Marketing Mix (7Ps) and Marketing Performance of Some Selected Islamic Banks: An Analysis PDF

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Bangladesh Journal of MIS, Volume 7, No 1, December 2015 Marketing Mix (7Ps) and Marketing Performance of Some Selected Islamic Banks: An Analysis Mohammad Anwar Hossain1 Md. Zahidul Islam2 Abstract: This study is an attempt to find out the relation between marketing mix (7Ps) and banking performanc...

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Marketing Mix (7Ps) and Marketing Performance of Some Selected Islamic Banks: An Analysis Md Zahidul Islam Bangladesh Journal of MIS

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Bangladesh Journal of MIS, Volume 7, No 1, December 2015

Marketing Mix (7Ps) and Marketing Performance of Some Selected Islamic Banks: An Analysis Mohammad Anwar Hossain1 Md. Zahidul Islam2 Abstract: This study is an attempt to find out the relation between marketing mix (7Ps) and banking performance. The study based on the primary and the secondary data embarks that efficient use of marketing mix (7Ps) increases banking performance and vice versa. In this study, the author considered seven major factors of marketing mix (7Ps) followed by four selected private commercial Islamic banks in Bangladesh. The study reveals that people, physical evidence and process are the most significantly correlated to banking performance rather than product, price, promotion and place. Therefore, all Islamic banks should recruit skillful people, improve physical evidence and develop most convenient process to the customers for attractive and sustainable banking performance. Keywords: Marketing Mix (7Ps), Islamic Banking, Banking performance Introduction The banking industry is highly competitive, with banks not only competing among one another, but also with non-banks and other financial institutions (Kaplan and Norton, 2004). There are 39 private commercial banks operating in Bangladesh out of them eight banks are Islamic or are operating based on Islami sharia (en.wikipedia.org/wiki). Success of the banks depends on the amount of quality business brought by the bank executives operating in a highly competitive environment. An improvement to customer services and client relationships can be realized if all parties involved are ready to accept the change and support both at the top management level as well as the employee level (Gupta and Arun, 2008). Those supports could have been a mindset change of employees toward a more professional service by instilling an insight that a bank will have no meaning without its customer. The purpose is to maintain customers’ loyalty to the bank so that they will not turn to its competitor. This is a requirement for the Islamic banking in Bangladesh to make changes and implement a quality service standard with supports from a competitive resource. A recent survey shows that the parameters of marketing performance are transparency, stability and financial performance, innovation, service and product quality, Associate Professor, Department of Marketing, University of Dhaka, Bangladesh Assistant Professor, Department of Business Administration, Manarat International University, Dhaka, Bangladesh

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Bangladesh Journal of MIS, Volume 7, No 1, December 2015

and customization (http://www.ey.come) which are the inevitable part of marketing strategies as a prerequisite for success. This is an implementation of marketing strategy reviewed from a non-financial aspect. A competitive resource and quality service standard are not enough to improve the customer’s satisfaction. Creating a product based on varied market segmentation is a good marketing strategy because it is able to represent the need of any market segments so that a good marketing performance will be achieved (Sharma, 2010). However, there is a lot of information available about the marketing mix (7Ps) for the development of Islamic commercial banks in Bangladesh. In this paper an attempt is therefore made to identify the potential impact of marketing mix (7Ps) on Islamic banking performance. Marketing Mix (7ps) Product is defined as the extension of a service organization which develops a comprehensive service offer to meet customers’ needs and requirements in highly competitive markets (Tilley, 1999). In the view of a bank, different types of accounts are the products that a bank offer to customers. The products in service marketing mix is intangible in nature. Like material products such as detergent or soap, service products cannot be calculated. Banking Industry can be a brilliant example (Kotler, and Keller, 2007). According to Lovelock and Wirtz (2006), the core product is a vital constituent of the services offered and basically addresses two questions; first, “What do the buyers get when they purchase the product” and “What business are we in”? Price is operationally defined as the extension of a service organization which practices pricing policies and activities in setting a service price (Carson et al., 1998). Price means the different types of charges on different types of services imposed by the bank. Pricing in case of services is quite more difficult than in case of products. The price of the product depends upon the services provided by the Bank on the individual product to the customers. Zeithaml (1988) has defined price as “What is given up or sacrificed to obtain a product”. Jacoby & Olson (1977) defined objective price as the actual price of a product/ service. Promotion is defined as the extension of a service organization which uses the components of promotion activities and elements in formulating a service promotion strategy (Ennew et al., 2000). There are many promotional activities that are followed by a bank such as advertisement, personal selling, discount on services etc (Mittal and Mittal, 2009). Strategies to craft the consumer aware of the existence of a product or service. Promotions have become a serious factor in the service marketing. Visualization tangibilizes services through hoardings, print and TV campaigns or advertisements. Marketing communication helps in differentiating the services when there is no perceptible difference available (Jauhari and Dutta 2009).

