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TOPIC 5

CONSUMER BEHAVIOUR AND

CONSUMER BANKING

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5.1 The Study of Consumer

Behaviour

• The study of consumer behaviour is the study of how individuals make decisions to spend their valuable resources, such as time, money and effort, on consumption related items.

• Beyond the facets of how and why decisions, marketing researchers also consider the uses consumers make of the goods they buy and their subsequent evaluations.

• Thus, consumer behaviour refers to the behaviour that consumers display in searching for purchasing, using, evaluating and disposing of products and services that they expect will SATISFY THEIR NEEDS.

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Pembhgian Pasaran adalah merupakan langkah pertama dlm membuat pemasaran pasaran.

Kotler & Armstrong (1996) – Merupakan satu proses membahagian pasaran yg besar & mpyi pelbagai keperluan, ciri & gelagat kpd pasaran yg lebih kecil, yg mana individu2 di dlm setiap segmen mpyi keperluan, kehendak & gelagat pembelian yg sama.

PEMBAHAGIAN PASARAN

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PASARAN PEMBAHAGIAN

PASARAN

SEGMEN 1

SEGMEN B

SEGMEN C

PROSES PEMBAHAGIAN PASARAN

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5.2 Market Segments

• In developing a marketing strategy for financial services, a bank must determine their target in a product market to whom it will direct its marketing efforts.

• This is known as market segmentation; one of two pillars of marketing, in addition to positioning.

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• TUJUAN ASAS SEGMENTASI ADALAH UTK MEMBAHAGIKAN SESUATU POPULASI KPD KUMPULAN2 YG BERLAINAN DI MANA INDIVIDU2 DALAM SETIAP KUMPULAN ITU MPYI KEPERLUAN YANG SERUPA.

• UNTUK MENSEGMENTASIKAN PASARAN, BERBAGAI ASAS/PEMBOLEHUBAH DIGUNAKAN.

• ANTARANYA ASAS YG DIGUNAKAN IALAH

• I) DEMOGRAFI

• ii) GEOGRAFI,

• iii) PSIKOGRAFI &

• Iv) GELAGAT.

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• Buyers of bank services have unique needs and wants, and each buyer is potentially a separate market.

• Banks would do well trying different segmentation bases, alone or in combination, to find the best way to identify a market structure.

• This is better known as CUSTOMER PROFILING.

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5.2.1 Demographic

• Demographic segmentation divides the

market into groups based on variables

such:

age,

gender,

family size,

income,

occupation,

religion,

race and

nationality

Education

•This list is not exhaustive as other variables may from

time to time be adopted as a segmentation variable.

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• DEMOGRAPHIC VARIABLES ARE POPULAR

for segmenting customer groups as the

variables are easier to measure than other

types of variables.

• The demographic characteristics are also

commonly used in conjunction with other

segmentation bases to assess the size and

potential of the target market and to reach it

efficiently.

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• Maklumat demografi penting diketahui

sebelum asas2 segmentasi yang lain

boleh digunakan secara efektif dalam

membuat penilaian saiz pasaran

• Segmentasi demografi sangat

penting/popular kerana keperluan

pengguna berubah mengikut perubahan

ciri2 demografinya.

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5.2.2 Geographic

• Geographic segmentation divides the market

into different geographic regions such as

States (kedah,perlis,penang,perak, etc)

Regions (NR,SR,ER & WR)

Cities (Asetar,Kangar,Spetani,Ipoh,Kelang)

Countries (Msia,Thailand,Indonesia).

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• The bank may decide to focus on a few, paying

attention to the distinguishing characteristics

associated with each location.

• The needs of urban customers would differ

significant from that of rural dwellers.

• Kws majoriti penduduk melayu, bank will

embarks on ASB loan, chinese bank tumpu

pada saving/fixed deposit. Kws indusri bank will

fokus on commercial loan.

• Kws urban-Pinj. Perumahan

• Kws luar bandar/pendalaman-Pinj. Kredit mikro

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• E.g. Pasaraya borong Carrefour telah membuka cawangannya di bandar2 utama seluruh Malaysia.

• E.g.Pizza Hut di Malaysia memperkenalkan pizza yg halal & bercita rasa tempatan seperti pizza berperisa sate sbgi salah satu daya tarikan produknya & tdk menawarkan pepperoni pizza (tidak halal) seperti yg dilakukan di Amerika

• BSN membuka cawangan hampir di seluruh pelusuk negeri di Malaysia dibandar & diluar bandar.

