Analyzing the Marketing Strategy for Union National Bank - Case Study Example

Analyzing the Marketing Strategy for Union National Bank Student’s Name: Grade Course: Tutor’s Name: Date: Union National Bank’s Marketing Strategy The Union National Bank (UNB) is rated as one of the safest banks in the United Arab Emirates (UAE). Jointly owned by Abu Dhabi and Dubai governments, UNB has over the years since its establishment in 1982, launched widespread operations in the region (United National Bank, 2012a.). Currently, UNB has 54 branches in the UAE, one branch in Qatar, 26 branches in Egypt, and one branch in China (Businessweek, 2012). The bank’s marketing efforts are evident in its venture in different aspects of the banking business including its entrance in brokerage finance by setting up the Union Brokerage Company; its entrance into Sharia-complaint financial services by setting up the Al Wifaq Finance Company; its venture in new markets such as Qatar and China; and its relentless efforts to brand itself as a responsible corporate organization through its active involvement in corporate social responsibility initiatives (UNB, 2012a). In light of increasing consumer needs, it is also apparent that UNB has adopted a mix of delivery channels, which include branch banking, Internet banking, ATM banking, phone banking and mobile banking. As has been indicated by Jham, Genderen and Khanzode (2012), multi-channel banking is one of the strategic marketing approaches that banks in the UAE are adopting in order to package their service delivery in a manner that is more convenient for consumers. Ideally, the “right mix of banking channels” influences the appeal that banks have towards potential consumers (Jham et al., 2012, p. 771). It is worth noting that UNB’s operations in the UAE face competitive pressures from local and foreign commercial/retail banks, and other targeted financial institutions such as the Islamic banks. By 2007, the UAE had 17 national/local banks, 26 foreign banks, and 3 Islamic banks/financial institutions. In total therefore, the region has 46 banks (Hashmi, 2007). Problem Analysis Contemporary marketing mix thought indicates that firms need to develop the right product, price it appropriately, promote it, and distribute it to the right places. Following this thought, one can argue that firms in the banking sector develop products targeting individual and corporate consumers of financial services, package and price them appropriately, and deliver them to targeted clients. A critical look at UNB’s financial products reveals that the firm has unique products for different market segments. Such include salaried individuals, self-employed individuals, high-net worth individuals and business entities (UNB, 2012a). For each market segment, UNB offers accounts, loans, cards, assurance, saving schemes, and special offers specifically designed to meet needs identified specifically to be prevalent in that group of banking services consumers. For salaried individuals for example, UNB offers several bank account options, which include current, savings, call, fixed-deposit and easy accounts (UNB, 2012b). High net worth individuals can have custom-built accounts set up for them where simple to complex banking transaction needs can be handled. Considering the diversity of the markets where UNB has set up business, i.e. in the larger UAE, Egypt and China, it is highly unlikely that the banking services products it offers will work across the geographical and cultural divide. For example, while the Al Wifaq Finance Company may attract customers in regions with high Muslim populations like the UAE and Egypt, the same may not be very successful in China. Interpreted, this may mean that UNB did not consider the need to segment its markets differently based on the geographical and cultural dissimilarities that exist across the diverse markets. As noted by Muralleedharan (2010), judicious market segmentation is essential if a company is to successfully market its products and services to identified consumers. Notably, the attitudes, aspirations and sentiments of the Chinese people would be different from the Egyptians or people living in the Emirates. Such differences therefore make it difficult for UNB to effectively serve the three markets effectively using homogenous products. The prices of some of the UNB products are also on the higher side hence making it harder for the bank to compete with other players on a cost-based perspective. Some of the prohibitive costs that could reduce the bank’s competitiveness include the price if replacing personal identification numbers for one’s ATM card (AED 25), the AED 500 minimum rate charged for loan processing, the AED 10 charged for teller services exceeding the 6 free services offered per month, and the AED 50 charged for attaining one’s account balance among others (UNB, 2012c). GAP Analysis An apparent gap in UNB’s marketing strategy relates to its service delivery, most especially in customer service. In a 2008 report by Ethos Consultancy Limited, UNB was ranked in the 20th position out of the 29 banks surveyed (Mustafa, 2008). Notably, Mustafa (2008) indicates that UNB’s ranking is indicative of its declining customer service provision. As indicated by Uppal (2010, p. 36), “the key task of the bank is not only to create and win more and more customers, but also to