Marketing Mix (7Ps) and Marketing Performance of Some Selected Islamic Banks

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Place is defined as the extension of a service organization which uses distribution channels and activities in setting a service distribution strategy (Thornton and White, 2001). Suitable location for the bank denotes the service distribution especially in association with a bank. The place is a part of the marketing mix (7Ps) is where the customer receives the product or service. Place in case of services, determine where the service product is going to be located. Place in banking services means providing banking services at right time in convenient way (Borden, 1964). People (the service providers) is defined as the extension of a service organization which is customer oriented in practicing its business; putting the customer at the heart of business activities (Doyle, 1999). People mean existing manpower who work in the bank. The word “People” is used in services marketing in two perspectives. One for employees, i.e., internal marketing while another for customers, i.e., external marketing. In this way the term people indicate both employees and customers in service marketing. All people directly or indirectly involved in the consumption of banking services are an important part of the extended marketing mix (7Ps). (Hubbert, 1995). Process is defined as the extension of a service organization which has set a customer oriented and systematic procedures for a successful service delivery process. The process dimension refers to the actual procedures, mechanisms and flow of activities by which the offering is delivered (Verma, 2000). In the view of a bank, process means how to deliver the different services to the customers. Service process is the way in which a service is delivered to the end customer. A process is a particular operation or method of a series of actions, typically involving multiple steps that often need to take place in defined sequence. Since customers are present during service delivery, 'process' is important for customer satisfaction. Process explains how services are being delivered by service organization. If customer does not have sufficient time, he seeks a bank that provides effort and time saving banking services. Technology has a remarkable influence on the growth of service delivery options (Dabholkar & Bagozzi,2002). Physical Evidence is defined as the extent to which a service organization is interested in creating a customer friendly atmosphere in their working environment (Kasper et al., 1999). In the view of a bank, physical evidence means the existing physical setting of a branch of the bank or all the arrangement within a branch for delivering services. Physical evidence is the material part of a service. Strictly speaking there are no physical attributes to a service, so a consumer tends to rely on material cues. The physical evidences include signage, reports, punch lines, other tangibles, employee dress code etc. Tangibles are defined as the appearance of physical facilities, equipment, personnel and communication material (Zeithaml et al., 2009).

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Bangladesh Journal of MIS, Volume 7, No 1, December 2015

Tangible indicators in the physical environment of a service firm influence behaviour of customers and their future purchase decisions (Burgers et al., 2000). Consumers look at tangible elements and assume about the service firm and its performance (Lenka et al., 2009). Better tangible aspects of service quality of the bank branches enhance customers' satisfaction (Lenka et al., 2009). Literature Review An organization can live and thrive because of the existence of people who move it on. People are the main actors in an organization. They run an organization because they have a goal to achieve it (Baker, 2008). An Organization has to be able to create a superior quality resource in all aspects. A performance in an organization is the answer of the success or the failure achieving ultimate goal that has been set by the organization (Homburg, at el, 2009). The factor that plays important role in improving the performance of an organization is marketing performance. Performance assessment is a determination that is performed periodically on operational effectiveness in an organization, parts of organization and its personnel based on its objective, standard and criteria that have been previously set (Rajasekhara, 2008). Thus, it can be said that the performance of a bank is the final achievement of a service company which consists of several matters, i.e. the having specific targets that should have to be achieved, having a period of time in achieving the targets, and achieving efficiency and effectiveness (Eric and Robert, 2009). This indicates that the performance of a bank is the combination of its employee ability in achieving its purposes. Marketing performance is a factor that may be appropriate to represent the organizational performance as a whole. Marketing performance is also a concept to measure the achievement of an organizational performance (Biswa, 2006). For the Islamic banking in Bangladesh, its marketing performance indicators are based on: sales value, profitability, and market portion. Marketing performance consists of sales value, sales growth, and market portion (Collin & Geoffrey, 2008). Hence these three indicators will ultimately boil down the profit of the company. Marketing performance is a concept to measure the market achievement of a product. Hitt (2003) explains that “performance assessment is a part of the effort of a company in observing suitable strategy which is implemented in facing any environmental changes. A good introduction to the environment will give impact on the quality of resulted strategy which will in turn impact on the marketing performance. The implementation of a good marketing performance in an organization is one of the efforts of achieving the marketing objectives. The achievement of the objectives will require a long process for the products offered to reach the customers and for the customers to decide or choose the products offered.

