The ‘State Bank’ Case Analysis

1. Executive Summary

State Bank is a profitable, family-run business conveniently located at downtown Hillsborough – the countryseat. Its President is Mack McNeill and its newly appointed Director of Marketing is his son Phil McNeill.

It not only serves the Hillsborough populace of 15000, but also the suburbanites and farmers as far away as 20 miles. This is a full-service bank underlining the friendly, small-town service approach, while maintaining conservative policies on interest rates and loan procedures.

Apart from the two small limited service branches of two metro banks, there is only one other full-service bank located similarly in downtown Hillsborough, also, having a similar approach in terms of its overall service and policies. Both the banks share the business equally.

Phil McNeill’s proposal is to differentiate the bank from its current and future competitors by promoting and campaigning for a new image as ‘The Friendly Bank’ by giving the bank a new look, using new advertising and printed materials (shifting to pastel), and training its employees to give better and friendlier service. Phil expects this move will make State Bank more attractive, which would help attract a larger share of the areas new residents and businesses.

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The new look of the State Bank should not give the impression that its priorities have changed.

State Bank should move towards a new look slowly, rather than give a surprise to its clients, which might even result in becoming a shock! The plans should go ahead in a step-by-step process. Feedback and suggestions should be collected from current clients while employees should contribute in with their suggestions as well.

The bank should introduce calculated changes, which will help differentiate the bank to attract new clients, while keeping the older ones happy!

Current Marketing Situation

a) Company Background:

1. Market Description:

State Bank is conveniently located in downtown Hillsborough – the countryseat. The bank emphasizes on being the friendly, small-town local bank, serving mainly the Hillsborough population and other suburbanites and farmers as far away as 20 miles. The older townspeople and farmers are State Banks loyal customers. On the other hand, new people/residents are continuously moving into the Hillsborough area, and there are new businesses developing there as well.

2. Product Description:

State Bank is a full-service bank, stressing on the image of the friendly, small-town service bank. The bank follows a conservative policy, e.g. insisting on 25% down payment on homes and relatively short maturities on loans. However, State Bank has been very profitable, earning about $400,000 last year, 1% of the assets.

3. Competitive Review:

Apart from the two limited-service branches of two metro banks, located on the main highway, State Bank has only one other full-service bank as a competitor. The other full-service bank is also located similarly in downtown Hillsborough, with a similar image as a friendly, small-town service bank. Both the banks share the business equally.

State Bank’s employees are all local residents, trained to be friendly with the customers and knowing them on the first name basis. Even Mack McNeill tries to know all its customers in the first name basis, and in the process, maintains a competitive edge in giving a personalized service experience to all the clients. Its loyal customers are mainly the older townspeople and farmers.

b) Current Issue:

As new residents and businesses are increasingly moving into the Hillsborough area, State Bank wants an increasing share of this business with them. However, for that it is necessary that the bank differentiates and innovates its approach and structure in some way, which will not distract its current customers, however, be helpful in attracting new customers and businesses in the region.

c) Possible future directions:

State Bank can either move towards an aggressive marketing strategy to differentiate itself from its local competition, or continue to share the business as usual, without any kind of major differentiation which will make them stand out over its competitors. While the first option might give State Bank a strong competitive advantage over its competition, and help gain the new residents and businesses, but if the strategy is miss-managed, it can result in a big financial loss and also the bank might loose its current customers.

In the case of the latter option, the Bank might continue for sometime with its current loyal customers, and share the market equally with its local competitor, but will at the same time risk itself of being in myopia, and loose in the long run if its competitors differentiate and any other big bank enters its market.

SWOT Analysis

Strength: 1. It’s a family run full-service bank, which is conveniently located in a small town name Hillsborough. So this bank can serve more efficiently than other banks.

2. More over all the employees are from that town. So they have more understanding among them.

3. As employees and the customers all ready know each other very well, they have very friendly relationship with each other. Weakness:

1. The bank follows a conservative policy, meaning they charge a high interest rate because of its low available fund.

2. Because of its low fund the bank cant take aggressive approach about their strategies. Opportunity:

1. The company has only one strong competitor in the market. So they can easily study their competitor’s overall strategy and come up with a better plan to beat them.

2. The bank already has a very good reputation in the market. That’s why any kind of new approach will be easier to market to the clients.

3. By taking the a step towards differentiating their bank they can capture large market share. Threats:

1. Some of the older townspeople and farmers who are loyal customers will question the sincerity if any kind of new decision is taken.

