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Marketing Mix for Banking Sector

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The deregulation of the Nigerian economy through SAP affected the Nigerian financial system in many ways (Umunnaehila, 1996). These include methods of licensing new banks and financial institutions, the pricing of credits and deposits, foreign exchange management, the sectoral matrix of credits and deposits, and banks’ branch networking, among others. The restructuring policy of SAP, also, brought deregulations in the Nigerian banking system which encouraged many new banks to enter into the Nigerian banking industry, the results of which were shown in intense competition within and without the Nigerian banking industry. This increased competition resulted in banks seeking for clients and designing services that would meet clients’ needs and wants. Consequently, Nigerian banks started designing new approaches and strategies to ensure survival and growth (Umoh, 1992).

However, the performance of banks in the Nigerian banking system does not seem to have been good enough because while some banks appear to have brought dynamism, challenges, competition, and growth in the banking sector, others seem to have lost some of the confidence which their clients had in them, in addition to poor performance indices in their operations, which have resulted into all forms of distress. This unclear nature of the effectiveness of the approaches utilised by Nigerian banks to cope with changes in the banking environment constituted the major research problem of this study.

The poor condition of some Nigerian banks is a function of some interrelated problems. According to Sheng (1991), the causes of bank distress, or poor performance, are due to micro-economic factors (bank management practices and strategies) or macroeconomic factors (environmental factors). Mamman and Oluyemi (1994) have, however, posited that bank failure/poor performance in Nigeria is a function of mismanagement of relevant dimensions of organisational activities. Informed normative thought is of the impression that superiority of management is a major consideration which differentiates excellent (effective) banks from less successful (ineffective) banks, and this is in contrast to the impression that macro economic variables are the salient factors in all banking failures (Aristobulo, 1991).

Faced with the compelling need to achieve their organizational goals, Nigerian banks can explore new avenues, approaches, strategies or practices to achieve set goals and objectives. Many approaches can be used to achieve set corporate goals and objectives. These approaches are generally called strategic management, and the thrust on strategic management has given rise to strategic marketing (Jain, 1983). Marketing considerations, together with those of other functional areas of business, play an important role in designing and implementing corporate policies and strategies. Once corporate policies and strategies are designed and implemented, the role of marketing is to contribute to their achievement (Cravens, Hill & Woodruff, 1980). Marketing success is a major determinant of organisational success (Adler, 1967), and the future survival and growth of any organisation (including banks) in an economy can be said to be a function of the efficiency and effectiveness of its marketing practices (Udel, 1972).

The changes in the Nigerian banking system demand the adoption of efficient and effective marketing strategies. Nigerian banks need to adjust to the changes in the banking industry. To understand and take advantage of the changes in the industry, which may be opportunities or threats, Nigerian banks need to understand the important factors shaping the Nigerian banking industry and the relevant strategic decisions to be taken. These strategic decisions must take into account the relevant competitive, economic, political, regulatory, legal, technological, and socio-cultural factors, in addition to considering their strengths and weaknesses, among others.

According to Johne and Davies (1999) organizations experiencing competitive business threat can operate efficiently and effectively through the marketing strategies of market innovation (i.e by improving the mix of market segments served), product innovation (i.e. by improving the mix of products and services offered to clients and customers) and process innovation (i.e. by improving the mix and efficiency of internal operations). Generally, it is claimed by marketing analysts and practitioners that marketing inputs are important ingredients for achieving effectiveness (Day & Reibstein, 1997; Kim & Mauborgne, 1997; Johne, 1999). Marketing, also, has been implicated as the most exposed organizational business function to changes in environmental factors (Mann, 1980). Therefore, marketing of banking services in Nigeria requires a strategic approach in order to be efficient and effective (Nwachukwu, 1993). Ads by Google

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This study is likely to be useful to financial institutions, service firms, and professional managers who are constantly looking for marketing approaches, practices and strategies that can be used to achieve organisational goals and objectives. Also, governments, organizations, and individuals concerned with formulating banking policies and strategies can benefit from this study. Finally, this research study is expected to stimulate research interests among academics, scholars, and students in other aspects of bank services management.