Marketing Mix (7Ps) and Marketing Performance of Some Selected Islamic Banks

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A broad range of marketing aspects bring various stages that have to be passed by the products and services before finally handed by customers (John, 2002). Therefore that broad scope of activities has to be simplified through marketing programs which are often known as marketing mix (7Ps). Marketing program consists of a number of decisions regarding the mixture of various used marketing tools. 4Ps marketing service is still considered to be less available, therefore the experts added three more aspects, i.e.: people, processes, and physical evidence (Ledgerwood, 2008.). Those three added elements have a strong relationship with services where each activity up to the product selection is an integrated series, resulting a direct interaction between them. Therefore that marketing mix (7Ps) of service will be divided into seven parts usually known as 7Ps, i.e.: product, price, promotion, place, people, process and physical evidence. Objectives The main objective of the study is to examine the relationship between marketing mix (7Ps) and banking performance of private commercial Islamic banks in Bangladesh. The specific objectives are i) To make a rank among marketing mix (7Ps) on the basis of the banking performance. ii) To suggest some policy measures to be adopted by the planners and the decision makers. Methodology To understand the research topic quantitative method was applied for the study. In order to meet the objectives of the study, it was required to collect data both from the primary and the secondary sources. Secondary data were collected by consulting various documents, such as annual reports, journals and internet. Primary data were collected through semistructured questionnaire and interview technique was used to collect the data. The judgmental sampling procedure was used to select the sample units from clients and employees of the four selected private commercial Islamic banks who were willing to respond to the questionnaire. Total numbers of respondents were 120 selected from 12 different branches of 4 different banks in the Dhaka city (Islami Bank Bangladesh Limited, Shahjalal Islamic Bank Limited, Al-Arafah Islami bank, and First Security Islami Bank Limited). Questions are designed in a five point Likert scale to measure the correlation between marketing mix (7Ps) and banking performance. Five point Likert type scale denotes 5 for strongly agree, 4 for agree, 3 for neutral, 2 for disagree and 1 for strongly disagree.

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Bangladesh Journal of MIS, Volume 7, No 1, December 2015

Data have been analyzed by using multivariable regression technique. Descriptive as well as statistical analysis has been done in the study. To test the hypothesis, Pearson’s product moment correlation analysis, multivariate analysis and stepwise regression analysis were used. The statistical computer package SPSS version 17 was utilized to analyze the data. Model The authors have used the banking performance as the depended variables and the marketing mix (7Ps) are independent variables (product, price, promotion, place, people, process, and physical evidence). The authors have run the OLS regression model to determine the significance level of the variables for banking performance. The basic model for the study was therefore as follows: MM=   1 X 1   2 X 2   3 X 3   4 X 4   5 X 5   6 X 6   7 X 7  e Where, MM= Marketing Mix (7Ps), X1 = Product, X2 = Price, X3 = Promotion, X4 = Place, X5 = People, X6 = Process, X7 = Physical evidence and  is constant and  1,  2,  3,  4,  5,  6,  7, are coefficients to estimate and e is the error term, which the authors assumed as nil for this research. Hypothesis development Here, the authors have identified seven prominent factors of marketing mix (7Ps) which are highly related to the marketing performance. The model proves that there jg a significant positive relation between marketing mix (7Ps) and the marketing performance. Based on the literature review different dimensions of marketing mix (7Ps) corresponding to the marketing performance was established. The following hypotheses of the study are proposed: Hypothesis 1 (H1): There is a positive relationship between banking product and the marketing performance. Hypothesis 3 (H3): There is a positive relationship between promotion and the marketing performance. Hypothesis 5 (H5): There is a positive relationship between people and the marketing performance. Hypothesis 7 (H7): There is a positive relationship between physical evidence and marketing performance.

Marketing Mix (7Ps) and Marketing Performance of Some Selected Islamic Banks

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Findings Background Information and Marketing Mix (7Ps) Out of 120 respondents from selected four Islamic banks employees and customers, 77% were male and 23% were female. 30 respondents (15 employees and 15 customers) have been selected for each bank from twelve branches in Dhaka city. The age of the respondents ranging from 18 to 25 was 15%, from 26-35 was 67% and from 36-50 was 18%. The professions of the respondent were 4% students, 66% service holders, 24% business men and 6% house wives. Table 1: Marketing Mix (7Ps) vis-à-vis Banking Performance Marketing Mix (7Ps)

Minimum Maximum

Mean

Std. Deviation

Product

.67

.92

.7818

.05665

Price

.58

.93

.7437

.08312

Promotion

.60

.80

.6991

.04368

Place

.67

.80

.7493

.03457

People

.63

.94

.7653

.07484

process

.65

.90

.7892

.05002

Physical evidence.

.58

.96

.7413

.07757

Source: Field Survey The above table shows minimum and maximum levels of marketing mix (7Ps) regarding banking performance of different private commercial Islamic banks. They are: product 67% to 92%, price 58% to 93%, promotion 60% to 80%, place 67% to 80%, people 63% to 94%, process 65% to 90%, and physical evidence 58% to 96%. Model Summary Table 2: Regression Analysis Model

R

R Square

Adjusted R Square

Std. Error of the Estimate 1 .927 (a) .860 .847 .05703 The calculation shown above indicates that there is a significant correlation between dependent variable and independent variables. And at 5% level of significance the

Bangladesh Journal of MIS, Volume 7, No 1, December 2015

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correlation is 92.7%. Here, adjusted R square is 0.847 which determine that about 84% variation of dependent variable is explained by independent variables included in this model. Table 3: Multivariate (OLS) Analysis Links (following

Hypotheses

B

Std. Error

t-value

Result

Product

H1

0.106

.090

2.240***

Accepted

Price

H2

0.124

.035

2.420***

Accepted

Promotion

H3

0.101

.038

2.090***

Accepted

Place

H4

0.148

.046

3.124***

Accepted

People

H5

0.646

.052

12.178***

...