retain them through effective customer service”. While marketing efforts such as attractive banking products, promising offers, and good interest rates may attract customers to UNB, only the satisfied customers will stay on. Notably, poor quality customer services negatively affect customer retention hence jeopardizing the success of strategic marketing. Gap Analysis Objectives To investigate UNB Bank’s current market strategy and indicate any apparent gaps that may hinder its performance in the competitive market. Additionally, the gap analysis and the problem analysis will form the basis for recommendations made hereunder. Recommendations Uppal (2010, p. 32) defines marketing banks services as “the aggregate function directed at providing service to satisfy customer’s financial needs and wants more effectively than the competition keeping in view the organizational objective”. Following this definition, one can recommend that instead of offering homogenous products for all market segments across the UAE, Egypt and China, UNB should consider seeking in-depth knowledge and understanding of the banking-related needs presented by its customers in the three business areas. Based on such understanding, the bank can then develop a comprehensive bank-product package that will address the diverse needs presented in the different market segments presented in each country/region. As indicated by Muralleedharan (2010 p. 42), banks need to introduce “a local touch” in the products developed for different markets “by considering local peculiarities”. By so doing, banks could improve their chances of being accepted locally. In a country like China, local acceptance is especially essential if UNB is to shed off the perceptions that locals may hold regarding it as a foreign bank and hence not accepting its marketing offers as easily as they would a locally owned bank. The pricing aspect of UNB could also be improved especially if the bank wants to attract more customers across the low-income and middle-income groups. For example, the requirement to maintain a minimum balance of AED 3000 for the current and savings accounts by self-employed individuals is too restrictive especially in a region where other banks are offering services that require as low as AED 1000. Customers (especially those who need high amounts of liquid cash to run their businesses) may opt to open accounts with banks that have low minimum balance requirements, and this naturally acts as a disadvantage for UNB. An example of a bank with a highly competitive approach to service delivery is HBSC (a foreign-owned bank), which maintains a nil minimum deposit requirement, gives 1.50% interest on deposits made to a savings account, and offers free online transfer of funds (HSBC, 2012). Unlike UNB’s 6 free over the counter transactions, HSBC only allows its clients to make one free such transaction. The lesson derived from the UNB-HSBC comparison is that the former needs to price its products in a manner that attracts high customer volumes without giving up its profit-making motive. From the discussion regarding the absence of satisfactory customer service provision in UNB, it can be understood that the management needs to formulate new and better ways to attend to its client. As has been noted by Uppal (2010), a bank, its products, prices, or effective distribution of the same are all useless unless it succeeds in attracting and retaining customers in numbers that enable it to cover its expenses and make a profit. Since UNB operates predominantly in the UAE, the bank can distinguish itself from other banks by using superior customer care services as its competitive advantage especially considering that consumers have argued that the majority of UAE banks have unsatisfactory customer care services (Mustafa, 2008). Notably, the Abu Dhabi Islamic Bank, and the National Bank of Abu Dhabi have moved from positions 18 and 23 in the 2008 Ethos Report, to positions 3 and 8 respectively in the 2010 report by the same company (El Ajou, 2010). However, UNB’s position remained unchanged, thus indicating that there were no customer care provision improvements on its part. Considering that the reports by Ethos are based on the services offered by call centers maintained by banks across the UAE, UNB should seek to improve its services by targeting three service areas as indicated by Genesys (2009). They include: “customer experience”; “cross-selling and up-selling”; and “agent productivity and satisfaction” (Genesys, 2009, p. 8). In customer experience, UNB should seek to ensure that all its call centre agents understand the consequences that their interaction with customers has on the bank’s ability to attract and retain lasting business relationships. The call centre agents must also understand that every interaction with the customer presents a sales opportunity and hence should not be wasted through poor customer service delivery. The situation presents an opportunity to cross-sell and up-sell. The third consideration by UNB is closely linked to the management theory, whereby, the productivity and/or service delivery of call centre agents is most likely being affected by their job satisfaction levels. To ensure that the call centre agents working in its customer service departments are well motivated therefore, UNB needs to address the different aspects of human resource