STRATEGIC ALLIANCE – A MARKETING TOOL IN BANKING INDUSTRY Ms. Rashmi Kanitkar

ABSTRACT Any marketing manager has two major tasks, customer acquisition and customer retention. In case of financial products due to homogeneous nature of the products the tasks become more difficult. Under such circumstances one of the Marketing Strategy adopted by various private banks is of “ Strategic Alliances” with various other organizations. The strategic alliances become effective if those product categories are relevant to the customers. In the present study effort is made to study importance of strategic alliance in Private Banking sector and it’s co-relation with intended planned purchases of youth. The two banks that have been selected are Kotak Mahindra Bank & Yes Bank. The study is based on primary as well as on secondary research. This is an inferential type of study. The results show that both the banks have a number of alliances in various product categories. The product categories for which banks have made alliance and planned purchase categories of respondents match with each other.

I. INTRODUCTION The basic job of a marketing manager is to earn profits for the organization. To achieve this goal any marketing manager has to face two important tasks – customer acquisition and customer retention. Cost of customer acquisition is 7 times more than customer retention. Customer acquisition cost includes lead generation cost & conversion cost. That is costs incurred to get attention of the customer create desire in the minds of customer and to make him buy the product. In case of service sector these tasks become more difficult because of intangible nature of the product. Further in Banking & financial sector the products are governed by Government regulatory bodies and similar products are offered to the customer at large and there is no scope for product differentiation. Under such circumstances Bankers are always looking for new strategies to attract, retain the customers & to maximize the revenue and profitability. Marketing Strategies in Retail Banking The banking sector divides it’s market into two broad segments. Organisational & Retail segments. Organisational segment is attended basically through personal selling. The retail segment is vast and fabricated and needs bouquet of strategies to achieve the marketing objective. One of the marketing strategies is forming Strategic Alliance with other organisations, products or brands. As per Wikipedia Brand alliances are of three types – a. Co-branding b. Brand Licenses c. Cross Marketing As per Banking maestros Strategic Alliances are of three types 55 | P a g e

1. Co-Branded Alliance 2. Business Alliance 3. Marketing Alliance After studying alliances made by various banks and considering description of each category of alliances suggested by both the sources, “Cross Marketing” category was added to the categories suggested by Banking Stalwart. In present scenario these four categories should cover all types of alliances in Indian Banking. Participation of Alliances in Business Growth A) Co-branded alliance - ICICI BANK VISA CREDIT CARD is an example of co-branding. ICICI BANK JET AIRWAYS MASTER CREDIT CARD is an example of tri-partite co-branding B) Business alliance - MMT AND ICICI BANK's delightful deposits. Here customer does 12 month RD and gets 13th installment free to avail a travel package from MMT. Similarly TANISHQ and ICICI BANK's delightful deposit. Here understanding is that both companies will promote the offer to their respective customers and allow each others' field team in actively acquiring new customers. Here typically both companies need to change/ tweak/ integrate systems of two companies to make the offer work. C) Marketing Alliance - As a credit card customer you may be receiving offers like 15% off on Mainland China etc. This is an example of marketing alliance. It is similar to the above however there is no major changes required in Bank's products and processes to run such offers. D) Alliance for Cross Marketing - Customers of one product or service is targeted with promotion & sale of a related product. For example marketing of mutual funds & insurance by the Banks. Co-Branding & Business alliance, helps all the partners, for customer acquisition by cross trafficking. It also offers value addition for existing customer. Marketing alliance basically gives benefits to customers for being the customer of the Bank by way of special discounts. Most important thing is all three alliances (except cross marketing) create an opportunity to make use of “Plastic Product” of the bank more frequently. Cross marketing helps a bank to use the potential of its customer base to fullest extent by offering them to similar minded product In short, Strategic Alliance combines strengths of both brands and can Reshape Marketing Landscape by way of 1. Providing customers with great value 2. Increasing market penetration 3. To adapt new marketing trends 4. Exploiting strength of the organization to fullest to optimize ROI According to Dan Beem( president of Cold Stone Creamery) It is simple to see why co-branding is so attractive. Take the strongest elements of your products and combine them with the best complementary brands to offer new goods and services. In other words, the potential worth of the whole may be greater than the sum of the individual brands. In his post of October 2014 Mr. Caitlin says“More technologies will come and go, but the fundamental principle of banking that has been and will always be is relationships. Your profitable customers want relationships”. This is exactly is the objective of various alliances that a bank does.