Marketing strategies and tactics are concerned with taking decisions on a number of variables to influence mutually- satisfying exchange transactions and relationships. Typically, marketers have a number of tools they can use, and these include megagmarketing (Kotler, 1986) and the so-called 4ps of marketing (McCarthy, 1975), among others. This section of the paper examines certain relevant dimensions of marketing strategy and effectiveness in the following subsections.

Marketing Research

Researching the market for any product or service is undertaken to gather relevant information and data that aid a number of marketing management decisions, which include the development of a new product, modification of an existing product, the content of advertising, pricing level, distribution channels, customer and client behaviour, among others. The effectiveness of marketing research is often studied in relation to specific marketing decisions. Its importance as a marketing variable has been recognized over time (Rothwell et al., 1974; British Institute of Management, 1975; Baker & Abou-Zeid, 1982; Connell, 1979; Takeuchi & Quelch, 1983; Alexander, 1985; Walsh & Roy, 1983; among others) .It seems logical, therefore, to hypothesize that market research has a positive influence on organisational performance/effectiveness. Given the dictate of the marketing concept that the customer/client is, or should be, the focus of the organization, it is axiomatic that marketing and market research be included in an organization’s operations that result into managerial effectiveness.

However, investigations of the existence and effectiveness of marketing and market research have been called into some question. Criticism by Ames (1970), Wilson (1984) and King (1985), among others, has emphasised that counting the number of heads in marketing research departments, or estimating marketing research budgets, focuses on the trappings of marketing, not its substance. While much research exists which can help companies implement marketing research strategies and policies, relatively little work has been done which suggests how these marketing research variables relate to organisational performance and effectiveness, either in absolute terms or in relation to other marketing factors (Baker & Hart, 1989).

Product Strategy

Some normative and empirical researchers have posited that, ultimately, organisational effectiveness is a function of its product or service policy (Baker, 1985; Majaro, 1977; Borden, 1963; Aluko, 1983). For example, “Price” is the price of the product or service, “advertising” is the advertising of the product or service, “distribution” is the distribution of the product or service, and “promotion” is the promotion of the product or service. All of these are product considerations (Kent, 1984). NEDO (1977) published a study on non-price factors influencing export performance or effectiveness, and one of the major aspects of the research was defined as product, including design, reliability, specification, delivery, and after-sales service.

The necessity of product innovation is widely recognised as being of critical importance, not only to organizational and strategic effectiveness, but also to a nation (Baker, 1985; Kotler, 1980). It is to be noted, however, that the many factors which comprise product or service policy, (such as product differentiation, design, performance, reliability, technological advancement, superior manufacturing, new product development, product modifications, diversification, etc) are organic ways of gaining competitive advantage and achieving organizational success and effectiveness. King (1985), in an assessment of marketing, makes the point that “Real” marketing’s take-off point is designing a product or service to meet the needs and wants of a group of customers or clients. It embraces suitability for purpose, quality, design, availability, after sales service, and other aspects of a customer’s/client’s relationship with a product brand.

Promotional Strategy

The quality of a product/service can be enhanced by what Piercy (1982) calls ‘marketing intangibles’. A number of studies have included ‘service’ on the list of factors distinguishing product success from failure. For example, in the list of strengths displayed by Japanese industry, Baranson (1980) included ‘financial support’ and ‘after-sales service’.

