Banking promotion: A measured approach<\/p>\n
Elvyn G Masassya, Analyst, Jakarta<\/p>\n
Indonesia's banking crisis isn't over quite yet.<\/p>\n
This is painfully clear, as the performance of the banking
\nsector is only just above water.<\/p>\n
The Capital Adequacy Ratio (CAR) of various banks, for
\nexample, is still close to eight percent.<\/p>\n
In some cases, however, the CAR is even less.<\/p>\n
If requirements were properly followed, these banks would be
\nliquidated. But since they to fall under the supervision of the
\nIndonesian Bank Restructuring Agency (IBRA) management at a time
\nwhen IBRA officials plan to merge, they can avoid liquidation.<\/p>\n
Besides the CAR, the banking sector's less-than-satisfactory
\ncondition can also be viewed from its intermediary function,
\nparticularly in channeling loans.<\/p>\n
Until now, the banks' intermediary function has not returned
\nto normal. The figure of the Loan to Deposit Ratio (LDR) or the
\ncomparison between the loans channeled and the funds collected is
\nstill below 50 percent.<\/p>\n
In fact, the LDR is the main indicator of banks' intermediary
\nfunction. Even a close look at the banking sector's balance
\nsheets will show that some bonds (in recapitalized banks) and
\nBank Indonesia's promissory notes will still dominate the
\ncomposition of banks' assets.<\/p>\n
This means that banks have yet to make productive use of
\npublic funds. This reality shows that, until early 2002, the
\ncountry's national banking condition has yet to be completely
\nsound.<\/p>\n
Strangely, although banking financial conditions seem to be
\njust above water, a number of banks have been intensifying their
\npromotional activities. They adopt patterns of promotion in the
\nbelow-the-line or above-the-line format, using various methods of
\ncommunication.<\/p>\n
Some banks have bought air time for spots on some television
\nprograms for their special features to sell their name.<\/p>\n
This phenomenon has raised important questions: What are these
\nbanks looking for? Why are they willing to spend so much money on
\npromotional activities even though they are not fully recovered?
\nWhat's behind all this?<\/p>\n
The answers vary. Some banks wish simply to attract new
\ncustomers so that they can conduct more intense advertising
\ncampaigns, thus drawing more business.<\/p>\n
The formula for this is easy. The banks just boost name
\nrecognition by putting all their money and resources into
\nadvertising, so that theirs' is the one people recognize.<\/p>\n
Irrespective of methods or motivations, national banking seems
\nto be undergoing a shift of orientation.<\/p>\n
Many banks used to perform only in the corporate segment
\nbefore the onset of the crisis. But afterwards, a lot of banks
\nhave changed their vision, and entered the retail sector.<\/p>\n
Strictly speaking, national banks are now virtually going
\nretail.<\/p>\n
Why is this so? The economic crisis, it seems, has taught
\nbanks that the corporate sector is the most vulnerable to the
\nwhims of the international marketplace.<\/p>\n
Although the crisis of the late 90s also affected the retail
\nsegment, its impact there was less far less severe than that on
\nthe corporate one. This condition has alerted banks to the
\nreality that they need to pay more heed to the retail sector.<\/p>\n
The implication of going retail has surely led to some changes
\nin banks' strategies, including in strategies to collect public
\nfunds.<\/p>\n
Many banks have adopted the one-on-one approach and provided
\nprivate facilities while still in the corporate market.<\/p>\n
Yet this pattern is obviously irrelevant when they play in the
\nretail sector. Thus, it isn't strange if nowadays quite a few
\nbanks lure their would-be customers with a variety of offerings.<\/p>\n
Banks have also designed television programs to draw
\nattention, though they sometimes have no relation at all to
\nbanking. The banks just sponsor the programs.<\/p>\n
They expect these programs to improve their image and, in
\nturn, influence fund owners to choose them.<\/p>\n
The problem is whether this pattern of promotion, which is
\nrather superficial, will prove effective enough to positively
\ninfluence the banks' business.<\/p>\n
In effect, this does not always happen.<\/p>\n
Even though banks sponsor a number of television programs --
\nfrom music shows to talk shows to quiz shows among others, they
\nare, at the least, only able to create brand awareness.<\/p>\n
These programs will not be able to automatically convince
\npeople to switch banks, as the nature of banking in Indonesia is
\na very specific one.<\/p>\n
People's reasoning behind choosing their banks often varies.
\nThe banks must, at the very least, offer assurances of safety and
\nconvenience, which includes satisfactory service.<\/p>\n
The role of these two factors cannot be exaggerated through
\npromotion. Only experience can lead to true assurance.<\/p>\n
So does this mean that the pattern of this mass campaign
\ncarried out by banks is useless? Of course not.<\/p>\n
Mass promotion and image building remain vital. Many remain
\ntraumatized by various cases of bank liquidation in recent years.
\nThis is why public confidence in banks must be maintained.<\/p>\n
The way to develop this confidence, however, should be
\nmeasured and smart. Such a philosophy should also prevail when
\nstrategies for banking promotion are formulated.<\/p>\n
In the end, attracting customers by giving out prizes or
\nundertaking mass promotional campaigns is not incorrect.<\/p>\n
Yet these programs cannot be expected to guarantee that the
\nbanks' achievements in business will be strong.<\/p>\n
And let's not forget that those who are targeted by banking
\nads, are also divided into categories.<\/p>\n
Some of them share common traits when selecting banks: What,
\nfor example, are the benefits? Should they obtain high interest
\nrates, security, services or rewards?<\/p>\n
A broad ad campaign is therefore not merely a stimulus to draw
\ncustomers to a bank. Whether this mindset can be converted into
\naction will depend on each person's individual experience.<\/p>\n
Perhaps, in the months or years to come, a more educational
\napproach will be taken toward advertising.<\/p>\n
Just scripting television ads without smartly packaging them
\nwill only misfire.<\/p>",
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