Identify the USP of a retail product

• The class will breakout into FAS groups

• Each group will be assigned a task-
• A – Housing loan products in private banks
• B- Housing loan products in public sector banks
• C- Deposit products in banks ( concentrate on the different features in savings
account and the fringe benefits that come with it).
• D- Insurance products
• E- Various ancillary products in private banks channel services like E- lobby services,
internet banking, mobile banking and cheque collection.
• F- Various ancillary products in public sector banks channel services like E- lobby
services, internet banking, mobile banking and cheque collection.
• The groups should study as many products of as many banks as they can in
that sector allotted and understand the USP of those products. Prepare a
small table and share your work with me by end of day. A link will be created
• Remember we are not looking at interest rates but the features in the
product
• Distribute the work amongst the team members
• You will get a chance to present it some time in the later sessions and 25%
of the marks for group presentations will be assigned to this task
• I will end the breakout sessions at 12.25 and close the session. Do not leave
before that as I will be visiting the groups as the session is progressing
Debate 3:
RBI’s oversight on cooperative banks
( three groups will discuss one point each in the 9th session)
• In view of the latest developments students will debate on how much
control RBI had on Cooperative banks before the new amendment
• whether and to what extent will the latest amendments give RBI
control on the Cooperative banks
• whether such control could have prevented the latest crisis in that
sector or be sufficient to prevent a PMC like situation.
Introduction
• Retail banking is a service primarily for individual customers.
• Retail banking focuses on consumer markets.
• Retail banking entities provide wide variety of personal banking
services like savings bank, recurring deposits, bill payment services
and debit and credit cards.
• Customers can also avail asset based products like personal loans,
auto loans and mortgage loans.
Constraints:
Large client base root cause for customer dissatisfaction beyond a
point.
Incompatibility of technology for the rapid change in the products in
retail.
Higher delinquencies in personal loan portfolios.
Retail Banking
Banks adopt the following models for implementing their retail trade
initiatives ( development of products and sourcing of business)
In- house sourcing -Most of the PSBs use in- house developed retail
banking models.
Some channel services are outsourced due to lack of in- house facilities.
end to end outsourcing
predominant outsourcing
partial outsourcing
Banks have to highlight the USP (unique selling proposition)
Product policy
• Product policy is one of the main task in product management. The
product designers should know the types of products to be offered,
suitable to different customer segments.

• To decide this the bank has to evolve a product policy that involve
the following concepts:

• Product positioning
• New product development
Product Life Cycle

• Introduction stage : When a product is introduced the sale volume

will be low and revenue from the product will not be sufficient to
cover the cost of producing, marketing and servicing. It takes time for
the product to occupy the minds of customers.
• Growth stage : the sale volume picks up and the product is likely to
break even and starts generating profits for the organisation. During
this period, the consumer awareness of the product will be high and
that will result in growth.
• Maturity stage: There is more growth and the volume peaks.
• Saturation stage: At this stage because of competition and better
products from the competitors, stagnation will creep in, which will
result in saturation of sales. At this stage business and profits
stagnate, customers develop a tendency of indifference to the
product.
• Decline stage: Final stage in the product
The core products like savings bank, current account, term deposits,
recurring deposits, cash credit, overdraft, retail loans, term loans, etc
need not have strong marketing strategies. These products will have a
stable life in the growth stage of product life cycle as they are
indispensable to the customers. However a frequent up-dation/ add-
ons are necessary to keep pace with competition.
Stages in New Product Development
1. Generating new product idea : New ideas are generated from market
research based on customer expectations from existing and potential
customers, from employees of the bank under employees’ suggestion
scheme. The suggestions are also considered both for refining the existing
products as well as ideas for new products.
2. Idea screening : With grouping together all the ideas generated from
various sources, the ideas are analysed based on the following approach
• Whether there is a need for new product
• Is it an improvement on the existing product
• Can the existing infrastructure handle it
• Is the new product in our existing or a new line of business
Stages in New Product Development
3. Concept testing :Concept testing is effectively done by taking feed back from the
customers about their perception of the proposed products. This experiment is to
understand the market response and to know the customer perception of the
product concept.
4. Business analysis and market analysis : This stage will decide whether the product is
viable from the financial and marketing angle. This will be based on the cost benefit
analysis of the product.
5. Actual product development : Now the actual product is developed.
6. Test marketing: The new product developed is first soft launched in selected market
segments. Based on the response and the feed back received from the market , the
product is launched on a full scale to the desired segments.
7. Commercialisation : Full launch of the product
Product Evolution
According to Theodore Levitt , a product over a period evolves on the
following lines:

• The generic product

• The expected product
• The augmented product
• The potential product
Product Evolution
• Generic Product is an unbranded and undifferentiated commodity like
SB, current account, etc
• Expected Product represents the customers’ expectations from the
product.
• Augmented Product is voluntarily improving the product in order to
enhance its value.
• Potential Product is tomorrow’s product with enormous scope for
improvement in the changed competitive scenario.
Product Positioning
• Rosser Reeves in his famous book “Reality in Advertising” defines
positioning as “the art of selecting out of number of unique selling
propositions, the one which will get the maximum sales”
• For positioning the most important factor is the customer’s mind.
The positioning starts with understanding or mapping of a
prospective or existing customers’ mental perception of products.
• The period of occupation of these products in the mental perception
of the customer depends on effectiveness of the product.
• The positioning guru, Jack Trout defines as “ not what you do to the
product but what you do to the mind”
Example of product positioning

