1.

Business Models in Private Banking discover, understand and deIine Arvetica 7th oI February
2008
2.
3. UBS
4. Geneva Private Banks
5. Investec
6. Syz
7. Independant Asset Managers
8. Mirabaud Asset Management
9. Sodi
10.EFG
11.Swissquote
12.TIGER21
13.CONCLUSION multiple business models are competing in private banking
14.
15.WHICH . path should I choose? How can I make the right decision?
16.WHAT . actually is a business model?
17.Practice Shows: Understandings Diverge
18.
4 a business model is the blueprint oI how a business intends to generate proIits and it can be
described by a number oI components
19.what do we oIIer? WHAT?
20.whom do we oIIer it to? WHAT? WHO?
21.how do we do it? WHAT? WHO? HOW?
22.whats in it Ior us? WHAT? WHO? HOW? $? t ?
23.9 Bricks to Describe your Business Model WHAT? WHO? HOW? $? t ? CLIENTS
24.9 Bricks to Describe your Business Model WHAT? WHO? HOW? $? t ? CLIENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS
25.9 Bricks to Describe your Business Model WHAT? WHO? HOW? $? t ? CLIENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS OFFER
CLIENT SEGMENTS
26.9 Bricks to Describe your Business Model WHAT? WHO? HOW? $? t ? CLIENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS OFFER CLIENT SEGMENTS ACQUISITION
CHANNELS
27.9 Bricks to Describe your Business Model WHAT? WHO? HOW? $? t ? CLIENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS OFFER
CLIENT RELATIONSHIPS CLIENT SEGMENTS ACQUISITION CHANNELS
28.9 Bricks to Describe your Business Model WHAT? WHO? t ? CLIENTS CLIENT SEGMENTS
CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS
CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS
CLIENT SEGMENTS OFFER CLIENT RELATIONSHIPS CLIENT SEGMENTS REVENUE
FLOWS ACQUISITION CHANNELS HOW? $?
29.9 Bricks to Describe your Business Model WHAT? WHO? HOW? t ? CLIENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS OFFER
CLIENT RELATIONSHIPS CLIENT SEGMENTS REVENUE FLOWS ACQUISITION
CHANNELS KEY RESOURCES $?
30.9 Bricks to Describe your Business Model WHAT? WHO? HOW? t ? CLIENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS OFFER
CLIENT RELATIONSHIPS CLIENT SEGMENTS REVENUE FLOWS ACQUISITION
CHANNELS KEY RESOURCES $? CLIENT SEGMENTS CLIENT SEGMENTS KEY
ACTIVITIES
31.9 Bricks to Describe your Business Model WHAT? WHO? HOW? t ? CLIENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS OFFER
CLIENT RELATIONSHIPS CLIENT SEGMENTS REVENUE FLOWS ACQUISITION
CHANNELS KEY RESOURCES $? CLIENT SEGMENTS CLIENT SEGMENTS KEY
ACTIVITIES CLIENT SEGMENTS CLIENT SEGMENTS PARTNER NETWORK
32.9 Bricks to Describe your Business Model WHAT? WHO? HOW? $? t ? CLIENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT
SEGMENTS CLIENT SEGMENTS OFFER COST STRUCTURE CLIENT RELATIONSHIPS
CLIENT SEGMENTS KEY ACTIVITIES PARTNER NETWORK REVENUE FLOWS
ACQUISITION CHANNELS KEY RESOURCES
33.HOW . can we sharpen our business model and achieve innovation?
34.eric calling
35.The 5 steps oI business model design & innovation
4 describe existing business model
4 assess strengths and weaknesses
4 brainstorm on improvements & opportunities
4 turn new model into a project roadmap
1 2 4 3 VISUALIZE ASSESS INNOVATE PLAN 5 IMPLEMENT
4 communicate & implement
36.VISUALIZE: co-create to draw your business model
37.The 5 steps oI business model design & innovation
4 describe existing business model
4 assess strengths and weaknesses
4 brainstorm on improvements & opportunities
4 turn new model into a project roadmap
1 2 4 3 VISUALIZE ASSESS INNOVATE PLAN 5 IMPLEMENT
4 communicate & implement
38.ASSESS: question your business model acquisition and distribution channel assessment
strengths () (-) weaknesses our channels have a strong reach among our target clients our
channels only reach a Iraction oI our target clients we know how eIIective each oI our channels
is we don`t know how successIul our channels are we know how cost eIIicient each oI our
channels is we don`t know how costly our channels are we use our most costly channels Ior our
most proIitable clients unproIitable clients regularly use our most expensive channels . .
39.The 5 steps oI business model design & innovation
4 describe existing business model
4 assess strengths and weaknesses
4 brainstorm on improvements & opportunities
4 turn new model into a project roadmap
1 2 4 3 VISUALIZE ASSESS INNOVATE PLAN 5 IMPLEMENT
4 communicate & implement
40.INNOVATE: ideate, prototype, iterate, decide
41.INNOVATE: ideate, prototype, iterate, decide WHAT? WHO? HOW? $? t ? CLIENTS
CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS
CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS
CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS
CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS CLIENT SEGMENTS
CLIENT SEGMENTS CLIENT SEGMENTS OFFER COST STRUCTURE CLIENT
RELATIONSHIPS CLIENT SEGMENTS KEY ACTIVITIES PARTNER NETWORK
REVENUE FLOWS ACQUISITION CHANNELS KEY RESOURCES
42.The 5 steps oI business model design & innovation
4 describe existing business model
4 assess strengths and weaknesses
4 brainstorm on improvements & opportunities
4 turn new model into a project roadmap
1 2 4 3 VISUALIZE ASSESS INNOVATE PLAN 5 IMPLEMENT
4 communicate & implement
43.PLAN: draw a project roadmap and align your enterprise Strategy direction new business model
44.PLAN: draw a project roadmap and align your enterprise Strategy Structure power direction new
business model
45.PLAN: draw a project roadmap and align your enterprise Strategy Structure Processes power
direction inIormation new business model
46.PLAN: draw a project roadmap and align your enterprise Strategy Structure Processes Rewards
power direction motivation inIormation new business model |Galbraith 2001|
47.PLAN: draw a project roadmap and align your enterprise Strategy Structure Processes Rewards
People power direction skills/mind-set motivation inIormation new business model |Galbraith
2001|
48.The 5 steps oI business model design & innovation
4 describe existing business model
4 assess strengths and weaknesses
4 brainstorm on improvements & opportunities
4 turn new model into a project roadmap
1 2 4 3 VISUALIZE ASSESS INNOVATE PLAN 5 IMPLEMENT
4 communicate & implement
49.IMPLEMENT: just do it.
50.smoking gun
51.Thank you.
http://www.slideshare.net/Alex.Osterwalder/private-banking-business-models-97
Business models in banking: Is there a best practice?
Speech by Gertrude Tumpel-Gugerell, Member of the Executive Board of the ECB
CAREFIN Conference on ~Business Models in Banking: Is There a Best Practice at
Bocconi University
Milan, 21 September 2009
Ladies and Gentlemen,
|1|

