Standard Chartered Bank Plc (hereinafter referred to as “the bank”) is one of the prestige commercial banks in the world with the head quarter in London, UK. The bank was established after the merger of The Standard Bank and The Chartered Bank in 1969. Standard Chartered Bank Plc acquired Standard Chartered Merchant Bank Asia Limited in 1985, ANZ Grindlays Bank in 2000, Korea First Bank in 2005 and American Express Bank Ltd in 2008. As of 30 June 2010, the total assets of Standard Chartered Bank Plc reached USD 480.8 billion, ranked 9th in UK and 55th in the world (SCB, 2010). The bank was 18.4% owned by Temasek Holdings and 6.2% by Blackrock Inc (SCB, 2009).
From a brief investigation of the marketing strategy of the bank (up to 30 June 2010) using relevant current marketing theories, a SWOT analysis for Standard Chartered Bank Plc will be provided. The analysis will provide empirical implications in assessing the current marketing tools, the customers, the current issues faced and the control system adopted by the bank.
Segmentation
Marketing segmentation is the process of divide customers into different groups, within which customers possess similar characteristics and requirements (McDonald and Dunbar, 1998). The bank segments their customers as follows:
Individual customers: the main services provided to this segment are savings and account services, mortgages, credit cards etc…
SMEs: this sector has grown rapidly in the footprint countries of the bank in Asia, Africa and the Middle East, but most of them have not enjoyed the global standard banking services (SCB, 2009). The most suitable services for the segment are cash management, trade finance; lending…
Corporate & Institutional customers: these are large customers with extensive financial needs. In this segment the bank provides wholesale banking services i.e. clearing and collection services, liquidity management, treasury, advisory services…
Islamic customers: this group of customers uses financial services in line with Islamic law (Shariah). Therefore the bank provides financial services that are in conformity withShariah. (SCB)
The segmentation enables the bank to understand each segment’s needs, thus design the most appropriate marketing mix for each segment. Positioning is the next stage after segmentation and targeting. Positioning is about how a company wants the customers to perceive its brand and products (Ennew and Waite, 2007). The position of the bank in the global marketplace is as in Figure 1.
The bank has a high quality of services in comparison with those of other international financial institutions. However the accessibility is lower than other global rivals (HSBC, CitiBank, Deustche Bank…), since the bank does not have strong presence in Europe and the US, but has a strategy to focus in Asia, Africa and the Middle East (SCB).
The Marketing Mix for Consumer banking
Ennew and Waite (2007) define Marketing mix as the elements determining customers’ experience. Those elements include “4Ps”: Product, Price, Promotion and Place. They illustrate the process of how firms design 4Ps to encourage purchase decisions as in Figure 2.
Different from tangible goods, services are intangible, inseparable, variable, perishable and unable to own. Therefore in service sector it is necessary to add 3 more “P”: People, Physical Evidence and Process to form the 7Ps of service marketing mix (Booms and Bitner, 1981). In this paper, the marketing mix of Standard Chartered Bank for consumer banking segment (serving individual and SME customers) will be investigated.
Product
The bank provides a wide range of consumer banking services which is divided into 3 components: wealth management, retail products and SME products (SCB). The well known brand name in consumer banking in the main countries where the bank operates has been affirmed by prominent accolades granted by international organizations e.g. the Best Retail bank of the year in Singapore (Asia Banking and Finance Award 2009) (SCB, 2009)…
Price
Pricing for institutional customers is decided on a case by case basis based on customer behaviour and risk. The bank makes attempts to provide optimal payment solutions to the customers by applying advanced payment systems, reducing processing time, eliminating manual tasks… In 2009 the bank adopted Employee Banking Program (EBP), offering competitive pricing of banking services to the employees of corporate clients, which has delivered impressive results of 600 clients of wholesale banking and 3,750 SME clients registered for EBP (SCB, 2009).