The sales team can be a source of competitive advantage and effectiveness for a company. Piercy (1985) notes that the critical success factor (CSF) in the sampled companies was aggressive selling. Similarly, Baker and Abou-Zeid (1982) show that in award-winning British companies, personal selling was the most widely used method of promotion. A great deal has been written regarding the comparative success of various selling styles and a various sales attributes. Complex models have been developed to aid the decisions central to the management of sales forces in the field, namely: allocating selling effort and setting sales force size; territorial design; sales forecasting; evaluation and control (Bestwick & Cravens, 1977). Sales volume is also seen to be a function of environmental factors, company marketing strategy and tactics, sales-force organisation, and policies and procedures such as organisation, deployment of resources, recruiting and selection, training, rewards and incentives, evaluation and control (Walker, Churchill & Ford, 1979; Ryans & Weinberg, 1981; Avlonitis, Boyle & Kouremenos, 1985). Personal selling is an important marketing tool, which depends for its success/effectiveness on a number of factors such as organisation, training, remuneration and motivation, supervision, and evaluation (Baker & Hart, 1989).

Contemporary strategic marketing practice calls for more than developing a good product or service, pricing it adequately, and making it available to target customers or clients. Organizations should also promote their products and services to present and potential customers and clients. Udel (1968) identified marketing promotions as the most important facet of marketing strategy leading to effectiveness. Advertising, an aspect of promotional strategy, has both an informative and persuasive role, and in this respect can alter customers’/clients’ perceptions of a product or service. As Pickering (1976) suggests, advertising can increase brand loyalty, thereby decreasing price elasticity through increased differentiation. Bain (1956) posits that advertising can have a cumulative and long lasting effect on organisational and strategic performance.

Pricing Strategy

Some studies have included price on the list of critical factors, which determine success and effectiveness. Atkin and Skinner (1975), for example, reveal that companies regard pricing policy/strategy as being either vital or most important to their business performance and effectiveness. Also, Mikesell and Farah (1980) posit that the decline of the USA share of the markets in developing countries was mainly due to price factors.

By contrast, a number of writers maintain that price is the least important determinant of demand. Posner and Steel (1979), for example, contend that non-price factors are paramount in advanced countries. Such a view is upheld by the studies of Kavis and Lipsey (1971), Udell (1964) and Patchford and Ford (1976). Evidently, there is great diversity of perspective with regard to the relative importance of price and non-price factors in determining the success and effectiveness of strategies and companies.

Megamarketing Strategy

In addition to the traditional marketing mix elements (i.e., the so-called 4Ps of marketing) of product, price, place, and promotion, marketing executives can use the tool of megamarketing to achieve marketing objectives (Kotler, 1986). Megamarketing is the strategically coordinated use of economic, psychological, political, and public relations skills to gain the co-operation and understanding of some relevant parties in order to enter and/or operate in a given market efficiently and effectively.

Marketing is concerned with the management of mutually-satisfying exchange transactions and relationships between and among the relevant parties. However, it is sometimes desirable to create additional incentives, services, and pressures for non-customers/clients. Megamarketing, thus, takes an enlarged perspective of the skills and resources needed to enter and operate in certain markets or segments. In addition to preparing attractive product or offers for customers or clients, megamarketing may use connections with powerful people in positions of authority to corner marketing jobs. Also, situations exist where markets in which the established participants or approvers have made it difficult for companies with similar or even better marketing offers to enter or operate.

The difficulties or barriers can be in form of discriminatory legal requirements, political favouritism, cartel agreements, social or cultural biases, unfriendly distribution channels, and refusals to cooperate, among others. These challenges and difficulties can be handled via megamarketing strategy. Marketers have traditionally defined marketing environment as those external factors, which cannot be controlled by an organisation. But megamarketing posits that environmental factors can be handled through lobbying, legal action, negotiation, public relations, among others (Zeithaml & Zeithaml, 1984). Also, traditionally, it is assumed and posited, through Say’s Law of economics, that demand creates its own supply. But some markets can be blocked sometimes, thereby creating supply shortages, and this may necessitate the use of megamarketing strategy.

Distribution Strategy

An important proposition in marketing and economics is that consumption depends on availability/distribution (Baker, 1980/81). But despite its obvious importance, distribution remains a largely neglected topic in marketing (Baker, 1992; Drucker, 1962). The marketing manager has two fundamental alternatives with respect to distribution strategy: he can either seek to work closely with intermediaries, or else assume their functions and push his products or services through the distribution channel; or he can seek to establish a franchise with ultimate consumers or clients and therefore pull his product or service through. Push strategies usually emphasize personal selling, while pull strategies tend to emphasize advertising and sales promotion (Baker, 1992). When selecting a channel of distribution for corporate effectiveness, a marketing manager should pay special attention to environmental factors, product and market characteristics, and company’s strengths and weaknesses, among others.

When considering distribution policy and strategy, corporate marketing managers might try to gain competitive advantage by seeking a higher level of customer/client service. In this context, customer/client service is seen to mean all aspects of the distribution process, which add value to the exchange transaction from the customer/client perspective (Wilson, Gilligan & Pearson, 1992). However, higher levels of customer/client service can mean higher costs of distribution, and this might, therefore, reduce a company’s price competitiveness and effectiveness. Wilson (1979) highlights the necessity to see costs as a whole since a reduction in one area can generate a disproportionate increase in another area. For example, it might be cheaper and more efficient to use an expensive means of transportation (e.g. air) than to maintain a number of local warehouses. The distribution strategy is possibly more difficult to manage than the other elements of the marketing mix because its operational decisions involve other functions to a greater extent. It is perhaps because of this organizational fragmentation of responsibility in distribution strategy activities that the idea of distribution as an integrative activity in business has only relative and recently developed (Wilson, Gilligan & Pearson, 1992).

The need for auditing all the marketing-mix elements stems from change, and the distribution element of the marketing mix has, perhaps, been subject to more changes than any other element of the marketing mix in some countries. For example, in the UK, substantial changes have been observed in containerisation, computerisation, and distribution channels (Wilson, Gilligan & Pearson, 1992).

According to Chen (1999), in an industry, which is as complicated as the financial industry, there is no simple formula, which can predict successful and unsuccessful organizations from the surrounding environment. Critical Success factors (CSFs) and a company’s competitive ability and capability are the salient ingredients for competitive advantage (Bamberger, 1989). Therefore, an appropriate identification of a bank’s CSFs can provide an avenue for assessing and building up its effectiveness and competitive advantage (Sheng, 1999). Corporate business strategy (in marketing, operations/production, finance, and personnel, among others) has been identified as an effective strategy that influences resource allocation, competitive advantage, and consequently, corporate efficiency and effectiveness (Hofer & Schendel, 1978). This research focused on the effectiveness of marketing strategies in Nigerian banks.


This section of this paper presents the data collection and analysis approaches used in this study. Specifically, the chapter describes the study population, sample size, research instruments, and data analysis techniques, among others.

Population and Sample Size

The population for this study consisted of the banks in Nigeria, most of them having their headquarters in Lagos State of Nigeria. These banks were the commercial banks, the merchant banks, development banks, and community banks. The banks ranged from small to large banks operating in Nigerian cities, communities, and villages.

The data for this study, which was a subset of a larger study, were collected from a sample of thirty-nine licensed Nigerian banks operating in Lagos State of Nigeria. All the four big Nigerian banks (First Bank, Union Bank, United Bank for Africa, and Afribank) were included in the sample. These four big banks at a time accounted for more than sixty percent (60%) of banking activities in Nigeria (Ndekwu, 1994). Since the use of simple random sampling would have resulted in an over-representation of the small banks (Kim & Lim, 1988), the thirty- nine banks were selected on the basis of stratified sampling technique.