• Citi bank introduced a “un fixed deposit” where customer before

maturity of the deposit can withdraw a part from the term deposit. If
it is partly withdrawn, interest is paid on the balance withdrawn at
the rate applicable for the period the deposit has run and the balance
deposit will get contracted rate of interest. This product became an
instant hit as no other banks had offered this type of product .
Product Branding
• Product Recall is termed as “branding”. Branding initiatives help banks
to develop definite business through product specific strategies
• Branding can be powerful tool for relationship building.
• The branding efforts starts at corporate level of a bank. It is about
giving catchy, attractive and easy to remember names for the
products.
Business model innovation
Business model innovation is the art of enhancing advantage and value
creation by making simultaneous—and mutually supportive—changes both to
an organization’s value proposition to customers and to its underlying
operating model. At the value proposition level, these changes can address
the choice of target segment, product or service offering, and revenue model.
At the operating model level, the focus is on how to drive profitability,
competitive advantage, and value creation through these decisions on how to
deliver the value proposition:
Where to play along the value chain
What cost model is needed to ensure attractive returns
What organizational structure and capabilities are essential to success
Four Approaches to Business Model
Innovation
• Companies hoping to drive growth through business model innovation
face a number of critical questions:
How broad should the scope of the effort be?
What’s the appropriate level of risk to take?
Is it a onetime exercise, or does it call for an ongoing capability?
• To answer those questions, it’s important to realize that not all business
model innovation efforts are alike. 
• Understanding the four distinct approaches to business model innovation
can help executives make effective choices in designing the path to
growth
Four Approaches to business
Model Innovation
• The reinventor approach is deployed in light of a fundamental industry
challenge, such as a new regulation, in which a business model is
deteriorating slowly and growth prospects are uncertain. In this situation,
the company must reinvent its customer-value proposition and realign its
operations to profitably deliver on the new superior offering.
• The adapter approach is used when the current core business, even if
reinvented, is unlikely to combat fundamental disruption. Adapters
explore adjacent businesses or markets, in some cases exiting their core
business entirely. Adapters must build an innovation engine to
persistently drive experimentation to find a successful “new core” space
with the right business model.
• The maverick approach deploys business model innovation to scale up
a potentially more successful core business. Mavericks—which can be
either startups or insurgent established companies—employ their core
advantage to revolutionize their industry and set new standards. This
requires an ability to continually evolve the competitive edge or
advantage of the business to drive growth.
• The adventurer approach aggressively expands the footprint of a
business by exploring or venturing into new or adjacent territories. This
approach requires an understanding of the company’s competitive
advantage and placing careful bets on novel applications of that
advantage in order to succeed in new markets.
Business model transformation

Business model innovation is critical to transformation. Many organizations

share a common set of concerns:
What type of business model shift will help us achieve breakout
performance?
How do we avoid jeopardizing the core business?
How do we build the capability to develop, rapidly test, and scale new
models?
Inspiring an organization to change is not a trivial undertaking, but given the
current strategic environment, it’s a critical one.
PRICING OF PRODUCTS AND SERVICES
• Banks develop models for pricing of products and services based on
certain fundamental parameters.
• They are market dynamics, risk perception, return expectations,
tenor/duration, resources position, ALM position and customer
profile.
• Balancing of these variables in the pricing model is an important
exercise banks have to undertake.
TECHNOLOGY MODELS
• The technology platform plays a major role in the retail banking initiatives.
Technology is the backbone of the process and delivery efficiency of banks.
• Technology models are either in- house or outsourced or partially
outsourced and partially in -house. Most of the PSBs models used to be in -
house but now a days they also adopt more efficient out sourced models.
• Due to stiff competition in retail banking, banks have brought many E-
banking products on their technology platform. Eg E -LOBBY, Mobile
banking, internet banking, payment systems through BHIM and other private
payment players; linking of tax payments like IT, GST, VAT, Custom duties to
banks core banking platform; Cheque truncation services
Segment targeting
• Retail banking success depends on banks understanding of different
segments and developing of appropriate products to meet these
segments. Though different products cater to different segments,
there are certain products like core products which cater to all
segments.
• Different bankers market their different products in different names
though they have common features. The idea of this is to make the
customers identify the bank with the particular name of the product.
CUSTOMER SEGMENTATION
• Their need pyramid will vary with the rise in their income levels.
• Bank develop their products based on their segmentation.
• Banks target their relevant segment for maximum conversion in to
business.
CUSTOMERS SEGMENTATION
• Customers can be segmented based on their income level. The income levels may vary
from bank to bank
INCOME LEVEL - CUSTOMER SEGMENT
(in lakhs)
Rs 2 – 10 - Mass market
Rs10 – 50 - Mass affluent
Rs 50 –100 - Super affluent
Rs 400 –Rs4000 - HNW
Rs4000 – Rs120,000 - Super HNW
Rs120,000 above - Ultra HNW
• Similarly customers can be segmented based on other variables such as age, gender,
profession, employment etc
Session 10