Are SMEs relationship seekers or price watchers? Target marketing implications for banks

Manpreet Kaur, Kanwaljeet Singh () and Sarita Arora
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Manpreet Kaur: Sri Aurobindo College of Commerce and Management
Kanwaljeet Singh: Sri Aurobindo College of Commerce and Management
Sarita Arora: Sri Aurobindo College of Commerce and Management

Journal of Financial Services Marketing, 2023, vol. 28, issue 3, No 12, 615-625

Abstract: Abstract Varying needs of the customers lead to diverse buying practices among them. Hence, banks cannot target customers with old mass marketing strategy rather they need to be customer centric and focus on target marketing strategy where segments should be identified on some basis and appropriate positioning should be done in the targeted markets. The purpose of the paper is to explore the bank selection criteria of SMEs and to identify the segments of SMEs market based on their bank selection criteria so that they can be targeted through appropriate positioning strategies. In the present study, primary data regarding bank selection criteria of SMEs have been collected through a self-structured scale from SMEs of two states of India namely Punjab and Uttar Pradesh. Multistage sampling was used to collect data from 406 SMEs. Exploratory Factor Analysis was employed to extract the factors measuring bank selection criteria of SMEs. Further, a measurement model was specified under Structural Equation Modeling to check reliability and validity of the scale. Behavioral segmentation of SMEs was done based on their bank selection criteria using Cluster Analysis. Six factors namely Bank Attributes, Service Quality, Bank Personnel, Financial Factors, Accommodation of Credit Needs and Business Knowledge were found to be considered by SMEs while choosing a bank. Behavioral segmentation of SMEs was done based on their bank selection criteria which concluded two SMEs clusters namely Relationship Seekers and Price Watchers where the major chunk is relationship seekers. Appropriate positioning strategy is suggested for banks based on the analysis done. Extensive literature is available exploring bank selection criteria of SMEs. Present research makes a step-up in the available literature by suggesting a differentiated marketing strategy for banks to attract SMEs customers. A relationship-oriented strategy should be adopted for established old firms whereas newly established firms should be targeted with transaction-oriented strategy by being flexible in interest rates and collateral as well as margin requirements. This can enable banks to customize or tailor their marketing activities more accurately.

Keywords: SMEs; Target marketing; Banks; Behavioral segmentation; Bank selection criteria (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1057/s41264-022-00162-z

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