management in order to ensure that the agents have the skills needed to handle customers well, and are well motivated to work for the bank. In addition to the agent-mediated customer services, UNB should consider improving the customer experiences in different channels, which include ATMs, fax, SMS, web chat, and e-mails. Such improvements would make it possible for customers to conduct their banking businesses whenever and in whichever way they prefer. Notably, UNB has put AED 100 charge for account closure within a year of opening. This is clearly a strategy meant to discourage customers from closing their banks account and shifting to other banks. While punitive, the AED 100 charge is not an effective customer retention strategy at least in the long-term. Arguably, customers who do not want to lose the AED 100 could maintain a dormant account (which attracts no charges) until a year is over. They could then easily close their accounts and move on to another more customer-friendly bank. As such, the solution to retaining customers is not restricting their willful leaving, but serving them in a manner that will make them want to stay on. Such sentiments were expressed by Reagan (2010) who notes that the growth phase in UAE’s banking sector is slowly hitting maturity, and this means that banks will need to develop new marketing strategies. Specifically, banks that seek to use good customer service provision as a tactic to improve their individual bottom line through customer retention will need to develop and embrace newer marketing strategies. For example, instead of using the traditional ways of handling calls, the bank could invest in an intelligent form of call handling infrastructure, whereby service priorities are matched with customer value. In such a case, the high net worth individuals are automatically detected by the system and their calls routed without delays to available customer care attendants, while callers from segments where the bank does not derive much revenue are provided with equally satisfactory customer services by either giving them alternatives to proceed to a self-service channel or giving them an alternative to leave their details for a call-back from customer care representatives. When the latter is promised, the bank should have an in-house policy that makes it mandatory for all calls by customers to be returned within reasonable time. In the Ethos Report, it was indicated that the most common customer complaint was that banks never returned their calls at all, and when returned, the calls would be returned days later (Mustafa, 2008). Indicative Budget Activity Approximate cost (AED million) Researching and segmenting potential markets in UAE, Egypt & China 1.9 Bank product development for identified market segments 0.5 Promotion of the developed products across the target markets 5.0 Employing the services of a consultancy to advise on the best pricing strategy to use on UNB’s banking products 2.5 Promoting the new prices for banking products 2.5 Improving UNB’s customer service delivery through improvements in the call centers (hiring skilled customer care representatives, training them appropriately, and motivating them appropriately. 2.7 Enhancing customer experiences through ATM service delivery, SMS, email, fax, and web-chat interactions 2.0 Total approximated budget (+/- 10%) 16.1 References Businessweek 2012, ‘Union National Bank/ Abu Dhabi (UNB: Abu Dhabi)’, viewed June 29, 2012 http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=UNB:UH. El Ajou, N 2010, ‘Ethos consultancy reveals findings of its 6th annual bank benchmarking index for service excellence’, AME Infor FZ LLC/4C, viewed July 2, 2012, < http://www.ameinfo.com/246431.html> Genesys 2009, ‘Customer service strategies for the retail banking industry’, viewed July 2, 2012 from < http://www.genesyslab.com/docs/?id=20332> Hashmi, M. A 2007, ‘An analysis of the United Arab Emirates banking sector’, International Business & Economics Research Journal, vol. 6, no. 1, pp. 77-88. HBSC 2012, ‘eSaver- your online savings account’, viewed 02 July, 2012, < http://www.hsbc.ae/1/2/personal/banking/current-accounts/esaver/> Jham, V, Genderen, E, & Khanzode, K 2012, ‘Strategic adoption of multichannel banking by customers in UAE banks’, International Conference on Technology and Business Management, March 26-28, pp. 771-778. Muralleedharan, K K 2010, ‘Marketing Strategies of the banking industry’, pp. 14-74, viewed July 2, 2012, Mustafa, A 2008, ‘Study of UAE banks: a matter of rank’, Gulf News, viewed July 2, 2012, < http://gulfnews.com/news/gulf/uae/general/study-of-uae-banks-a-matter-of-rank-1.461058> Reagan, B 2010, ‘The secret of its success: every client is important’, The National, viewed July 2, 2012, < http://www.thenational.ae/lifestyle/personal-finance/the-secret-of-its-success-every-client-is-important> United National Bank (UNB) 2012a, ‘About us’, viewed June 29, 2012 UNB 2012b, ‘salaried individuals; self employed individuals; high net individuals; business entities’, viewed June 29, 2012, < http://www.unb.com/english/index.aspx>. UNB 2012c, ‘fees/charges for individual customers’, viewed July 02, 2012, < http://www.unb.co.ae/English/FinancialDoc/tariff.pdf> Uppal, R. K 2010, ‘Marketing of bank products- emerging challenges & new strategies’, JM International Journal of Management Research, November, 35-42. Read More