It is a real pleasure Ior me to speak today at Bocconi University. Founded in 1902, Bocconi was
the Iirst Italian university to oIIer degrees in economics. As one oI the oldest economics
departments in Europe, Bocconi leads the way in intellectual thinking on economic progress and
innovation. It thereIore seems the perIect place to host today`s conIerence on banking business
models and to discuss their Iuture.
Given that the worst Iinancial storm since the 1930s is only gradually calming down, the topic
chosen Ior this conIerence is very apt. Banks have taken centre stage in the ongoing Iinancial and
economic crisis, and any deIinitive resolution to the crisis essentially hinges on banks regaining
Iinancial health and public conIidence on the basis oI sustainable and welIare-enhancing
business models.
However, not all banks have been equally aIIected by the crisis, nor have they been equally
responsible Ior it. The main players have mostly been large international investment banks or
banks that had moved away Irom traditional retail banking activities. This movement towards a
presumably more 'modern business model relied principally on the origination, distribution and
trading oI oIten complex securities, on other Iee-income generating activities, as well as on a
Iunding structure more dependent on wholesale markets.
Many Iactors have contributed to the current Iinancial crisis, namely excessive risk-taking, the
emergence oI a shadow banking system, the exponential growth oI innovative Iinancial products,
inadequate corporate governance incentive structures at banks, the lack oI proper regulation and
an environment oI abundant liquidity at low interest rates. But my speech today is going to Iocus
on excessive risk-taking and banks` creation oI innovative Iinancial products, which has led to
the transIormation oI their business models.
To a large extent, this shiIt towards a new business model was based on innovation in the
structured credit market, particularly in respect oI securitisation instruments, such as credit
deIault swaps, asset-backed securities and collateral debt obligations. A common Ieature oI all
these Iinancial innovations is that they transIorm, transIer and trade credit risk. One oI the main
consequences oI the use oI such instruments is that large amounts oI credit that were previously
predominantly illiquid (such as bank loans) then became liquid and could potentially be traded in
Iinancial markets.
However, we must not blame such credit risk transIer instruments and vehicles per se . I am
conIident that those instruments generating real economic value will survive the crisis, albeit
probably at much reduced volumes, in less complex structures, with improved transparency, and
subject to Iinancial regulation and supervisory structures. They will survive because, when
prudently applied and suIIiciently monitored in terms oI their impact on Iinancial stability,
Iinancial innovations generally tend to make a Iinancial system more eIIicient without
necessarily increasing its Iragility.
At this point, it is worth asking what the main banking business models could or should look like
Irom a policy-maker`s perspective, which takes into account implications Ior both Iinancial
eIIiciency and stability. I will limit the remainder oI my speech to a Iew oI the main points oI the
argument and will also point out some early lessons to be learnt Irom the crisis.
hat is so special about the business of banking?
I will start with a standard deIinition oI a 'bank, recalling the main Iunctions that banks are
supposed to perIorm and explaining why these Iunctions are so important and special that they
warrant relatively close public intervention and oversight.
A bank is 'an institution whose current operations consist in granting loans and receiving
deposits Irom the public.
|2|
This deIinition reIers to the core activity oI commercial banks,
namely the simultaneous acceptance oI deposits and oIIering oI loans, which distinguishes them
Irom other Iinancial intermediaries. However, banks typically conduct a broader range oI
activities, which can be subsumed under the Iollowing three Iunctions:
|3|

First, banks provide the public with liquidity (money) and
payment services through their deposit-taking business.
Second, banks transIorm assets in terms oI denomination,
quality and maturity, as well as manage the associated risks.
Third, banks process inIormation and monitor borrowers
using specialised technologies. In so doing, they oIten
establish long-term relationships with their clients, which
may Iurther mitigate the negative impacts oI adverse
selection and moral hazard on the resource allocation
process.
Changes in banking business models
BeIore I turn to the question oI how this traditional banking model has changed over the past Iew
years, I am going to take a brieI look at Iinancial market history.
Glass-Steagall: investment banks versus commercial banks
Looking speciIically at the history oI the Iinancial markets in the United States, it was bad
banking practices and the public outcry aIter the stock market crash oI 1929 that brought about
the Glass-Steagall Act oI 1933. Interestingly, the Act Iollowed an enquiry into whether
commercial banks had sold unsound securities to their customers, thus converting potential bad
loans into securities issues. The Act thereIore prohibited commercial banks Irom underwriting,
holding or dealing in corporate securities, either directly or through securities aIIiliates.
|4|
In my
view, the concerns that prompted the Act were very similar to those currently being voiced
particularly in relation to concerns about banks` business models and the sale oI unsound
securities to unsuspecting investors.
The Act had a global impact on competitive conditions. For instance, the large presence oI major
US investment banks in Europe can be traced back to the implementation oI this Act, which
separated investment banks Irom commercial banks. The Act also had an impact on the
supervision oI banks, mostly in the United States, but also in other regions in the world,
including Europe. Owing to the Iunding structure oI commercial banks and the stronger links
between them and hence their importance Ior Iinancial stability commercial banks were
regulated accordingly. In contrast, investment banks were expected to be in less need oI close
monitoring and regulation, as they were seen to be less important Irom a Iinancial stability
perspective. The current crisis has vividly illustrated how the actions oI not only commercial
banks and investment banks, but also other Iinancial players, can have a major impact on all
parts oI the Iinancial system and the economy at large.
I should now like to Iocus on two major Iactors that have changed the way banks do business.
First, I will discuss the changes in banks` business models that relate to the sources oI their
revenue. And, second, I will Iocus on the changes in the Iunding oI banks and talk about the
unintended consequences oI the expansion oI their securitisation activities.
iversification in the sources of revenue
With regard to the change in the sources oI banks` revenue, the repeal oI the Glass-Steagall Act
in 1999 is a prime example oI deregulation in relation to banks` business models. II we compare
the regulations in place today with those oI 20 years ago, we see an unprecedented process oI
deregulation across regions and Iinancial sectors. One consequence oI this deregulation has been
a global trend towards more diversiIication in banks` income sources, i.e. towards higher
brokerage Iees and commission more generally called 'non-interest income. The increase in
non-interest income provides banks with additional sources oI revenue and can thereIore provide
a diversiIication in their overall income. At the same time, non-interest income has usually been
a much more volatile source oI revenue than interest rate income. Investment banks, Ior
example, have a high dependence on non-interest income. Typically, they are more proIitable
than traditional commercial banks, but they are also much more leveraged and their earnings are
more volatile (see Chart 1). The volatility oI earnings, combined with the close ties oI
investment banks to other Iinancial players, calls Ior a higher level oI monitoring Ior these
systemically important players.
|5|

