Case study 9.

1 Customer acquisition at HDFC Bank

Until the 1990s, the banking sector in India was dominated by two main groups
the public-sector banks and the international banks. The former dealt with the
mass market, although the quality of products and services provided was
generally considered to be poor. The latter focused on the more wealthy
segments and were typically very selective in terms of accepting new
customers. Liberalization during the 1990s paved the way for the influx of new
private-sector banks, the first of which was HDFC, launched in 1995. The
banks research had identified a significant middle-class market, which expected
a high quality of service and was willing to pay for it. These customers were not
prepared to tolerate poor service and long queues in the public-sector banks, but
equally were less trusting of the international banks and less attractive to those
banks because they were outside the very high-income brackets.
As a new entrant, HDFC needed to develop its marketing mix in order to target
these customers and persuade them to switch to HDFC. The basic value
proposition that underpinned HDFCs approach was that of international levels
of service at a reasonable price. Specific marketing mix decisions were as
follows:
1. Product
To meet the needs of the chosen mid-market segment, HDFC offered a
comprehensive range of banking services, comparable to the product range of
international banks. This was supported by the targeting of specific products to
sub-segments based on differences in needs, expectations and behaviours. Staff
were recognized as being of considerable importance, particularly those on the
frontline, and the bank paid particular attention to recruiting staff with good
customer service skills.
2. Price

HDFC offered its initial bank account with the requirement for a minimum
balance of Rs 5000 significantly below the typical international bank
requirement of Rs 10 000, and so significantly cheaper, but still higher than the
public sector requirement of Rs 500. This ensured that HDFC had the margin to
support the delivery of superior service, while remaining significantly cheaper
than the international banks.
3. Promotions
HDFC supports its product and service offer with the usual range of above and
below the line marketing promotion, with direct mail, e-mail and SMS
becoming increasingly important. A significant recent innovation has been the
use of sophisticated analytical techniques to test and evaluate campaigns. This
has enabled HDFC to gain a better understanding of how customers respond to
marketing promotions and use this information to develop more effective
campaigns in the future. In addition, this analysis has enabled HDFC to target
its communications more effectively, thus reducing marketing spend and the
costs of acquisition.
4. Place
HDFC focused attention on the 10 largest cities in India, which account for
close to 40 per cent of the population, and concentrated on gaining maximum
market share in those areas before expanding to other cities. The decision to
operate with a central processing unit allowed the bank to keep the cost of
establishing a branch network relatively low, and thus supported more extensive
coverage (around 500 branches in around over 200 towns and cities). Alongside
its branch network, HDFC also delivered its services via ATMs, phones, the
Internet and mobiles to ensure that it met the diverse set of needs of its
midmarket customers.