SBI Kohinoor Business Model
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Q: Was the decision to attract ultra HNI customers through a separate dedicated branch a good idea?
A: HNI customers have requirement of privacy, personalised services, and exclusive banking facilities. The following reasons highlight the need for separate dedicated branch:
It was in keeping with SBI’s motto of being the “Banker to every Indian”. An ultra HNI expects best and instant service, e.g. banking round the clock. SBI could not have provided the same services at a branch where non-HNI customers also had their accounts, as this would alienate them. The SBI Kohinoor Banjara branch received many account opening requests within a few days of its opening. In addition, it also broke even in 3-4 months compared to the normal tenure of 12-18 months, and the current profit figures justify the opening of the branch. According to the Chief General Manager of the Kohinoor Branch, the deposits with the branch crossed 500 Cr. within the first year and the advances also have exceeded 150 Cr*. Establishing Kohinoor brand of SBI making it exclusive to the segment of UHNIs in India. *Source: The Hindu Business Line, November 7, 2012
Q: Critically evaluate the service design, customer selection and the employee selection strategy of SBI Kohinoor.
A: Service Design: Amongst the services of SBI Kohinoor, it can be argued that the better services were those of Loans (diversified range), FOREX Services (Vacationing is ranked 1 in terms of expenditure), and other NRI services (large NRI population from AP due to the IT/ITeS boom). Other chargeable facilities like the Lockers generated additional revenues. However, the Financial Planning services were not mentioned. Other chargeable facilities at the SBI Kohinoor such as the conferencing/ coffee bars were rarely used. Customer Selection:
Emphasis was laid on getting those customers who did not have their accounts with SBI. Ultra HNI’s demanded exclusivity and privacy from their banks. Therefore, by opening accounts by only invitation, and no active marketing except personal home visits by SBI personnel and word-of-mouth, SBI was able to ensure the same. SBI ensured that every HNI customer they attracted was not just someone wealthy, but also socially responsible. This was the unique feature for this branch. Employee Selection:
Employees were selected on the basis of their location, keenness, past track records and their ability to perform. This ensured deliverable, exclusive and round the clock banking services feasible. Training of staff in Financial Planning and Advisory services was not necessary as Customers would listen to their own advisors first and then to the new SBI managers. Yet, specialized training was provided to the Employees in Negotiation skills, Product knowledge and etiquette.
Q: Assume that SBI had a strong intention to roll out Kohinoor style branches, how should it have approached piloting the concept? What should be aim of such tests?
A: The aim of “Kohinoor” special branches is to attract Ultra High Net-worth Individuals (UHNIs) in a sustainable manner catering to their specific needs. This pilot project will enable to develop a competitive as well as profitable model for future rollout in cities where UHNI population is high.
The Framework calls for positioning the banking products and services based on the customer’s need to privacy, personalised services, exclusive banking facilities and even other features that went beyond banking. Following are the ways by which SBI could roll out Kohinoor style Branches:
Studying the number of HNI customers based on their highest population density area in each city. This would provide the location of the pilot branch for that targeted city. Studying the net worth of each HNI closest to the pilot branch for estimation of the minimum deposits to be kept at that SBI branch per customer. Studying the spending/investing and saving patterns of the HNI’s for the pilot branch. Developing banking products/solutions that fit most of the HNI customers, if not all. Sending invitations and personal visits by higher management to those HNI’s compatible with the above criteria, and then opening the branch, subsequently.
Q: In your judgment, is the concept ready to be rolled out successfully throughout the country? Assess both the positives and negatives in your assessment and then make a final call.
Huge market size of INR 235 Trillion, divided into approx. 219,000 families by 2015-16. Huge expenditure involved in setting up of these UHNI banking branches due to the geography and demographics. Opportunity to be the first in the market to cater exclusively for UHNIs. Separate operating model implementation for each branch/city required to fit the taste for each and every HNI. SBI has a legacy image of being an archaic organization. It had to break out of this notion to create Kohinoor Business Model. Segmentation required redefining processes. On the other hand, SBI is known as the common man’s bank. It did not want to send off wrong signals that it is not focusing on its existing customers and was no longer catering to all.
Yes, the model is ready to be rolled out, but in phases. By being the market pioneers in this segment based on a tried and tested model (SBI Kohinoor pilot branch in each city), SBI has the distinct chance to create the Kohinoor Brand based on the First Mover and Second Mover Advantages.
Q: Finally, think of serving the same UHNI customers through some of SBI’s existing branches. What would be the advantages and challenges of such an approach over the independent Kohinoor type approach? On balance, which one do you favour and why?
A: The advantage of the serving UHNI customers through existing branches would be that there would be a significant decrease in the initial
investment required by SBI, as no new branches would need setting up. Potential risks, due to chances of failure are also thus averted. The challenges would be:
As mentioned, HNI customers demand exclusivity and privacy. It will be difficult maintaining the same at branches that are already over-crowded. Therefore, chances of UHNI opening an account in existing branches are pretty low. Even if they open an account, retaining the UHNI Customers shall be challenging. Services as that of round the clock banking / personal bankers’ assignment are in direct contrast to SBI’s present structure and system. Chances of brand dilution exist.
On balance, it would be best to opt for the model currently being deployed by SBBJ through their Jaipur Branch, i.e. of integrating back office work with the front-end banking branches for easy transition. As the number and the wealth of the HNI’s increases, SBI should then set up individual branches catering to the HNI’s.