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An article written by Terry Leftospeaks speaks about how co-branding has redefined the $850 billion industry (in USA) and is the single largest factor in turning around MasterCard, which saw its first market share increase in 14 years during 1992. Intensions of Present Study In view of consideration of the effectiveness of Strategic Alliance in customer acquisition, customer retention & increase in profitability the present study has been undertaken to gauge the aggressive marketing efforts of the private banks. An alliance can become successful only if there is a fit between customer lifestyle desires and the offerings of alliance partner. In the following study a primary research was done to understand the buying intensions of future professionals. By way of matching those intensions with a bank’s alliances an estimate of the success of a banks in understanding it’s customer was made. Also an effort is made to estimate of reflection of these strategic alliances in a Bank’s performance. Literature Review Findings from the research of Munyoki, Pauline Koki , Candidate, Department of Business Administration titled “EFFECTIVENESS OF CO-BRANDING AS A BRAND STRATEGY IN THE CRED IT CARD SECTOR IN KENYA” School of Business, University of Nairobi suggested that- co-branding has positive effect to both the market share of the organization and card usage. In research done by David Nzyimi Makau on STRATEGIC ALLIANCES AND ORGANIZATIONAL COMPETITIVENESS AMONG COMMERCIAL BANKS IN KENYA: A CASESTUDY OF KENYA COMMERCIAL BANK It was found that Strategic alliances are formations that seek to achieve organizational objectives through collaboration rather than through competition and thus making such partnering firms to gain competitive advantage over their rivals. The study established that strategic alliances, especially non- equity alliances are positive and significantly correlated with organizational Competitiveness in terms of improving the organization’s ability for profit maximization, expanding market position as a result of growth in customer base, and increasing sales volume. The literature review shows that co-branding is an effective way of consumer engagement which leads to customer retention and loyalty Research Methodology Objectives of Study 1. To study extent of co- alliances made by the banks 2. To study buying intensions of future professionals 3. To make comparative analysis of level of reflection of those buying intensions in Strategic Alliances of Various Banks The study is based on both primary as well as on secondary data. The information of strategic alliances of various private sector banks is taken from the web site of the banks. For the study purpose Kotak Mahindra Bank & Yes Bank were selected. Kotak Mahindra Bank was selected because it ranked no.1 in market capitalization & Yes Bank has been ranked as best bank in mid sized banks. The effect of strategic alliances is studied from annual reports of 2015-16 year of both the banks.

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The buying intensions of customers were studied from primary data. The segment selected for the purpose was of young, about to be employed professionals; who will be the future customers of the private banks. The target group for the study was 4th semester students of Tier 2 management institute of Mumbai. The data of 50 students obtained by convenience sampling is considered for the study. Their future purchasing intensions were studied with the help of questionnaire

