solution

Case study

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 bank’s 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 HDFC’s approach was that of ‘international levels of service at a reasonable price’. Specific marketing mix decisions were as follows.

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.

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 publicsector 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.

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.

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.
The success of HDFC is evidenced in growth rates of 30 per cent per annum and a string of awards from AsiaMoney, Forbes Global, Euromoney and many others.