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5.2.3 Psychographic

• Psychographic segmentation divides the market into groups based on their social class (kedudukan dlm masyarakat), lifestyle (gaya hidup)or personality characteristics (perwatakan).

• . Faktor psikografi dikatakan boleh membuat perbezaan demografi menjadi tidak penting, kerana pengguna dlm demografi yg sama selalunya mempunyai psikografi yg berbeza.

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• Contoh: suri rumah berusia 30 tahun (Age) dari kelas atasan lebih cenderung membeli barangan keperluan di pasar raya, manakala suri rumah berusia 30 tahun (Age)dari kelas bawahan pula lebih gemar membeli keperluan hariannya di kedai runcit atau di pasar basah.

• Contoh: Golongan tua lebih gemar menjlnkan transaksi perbankan di kaunter (tradisional method) berbanding golongan muda (teknologi oriented)

• Cth: golongan muda suka motor berbentuk sporty Yamaha Rx-Z , tua Honda ex-5.

• Muda-stria neo,honda jazz, Tua-Waja/Volvo

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• Tdpt beberapa pemboleh ubah yg boleh digunakan pemasar utk mensegmenkan pasaran menggunakan asas psikografi iaitu:

• 1) Kelas sosial –cth: masyarakt kelas atasan memilih kws eksklusif bagi pembelian rumah, perabut import & kereta mewah. Sebaliknya masyarakat kelas bawahan hanya akan membeli rumah murah, perabut tempatan yg lebih murah & kereta biasa.

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• 2)Gaya/corak hidup- cth: seseorg yg pentingkan kesihatannya tdk akan keberatan utk membelanjakan pendapatannya utk membeli vitamin, barangan herba & sbginya. Sebaliknya seseorg yg tdk mementingkan kesihatan lebih rela membelanjakan wangnya utk keperluan lain drp membeli pil2 kesihatan.

(kos tinggi & mahal!)

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• 3)Personaliti- sering digunakan di dlm

membuat segmentasi bagi produk

kosmetik & pakaian. Cth: pengguna yg

bersifat agresif sering dianggap

berkeinginan utk mencuba sesuatu yg

baru & luar biasa. Oleh itu rekaan

kosmetik bewarna terang & pakaian yg

unik biasanya diperkenalkan utk pengguna

jenis ini.

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5.2.4 Behavioural

(Segmentasi menggunakan asas

gelagat)

• A similar segmentation base, behavioural, categorised the market based on their knowledge, attitudes, uses or responses to a product

• Life cycle marketing focuses on the idea that a consumer at each different stages of life will have different buying behaviour that can be influenced by his/her social class and lifestyle.

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• Consumers use products to express their social identities. Credit card-exclusive image. Ferari,merz vs toyota.

• The use of symbols provides a powerful means for marketers to convey product attributes to consumers.

• For example, expensive cars, designer fashions and diamond jewellery - all widely recognised symbols of success - frequently appear in advertisements to associate products with affluence or sophistication.

• Executive loan offer by Maybank. Reflect status/symbol elite. Gold card-reflect exclusive member!

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contd

• Pemasar selalunya menggunakan

pembolehubah dalam asas gelagat seperti

situasi penggunaan, faedah dicari, status

pengguna, kesetiaan, peringkat kesediaan

untuk membeli, dan sikap dalam usaha

mentakrifkan segmen2 yang wujud dalam

pasaran

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Contd. • 1) Situasi penggunaan-contohnya masyarakat

Jepun yg menggunakan the bukan sekadar untuk minum pagi atau petang tetapi sebagai sebahagian daripada upacara keramaian & menyambut tetamu mereka.

• 2) Faedah dicari- contohnya membeli ubat gigi Colgate dengan extra pudina ialah untuk kesegaran mulut, dan membeli kereta Perodua Kancil kerana penggunaan minyaknya yang lebih ekonomi berbanding dengan kereta2 lain

• 3) Status pengguna-pasaran boleh dibahagikan kpd bukan pengguna, pengguna berpontensi, pengguna pertama kali dan pengguna biasa.

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• Contohnya utk mengalakkan penduduk M’sia supaya melabur dlm Amanah Saham Wawasan 2020, kerajaan telah menjlnkan kempen yang berbeza iaitu kpd kump. yg tlh melabur, golongan yg berpotensi utk melabur, dan golongan yg belum melabur.

• Selalunya syarikat2 kecil akan menumpukan usaha pemasarannya ke atas pengguna sedia ada supaya pengguna tdk mudah berpaling kpd keluaran sykt lain. Ini kerana mengekalkan minat pengguna sedia ada adalah lebih mudah daripada menarik minat pelanggan baru (Kotler 1996)

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5.2.4

Psychographic/Demographic

• Psychographic/Demographic profiling is particularly useful in creating customer profiles for service marketers.