Chart 1: Bank profits and volatility of earnings
(median values of return on equity and standard deviation from 2000 to 2007)

Source: Bankscope.
In addition, there is one problem relating to the banks` risk management that applies mostly to
investment banks, but also to other large Iinancial institutions: most risk management techniques
neglected the correlations oI risks across securities, as not just banks, but also rating agencies,
did not suIIiciently internalise the growing systemic, market and liquidity risks. Moreover, banks
underestimated tail risk. The existing risk-management techniques worked well at predicting
small day-to-day losses in the middle oI the distribution but Iailed to anticipate severe losses that
are much rarer. But clearly, it is exactly those severe losses that matter most. This mispricing oI
risk relates to deIiciencies in risk management techniques, but also, and perhaps more
importantly, to existing incentives in the banking system oriented towards the short term
proIitability oI banks.
iversification in the sources of funding
Turning now to the second Iactor, the change in banks` Iunding sources: at the same time as the
change in the sources oI banks` revenue, there has been a wider change relating to banks`
liability side oI the balance sheet.
|6|
In particular, this reIers to the shiIt in banks` business
models away Irom the traditional model oI Iinancing. In the traditional model, there was a heavy
reliance on retail deposits, but this has been replaced by an increasing reliance on market-based
sources oI Iunding. The signiIicant recourse to speciIic Iunding instruments, such as mortgage
bonds and securitisation, has made banks increasingly dependent on capital markets, but at the
same time, oI course, less dependent on deposits, to expand their loan base. This is evident Irom
both an upward trending total assets to deposits ratio oI the largest euro area banks (see Chart
2.a) and an increase in the loans to deposit ratio oI large EU banks (see Chart 2.b). To the extent
that more stable retail deposit Iinancing has been replaced by wholesale Iunding, banks may
have become more exposed to market dynamics and perceptions, constituting a potential source
oI instability in the banking sector.
|7|

Chart 2.a: Total assets to total deposits of the largest euro area bank
(outstanding amounts, eonia banks)

Source: Bankscope.
Chart 2.b:Loans to deposit ratio of large EU banks
(corrected for extreme outliers)

Source: Bankscope.
Securitisation markets and the current crisis
The element oI this change in banks` sources oI Iunding that I would like to Iocus on in
particular is securitisation. Securitisation activity did indeed increase substantially in the years
prior to the Iinancial crisis (see Chart 3). As you know, securitisation and Iinancial innovation in
credit markets have generated signiIicant changes, particularly in the Iinancial structure oI banks,
and, more generally, in Iinancial market activity in the euro area. It has become clear that the
change in banks` business models Irom 'originate and hold to 'originate, repackage and sell
also had signiIicant implications Ior Iinancial stability. Securitisation was meant to disperse
credit risk to those who are better able and more willing to bear it. But, as the current crisis has
shown, this did not work out as envisaged. This stems Irom the Iact that the same instruments
that are used to hedge risks also have the potential to undermine Iinancial stability by
Iacilitating the leveraging oI risk, Ior example. Moreover, there were major Ilaws in the actual
interaction among the diIIerent players involved in the securitisation process. These included
misaligned incentives along the securitisation chain, a lack oI transparency with regard to the
underlying risks oI the securitisation business, and the poor management oI those risks. There
was a dramatic increase in the complexity oI securitised products prior to the crisis, owing
largely to misaligned incentives and investors` search Ior yield, which, in particular, made the
valuation and risk assessment oI these products extremely complex and diIIicult.
Chart 3: Securitisation issuance in Europe
(in EUR billions)

Source: European Securitisation Forum.
In contrast, the covered bond market has been more sheltered Irom these incentive problems than
securitisation markets, partly because traditional covered bonds have a simpler structure. This
makes the overall market more transparent, and the valuation and risk assessment easier.
Covered bonds also have a much stricter regulatory Iramework.
Overall, there have been problems in the securitisation market that relate to opacity and
misaligned incentives, which looking ahead need to be addressed by market participants and
regulators in order to restore the securitisation market to health.
Money market problems as a symptom
Having gone through some oI the major Iactors that have aIIected the condition oI banks during
the current crisis, I will conclude by recalling not only the exceptional speed with which the
crisis hit the Iinancial sector, but also the unprecedented size oI its impact. Consider, Ior
example, interbank markets. In normal times, interbank markets are among the most liquid in the
Iinancial sector. In 2006 the daily turnover in euro area money markets was t140 billion.
|8|
The
sudden seizing up oI interbank markets and subsequent Iailure to redistribute liquidity has
become very much a key Ieature oI the Iinancial crisis.
|9|
Chart 4 shows the spread between the
three-month unsecured rate and the three-month overnight index swap rate, which is a standard
measure oI interbank market tension. Until 9 August 2007, which is oIten said to mark the start
oI the Iinancial crisis, the unsecured euro interbank market was characterised by a very low
spread oI around Iive basis points. AIter the announcement by BNP Paribas that it would Ireeze
some Iunds, the spread increased by a Iactor oI 12 to around 60 basis points. AIter the collapse oI
Lehman Brothers and the events surrounding the last weekend oI September 2008,
|10|
the rates
shot up Iurther, eventually reaching a maximum oI 186 basis points. The increase oI rates in
September 2008 is mirrored by the amount oI Iunds deposited with the ECB at that time.
Chart 4: Interbank market

Source: F. Heider, M. Hoerova and C. Holthausen (2009), op.cit.
The events oI the last two years have not only shown that even the most liquid Iunding markets
Ior banks can seize up within days, but also proved that long-standing economic relationships
across diIIerent market segments can suddenly break down precisely as a result oI the links
between banks. Future regulation will take into account liquidity risk and prescribe sound
liquidity policies.
ow banks have fared during the recent financial crisis
The recent Iinancial crisis has illustrated how banks` own business models and incentives can
have a major impact on Iinancial stability. In this regard, recent international evidence suggests
that banking strategies that rely primarily on generating non-interest income or attracting non-
deposit Iunding are very risky.
|11|
There is also evidence, Ior example by Andrea Beltratti, Irom
Bocconi University, and co-authors, suggesting that those banks that perIormed better prior to
the crisis have also Iared worst during the crisis. This seems to suggest that the more proIitable
strategy prior to the crisis, has also been the more riskier strategy. Their research Iindings also
suggest that there may be additional policy tools that could contribute to containing Iuture threats
to Iinancial stability. In particular, banks in countries with stricter capital requirements and more
independent banking supervisors seem to have perIormed signiIicantly better during the crisis.
Also, banks with more Tier I capital and in countries with more restrictions on banks` activities
have also done relatively well in recent quarters.
|12|