II. DATA ANALYSIS PART 1- COMPARATIVE STUDY OF ALLIANCES OF KOTAK MAHINDRA BANK AND YES BANK Comparative Study of Alliances of Kotak Mahindra Bank and Yes Bank- Planned Purchases th This data is taken as on 18 Jan 2017 PRODUCT CATEGORY STRATEGIC ALLIANCE STRATEGIC ALLIANCE DESIRED BY YOUTH AS PER PARTNERS OF KOTAK BANK PARTNERS OF YES BANK SURVEY CLOTHES & ACCESSORIES Bata, Snap Deal,forever New, Victorinox, Longchamp, Snapdeal, Puma, Urban ladder jack & Jones, Tresmode, Samsung, Wish N Buy, Urban ladder, Urban clap, Big Ferns N Petals, Little Pipal (8) Basket (Discount) (33) (Discount) ELECTRONIC GOODS FOR Apple Store, Samsung mobiles, Samsung, Snapdeal, Jabong, PERSONAL USE reliance digital, Vijay stores, Sony Ezone, Myntra, Croma (6) Croma, E zone (EMI facility) (6) (Discount) TRAVEL Fab Hotels, Hertz, Agoda.com, Ola, Musafir, ClearTrip, Zoom car, Yatra, Visa (Discount) Booking.com, Della Adventure (5) (6) (Discount) TWO WHEELER No Data Loan Facility FOUR WHEELER Loan Facility Loan Facility DURABLES KITCHEN No Data No Data DURABLES HOME (EMI facility with Croma etc.) (Discount facility with Croma etc.) HOUSE PURCHASE Home Loan Facility Home Loan Facility INVESTMENTS Birla Sun Life Balanced 95, ICICI Tax consultancy, Prudential Balanced Advantage Fund, L&T India Prudence Fund, Sbi Magnum Balanced Fund (Equity Funds) INSURANCE FOR SELF Kotak Life Insurance Max Life Insurance INSURANCE FOR FAMILY Kotak Life Insurance Max Life Insurance Table 1

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Observations – In Planned purchase category Kotak Mahindra Bank has 50+ alliances. Where as Yes Bank has less than 50 alliances. In clothes and accessories Kotak Mahindra Bank has 33 alliances where asYes Bank has 6 alliances In Electronics goods personal use category although both the banks has same number of alliances Kotak Mahindra has alliance with Apple store whose products are most popular in youth segment In case of Travel Category Kotak Mahindra has more alliances than Yes Bank. Kotak Mahindra does not mention any thing about loan for two wheelers where as Yes Bank specially mentions about availability of loans for 2 wheelers. Comparative Study of Alliances of Kotak Mahindra Bank and Yes Bank-– Spontaneous Purchases This data is taken as on 18th Jan 2017 PRODUCT CATEGORY STRATEGIC ALLIANCE STRATEGIC ALLIANCE DESIRED BY YOUTH AS PER PARTNERS OF PARTNERS OF SURVEY KOTAK BANK YES BANK Movies Inox , PVR (Discount) (2) No data RESTAURAUNT/PUB Kotak Wine & Dine, US Pizza, Pizzahut, Mad over Donuts, Cookie Man (Discount) (3) Zomato, Hotel Al zamzam, Zaffran, Urban Asia, Kapa Zone Restaurant, Bawarchi, BrewBites, Delhi Spice, Zaheer Khan's Dine Fine etc (142) (Discount) Health & Pub Jean Claude Biguine, Warren Apollo Pharmacy, Jean Claude Trocomosalone, LakmeSalone, Biguine, Kidzania (3) Jawed Habib, Four Fountains (Discount) 5 Table 2 Observations : In case of tie up with theaters Kotak Mahindra bank has tie up with Inox and PVR In restaurant & Pub facility Yes Bank has tie up with 142 organisations In case of Health category Yes Bank has tie up with Apollo Pharmacy Conclusion – Table 1 & 2 both show that both the banks have made strategic alliances with various organizations and brands very aggressively. It is obvious that these alliances, especially non- equity alliances are positive and significantly correlated with organizational Competitiveness in terms of improving the organization’s ability for profit maximization, expanding market position as a result of growth in customer base, and increasing sales volume.

