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Archive for October, 2008

When ads forget the connect, focussing on gloss only

October 12th, 2008 No comments
On Indian TV sets, two banks are having their re-branding advertisements running. Ideally its not an easy task to change the image of a PSU bank which has been there for long time and has already made a place in people’s mind. It can be good or bad, but people have that image firmly in the mind. So one would see the re branding effort to be having a high marketing cost and some of the big ad agencies are roped in to do the magic. And as Union Bank of India and IDBI takes on to refresh their image in this financial turmoil, lets see how one strikes the chord with customer and how one strikes the chord with only viewers while customers are left out in gloss.

Union Bank of India
New Tagline: Your Dreams are not your alone

Background Info
This $13.45bn assets worth bank is one of India’s largest state-run banks and is also listed on theForbes 2000. It was inaugurated by Mahatma Gandhi. Starting September 01, 2008, UBI has changed its corporate logo to identify itself differently in changing times.

Critique

Best part about the ad is that it is related to a normal middle class family.The TG (Target Group) group for this bank is largest group of people who would be depositing their savings and maybe salary too, essentially Indian Middle class. These people doesnt calculate the exact benefits in terms of money but focus more on safety of deposits. So the campaign should ideally be targeted for emotional connect and thats exactly where this ad campaign scores. The situations are taken from life of an oridinary person where they are overpowered with emotions from a family member, when this is feeling is connected with bank using tagline ‘yours dreams are not your alone’ it conveys the point home that bank worries about your hard earned investments as your family member would. 
Endpoint, it drives the point home with the intended customer and hence the money spent on marketing should result in increase in sales; so I would give it 5 stars.
IDBI (Industrial Development Bank of India)
New Tagline: Not just for big boys

Background Info:
Established in 1964 by an Act of Parliament to provide credit and other facilities for the development of the fledgling Indian industry, IDBI is currently the tenth largest development bank in the world. Some of the institutions built by IDBI are The National Stock Exchange of India (NSE), The National Securities Depository Services Ltd. (NSDL) and the Stock Holding Corporation of India (SHCIL) IDBI BANK , as a private bank after government policy for new generation private banks.
Critique
IDBI Bank, true to its name, was mainly an industrial development bank. It has now started focus on its retail banking operations (earlier it was more on Corporate banking, SME solutions and agricultural loans) and hence the campaign. The ad shows that two kids are playing football when the ball lands somewhere beyond. When they go to retrieve it they meet a pachyderm and retreat.
Next day when they start to play, the same elephant comes now with a kiddo elephant.  The baby approaches the ball and starts playing with the kids. And comes the tagline – Not just for the big boys.
Am sure most of the people will like the ad, thanks to the affection angle and presence of a kid elephant. I agree its fun to watch, but the good charm ends here. How many of the viewers will goto IDBI bank on viewing this account and put their savings there? How many will understand that ad wants to convey to its target group, same middle class, that not only big corporates but they too can use savings account there and other investment services. Even if its for upper middle class, I really dont see any effect; unless the ads start coming in channels like NDTV, Moneycontrol and Economic Times. Nevertheless the targets will be given to sales team for opening accounts and it has to be done by hook or crook. So eventually the money spent on marketing wont contribute efficiently to balance sheet. I would give 2 starts to it.
Also whatever they do on media, it needs to be backed by warm customer service in the branches as marketing isnt just advertisement alone! (remember Kotler?)

Categories: Uncategorized Tags: , ,

Understanding importance of Banks – I

October 12th, 2008 2 comments

Since starting of this blog, I have tried to cover the topics for the people like myself, those who understand only basics of finance and not the luscious terms like hedge funds, leveraged buy outs, mortgage funds etc.
So we will be writing a series on the importance of banks, how they effect our financial ecosystem. In this first post, let us quote Ilian Mihov, Professor of Economics at INSEAD, France. Here is how he explains it -

Banks fulfill a very important role in the economy by matching borrowers and lenders. When we deposit $100 in a bank, the bank keeps, at most, two to three dollars in its vaults (in fact the money is often in the central bank), the remaining $98 or so is lent to a borrower.

Most businesses require loans for their normal operations. When the banking sector does not work properly, businesses cannot get loans and they have to curtail their production and lay off workers. As they curtail production, they demand fewer products from their suppliers and therefore their suppliers have to reduce their output and fire workers. If manufacturers cannot sell their goods because the firm downstream does not need as many products as before, they cannot generate enough revenue to repay their earlier loans. Businesses go bankrupt and banks experience further problems as their balance sheet deteriorates due to non-performing loans. At this point, banks want to lend even less because of the uncertainty generated from bankruptcies. As they lend less, the vicious circle continues – with producers cutting production and firing workers.