The way forward
What have we learnt about sustainable bank business models Irom the events oI the past two
years? First, it is important that the structure oI banks` liabilities is appropriate Ior the structure
oI the assets that they hold. Banks have been excessively leveraged relative to the risks they were
taking.
Second, we still know too little about why diIIerent banks hold diIIerent levels oI equity.
|13|
We
do know, however, that, ultimately, equity is the only robust buIIer against realising losses.
Although holding equity is costly, bank capital regulation should also take into account the
macroeconomic implications oI bank capital requirements.
Third, banks to a large extent ignored the role oI deposits as a stable source oI Iunding. More and
more assets were Iunded by non-deposit liabilities. Banks turned excessively to the wholesale
markets in order to Iinance their growth. Relying on wholesale markets Ior Iunding and liquidity
has proved to be exceedingly precarious.
Fourth, owing to its potential beneIits, innovation in the Iinancial sector will continue. However,
a serious evaluation oI the possible implications oI Iinancial innovation Ior Iinancial stability is
warranted. In the case oI securitisation, a sharp reduction in the level oI complexity and leverage
oI the instruments issued is expected, while a higher level oI transparency and more aligned
incentives are crucial Ior an eIIicient securitisation market.
FiIth, I would like to just say a Iew words on the macro-prudential aspects oI Iinancial stability.
It is very important to develop a proper Iramework Ior the macro-prudential supervision not just
oI banks, but also other Iinancial institutions, markets and instruments that can be systemic in
nature, irrespective oI whether they are regulated or not. For that, we need a deep understanding
oI the major trends in the Iinancial sector, including new business models, and their impact on
Iinancial stability.
|14|

I am pleased to note that the relevant authorities have already started to take action in response to
all these lessons that have been learnt Irom the Iinancial crisis. With a view to strengthening the
resilience oI the banking sector, the regulatory reIorm agenda that has been launched and agreed
internationally will:
introduce a leverage ratio, as a measure to curb banks`
excessive balance sheet growth. This measure will be
introduced initially as a supplement to the Basel II risk-based
Iramework and, subject to proper calibration and review, as a
minimum regulatory requirement;
raise the quality, consistency, transparency and level oI
capital, namely the amount oI common equity and other
instruments oI equally high loss-absorption capacity;
introduce a Iramework Ior counter-cyclical capital buIIers
above the minimum capital requirement, which will be raised
during economic upturns and be used in downturns, as well
as promote more Iorward-looking provisions; and
establish a minimum global standard Ior Iunding liquidity
which includes a stressed liquidity coverage ratio
requirement and a longer-term structural liquidity ratio.
These measures will be introduced by the end oI the year, and phased in as Iinancial conditions
improve and economic recovery is assured.
Measures to address the misalignment and lack oI transparency oI incentives in the securitisation
market include strengthening the capital requirements Ior exposures, as well as introducing risk
management practices and disclosures. These measures have already been agreed and will be
implemented in the course oI 2010. As improving economic conditions may lead to the
resumption oI securitisation activity, the measures taken will ensure that it is relaunched on a
sounder and more sustainable basis.
Finally, work is under way to ensure that all systemically important institutions, markets and
instruments are subject to adequate regulation and oversight. As a Iirst step, a report will be
issued in November by the IMF, the FSB and the BIS that will provide guidance on identiIying
systemically important institutions, markets and instruments.
I started this speech by brieIly describing why banks are special. The last two years have
painIully stressed how special and important they really are. When the Iinancial system Iails, the
whole economic system is aIIected. The Iinancial sector has undergone an unprecedented wave
oI innovation, change, consolidation and now crisis. We now have a better understanding oI the
business models that may not be sustainable, but there are still many open questions. For
example, will Iuture capital requirements provide banks with better loss bearing capabilities and
the economic system with less procyclicality? How can Iuture compensation and corporate
governance principles support the long term value creation oI banks? And, how can risk
management practises and risk pricing models better represent possible gains and losses?
Overall, there seems to be no simple answer on banks` best practises and their business model.
ThereIore, we need the contribution oI the academic community Ior the Iuture design oI banks`
business models and Ior the policies supporting them. I am oI course - already looking Iorward
to this conIerence providing some answers to the important questions at stake.


European Central Bank
Directorate Communications
Press and InIormation Division
Kaiserstrasse 29, D-60311 FrankIurt am Main
Tel.: 49 69 1344 7455, Fax: 49 69 1344 7404
Internet: http://www.ecb.europa.eu
Reproduction is permitted provided that the source is acknowledged
http://www.ecb.int/press/key/date/2009/html/sp090921.en.html
HDFC:
HDFC The Housing Development Finance Corporation Limited (HDFC) was incorporated in
August 1994 in the name oI 'HDFC Bank Limited', with its registered oIIice in Mumbai, India.
HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. The
Corporation has maintained a consistent and healthy growth in its operations to remain the
market leader in mortgages. Its outstanding loan portIolio covers well over a million dwelling
units. With its experience in the Iinancial markets, a strong market reputation, large shareholder
base and unique consumer Iranchise, HDFC was ideally positioned to promote a bank in the
Indian environment. 'HDFC Bank's mission is to be a World-Class Indian Bank. The bank is
committed to maintain the highest level oI ethical standards, proIessional integrity, corporate
governance and regulatory compliance.