Subject (Ss) for the research study consisted of marketing executives in the sampled thirty-nine Nigerian banks. The respondents consisted of Assistant General Managers, Senior Managers, Managers, Assistant Managers, and Officers responsible for marketing activities in their banks. The ages of these respondents ranged from 26 to 53 years. The working experience of the respondents ranged from 2 to 33 years, with most of the respondents having very high formal education; only five respondents had Diploma certificates in banking. Also, one respondent had a degree of Ph. D, while one hundred and seventy seven (177) respondents had Bachelors and Masters degrees with professional qualifications in banking and accounting. One can, therefore, expect that these respondents were qualified enough to evaluate the marketing strategies and effectiveness of their respective banks. Therefore, subject to the usual methodological limitations imposed by a survey research approach, the data gathered for this research may be regarded as a rich data set.

Research Instrument

Three hundred and forty (340) copies of the research instrument (questionnaire) were administered to marketing executives of the sampled thirty- nine licensed Nigerian banks operating in Lagos State of Nigeria. To get the co-operation of the respondents, the nature and purpose of the research study were explained to the respondents. The respondents were, also, promised complimentary copies of the research report (as response inducement) if they so desired.

Using senior bank executives who were undergoing a six-month training at the University of Lagos Nigeria, a pilot study of three Nigerian banks was undertaken in order to test and improve the research instrument. Also, during the pilot study, cross-interviews were conducted, whenever possible, with top executives of some Nigerian banks who were not respondents to the pilot study. This was done to improve the quality of the research instrument.

Of the 340 copies of the questionnaire, 194 copies were returned. Only 183 copies of the returned questionnaire were found completed and usable, resulting in an effective response rate of 54%. This response rate is reasonably better than some response rates in previous studies involving Nigerian managers/executive (Michell & Agenmonmen, 1984; Okoroafo, 1993). According to Chen (1999), a response rate of 38 % is typical of survey research works involving banks. Also, there is the possibility that respondents were more likely than non-respondents to engage in strategic marketing practice.

Section A of the research instrument required the respondents to indicate the emphasis their banks have placed on specific aspects of marketing strategies using a six-point scale ranging from “Very high emphasis” (5) to “No emphasis at all” (0). Section B consists of subsections B1 and B2. Subsection B1 of the research instrument required the subjects to provide some quantitative data of their banks’ performance with respect to average gross earning, average market share, average marketing cost as a percentage of total cost, and average profit before tax. Subsection B2 asked respondents to indicate the relative effectiveness of their banks’ marketing strategies in achieving their banks’ performance measures, ranging from “very effective” (5) to “Not effective at all” (0).

Section C of the research instrument asked respondents to provide some of their personal data (age, working experience, educational qualification, and the position/title of respondent). Respondents were also, asked to list five managerial problems affecting the effectiveness of strategic marketing practices in their banks, and were required to suggest solutions to the identified problems. These identified problems and solutions were utilized in discussing the findings of this research study.

Operationalization of Research Variables

Two major variables were used in this research. They include marketing strategy variables, and bank performance variables. Marketing Strategy Variables were developed from relevant literature (Udel, 1972; Kotler, 1986; Bush & Brobst, 1979; Baker & Hart, 1989). These marketing strategy variables include product strategy, promotional strategy, pricing strategy, distribution strategy, and mega-marketing strategy. These five broad marketing strategy variables were operationalised into twenty- seven (27) items.

Bank performance variables were both quantitative and qualitative. Quantitative bank performance variables were provided by respondents in the questionnaire on average gross earning, average market share, average marketing cost, and average profit in the last five years. Qualitative data on bank performance were obtained from respondents’ perceptual response on the extent to which the following performance measures have been achieved using their banks’ marketing strategies: Profit, Market share, Marketing cost, Gross earnings, Capital employed, Asset quality, Quality of marketing management practice, Liquidity, Turnover of top marketing staff, Management of departmental crisis.

The marketing performance measures were developed from the works of Mathew, Buzzell, Levitt, and Frank 1964, and the modified bank performance/CAMEL measures of Adewunmi (1985), which comprise Capital adequacy, Asset quality, Management practice, Earnings, and Liquidity (CAMEL).