On the top of this, depositors start worrying about their deposits because the non-performing loans have made some banks go belly up – your bank has lent out your money to borrowers who cannot return it. Depositors start withdrawing their cash and banks have even fewer possibilities for lending as they have to hoard cash in case there is a run on the bank. If the financial sector does not work, the real economy can go into a deadly spiral and shrink by 30 per cent as during the Great Depression.
Categories: Finance Tags:

Google’s another attempt to monetize on YouTube

October 8th, 2008 2 comments
In its continuing effort to find a way to make money from its YouTube unit, Google introduced on Tuesday a type of e-commerce ad that YouTube users can click to buy digital goods from Apple’s iTunes or Amazon.com.
Under the new program, viewers of a video with a music track, for example, would be able to click on an icon to download that song from one of the two music stores. “If you like the song, you don’t need to leave Google or leave the site to buy it,” said Bakari Brock, business affairs counsel at YouTube.
The new ad format is the latest that YouTube has introduced in recent months as it tries to turn the site’s large audience into substantial revenue. So far, that effort has met with limited success, according to many analysts.
Google, which paid $1.65 billion for YouTube nearly two years ago, is counting on the video site to help it expand into new forms of advertising at a time when the growth of its core business — small text ads that appear next to search results — is slowing down.
Mr. Brock said the new ads were YouTube’s first step toward building a viable e-commerce platform. For now, the program is limited to buying songs from EMI or the Universal Music Group on iTunes and Amazon. The recently released video game Spore is also available, Mr. Brock said. Over time, YouTube plans to expand the program to include other stores and other merchandise, like concert tickets, he said.
Music labels could choose to place the e-commerce links next to their own videos or on videos uploaded by users, whose images or soundtrack they identified using YouTube’s Content ID system, which allows content owners to find unauthorized material on the site.
Google executives have sent mixed messages about their ability to make money from YouTube. Earlier this year, Eric E. Schmidt, Google’s chief executive, said it had taken longer than he expected to find the right advertising models for YouTube. Last month, he said that he was satisfied with YouTube’s progress.
“You Tube is a huge end-user success and we are awaiting the monetization that goes with that, and we believe it will come,” Mr. Schmidt said. “We are where we should be.”
Peekaboo:
On Tuesday, YouTube also introduced a larger viewer that it said was suitable for the growing number of long-format videos available on the site.
Categories: Technology Tags:

Four Weeks of Financial Turmoil

October 8th, 2008 1 comment
Last four weeks have sent the financial world in a full carnage, as bear guzzled up the giants who had been on bull rampage for quite some time now.

We are sure you would have read about what happened, how it happened and what can happen further, so here are some links to just epitomize the blood bath.
(All of these are either interactive or images)

Journey of the four weeks of dominoes turmoil

Price-Earning ratios graph, indicating when its time for stock to bond market shift

How the Credit Crisis Unfolded

A timeline of bailouts and buyouts of financial companies in US and UK

Sources: NY Times website

Categories: Economics, Finance Tags:

Economics of a non-cash transaction

October 1st, 2008 1 comment
You would have seen these notices outside shops

All Major credit cards accepted, Conditions apply
Condition: Bill should be atleast Rs.200

No return, No Exchange
2% extra on credit cards


This makes us wonder about the business model of a credit card and how the economies of a credit card transaction are placed between various entities involved in a transaction.

Ideally in a transaction, you would see two parties – an entity who pays and an entity who accepts; but to complete a credit card transaction you will need five entities to come and work in unison. (It may happen that some of these entities are same and not different)

Lets go through the last transaction you did when you bought that book for yourself. Say the book was of Rs. 100 and you paid through your ICICI Visa card and signed on the slip, showing HDFC name, which was kept by the merchant. Now as per the illustration below, Merchant would get back only Rs. 98.10 from Acquirer out of 100 and is paid 1.9% less. This 1.9% will now feed the rest of the three entities. And you will pay back full Rs. 100 to your credit card issuer, ICICI bank, at end of your billing period. But ICICI will give Acquirer (HDFC here), the one who placed the card reader in the shop, Rs 98.60 keeping Rs 1.40 to itself. So by now HDFC has already made Rs 0.50 (98.6-98.1). Now HDFC will give Rs. 0.07 to VISA while ICICI will give Rs. 0.08 to VISA.

Now above numbers are for transaction of Rs. 100 so use these numbers in percentage points and you get an idea of money interchanged per transaction in percentage. The numbers here are just illustrative and would change according to network, merchant type etc. But they do give a fair idea.

But then there are many ways of doing a non cash transaction these days: Credit card, Debit Card, Prepaid Card, PayPal/Google Checkout or Mobile payments…

The snapshot below lists the approximate processing fees charged by each major player in various payment instruments (ranging from Cash/Check to Credt & Debit Cards and Mobile Payments).

Categories: Economics, Finance Tags: