Branch Location and

Distribution
• Distribution is the means through which a seller makes his product
available to the buyer. In the marketing of consumer or industrial
goods, use of various middlemen known as a channel of distribution.
• Distribution in banking is any means of increasing the availability
and/or convenience of a service that increases its use or the revenue
from its use.
• In considering branch locations and distribution means, banks are
concerned with the two very large groups of customers (private v.
corporate customers), also with the major dimensions of their
activities.
i. Offering a very large variety of financial services; and
ii. Competing for 'savings' (deposits) and 'chequeing', (ie. current)
accounts.
• In distributing bank services, the bank marketer is faced with the problem
of encountering a huge market that he should duly serve.
• Two broad categories of markets:
1. The mass (retail) market. Standard products, relatively inflexible in
performance and cost, can be offered to this market. It spells out the
requirements of geographical decentralisation, standardised services,
heavy advertising and promotion, attractive services and, above all,
cost-effective processes.
2. The individual (corporate) market. This market constitutes single orders
of sufficient size or importance to be profitably singled out for
individual treatment. It requires individualised services and counselling,
such as comprehensive financial advice, the availability of research
services and contact brokerage to the customer, negotiated terms, and so
on.

Distribute a service without a clear concept of the market can be a formula

Means of distributing bank services
• The channels of distribution for banks' services help to maintain existing
bank users or increase their use among existing or new customers.
• Bank marketer must facilitate the right product for the right people at the
right price and at the right place.
• Organisation identifies its target market and then attempts to define the
appropriate marketing mix to reach that market.
• Marketing mix is the set of controllable variables that the firm uses to
influence the target market.
• Operating within a broader marketing environment where there are
numerous uncontrollable variables, such as economic factors, technological
change, and political and governmental attitudes, which may affect the
scope and operation of the marketing-mix variables.
• Planning for new branch locations has to be done well in advance of
the branch actually opening and an advertising campaign has to be
planned weIl before it comes into operation.
• Branches must be located where there are customers. The attraction of
the urban area is obvious, as it is here where the customers are located.
Centres of industry, commerce and population are the obvious
locations. Less conventional locations include 'banks on wheels' at
agricultural shows, leisure exhibitions and trade fairs.
Channels of distribution
• Bank branches: The most important channel of distribution, relatively
fixed in location, must be conveniently situated, serve potential
customers.
• Bank credit cards: Through which a bank offers its credit services.
Overcome the factor of inseparability, establish contacts with a wide
variety of traders and persons who may not otherwise use the services
provided.
• Banking by mail: Increases the availability and convenience of the
bank's service, expanding the geographic area within which it can
operate.
• In-shop branches: Use of shops as bank agents.
• In-touch financial services: Computerised facilities have been used in
supermarkets to record each transaction.
• Customer can instruct the computer to perform financial services such
as:
(a) paying bills by transferring funds from his/her bank account to that
of a creditor;
(b) keeping his/her family book by reporting the expenses with a
biweekly budget analysis broken down into several categories (food,
housing, clothing, etc.);
(c) computing income tax data;
(d) storing household records like insurance policies, credit cards'
numbers and drivers' licenses and vehicle registration numbers.
The channels of distribution in financial services
perform a number of key functions
i. Sale and offer of services and products, as well as advising
customers.
ii. Contact and liaison with advertising and public relations agencies to
assist in designing more effective advertising/promotional
campaigns.
iii. Gathering of information necessary for planning.