BUSINESS PHILOSOPHY:
BUSINESS PHILOSOPHY Operational Excellence Customer Focus Product Leadership People
HDFC Bank's business philosophy is based on Iour core values ;

CAPITAL STRUCTURE:
CAPITAL STRUCTURE The HDFC Group holds 23.63 oI the Bank's equity and about 17.05
oI the equity is held by the ADS Depository (in respect oI the bank's American Depository
Shares (ADS) Issue). 27.45 oI the equity is held by Foreign Institutional Investors (FIIs) and
the Bank has about 4,33,078 shareholders

DISTRIBUTION NETWORK:
DISTRIBUTION NETWORK HEADQUARTERED : MUMBAI NUMBER OF BRANCHES :
1725 NO. OF CITIES COVERED : 780 NO. OF ATM`S : 4393 REVENUES : Rs. 2,429.27
crores PROFITS : R s. 665.60 crores TOTAL EMPLOYEES : 11,777

FINANCIALS:
FINANCIALS Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Capital and Liabilities: Total Share
Capital 310 313 319 354 425 Equity Share Capital 310 313 319 354 425 Share Application
Money 0.43 0.07 400.92 PreIerence Share Capital 0 0 0 0 0 Reserves 4,210 4,986 6,114 11,143
14,226 Revaluation Reserves 0 0 0 0 0 Net Worth 4,520 5,300 6,433 11,497 15,053 Deposits
36,354 55,797 68,298 100,769 142,812 Borrowings 5,290 4,560 2,815 4,479 2,686 Total Debt
41,644 60,357 71,113 105,247 145,497 Other Liabilities & Provisions 5,264 7,849 13,689
16,432 22,721 Total Liabilities 51,429 73,506 91,236 133,177 183,271 Mar '05 Mar '06 Mar '07
Mar '08 Mar '09 Assets Cash & Balances with RBI 2,650.13 3,306.61 5,182.48 12,553.18
13,527.21 Balance with Banks, Money at Call 1,823.87 3,612.39 3,971.40 2,225.16 3,979.41
Advances 25,566.30 35,061.26 46,944.78 63,426.90 98,883.05 Investments 19,349.81 28,393.96
30,564.80 49,393.54 58,817.55 Gross Block 1,290.51 1,589.47 1,917.56 2,386.99 3,956.63
Accumulated Depreciation 582 734 951 1212 2250 Net Block 708 855 967 1175 1707 Capital
Work In Progress 0 0 0 0 0 Other Assets 1331 2277 3605 4403 6357 Total Assets 51429 73506
91236 133177 183271 Contingent Liabilities 84586 138899 202127 582836 396594 Bills Ior
collection 5343 5239 7212 17093 17940 Book Value (Rs) 146 169 201 324 344

Bank oI Baroda:
Bank oI Baroda 'To be a top ranking National Bank oI International Standards committed to
augmenting stake holders' value through concern, care and competence .' Bank oI Baroda is an
India-based company. The Company's solutions includes personal banking, which includes
deposits, gen-next services, retail loans, credit cards, debit cards, services and lockers; business
banking, which includes deposits, loans and advances, services and lockers; corporate banking,
which includes wholesale banking, deposits, loans and advances and services, and international
business, which includes non-resident Indian (NRI) services, Ioreign currency credits, ECB,
oIIshore banking, export Iinance, import Iinance, correspondent banking, trade Iinance and
international treasury. It also oIIers services, such as Domestic operations and Forex operations.
It also oIIers rural banking services, which include deposits, priority sector advances, remittance,
collection services, pension and lockers.

BUSINESS PHILOSOPHY:
BUSINESS PHILOSOPHY honest & prudent leadership Customer care & concern Iinancial
integrity

DISTRIBUTION NETWORK:
DISTRIBUTION NETWORK HEADQUARTERED : MUMBAI NUMBER OF BRANCHES :
3209 80 (overseas ) NO. OF CITIES COVERED : 1289 NO. OF ATM`S : REVENUES : Rs.
2020.10 crores PROFITS : Rs. 3058.33 crores TOTAL EMPLOYEES : 38960

CAPITAL STRUCTURE:
CAPITAL STRUCTURE

Slide 11:
Balance Sheet 09 Mar '06 Mar '07 Mar '08 Mar '09 Mar '10 Total Share Capital 365.53 365.53
365.53 365.53 365.53 Equity Share Capital 365.53 365.53 365.53 365.53 365.53 Share
Application Money 0.00 0.00 0.00 0.00 0.00 PreIerence Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves 7,478.91 8,284.41 10,678.40 12,470.01 14,740.86 Revaluation Reserves 0.00 0.00 0.00
0.00 0.00 Net Worth 7,844.44 8,649.94 11,043.93 12,835.54 15,106.39 Deposits 93,661.99
124,915.98 152,034.13 192,396.95 241,044.26 Borrowings 4,802.20 1,142.56 3,927.05 5,636.09
13,350.09 Total Debt 98,464.19 126,058.54 155,961.18 198,033.04 254,394.35 Other Liabilities
& Provisions 7,083.90 8,437.70 12,594.41 16,538.15 8,815.97 Total Liabilities 113,392.53
143,146.18 179,599.52 227,406.73 278,316.71 Balance Sheet 09 Mar '06 Mar '07 Mar '08 Mar
'09 Mar '10 Cash & Balances with RBI 3,333.43 6,413.52 9,369.72 10,596.34 13,539.97 Balance
with Banks, Money at Call 10,121.21 11,866.85 12,929.56 13,490.77 21,927.09 Advances
59,911.78 83,620.87 106,701.32 143,985.90 175,035.29 Investments 35,114.22 34,943.63
43,870.07 52,445.88 61,182.38 Gross Block 1,873.17 2,244.62 3,787.14 3,954.13 4,266.60
Accumulated Depreciation 952.44 1,155.81 1,360.14 1,644.41 1,981.84 Net Block 920.73
1,088.81 2,427.00 2,309.72 2,284.76 Capital Work In Progress 0.00 0.00 0.00 0.00 0.00 Other
Assets 3,991.16 5,212.50 4,301.83 4,578.12 4,347.22 Total Assets 113,392.53 143,146.18
179,599.50 227,406.73 278,316.71 34,678.87 54,999.86 75,364.33 64,745.82 77,997.01 Bills Ior
collection 10,407.04 12,976.53 15,105.51 22,584.64 27,949.60 Book Value (Rs) 215.35 237.46
303.18 352.37 414.71

MARKETING IN BANKING :
MARKETING IN BANKING Marketing scope in banking sector should be considered under the
service marketing Iramework Bank marketing does not only include service selling oI the bank
but also is the Iunction which gets personality and image Ior bank on its customers` mind. The
reasons Ior marketing scope to have importance in banking and Ior banks to interest in marketing
subject can be describe as: Change in demographic structure Intense competition in Iinancial
service sector Banks wish Ior increasing proIit

THE MARKETING MIX IN BANKING SECTOR:
THE MARKETING MIX IN BANKING SECTOR SERVICE Recently, banks are in a period
that they earn money in servicing beyond selling money. The prestige is get as they oIIer their
services to the masses. Like other services, banking services are also intangible. Banking
services are about the money in diIIerent types and attributes like lending, depositing and
transIerring procedures. These intangible services are shaped in contracts. The structure oI
banking services aIIects the success oI institution in long term. Besides the basic attributes like
speed, security and ease in banking services, the rights like consultancy Ior services to be
compounded are also preIerred. PRICE The price which is an important component oI marketing
mix is named diIIerently in the base oI transaction exchange that it takes place. Banks have to
estimate the prices oI their services oIIered. By perIorming this, they keep their relations with
extant customers and take new ones. The prices in banking have names like interest, commission
and expenses. Price is the sole element oI marketing variables that create earnings, while others
cause expenditure. While marketing mix elements other than price aIIect sales volume, price
aIIect both proIit and sales volume directly. Banks should be very careIul in determining their
prices and price policies. Because mistakes in pricing cause customers` shiIt toward the rivals
oIIering likewise services. Traditionally, banks use three methods called 'cost-plus,
'transaction volume base" and 'challenging leader in pricing oI their services.

Slide 14:
DISTRIBUTION The complexity oI banking services are resulted Irom diIIerent kinds oI them.
The most important Ieature oI banking is the persuasion oI customers beneIiting Irom services.
Most banks` services are complex in attribute and when this Ieature joins the intangibility
characteristics, oIIerings take also mental intangibility in addition to physical intangibility. On
the other hand, value oI service and beneIits taken Irom it mostly depend on knowledge,
capability and participation oI customers besides Ieatures oI oIIerings. This is resulted Irom the
Iact that production and consumption have non separable characteristics in those services. Most
authors argue that those Ieatures oI banking services makes personal interaction between
customer and bank obligatory and the direct distribution is the sole alternative. Due to this
reason, like preceding applications in recent years, branch oIIices use traditional method in
distribution oI banking services. PROMOTION One oI the most important element oI marketing
mix oI services is promotion which is consist oI personal selling, advertising, public relations,
and selling promotional tools. PERSONAL SELLING Due to the characteristics oI banking
services, personal selling is the way that most banks preIer in expanding selling and use oI them.
Personal selling occurs in two ways. First occurs in a way that customer and banker perIorm
interaction Iace to Iace at branch oIIice. In this case, whole personnel, bank employees, chieI and
oIIice manager, takes part in selling. Second occurs in a way that customer representatives go to
customers` place. Customer representatives are specialist in banks` services to be oIIered and
they shape the relationship between bank and customer.

Slide 15:
ADVERTISING Banks have too many goals which they want to achieve. Those goals are Ior
accomplishing the objectives as Iollows in a way that banks develop advertising campaigns and
use media. Conceive customers to examine all kinds oI services that banks oIIer 2. Increase use
oI services 3. Create well Iit image about banks and services 4. Change customers` attitudes 5.
Introduce services oI banks 6. Support personal selling 7. Emphasize well service Advertising
media and channels that banks preIer are newspaper, magazine, radio, direct posting and outdoor
ads and TV commercials. In the selection oI media, target market should be determined and the
media that reach this target easily and cheaply must be preIerred.

Slide 16:
Banks should care about Iollowing criteria Ior selection oI media. Which media the target market
preIer Characteristics oI service Content oI message Cost Situation oI rivals Ads should be
mostly educative, image making and provide the inIormation as Iollows: Activities oI banks,
results, programs, new services Situation oI market, government decisions, Iuture developments
The opportunities oIIered Ior industry branches whose development meets national beneIits.
ADVERTISING

Bank oI Baroda Marketing & Branding Strategy:
Bank oI Baroda Marketing & Branding Strategy

Brand Ambassador:
Brand Ambassador It initially had India`s Iormer cricket team captain- Rahul Dravid as its brand
ambassador (2004-07). As an icon, Rahul Dravid epitomized stability, sincerity and substance
which in a way complemented to the Bank oI Baroda`s brand image .

Slide 19:
Bank oI Baroda has established its operations in Maldives, Sri Lanka, Singapore, UAE, Yemen,
Russia, Kenya, China, Malaysia, Thailand and many other countries around the globe. Rapid
integration oI business with the technologies through core banking solutions, i-banking, and host
oI other Iacilities has established Bank oI Baroda as the Ioremost PSU bank in the country
Expansion

Slide 20:
It is the Iourth largest bank in India and consists oI 2.5 crore customers. Bank`s latest marketing
initiatives are aimed at positioning it as a Iinancial service provider with 'value proposition and
'market-driven being the keywords. The bank has rolled out branches Iar and wide across the
country to distribute an impressive assortment oI Iinancial products to its heterogeneous
customer base Positioning

Slide 21:
Business Lines-Marketing Strategy

Slide 22:
Recent Marketing Initiatives Communication Campaigns : Shukriya Sau Salon Kaa and Baroda
Next Use oI Sybase 365 Marketing InIormation System Launch oI Baroda Swarojgar Vikas
Sansthan Next Gen Branch opened in Major cities

Slide 23:
Promotions Abroad The marketing strategy oI the Bank oI Baroda Iocuses on the promotion oI
the values that the bank wants to portray to its customers (both prospective and current). It wants
to be seen as an eIIicient organization meeting all the needs oI the average middle-class customer
in a warm and Iamiliar setting. The accessibility oI the bank in all corners and the adoption oI the
latest technology are some oI the areas mentioned to create the Ieel oI a bank which despite
being national in origin, is up with the times and ready Ior the new-age customer`s demands

Slide 24:
HDFC BANK Business S trategy Increase market share in India`s expanding banking and
Iinancial services industry by Iollowing a disciplined growth strategy Iocusing on quality and not
on quantity and delivering high quality customer service Leverage our technology platIorm and
open scalable systems to deliver more products to more customers and to control operating costs
Maintain current high standards Ior asset quality through disciplined credit risk management
Develop innovative products and services that attract the targeted customers and address
ineIIiciencies in the Indian Iinancial sector Continue to develop products and services that reduce
bank`s cost oI Iunds Focus on high earnings growth with low volatility

Slide 25:
HDFC Bank Marketing & Branding Strategy HDFC is looking at positioning HDFC as a one-
stop Iinancial supermarket and the objective oI the promos is not just acquisition oI new
customers, but also looking at creating product awareness, enhancing usage and also providing
value-adds to our customers to reward them Ior their Iaith and loyalty HDFC plan to send
personalized mailers about our various products to all those in contact with during these mass
promotions The ATMs are back in the ads now but with a shiIt Irom the largest ATM network to
the Iastest ATM. HDFC ATM`s allow the customers to store their Iavorite transaction and then
give quick access to that transaction with a Iavorite button rather than going thru multiple
screens every time and thus helps in 40 Iaster cash withdrawal. HDFC is communicating this
beneIit to the customers thru the '40 Faster ATM TVC series

Slide 26:
Media-Based Marketing

Slide 27:
earlier campaigns overdosed themselves on older people, the latest campaigns certainly make the
company look a lot younger. A signiIicant majority oI metro might Iind the recent campaigns
more in line with their lives, as they are more contemporary 'HDFC Standard LiIe India Spells
2010'. Child Actor Darsheel SaIary and Actress Tisca Chopra launched the competition

Conclusion:
Conclusion Evolving Indian customer While the banking industry was in a state oI Ilux, the
customers were evolving too. With liberalization and the entry oI international brands into the
country, customer expectations had begun to change in terms oI quality and service. The media
boom and the advent oI several satellite channels changed attitudes Iurther. Indians had begun to
travel internationally either on work or Ior leisure and had become more discerning. No longer
were they willing to wait in long queues or tolerate condescending behavior. This change began
to reIlect itselI in terms oI expectations Irom banks too. Players would be benchmarked against
global standards, while services would be compared to the best oI other industries as well. There
seemed to be an Opportunity Ior a bank that served customers well at a reasonable price

Slide 29:
Value proposition as an Acquisition Strategy Addressing the need gap, HDFC Bank decided to
oIIer international levels oI service at a reasonable price`. This proposition was relevant to a
vast and statistically signiIicant middle-class market. Given the Iact that this was what the
market was waiting Ior, it met with great success and helped make acquisition an easier task, as
it addressed consumer needs.

any Questions ?:
any Questions ?

http://www.authorstream.com/Presentation/sandyrana2002-808850-hdIc-vs-bob/


In the sequence oI strategic analysis and decisions, "marketing mix" analysis Ialls aIter various
external and internal environmental analyses such as PESTEL analysis, Porter's Five Forces
analysis, SWOT Analysis and even Iormulation oI competitive strategies (Porter's Generic
Strategies).
Marketing mix is an imperative concept in modern marketing and academically it is reIerred to
as the set oI controllable tools that the Iirm blends to produce the response it wants in the target
market, so it consists oI everything the Iirm can do to inIluence the demand Ior its product
(Kotler and Armstrong, 2004). It is important to realise that marketing mix strategy oI any
company can have one major Iunction, that is, strategic communication oI the organisation with
its customers (Proctor, 2000). It was Iurther argued that marketing mix provides multiple paths
as such communication can be achieved either in spoken Iorm and written communications
(advertising, selling, etc.) or in more symbolic Iorms oI communication (the image conveyed in
the quality oI the product, its price and the type oI distribution outlet chosen). However, the key
element is that the main aspects oI marketing mix that will be discussed below "should not be
seen as individual entities, but as a set oI interrelated entities which have to be set in conjunction
with one another" (Proctor, 2000: 212).