Promotion
The bank has allied with hotels and travel corporations throughout the footprint regions (i.e. IHG hotels, Best Western, Octopus Travel…) to offer a lot of promotion programs for the Standard Chartered Visa card. Card holders can enjoy a 3rd night free in the many luxurious hotels in tourism centers in India, Dubai, Vietnam, Singapore, Japan and Australia (SCB).
Place – Network and Branch distribution
The bank’s organization structure is divided into two main units: the Consumer banking unit and the Wholesale banking unit. The consumer banking unit serves 14 million individual customers via nearly 1,700 branches and 5,679 ATMs in Hong Kong, Singapore and Malaysia… (SCB, 2009). The acquisition of banking units of American Express in 2008 provided the bank with an access to 10,000 private individual and institutional customers. The deal also helped the bank open more branches in India, Taiwan (SCB, 2009). The bank also provides online banking services for both individual and corporate customers to save their time and resources. Intensive distribution is applied for simple and traditional banking services, while more complicated products are distributed selectively in some branches.
People
The bank has over 77,300 employees of whom only 2,000 are UK based. To manage and maintain staff efficiency, the bank adopted an online system which allows each employee to update their annual objectives, thus managers and employees can easily agree and supervise performance just at a click. Opportunities for promotion are in the spotlight to attract talented employees. There are many training programs offered to emerging leaders. Bonus and reward scheme are applied across the globe with homogeneity (SCB, 2009).
Physical Evidence
The bank has a strong presence with nearly 1700 branches worldwide. All the branch buildings and transactions materials like check books, statements… are well designed with the green and blue logo, thus make the clients bear in mind the brand image of the bank.
Process
In consumer banking, a Consumer Charter is adopted to deliver fast and accurate service, provide best solutions to clients’ financial needs, and the final goal is to be the bank customers recommend to their friends and colleagues (SCB). One example of efficient process in consumer banking is the investment advisory service of the bank. A customer-focused process with 6 steps is applied in the bank as in the chart.
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Relationship marketing
The bank genuinely commits to building relationships with stakeholders e.g. customers, employees, shareholders… The example of the Customer Charter shifting the bank in the previous section shows that the bank is making a thrust toward the modern concepts of customer relationship management. That allows the bank to find and retain the right customers and maintain long-term relationships with them. The bank also applies a customer database management system which makes it easier to elicit specific information of customers, thus CRM could be more efficient.
Employees are provided with a good working environment, chances of promotion and rewarding system. Managing good relationships with employees is one of the ways to assure the quality of service.
Long-term shareholders’ value is assured and generated by sustainable banking operation. Besides, the bank runs many CSR programs e.g. funding for avoiding blindness operations, HIV education, sports and life skills education… (SCB, 2009)
Customer care
In 2008 the consumer banking arm of the bank started a transformation from product-focused to customer-focused strategy with the application of the Customer Charter. The Charter guaranteed the customers of the bank will be treated fairly and receiving best quality. Customers are asked if they will recommend the bank to their friends, hence the results hepl to measure customer satisfaction via Consumer Banking Net Promoter Score (NPS) Index (SCB, 2009).
In the second half of 2009 the bank launched the Priority Banking Program which rewards customers based on their total transaction volume across products like savings account, mortgages… More attractive bundles of products are designed to best suit customers’ needs. To support SME customers, the bank employed additional 700 relationship managers in 2009 (SCB, 2009).
Control system
Strong corporate governance is the strategic target at both group and local level. The bank has a strong board of directors with wide professional experiences and long time engaging to control the bank. The transition of most important management positions is smooth and assures seamless operation.
The policies and procedures on internal audit, risk management and professions… are formalized in written documents. This ensures all risks are covered and all professional procedures are in place. The updated performance of the whole groups is reported to the management timely and regularly. A group Code of Conduct is communicated to all employees to ensure ethical conduct of work. The bank organizes a General Meeting annually with full Board attendance to decide key strategic problems of the bank.