The normative and empirical works of Leithmann and Hulbert (1972), Lassitz and Greene (1975), Kinnear and Taylor (1983), Levine (1981), Blalock (1979), Wimmer and Dominik (1987), Perry (1981) Nie et al (1975), Labovitz (1970, 1975), Abelson and Turkey (1970), Steers (1975), McNemar (1972) and Ekpo-Ufot, 1992, among others, provided the intellectual prop for the measurement scale, reliability and validity, and the data analysis methods used in this research.

The reliability of the research instrument was determined by using the Levine (1981) version of split-half reliability test and Cronbach alpha formula. Split-half reliability coefficients were not calculated for some of the measures in the research instrument because these measures did not meet the condition for spilt-half method (Goode & Hatt, 1952). The calculated reliability coefficients met Srinivasan’s (1985) acceptability criterion of 0.7 or higher reliability values. Moreover, Chen (1999) posits that a reliability coefficient of 0.5 or higher is considered sufficient when dealing with exploratory research combined with invalidated data. Statistical analysis used included descriptive statistics and Pearson’s product moment correlation analysis. All the data analysis procedure (descriptive statistics and Pearson’s product moment correlation analysis) was accomplished using the IBM SPSS/PC+ computer package. Data analysis was done at 95% confidence level or higher


Effectiveness of Strategic Marketing Practices

Table 2.0 presents the descriptive statistics of the effectiveness of strategic marketing practices of the studied banks. The finding shows that strategic marketing practices have been reasonably effective in banks, with strategic marketing effectiveness being highest in C26 (asset quality), C25 (capital employed) and C2 (liquidity). The essence of strategic marketing is to achieve set objectives, and these objectives can be measured in terms of profit, market share, marketing cost, gross earnings, capital employed, asset quality, quality of marketing management, liquidity, turnover of marketing staff, and management of department crisis. The effectiveness of strategic marketing practice in the studied banks is encouraging, with the highest level of effectiveness (96.1%) shown in asset quality, capital employed, and liquidity. These are the CAMEL measures of performance.

According to Umoh (1992), the effectiveness of banks’ strategies determines the survival and growth of banking system in Nigeria, especially in an ever-changing banking environment, and it is conventional in banking to assess the effectiveness of a bank through the CAMEL (C = Capital Employed; A = Assets quality; M = quality of Management; E = Earnings, and L = Liquidity) measure. Effective bank management through strategic marketing assists in the employment of capital raised, and manages the banks’ asset portfolio in viable business options so that the assets are seen to be performing and yielding returns. The marketing strategies of banks, in order to show reasonable levels of effectiveness along the CAMEL measures, have to emphasize a marketing management team with foresight, experience, and commitment towards the survival and growth of the bank, among others.

Oluyemi (1995) posits that the most widely accepted measure of performance of licensed bank is current profitability, which is measured in terms of return on assets and return on equity. For example, return on equity measures the extent to which banks’ strategic marketing practices have created value from the funds provided by bank owners. A Nigerian bank that creates comparatively large amounts of value (in relation to its equity) through is strategic marketing practices can be said to show high level of effectiveness. And as table 2.0 shows, the studied banks have shown appreciable levels of effectiveness using the identified measures of performance.

The Relationship Between Emphasis on Marketing Strategy Variables and Performance Measures

Table 3.0 presents the correlation between emphasis on dimensions of marketing strategy (B1 1 to B1 32) and quantitative measures of performance (C1 i to C1 iv). The crucial quantitative marketing performance measures of average gross earnings (C1i), average market share (C1ii), marketing cost (C1iii), and average profit (C1iv) were predicated to be positively associated with emphasis on each of the marketing strategies.

Sixty of the 128 coefficients (47%) are statistically significant at 95% confidence level or higher. The data can, therefore, be accepted as above chance.

The best predictor of gross earnings (C1i) is pricing strategy (B1 30) with a correlation coefficient of 0.4219, P

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