Main Aspects of Marketing Mix (100)
The easiest way to understand the main aspects oI marketing is through its more Iamous
synonym oI "4Ps oI Marketing". The classiIication oI Iour Ps oI marketing was Iirst introduced
and suggested by McCarthy (1960), and includes marketing strategies oI product, price,
placement and promotion. The Iollowing diagram is helpIul in determining the main ingredients
oI the Iour Ps in a marketing mix.
O Product
In simpler terms, product includes all Ieatures and combination oI goods and related services that
a company oIIers to its customers. So the Airbusproduct includes its body parts such as the
engine, nut bolts, seats, etc along with its aIter-sales services and all are included in the product
development strategy oI the Airbus. However, a serious criticism can be raised here in terms oI
how marketing mix analysis will cater Ior companies such as ABN Amro Bank, Natwest Bank,
British Airways and Fedex Corporation as they don't possess tangible products. It was argued
that is it Ieasible to omit service-oriented companies with the logic that the term "services" does
not start with a "P", however, it was asserted that these companies can use the terminology oI
"service products" under marketing mix strategy making (Kotler & Armstrong, 2004).
Lazer (1971) argued that product is the most important aspect oI marketing mix Ior two main
reasons. First, Ior manuIacturers, products are the market expression oI the company's productive
capabilities and determine its ability to link with consumers. So product policy and strategy are
oI prime importance to an enterprise, and product decisions dictate the scope and direction oI
company activity. Moreover, the market indicators such as proIits, sales, image, market share,
reputation and stature are also dependent on them. Secondly, it is imperative to realise that the
product oI any organisation is both a component and a determinant oI the marketing mix as it has
a great inIluence on the other elements oI the mix: advertising, personal selling, channels oI
distribution, physical distribution and pricing. So without proper product policy, a company can
not pursue Ior Iurther elements oI marketing mix.
Pricing
Pricing is basically setting a speciIic price Ior a product or service oIIered. In a simplistic way,
Kotler and Armstrong (2004) reIer to the concept oI price as the amount oI money that customers
have to pay to obtain the product. Setting a price is not something simple. Normally it has been
taken as a general law that a low price will attract more customers. It is not a valid argument as
customers do not respond to price alone; they respond to value so a lower price does not
necessarily mean expanded sales iI the product is not IulIilling the expectation oI the customers
(Lazer, 1971).
Generally pricing strategy under marketing mix analysis is divided into two parts: price
determination and price administration (ibid).
Price determination is reIerred to as the processes and activities employed to arrive at a price Ior
a product including consideration oI relative prices oI products within the same line, and
diIIerences in price Ior similar products oI diIIering grades and qualities.
Price administration is reIerred to as the activities involved in Iitting basic prices to particular
sales situations such as geographic locale, Iunctions perIormed by customers, position oI
distribution channel members, or special sales situations. An example oI this is special
discounted prices at, Ior instance, GAP, NEXTetc or Coca ColaandPepsiwherediIIerent prices
are set in diIIerent geographical areas considering the diIIerence in patterns oI usage as well as
varying advertisement costs.
Placement
Placement under marketing mix involves all company activities that make the product available
to the targeted customer (Kotler and Armstrong, 2004). Based on various Iactors such as sales,
communications and contractual considerations, various ways oI making products available to
customers can be used (Lazer, 1971). Companies such as Ford, Ferrari, Toyota, and Nissan use
speciIic dealers to make their products available, whereas companies such as Nestle involve a
whole chain oI wholesaler retailers to reach its customers. On a general note, while planning
placement strategy under marketing mix analysis, companies consider six diIIerent channel
decisions including choosing between direct access to customers or involving middlemen,
choosing single or multiple channels oI distributions, the length oI the distribution channel, the
types oI intermediaries, the numbers oI distributors, and which intermediary to use based on the
quality and reputation (Proctor, 2000)
Promotion
Promotional strategies include all means through which a company communicates the beneIits
and values oI its products and persuades targeted customers to buy them (Kotler and Armstrong,
2004). The best way to understand promotion is through the concept oI the marketing
communication process. Promotion is the company strategy to cater Ior the marketing
communication process that requires interaction between two or more people or groups,
encompassing senders, messages, media and receivers (Lazer, 1971). Taking the example oI
Nokia, the sender oI the communication in this case is Nokia, the advertising agency, or both; the
media used in the process can be salesmen, newspapers, magazines, radio, billboards, television
and the like. The actual message is the advertisement or sales presentation and the destination is
the potential consumer or customer, in this case mobile phone users.
Limitation of Marketing Mix Analysis (4Ps of Marketing)
Despite the Iact that marketing mix analysis is used as a synonym Ior the 4Ps oI Marketing, it is
criticised (Kotler & Armstrong, 2004) on the point that it caters seller's view oI market analysis
not customers view. To tackle this criticism, Lauterborn (1990) attempted to match 4 Ps oI
marketing with 4 Cs oI marketing to address consumer views:
Product Customer Solution
Price Customer Cost
Placement Convenience
Promotion Communication
ow to rite a Good Marketing Mix Analysis
To Iollow a simple and best approach Ior marketing mix analysis, it is imperative to understand
the purpose oI this analysis. So the basic key is to analyse the company's overall marketing
strategy primarily through the strategies it Iollows under the 4Ps oI marketing.
So the approach should be to keep equal balance in analysing all Iour elements oI marketing mix.
The Iollowing points should be considered while carrying out analysis:
O While analysing a company's product, a common Iallacy can be Iocusing on the Iinal
outlook oI the product and that gives rise to a nave approach. Analysts should consider
and analyse all major product decisions that the company may have carried out including
quality, Ieatures, options, style, brand name, packaging, sizes, aIter-sales services,
warranties, returns, etc. Moreover, the company's position, as well as marketing strategy
in the market, can be judged on the basis oI its product mix including width, length, depth
and consistency (Proctor, 200). Width is the number oI lines the Iirm carries, Ior example
Sony has various lines including TV, video, cameras and laptops. Length is the number
oI items in the product mix, Ior example Toshibahas diIIerent types oI TVs and laptops.
Depth is the number oI variants oI each product oIIered in the line such as clock radios,
car radios and pocket radios. Finally, consistency is how closely related the various
product lines are in terms oI the use to which they are put, more commonly including
electrical and entertainment products. So, using these bases Ior product strategy
classiIication will lead to easy and eIIective analysis. Finally, one should attempt to
identiIy what the company is actually aiming at through its product. There can be three
possible product strategies in a company's action (Proctor, 2000). Either it aims the
product at the market such as Erickson with new mobile phones to cater Ior the business
class; it can be given a "Iace liIt" such as Marks & Spencer's attempt with more
customer-speciIic products; and it can be withdrawn, discontinued or eliminated such as
Marks & Spencer closing down its unproIitable units across the globe.
O To write a valuable pricing analysis oI a company, the key is to correlate its pricing
strategy with its product position in the market. The company may use various pricing
strategies such as penetration, skimming, competition-based pricing, psychological
pricing, price wars, etc (Proctor, 2000). A company uses penetration prices iI its product
is entirely new to the market so it may charge low prices to increase market share. It may
be observed that Porsche and Ferrariuse skimming pricing where they may charge a
higher price as they know their speciIic customers will buy their product at any price.
Sometimes companies have more Iluctuating prices so an analyst should consider that
their might be competition going on or a price war has broken through between rivals.
For instance, Pepsi and Coke oIten indulge in such price wars. Sometimes psychological
dimensions can be considered as well. Customers easily Iind products in Tesco, Asda or
Sainsbury'swith price tags oI 2.99 or 4.99 rather than 3 or 5 as customers may
perceive them as 2 or 4. So the writer must analyse which oI these strategies a
company is Iollowing and Ior what reason.
O Similarly, placement analysis requires the knowledge oI a company's distribution
channels, Ior instance analysis oI the Iact that a company is involving any middleman or
not. II analysis oI a consumer-good producer such as Nestle, Cadbury, and Colgate &
Palmolive is carried out, there are high chances that a middleman will be involved
considering the size oI the market in target. However, industrial producers such as Airbus
may opt Ior direct distribution considering the limited number oI customers. Similarly, it
should be noted that a company may be using a speciIic intermediary iI the ease,
reliability, image oI the particular outlet, the way in which it perIorms and the deals
which can be struck with the distributor are satisIactory. So, a company may choose
C&A rather than Marks and Spencer, or Tesco rather than any other retail outlet (Proctor,
2000). On a general note, a very good analysis can be made iI the placement related the
six questions highlighted in previous sections are tackled.
O Finally, the basic step in promotion analysis is to identiIy the communication objective
that the company is aiming at. There can be multiple communication objectives that can
be identiIied. One should analyse how the promotion strategy is aimed at creating
awareness oI the product or service, provision oI product inIormation, brand recognition,
gaining access to a target audience that is inaccessible to a salesman, evoking desire Ior a
product or service, merely making the selling task easier, overcoming prejudices, creating
a reminder or to allay cognitive dissonance (Proctor, 2000). Once the communication
objective is identiIied, then it is imperative to analyse the message and the promotional
mix that is used by the company including advertisement, sales promotion, publicity and
personnel selling. For Instance Nike very rarely uses personal selling due to its
established brand awareness, however, it continually uses advertisements with
communication objective oI creating a product reminder. Contrary to that, Unilevermay
use personal selling, advertisements as well as oIIering discounts (sales promotion) iI it
launches a new consumer good such as toothpaste or soap to cater Ior the communication
objective oI creating new product awareness.
Information for Marketing Mix Analysis
Students may seek inIormation regarding market mix analysis (4 Ps) Irom two basic sources:
market and academic. For market sources, inIormation is easily available Irom a company's
website, business reports, newspapers/published data on marketing, independent market survey
reports and, in some cases, students may visit a retail outlet to analyse a product, its pricing and
promotional strategies. However, to get more speciIic details, marketing and advertising
academic journals and secondary data in the Iorm oI case studies can be the ideal source.
Conclusion
Marketing mix analysis is a Iundamental step towards eIIective strategy. Where other analysis
are more related to environment and Ieasibility analysis, the 4 Ps oI marketing including the
product itselI, pricing, placement and promotion are the Iour wheels oI the vehicle on which the
path oI an organisation's marketing success is actually dependent.