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Reflections of Strategic Alliance in Performance Report KOTAK MAHINDRA BANK YES BANK

31st March 2015 31st March 2016 31st March 2015 31st March 2016

Other Income Other Income

214,710,843 280,323,643 20,479,127 27,294,218 Total Income (Retail Banking) 916.58 957.01 Capital Expenditure (Retail Banking) 124.64 169.88

Kotak Mahindra Bank - Tied up with Thomas Cook and Kuoni Travels to offer a Holiday Savings Account linked to a Recurring Deposit. Customers get benefit of various schemes & offers launched by these travel companies and the banking linkage enables them to save on a monthly basis to facilitate the holiday expenses Above observations show – Kotak Mahindra Bank has specifically mentioned income and expenditure of retail Banking. Whereas no such mention was noticed in Annual report of Yes Bank. In case of Kotak Mahindr Bank the other income as well as income from retail Banking has increased. Where as in case of Yes Bank it has decreased. Conclusion- Alliances for financial products is an organic alliance. Making alliance with other brands repeatedly over the years indicates that these alliances must be contributing in income generation, customer acquisition or in customer retention. Hence these strategic alliances are very important for the private Banks. Part 2 Study of Planned Purchase intentions of Youth PURCHASE INTENTIONS FROM 1ST SALARY

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Observations –  The most dominant category that has emerged is of Mobile phone. In this category 17 respondents out of 19 wanted to buy “I Phone”  The next category where purchase intention is more is of “Accessories for self”. In this category there is demand for Watch, Clothes and Camera.

III. IN ANOTHER QUESTION THE FUTURE PROFESSIONALS WERE ASKED ABOUT THEIR PREFERENCES OF GADGETS The preferences are as follows Product Category Nos. Preferred Brands Mobile 33 Iphone-24,Mi - 2 , Moto G - 1 ,Note 3 - 1 I Pad/ I Pod 7 Laptop 7 Apple -1 Hp - 2, Dell - 3, Kindle – 1 Sound System 6 Xbox360 - 2 Ps4 - 3 Camera 4 Nikon - 3, Cannon - 1 Smart Watch 4 Apple - 2, Moto 360 - 1 TV 2 Plasma type Vehicle 2 Vento, Royal Enfield Table 3 – Preferred brands of Gadgets Observations – The above tables show that i-phone is most preferred brand WHAT WOULD YOU LIKE TO BUY FROM FIRST 6 MONTH'S SALARY

Observations-  The table shows that the category where purchase intentions are maximum is clothes and accessories. In a way it is fragmented category because it has multiple products.

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 The next two categories which are equally in demand are travel and investment products. In case of travel further details can be referred from next table.  The third product category in demand is electronic goods for personal use. This category mainly consists of following products – Mobile Phones, laptop, sound system and camera (in that order). Again in mobile phone the brand that is at the top of mind of many students is “i Phone”  Purchase of two wheeler and four wheeler is next. In four wheeler preference is to Honda City and in two wheelers brands like Harley Davidson, Honda & Bajaj are desirable. PURCHASE PLANS FOR NEXT 4 YEARS PURCHASE INTENSIONS IN 1st YEAR Product Category Nos. Preferred Brands Product Nos. Preferred Category Brands Mobile 14 Iphone, Lava, Google Savings 2 Car/ Bike 13 Honda, CBR,Royal Camera 1 Nikon dslr Enfield,Skoda Accessories for 9 Apple, Dragon Ball Not Planned 6 Personal Use Merchandise Travel 4 PURCHASE INTENSIONS IN 2ND YEAR Product Category Nos. Preferred Brands Product Nos. Preferred Category Brands Mobile 1 I phone Savings 2 Car/ Bike 14 Duster, Hyudai,Honda City,Harley TV 2 Davidson Accessories for 5 Dell Home 4 Personal Use Travel 11 International (7) Not Planned 11

PURCHASE INTENSIONS IN 3RD YEAR Product Category Nos. Preferred Brands Product Category Nos. Preferred Brands Vehicle 12 Creta,Volkswagen Investment 2 Home 10 Personal Accessories 3 Travel 10 International Not Planned 14

PURCHASE INTENSIONS IN 3RD YEAR Product Category Nos. Preferred Brands Product Category Nos. Preferred Brands Vehicle 10 Creta,Volkswagen Investment 1 Home 8 Personal Accessories 2 Travel 7 International Not Planned 22

