Banking promotion: A measured approach

Banking promotion: A measured approach

Elvyn G Masassya, Analyst, Jakarta

Indonesia's banking crisis isn't over quite yet.

This is painfully clear, as the performance of the banking
sector is only just above water.

The Capital Adequacy Ratio (CAR) of various banks, for
example, is still close to eight percent.

In some cases, however, the CAR is even less.

If requirements were properly followed, these banks would be
liquidated. But since they to fall under the supervision of the
Indonesian Bank Restructuring Agency (IBRA) management at a time
when IBRA officials plan to merge, they can avoid liquidation.

Besides the CAR, the banking sector's less-than-satisfactory
condition can also be viewed from its intermediary function,
particularly in channeling loans.

Until now, the banks' intermediary function has not returned
to normal. The figure of the Loan to Deposit Ratio (LDR) or the
comparison between the loans channeled and the funds collected is
still below 50 percent.

In fact, the LDR is the main indicator of banks' intermediary
function. Even a close look at the banking sector's balance
sheets will show that some bonds (in recapitalized banks) and
Bank Indonesia's promissory notes will still dominate the
composition of banks' assets.

This means that banks have yet to make productive use of
public funds. This reality shows that, until early 2002, the
country's national banking condition has yet to be completely
sound.

Strangely, although banking financial conditions seem to be
just above water, a number of banks have been intensifying their
promotional activities. They adopt patterns of promotion in the
below-the-line or above-the-line format, using various methods of
communication.

Some banks have bought air time for spots on some television
programs for their special features to sell their name.

This phenomenon has raised important questions: What are these
banks looking for? Why are they willing to spend so much money on
promotional activities even though they are not fully recovered?
What's behind all this?

The answers vary. Some banks wish simply to attract new
customers so that they can conduct more intense advertising
campaigns, thus drawing more business.

The formula for this is easy. The banks just boost name
recognition by putting all their money and resources into
advertising, so that theirs' is the one people recognize.

Irrespective of methods or motivations, national banking seems
to be undergoing a shift of orientation.

Many banks used to perform only in the corporate segment
before the onset of the crisis. But afterwards, a lot of banks
have changed their vision, and entered the retail sector.

Strictly speaking, national banks are now virtually going
retail.

Why is this so? The economic crisis, it seems, has taught
banks that the corporate sector is the most vulnerable to the
whims of the international marketplace.

Although the crisis of the late 90s also affected the retail
segment, its impact there was less far less severe than that on
the corporate one. This condition has alerted banks to the
reality that they need to pay more heed to the retail sector.

The implication of going retail has surely led to some changes
in banks' strategies, including in strategies to collect public
funds.

Many banks have adopted the one-on-one approach and provided
private facilities while still in the corporate market.

Yet this pattern is obviously irrelevant when they play in the
retail sector. Thus, it isn't strange if nowadays quite a few
banks lure their would-be customers with a variety of offerings.

Banks have also designed television programs to draw
attention, though they sometimes have no relation at all to
banking. The banks just sponsor the programs.

They expect these programs to improve their image and, in
turn, influence fund owners to choose them.

The problem is whether this pattern of promotion, which is
rather superficial, will prove effective enough to positively
influence the banks' business.

In effect, this does not always happen.

Even though banks sponsor a number of television programs --
from music shows to talk shows to quiz shows among others, they
are, at the least, only able to create brand awareness.

These programs will not be able to automatically convince
people to switch banks, as the nature of banking in Indonesia is
a very specific one.

People's reasoning behind choosing their banks often varies.
The banks must, at the very least, offer assurances of safety and
convenience, which includes satisfactory service.

The role of these two factors cannot be exaggerated through
promotion. Only experience can lead to true assurance.

So does this mean that the pattern of this mass campaign
carried out by banks is useless? Of course not.

Mass promotion and image building remain vital. Many remain
traumatized by various cases of bank liquidation in recent years.
This is why public confidence in banks must be maintained.

The way to develop this confidence, however, should be
measured and smart. Such a philosophy should also prevail when
strategies for banking promotion are formulated.

In the end, attracting customers by giving out prizes or
undertaking mass promotional campaigns is not incorrect.

Yet these programs cannot be expected to guarantee that the
banks' achievements in business will be strong.

And let's not forget that those who are targeted by banking
ads, are also divided into categories.

Some of them share common traits when selecting banks: What,
for example, are the benefits? Should they obtain high interest
rates, security, services or rewards?

A broad ad campaign is therefore not merely a stimulus to draw
customers to a bank. Whether this mindset can be converted into
action will depend on each person's individual experience.

Perhaps, in the months or years to come, a more educational
approach will be taken toward advertising.

Just scripting television ads without smartly packaging them
will only misfire.