• It provides a meaningful insight for segmenting mass markets, providing direction as to which promotional appeals to use, and selecting advertising media that is most likely to reach the target market.

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5.2.5 Geo-demographic

• This segmentation scheme is based on the notion that people living close to one another are likely to have similar financial means, tastes, preferences, lifestyles and consumption habits.

• This technique is useful when potential prospects can be isolated in terms of where they live.

• Mumbai-india

• Damasara-kl

• Bukit indah -jitra

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5.3 Maslow's Hierarchy of Needs

• Maslow's hierarchy seeks to explain why people are driven by particular needs at a particular time of their lives.

• His answer is that human needs are arranged in a hierarchy, from the most important to the least important.

• In order of importance, they are :

physiological needs,

safety needs,

social needs and

Esteem needs

self-actualisation needs

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Figure 5.1 - Maslow's Hierarchy of Needs

Source: Marketing, 4th ed., by Philip Kotler and Gary

Armstrong, 1997. Prentice Hall.

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5.4 Segment Characteristics in

Banking

• In consumer banking or corporate banking, the banks target the segment that adheres to the common characteristics that typify an "ACE" customer. These customers are likely to be

• Asset-Rich (the ability to pay),

• Credit-worthy (the willingness to pay), and

• Exclusivity (possess the desire for exclusivity). ***ACE-JAGUH/HEBAT/ORG YG PANDAI DLM SATU2 PERKARA!

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• Firstly, the competition among banks in consumer banking is targeting customers who have the ability to repay, and a banker will look for assets that can provide security to the bank.

• Secondly, the customer must be credit-worthy.

• Even for credit card customers, he must have the ability to repay and the inclination to repay.

• The third characteristic is the exclusivity desire.

• A bank product should be designed in such a way that the customer likes it because of exclusiveness.

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• The first two criteria also apply for

corporate customers.

• However, in targeting small- and

medium-enterprises, the bank will have to

assess the credit worthiness of the board

of directors because they control the

company.

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• The need for the exclusivity design of bank

products is one of the reasons why banks

adopt the account relationship

management.

• The relation manager is hired

exclusively to service corporate

customers.

• He is likely to know what kind of products

to provide for his customers needs.

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5.5 Segmentation Criteria

• It is evident that there are several ways to segment a market, although; not all segmentation are effective.

• In order for segments to be useful in selecting the target market, they must fulfil the criterion of effective segmentation.

• Also the optimum number of segments must be identified beyond which overall profits will begin to decline.

• The application of the following criterion may help define the potential profitable market segments.

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1) The segment should be large or

profitable enough to justify the expense

in serving the segment in terms of

product development, promotion, etc.

2) The segment should preferably be the

largest homogenous group worth

pursuing with a tailored marketing

programme, e.g. high network individuals

(HNWI). The customer profile fits the

ACE characteristics.

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3) However, it should be sufficiently

heterogeneous (different) in relation to

other markets so that customers will

respond differently to some aspects of

the marketing strategy. Otherwise, this

defeats the purpose of the above

qualifying criteria.

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4) The segment characteristics should be

measurable as to the size, purchasing

power; among other variables, to

determine the potential of the segment.

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5) The segments should exhibit adequate

stability over time so that the marketing

efforts will have enough time to get the

desired response from targeted

segments.

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6) The variables used to segment the

market must provide directions on how

to reach the segments, so that the

segments could be effectively served.

THE FIRST THREE (1,2 & 3) CRITERIA

ARE QUALIFYING CRITERIA, WHILE

THE REMAINING ONES (4,5 & 6) ARE

DETERMINING CRITERIA..

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Continue!

• 5.6 MARKET TARGETING

• 5.6.1SEGMENT STRATEGIES

• 5.7 COGNITIVE DISSONANCE

• 5.8 CONSUMER BANKING

• 5.8.1 WHY IS THERE A SUDDEN INTEREST IN CONSUMER BANKING?

• 5.8.2 PRODUCT & SERVICES

• 5.8.3 TECHNOLOGY IN CONSUMER BANKING

• (self –study!)

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5.6 Market Targeting

• Market segmentation reveals a bank's

market-segment opportunities.

• The bank then evaluate the various

segments and decide on the target

segment based on the segment size and

its growth potential, its structural

attractiveness and the bank's objectives

and resources.

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Contd..

• The largest or fastest growing segments

are not always the most attractive for

banks.