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Observations – In 1st year the most preferred item is mobile followed by vehicle In the second year preference has shifted to purchase of vehicle followed by travel In 3rd year the preferred categories are vehicle followed by home and travel In 4th year the most preferred category is still vehicle followed by home and travel in that order Part 3- CO RELATION between Product Categories desired by Young professionals as per our survey and co- partners of Axis Bank PRODUCT STRATEGIC ALLIANCE PARTNERS OF STRATEGIC ALLIANCE CATEGORY KOTAK MAHINDRA BANK PARTNERS OF YES BANK DESIRED BY YOUTH AS PER SURVEY Collaboration with Apple Store, Samsung Alliance with Samsung, Snapdeal, Mobile (Specially i- Phone, etc. Jabong, Ezone, Myntra, Croma phone) Travel Fab Hotels, Hertz, Agoda.com, Zoom car, Ola, Musafir, ClearTrip, Yatra, Visa - Alliance for discount offers Booking.com, Della Adventure- alliance for discount offers Accessories Total 33 alliances with companies like Bata, 8 Alliances with Snapdeal, Puma, Snap Deal etc. Tresmode, Samsung, Wish N Buy, Ferns N Petals, Little Pipal etc. Vehicle Purchase & Offer home loans and loans for vehicles Offer home loans and loans for Home Purchase vehicles including 2 wheelers

IV. CONCLUSION & SUGGESTIONS  The buying preferences of future professionals are i-phone, vehicle, travel, accessories, home in this order.  Kotak Mahindra as well as Yes Bank has many tie ups with various e – retailers and service providers where customers can avail facilities like discounts or EMI facilities etc.  This is very much aligned to the habits of future professionals of looking for various deals. The alliances made by both the banks covered all the categories of preferences. The multiple alliances made by both the banks with various e retailers, brands shows that Strategic Alliances are an effective tool in customer acquisition, retention and thus earning profits. Basic condition is that those alliances must be relevant to the customers. The co relation of observations from Primary research & Secondary research shows that both the Banks have made alliances in the desirable categories by the youth. So these alliances must have fetched desired profits.

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BIBLIOGRAPHY 1. Dan Beem ,The Case For Co-Branding; http://www.forbes.com/2010/03/16/cold-stone-creamery-dan- beem-rocky-mountain-chocolate-cmo-network-co-branding.html 2. Posted by Caitlin On October 2014,Co-Branding: How a Strategic Bank Design Can Bring in More Customers; http://www.htg-architects.com/2014/10/co-branding-strategic-bank-design-brings-more- customers/ 3. By Terry Lefto, Co-Branding Reshapes Credit Landscape: Strategy Keys MasterCard Recovery, Forces New Thinking At Visa and American Express. Pizza Cards Next? http://www.adweek.com/news/advertising/co-branding-reshapes-credit-landscape-strategy-keys- mastercard-recovery-forces-new- 4. Dr. Baji Abdul, N.D Chandra Sekhar; B.Uma Maheswari, “Co Branding In India”, http://www.academia.edu/6774337/Co-Branding_in_India 5. http://www.rediff.com/business/report/perfin-does-it-make-sense-to-opt-for-co-branded- cards/20160909.htm 6. Hausman Angella, Back to Marketing Basics: Co-Branding Strategy in the Digital Age, 7. https://www.hausmanmarketingletter.com/back-to-marketing-basics-co-branding-strategy-in-the-digital- age/ 8. Bhasin Tinesh, Does it make sense to opt for co-branded cards? Source- Business Standard 9. http://www.rediff.com/business/report/perfin-does-it-make-sense-to-opt-for-co-branded- cards/20160909.htm 10. David Nzyimi Makau on STRATEGIC ALLIANCES AND ORGANIZATIONAL COMPETITIVENESS AMONG COMMERCIAL BANKS IN KENYA: A CASESTUDY OF KENYA COMMERCIAL BANK 11. Munyoki, Pauline Koki , Candidate, Department of Business Administration titled “EFFECTIVENESS OF CO-BRANDING AS A BRAND STRATEGY IN THE CRED IT CARD SECTOR IN KENYA” School of Business, University of Nairobi

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