveness, assurance, empathy and tangible aspects such as cards, documents and bank premises.
Customer Emotions: Customers’ emotions can also affect their perceptions of satisfaction with products and services. E. G. A customer who visits a bank in a happy mood may find the interacting employees friendly and helpful but the same employee may be assumed as hostile and irritating if the customer enters in a bad mood. Attributions for Service Success or Failure: Attributions or the perceived causes of events also deeply influence perceptions of satisfaction. Customers’ assessment of the reasons for an outcome influences their satisfaction.
E. G. If the loan rates are increasing a customer might assess the root cause as new policies from the government before determining her level of satisfaction or dissatisfaction with the bank. Perceptions of Equity or Fairness: A customer’s perception about satisfaction is deeply influenced by his feeling of equity in the course of service being provided to him in comparison to other customers. Especially in a service recovery situation like recovering wrong ululations in the customer’s account he seems to realize if he is treated fairly or not.