SWOT analysis for Consumer banking
(S)trengths
Extensive network serving a cosmopolitan customer base: The extensive branch network helps to excel the services to customers wherever they are through intra-network referrals. The diversified customer base helps the bank disperse risks to different markets, thus better weather the volatilities in the global financial market.
Strong brand image and diversified products: With high quality service, sound financial capacity, and strong presence, the bank succeeded in creating a prestigious brand name in the countries where it operates. That enables the bank to gain trust from the customers, thus carry out the strategic plans more successfully. The wide range of products can afford different demands of all groups of customers.
Sound Financial capacity: The key financial ratios of the bank are expressed in the Appendix 1 and 2 as attachments to this assignment. Figures are summarized and calculated from the Annual report 2009 and half year 2010 reports of the bank. As can be seen from the appendices, the bank has stable asset quality. The Non-performing loan (NPL) ratio slightly fell from 1.99% as of 2009 to 1.8% as of 30 June 2010. The bank delivered a profit after tax of USD 2.2 billion (increasing 9.5% against 30 June 2009). In general, the bank’s financial capacity is relatively good with fine asset quality. Such positive financial figures help the bank consolidate its brand name and image as a premier international financial institution, and on the other hand, set up enough budgets for marketing activities.
(W)eaknesses
In the US subprime mortgage crisis in 2008, the bank had a direct exposure of USD 77 million to Lehman Brothers (Farrell, 2008). In the Dubai debt crisis in 2009, the exposure of the bank was USD 7.77 billion (Gabbatt, 2009), equivalent to 3.9% total outstanding loans of the bank in 2009. Although the loans were considered as insignificant, those impacts prove that the bank, to some extent, is vulnerable to volatilities in global financial markets.
(O)pportunities
With a clear strategy to focus in Asia, Africa and the Middle East (SCB, 2009), the bank can take advantages from economic potentials in emerging countries. Firstly, the emerging markets were not severely impacted by the credit crunch in 2008. Such geographic concentration helps the bank avoid huge loss in 2008 as seen in many international competitors in the US and Europe.
Secondly, emerging countries in Asia, Africa and the Middle East, to some extent, still have underdeveloped financial systems against a large proportion of young and growing population who are under-banked. This creates opportunities for the bank to expand its individual and SME customer base in these regions.
Thirdly, most of emerging markets display robust growth rate over past decades. China and India – the leaders in emerging worlds posted an impressive GDP growth rate of 10.3% and 8.3% respectively in 2010 (CIA – the world fact book). The growth rate results in rising demands of financial services and these are ideal opportunities for the bank to profit from emerging markets.
(T)hreats
Changing macroeconomic conditions in footprint countries: With a global scale the bank has significant exposures to economic conditions in footprint countries, for example the currency fluctuations local markets. The financial statements of the bank is prepared in USD (SCB,2009), however since the bank has a substantial proportion of assets in other currencies, there is a risk that the fluctuations in the exchange rates may affect the cash flows.
Financial market dislocation: In the US subprime mortgage crisis since 2008, many large UK banks i.e. Lloyds TSB, Royal Bank of Scotland… suffered from loss and needed bail outs from the Government. Taking toll from the crisis, the share price of the bank plummeted to nearly one third of the price before crisis, though slowly recovered afterwards (Bloomberg). In the coming time, persisting problems in the global financial markets e.g. the sovereign debts of Eurozone economies; inflationary pressures in emerging economies… would bring more threats to the bank. An unforeseen market disruption could probably impact the bank’s operation if it does not insist on risk management.
Geopolitical events: Operating in a large number of countries all over the world, the bank has to face with a risk that geopolitical events may negatively impact trade flow, the customers’ needs and hence the operation of the bank. The recent political conflicts in the African countries like Egypt, Libya… are also a salient issue of business environment to the bank. Once the political unrests have not been solved, there could not be a stable environment for the bank to carry out its operation in these strategic markets.