2. If a new plan fails, the bank might have to face a big loss of money. Even it might lose it position in the market.

4. New Objectives and Issues:

a) Positioning Strategy:

State Bank looks to position itself as the “Friendly Bank”, which will differentiate it from other local banks. For this reason, it is important for the bank take certain steps towards strengthening its desired place in the market:

1 State Bank must redesign its interior and exterior in such a manner which looks more inviting and relaxing for its clients, while at the same time, it should alter its looks so much that the old/loyal clients find it difficult to relate this bank with the one they had known. The bank must become more spacious and comfortable, with more relaxing features inside. While on the outside, the bank should introduce a stronger and more inviting architecture, which would clearly reflect its reliability, strength and warm and friendly culture.

2. State Bank must initiate an attractive positioning campaign, which would work to inform its clients about its improved infrastructure bolstering its renewed commitment to serve its valued customers better.

3. State Bank must review its Brand Image, the color schemes which would become a part of its identity. This step, however, should be taken very carefully, making everything look an improvement rather than a complete change.

4. Last but not the least, State Bank must highlight its image as the local small-town bank by training its employees so communicate more with the local population by being involved in some socially responsible projects initiated by clubs founded and funded by State Bank.

This step will not only boost the image of the Bank among the locals, but also strengthen their relationship with the Bank, while bring people closer to its employees. The Bank can also encourage its clients and the local population to collaborate with them to build a better Hillsborough neighborhood, in the process, making the locals feel to be an integral, important and socially necessary part of the State Bank.

b) Product Strategy:

State Bank offers full banking services, however, it must innovate to differentiate itself from its local competitor who do the same. State bank must introduce some more financial services, such as insurance policies. Three insurance policies that can be suggested are:

1. Agriculture Insurance: This will not only attract farmers who are loyal customers for the bank, but also other farmers in the region who would like to have their crops insured (in case of an unexpected disaster). This step might also motivate more farming business in the region, which in turn would create more clients in this particular segment of the market.

2. Small vehicles insurance: This will benefit the bank by having most of the vehicles ensured through them, earning them valuable profits. This will also be appreciated by its old clients, and will motivate the new clients to take advantage of such policies offered by the bank.

3. Health Insurance: Health insurance will sent positive vibrations to the banks old customers, projecting the banks care and helpfulness, while attracting new clients for their safety needs as well. This policy, if marketed properly, can actually seem like a CSR activity as well as a business initiative taken by the bank.

State Bank can take the pioneering step in Hillsborough by introducing ATM card facilities for its clients, which promises 24 hours service for a more convenient banking experience.

Another step would be to introduce quick bill payment system. With the help of this system, a person can pay his bill by sitting at home with a simple phone call, or giving authority to the bank to pay his bills through transferring his credits whenever the bills arrive (in this case, the bills must arrive to the bank).

State Bank can also facilitate young clients/students by relaxing the amount needed to open their first account in the bank by a considerable margin. This will help in building the foundation of a long lasting business relationship.

c) Pricing Strategy: State bank follows a conservative policy means they impose 25 percent interest on down payment on homes and relatively short maturities loan. Although this rate is quite equal to those other local bank but the bank can easily get a strategic advantage by lowering their interest rate. Here are some ways state bank can take this advantage:

1. State bank can reduce its interest rate on short maturities loan and can increase its interest rate on long term loan. Thus it can balance between two types of loans. As most of the people of the region are middle class people, they take more short term loan than long term loan. So they will surely prefer this approach.

2. The bank can increase its interest rate on fixed deposit. It can offer that if person deposits specific amount money for a certain time, he will get some extra interest on that amount. d) Distribution Strategy: The bank can start a new campaign to deliver the service into client’s house. With the help of this campaign their “The Friendly Bank” image will get more importance and popularity. They can do this in the following ways: 1. They can introduce their own delivery network. If a client can not come to the bank for specific reason, the bank sent a person to that client with the money. 2. They can even send their sales people for door to door personal salesmanship especially for the insurance policies.

e) Communication Strategy:

The State Bank must have a more streamlined communication system to achieve success in all its plans. The communication activities must include:

i. Regular client feedback

ii. Clear and concise messages to be transmitted by the bank to the client through phone, email and text messaging (via sms).

iii. Training the employees more to improve their listening and speaking skills, also their body-language can be improved further, to make the client’s experience a cheerful one.

iv. State Bank can host a quarterly anniversary/event where they would thank its loyal customers for their trust and staying together with the bank, while together with the old clients, welcome the new clients to the “State Bank Family!”.