The most important distribution channel for banks and building

societies is the branch. The decision to build a branch in a certain
location can be very costly if it turns out to be the wrong place.
Different financial institution branches
• Full service branch: Conventional delivery system within the financial
industry. For many financial institutions, nearly all branches,
irrespective of their size, provide a full range of the products and
services offered by the institution to both corporate and retail
customers. The traditional reasons for establishing branches were to
collect deposits, arrange loans and provide convenience in conducting
transactions.
• Speciality branch: Alternatives to full service operations. Focus on
either retail or corporate business, but not both. Real estate specialist
branches focus on mortgage finance. Thus the time devoted to
withdrawal and deposit transactions is reduced.
• 'High net worth' branches: These branches are located in appropriate
sociodemographic areas and they distribute a range of financial
services for upmarket customers. Based on minimum account balance
criteria, and they emphasise personal financial counsellor services
rather than conventional bank teller services.
• Corporate branches: These aim at middle-market corporate accounts
and do not usually handle retail financial services. The services
provided are on-line foreign exchange, letters of credit, asset-based
financial specialisation, corporate cash management services and so
on.
The status of each branch is determined by the area and customers it
serves.
Barriers to the provision of delivery systems in
financial services:
• Two types of barriers: business barriers and technological barriers.
The decision-making process for setting up
a new bank branch
Cohesive marketing strategy for bank image
• A uniform image for each branch is desirable on two counts. It
advertises nationally the bank in question and second, it provides
psychological reassurance to the customer that no matter which branch
he enters he is moving into an environment with which he is familiar
from his home branch.
• Branches should be designed to have a uniformity of appeal. What is a
'good' location for one bank is likely to be highly suitable for another
and there is often a tendency for banks to cluster, with a corner 'high
street' site being quite common.
• This type of site offers convenience for the customer and some
evidence suggests that this is an important element in bank selection by
potential customers. This type of site also provides the bank with an
opportunity to project an 'image' (by, for example, the architectural
style of the building) and a presence to the maximum number of people.
• These types of sites have advantages such as ease of market entry,
parking facilities for customers and regional publicity, they also have
some potential disadvantages in terms of loss and identity, lack of
control over the human setting, and burdens of non-essential costs.
• The bank site may thus be a significant factor in attracting new
accounts but it also serves to promote the bank. The well-chosen site
helps to advertise the bank and the adoption of a corporate symbol
may aid this process. Externally the type of building can help to
project an image of the bank.
• The interior design of the bank can be utilised to create a particular
psychological environment for the customer. the feeling of
'friendliness‘ towards customers - to make the bank appear as a less
'official‘ organisation.
The following principles are essential to the formulation of a cohesive
marketing strategy:
1. A bank's image is an important non-material asset that should be
managed so that it supports and keeps in step with the developing
strategy.
2. A distinction must be made between the 'identity' of the bank that is
permanent, and its image, which may evolve over the course of time.
It is important that bank management makes this discrimination so
that the bank's image retains flexibility within a changing market
environment.
3. Managing the bank's image should be the province of a specialised
group but this group must have the support and co-operation of all
levels of management.
4. Branch personnel constitute a vital link in accurately projecting the
bank's image as perceived by the marketing department. If the branches
are not convinced that the strategy is correct, even the most carefully
devised plan will flounder. It is, therefore, important that personnel are
kept informed about what is being proposed and then trained to
implement any specific projects. Obviously this is a problem of internal
communications within the organisation.
‘Hub-and-spoke’ branch banking
• The system of providing a limited service in the smaller branches,
backed up by a nearby, larger core branch, that is able to carry out all
the services the bank offers, is called 'hub-and-spoke' branch banking.
• The smaller satellite branches provide a limited and mostly highly
automated service, dealing mainly with personal banking. These are
linked to a 'key branch' that offers a full range of services, and often
coordinates the activities of its satellites.
• There are between four and 15 satellites to one key branch. The hub is
responsible for corporate business and has overall jurisdiction for the
network as a whole.
The advantages of hub-and-spoke branching
1. Costs are reduced by concentrating specialised (and expensive) staff
in key branches;
2. Duplication of management skills is avoided;
3. The processing function is centralized in a limited number of
branches; and
4. Banks are able to pursue simultaneously both product and
relationship strategies, for example identifying 'good‘ customers in
satellite branches, who are then served by product managers
(bankers) located in key branches.
The advantages of locating branches in shopping
centres or the 'high street'
• Easy market entry since many shoppers and potential customers
frequent the high street and shopping centres.
• Parking and transport facilities are available.
• Most shopping centres and high street locations have 'built-in' deposit
potential.
limitations
• It might not be able to expand because of limited adjacent space.
• It might lose its special identity because of the many competing
branches around.
• In certain cases shopping centres have restricted opening hours, which
might affect the branch's activity.
Whether or not to install an ATM
• Four main problems with ATMs: reliability, security from fraud, volume generation
at any particular location, and the relatively high costs per machine network.
• The decision whether or not to install an ATM depends on a number of factors, as
follows:
1. Its impact on branch staffing levels, branch business and costs.
2. The cost of investing in a large network of ATMs, including service support and
reciprocal arrangements with other financial institutions.
3. The impact of ATM installation on a financial institution's image and its ability to
differentiate its services/products.
ATMs and Eftpos (electronic fund transfer at point of sale) are much more efficient in
cost savings, time and labour.
There are a number of important reasons for
installing ATMs
• To increase customer convenience; to increase customer traffic; to
reduce cheque volume and consequently cheque processing costs; to
reduce labour costs; to reduce cash security problems; and to provide
the bank/ building society with clear strategic advances (for example
entry barriers, greater economies of scale, and product differentiation).
• There is now a trend to establish ATMs in satellite or away-from-
branch locations, in shopping centres and in commercial complexes.
ATMs can be used to absorb extra customer demand during peak hours
or outside branch business hours. They also save staff time and today
there is no doubt about their cost effectiveness.