Conclusion and recommendations
The consumer banking marketing strategy of the bank is comprehensive with synergic solutions. Striking strengths can be seen at an extensive network, brand image and financial capacity.
However, considering the current internal and external issues faced by the bank, it is suggested that the bank should focus on corporate governance, especially in risk management. The segmentation of the bank is traditional based on the financial objectives, motivations for using the services and customer behaviours, which is similar to the theory of Harrison (1994).
Lee (2002) concludes that one of the key issues is to provide the right mix of financial services by the right channels to the right segments of clients. The marketing mix for consumer banking of the bank could be improved should the bank applies a more detailed pricing strategy, keeps competitive pricing in simple services, and on the other hand, assures the quality and reputation in more complicated financial services (Devlin, 2000). Instead of direct promotion methods via phone, email which are annoying to customers, more subtle method should be applied e.g. giving a little information initially, just like a teaser attached to a bank statement, thus stimulating the curiosity of clients (Page and Luding, 2003). However, direct methods of communication should not be taken for granted in customer care. Those methods could reduce traditional face-to-face interaction (Meuter et al., 2000) which maybe unnecessary and costly. Customer relationship management should begin from customers’ perspective (Law et al., 2003).
With above recommendations the marketing strategy of the bank could be improved, and the increased margin could help the bank set up more provision against external threats.
APPENDIX 1:
KEY FINANCIAL INDICATORS OF STANDARD CHARTERED BANK PLC.
Indicators
30Jun10
31Dec09
30Jun09
31Dec08
31Dec07
Total Assets (USDm)
480,827
436,653
411,220
435,068
329,838
Equity (USDm)
30,053
25,226
23,890
22,695
21,452
Profit after tax (USDm)
2,181
3,477
1,991
3,511
2,989
Capital Adequacy Ratio (CAR)
15.5%
16.5%
15.8%
15.6%
15.2%
Tier 1 ratio
11.2%
11.5%
10.5%
10.1%
8.80Â %
Non-performing loans ratio (NPL)
1.8%
1.99%
2.2%
1.7%
1.95%
Loans/Deposits
77%
78.35%
79.4%
74.4%
85.82%
ROE
15%
15.1%
8.5%
16.3%
15.35%
ROA
1%
0.8%
0.5%
0.9%
1%
Cost/Income ratio
54.8%
53.3%
50.6%
54.5%
57.3%
Interest income/Total income
47.6%
48.2%
53.5%
47.1%
43.4%
Source: Standard Chartered Bank half year report 2010 and Fitch Ratings
APPENDIX 2:
OUTSTANDING LOANS BY GEOGRAPHIC REGIONS
(USDm)
Regions
30Jun10
%
31Dec09
%
30Jun09
%
Asia – Pacific
150,601
68.7%
140,168
69.5%
124,733
67.4%
India
10,171
4.6%
8,866
4.4%
8,217
4.4%
Middle East and the rest of Asia
18,438
8.4%
18,484
9.2%
18,113
9.8%
America and Europe
36,165
16.5%
30,256
15%
30,146
16.3%
Africa
3,980
1.8%
4,029
1.9%
3,743
2.1%
Total
219,355
100%
201,803
100%
184,952
100%
Source: Standard Chartered Bank half year report 2010
PROFIT BEFORE TAX BY GEOGRAPHIC REGIONS
(USDm)
Regions
30Jun10
%
31Dec09
%
30Jun09
%
Asia – Pacific
1,658
53.2%
2,868
55.6%
1,503
53%
India
624
20%
1,060
20.5%
526
18.5%
Middle East and the rest of Asia
400
12.8%
366
7.1%
220
7.7%
America and Europe
123
4%
375
7.3%
324
11.5%
Africa
311
10%
482
9.5%
265
9.3%
Total
3,116
100%
5,151
100%
2,838
100%
Source: Standard Chartered Bank half year report 2010
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