• Small banks may lack the skills or

resources to serve these segments, or that

these segments are very attractive to

banks with larger resources, thus making it

too competitive for the smaller banks.

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Contd..

• A segment may have the desirable size

and growth but still may not be attractive

due to low profitability.

• For instance, the segment would be less

attractive if it has too many current and

potential competitors and potential

substitute products already exist.

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Contd..

• Some segments would also be dismissed

as they are not congruent with the bank's

long-term objectives.

• Although the segments may be tempting in

it self, it may divert the bank's attention

and energies away from its main goals.

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Contd..

• The bank could adopt one of three market

coverage strategies for a target segment,

consisting of a set of buyers which share

common needs and characteristics, that it

decides to serve.

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5.6.1 Segment strategies

• The bank may decide to ignore segment differences and go after the whole market with a single offer.

• The offer will focus on the common needs rather than the differences in the needs of the consumers.

• Product designs and marketing programmes are aimed at appealing to the largest possible number of buyers.

• This form of undifferentiated marketing provides cost economies due to the narrow product line and lower 'production' costs

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Contd..

• In adopting a differentiated marketing strategy, the bank targets several segments by designing different offers for each.

• This strengthens consumers' overall identification of the bank with the particular product category as focus is on specific needs of the consumers.

• There will be a greater incidence of repeat sales because the offer would better match customer needs.

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Contd..

• The third form of market coverage

strategy, concentrated marketing is

most appealing to banks that have

limited resources.

• Concentrated marketing (niche marketing)

is an excellent way for attaining a large

share of one or a few sub-segments.

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5.7 Cognitive Dissonance

• Cognitive dissonance theory advocates that

discomfort or dissonance occurs when a

consumer holds conflicting thoughts about a

belief or an attitude.

• For instance, when consumers have made a

commitment to buy a product, particularly an

expensive item such as an automobile, they

often begin, to feel cognitive dissonance when

they think of the unique, positive qualities of the

brands not selected.

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Contd..

• When cognitive dissonance after a purchase or purchase commitment, it is called post-purchase dissonance.

• Because purchase decisions often require some amount of compromise, post-purchase dissonance is quite normal.

• Nevertheless, it is likely to leave consumers with an uneasy feeling about their prior beliefs or actions - a feeling they tend to resolve by changing their attitudes to conform with their behaviour.

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Contd..

• Possible post-purchase experience has

significant ramifications for marketers, who have

to build post-purchase strategies into their

promotional campaigns.

• What makes post-purchase dissonance relevant

to marketing strategies is the premise that

dissonance propels customers to take cognitive

steps to reduce the unpleasant feelings created

by rival thoughts.

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Contd..

• In addition to such consumer-initiated tactics to

reduce post-purchase uncertainty, a marketer

can relieve consumer dissonance by including

messages in its advertising specifically aimed at

reinforcing consumer decisions, offering

stronger guarantees and warranties, increasing

the number and effectiveness of its services, or

providing detailed brochures on how to use its

products correctly.

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Contd..

• Segmentation is one of two main pillars of

marketing. Segmentation identifies the

target market and provides a profile of the

target customers.

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5.8 Consumer Banking

• Consumer banking refers to the provision of financial services to individuals and small companies.

• The customer base mainly consists of individuals from all walks of life - students, clerks, factory workers, professionals and company executives.

• Thus consumer-banking products range from the all-in-one deposit accounts to flexible personal loans.

• The examples include educational loans, housing loans, lifestyle loans, club membership loans and margin financing on stocks.

• These are commonly advertised and promoted in the newsprint media.

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5.8.1 Why is there a sudden

interest in consumer banking?

• There are three main reasons that account

for the banks' entry into this market sector.

1.Firstly, banks realise that economic

development has brought about a growing

middle class with strong purchasing power

and certain affluence. They want the

comfort and prestigious things in life and

they are confident of earning more.

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Contd..

2. Secondly, banks are also experiencing

shrinking profit margins from their

corporate banking. Thus, they might

find it easier to levy higher charges on

retail clients. Banks generally price 2%

to 3% higher in lending rates on

consumer loans than corporate loans.

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Contd..

3. Thirdly, consumer banking provides a

steady source of fund to the bank. Not

only is there stability in deposit growth,

retail deposits are often a cheaper

source of fund. It helps the bank to

lower the cost of funds and therefore

further improve interest margins. This

leads to higher profitability.

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5.8.2 Products and services

• Since the 1980s, basic consumer banking

facilities, such as cash and cheque

deposits and withdrawals, have undergone

tremendous changes from limited branch

operation hours to extension of business

into off-office hours to 24-hours

self-service ATM electronic banking

services.

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Contd..

• The emergence of home and telephone

retail banking delivery systems have also

brought about greater convenience to'

the-customers. Joint marketing effort

between retailers and banks is common.

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Contd..

• Personal loan products, e.g. residential loans, car loans, margin financing, and study assistance schemes, are neatly tailored to match individual needs.

• Citibank even allows its customers to choose their own repayment terms.

• In addition, it also takes the initiative to consolidate accounts such that credit balance in the deposit or investment product account would automatically be transferred to offset the debit balance in the loan accounts.

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Contd..

• "All-in-one" deposit products are one of

the many innovative packages.

• In Singapore, Hong Kong Bank attempts

to attract customers from different levels of

income group by implementing a

multitiered interest rate to its Prime

account holders.

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Contd..

• Credit cards, free gifts, lucky draws and frequent flyer programmes are not unusual as promotional gimmicks to gain market share.

• With the liberalisation of the Employees Provident Fund and increased public education in financial investment, it is possible that in future consumers’ interest will shift to non-deposit investment instruments.

• New consumer banking products and services will be offered by banks.

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5.8.3 Technology in consumer

banking • In the past, customers could only withdraw cash

over the counter at bank branches.

• Today, they can withdraw cash at ATMs outside bank branches, supermarkets, petrol kiosks and bus terminals at their own convenience.

• Bank transactions through ATMs are processed on-line and linked to the bank's central mainframe where customer records are updated almost instantaneously.

• Besides cash withdrawals, consumers can also request for account balances, new cheque books, transfer funds across accounts and even apply for new shares on the screen.

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Contd..

• Home and telephone banking also helps consumers to execute their requests.

• One typical example is Citibank's 24-hours phone banking system.

• It is a telecommunication system directing customer enquiries to a specific banking officer or banking facilities, not through a receptionist, but through a centralised computer processing unit.

• Advances in technology make telephone banking more user-friendly and thus there will be a push for more electronic products in banking

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Contd..

• As technology is taking consumers into a cashless society, credit cards, debit cards, stored value cards and smart cards are commonly used to settle purchases for groceries, air tickets, petrol, bills for meals at restaurants, making telephone calls and even taking public transportation.

• Such purchasing habit has become a major concern to banks so much so that those banks who do not follow the trend would seem antiquated and may lose out in the consumer banking battle.

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Contd..

• The bricks-and-mortar distribution system will be playing a less important role in the future.

• This is largely because branch network is costly to maintain and more risky (exit price is involved).

• However, it will continue to be an essential step in establishing physical footholds in new markets.

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Contd.. • The business activities carried out at the counter

will also be different, with more new products being offered.

• The major function of the branch will soon be replaced by more consultation and advisory services for financial planning, investment, tax and legal matters.

• A new generation of skilled and knowledge based employees will be stationed in the branch to answer customer enquiries.

• Banks have also upgraded the appearance of banking halls to keep up with the customer expectations and to induce an atmosphere of trust and confidence.

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Contd..

• McCoy et al (1994) reported a market research which showed that consumers' choice of distribution channel is dependent on market segment and geography.

• Thus, banks need to have a thorough understanding of their existing consumers' wants and preferences before committing any heavy investment in developing new delivery systems.

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Contd..

• A study conducted by the Bank Administration

Institute in 1993 further highlighted that 95% of

self-service oriented consumers would prefer

doing banking facilities outside of the branch to

in-house branch services.

• The mix-channel users felt more comfortable

with slightly more branch service and equal

basis on self-service channels.

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Contd..

• All these changes to bank delivery systems have become a race for market competence and survival.

• Customers are demanding greater convenience, flexibility and accessibility.

• Changing lifestyles and spending patterns have led to the need for more appropriate distribution channels too.

• As consumers become more computer literate, they become more sensitive to the speed of product delivery.

• Thus, increased emphasis is given to automation of delivery systems.

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Contd..

• On the supply side, significant economic growth

has contributed to the increase in middle class

and a more affluent customer base.

• Singapore, Hong Kong, Japan and Australia

enjoy a high level of retail banking products and

services.

• Changes in the mix of delivery systems are

further supported by the existence of established

infrastructure and communication networks.

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Contd..

• The compliance with bank capital adequacy

requirements (CAR) has compelled banks to be

more efficient in their deployment of funds.

• Every dollar lent must be accounted for in terms

of risk and return.

• Therefore, consumer banking with its high

interest margin and fee-based income provides

an attractive alternative to generate high returns.