Name of the organization: Stanbic Bank Kenya
Type of the organization: Stanbic Bank is a public limited company that was established in 1958 after Ottoman Bank incorporated its first subsidiary in the region. The Bank is operating as a subsidiary of the parent bank Standard Bank Holdings Plc that is listed on the Nairobi Securities Exchange.
Size of the organization: The Bank has about 1100 employees that are distributed across its 26 branches that are distributed across the country.
Range of Products and Services: The Bank offers a wide range of products which are tailored for both businesses to business markets and well as business to consumer markets in both the corporate and investment banking (CIB) as well as personal and banking (PBB).
Low Relative Market Share High
| QUESTION MARKS Cash &liquidity management, investor services, Digital banking, Africa/China Banking | STARS Commercial Banking, Private Banking.
|
| CASH COWS Personal Banking, Corporate Banking, Loans and Mortgages, Vehicle and Asset financing, wealth, and investments. | DOGS
|
High
Market Growth
Rate
Low
Customer Base: The Bank has a wide range of customers who are classified mainly as either corporate customers that fall under the business to business segment or the public customers that fall under business to consumer segment. The Bank serves both the B2B and B2C customers.
Competitors: The Bank faces stiff competition from the some of the industry leaders in Kenya which in this case include KCB bank and Equity Bank. When it comes to high end banking segment, there is competition from Standard Chartered Bank.
| Competitor | Strengths | Weakness |
| KCB Bank | Huge Market Share, Accomplished business units | Associations to the governments. |
| Equity Bank | Huge market share, Strong distribution and sales networks | Poor brand perception among the wealthy. |
| Standard Chartered Bank | Favorable Brand Perception, Huge marketing budgets | High labor costs. |
Stakeholders: There are a number of stakeholders that influence the manner in which the organization operates. They include employees, managers, the shareholders, the board of directors, customers, regulators, competitors, as well as suppliers.
Mendelow’s Matrix
| Stakeholders with High power and low interest Government authorities (keep satisfied) | Stakeholders with high power and high interest Investors and Customer (Key players) |
| Stakeholders with low power and low interest Support Staff such as cleaners (minimal effort) | Stakeholders with low power and low interest Employees, business partners, suppliers, local community as well as environmental group (keep informed) |
High
Power
Low
Low Interest High
Key Customer segment: The key customer segment will be B2C segment with a lot of emphasis being placed on asset financing mortgage customers who are mainly the middle-class income earners (Courchane & Ross, 2019). Current mortgages are meant for the rich and wealthy.
Theme Chosen and Rationale for Choice: The theme chosen is market penetration. The choice is anchored on the fact that the company is unable to operate to its potential with regards to the number of customers it can be able to reach out to. The needs of the many middle-class income earners who are not able to afford the current mortgages in the market have not been met. (Tiwari, 2019). The company is operating below its market potential when it comes to mortgages.
Marketing Plan
Strategic Audit of SBK
AC2. 1 Situational Analysis – Where is the Bank now?
Situational analysis is all about understanding the current position of the institution being analyzed. In the case of this study, it highlights the current position of SBK with regards the use of marketing strategies in increasing the firm’s market share as well as market penetration. It interrogates the strategies being used by the firm to create value for its customers when it comes to retail banking options available. It addresses both the internal organizational and external business environment in which the firm operates in. The market penetration is the extent to which the firm is able to sell its existing products within the existing market. The global pandemic of Covid-19 has affected the banking sector immensely. The number of people that have lost their jobs as a result of the pandemic is about 1.4 million people. This means that the demand for mortgages has certainly gone down. This is a huge issue based on the fact that the Bank has to penetrate the market to be able to appeal to more people that are capable of taking up the products but they have not been able to get reached to. Due to the volatile situation, the qualification of some of the customers for the existing mortgages is also a huge challenge in that even though they may be working the slashing of their salaries has disqualified them from getting the mortgages hence the need to come up with an effective way of increasing the penetration of the mortgages in the market.
AC2.2 External Analysis and Internal Analysis
External Analysis
The external environment analysis will be based on Porter’s Five Forces that will mainly address the industry performance as well as the business strategy development that will highlight the strength of five forces that influence competition in the banking sector.
Porter’s Five Forces
| MARKET FORCES | HIGH | LOW |
| Bargaining Power of Suppliers
| – SBK main suppliers are the employees who supply labour and customers who supply it with capital. They can both shift or work with the competitors hence they have much power. – Data collection and analysis doesn’t come cheap due to few professional companies offering the service – Acquisition of new customers across corporate and retail remains a priority. | |
| Competition from industry rivals
| – Stiff competition from the likes of KCB, Equity Bank as well as Standard Chartered Bank among other 37 Banks operating in Kenya. – Less production differentiation hence less way of being unique form the competition. | |
| Threat of substitutes
| – The increase in the number of Saccos that are offering some of the services that would have otherwise been offered by SBK. – Mobile banking through the likes of M-Pesa is big threat to the company. | |
| Threat of new entrants | -The legal requirement for any entrant to get the licenses needed is indeed huge and difficult to make things work. -The efforts of Saccos and Micro finance lenders to transform into banks is length and tedious process that many hardly fancy. – SBK has a stable reputation as well as huge range of assets that will make it hard for any entrant to be able to operate at this level. | |
| Bargaining Power of Buyers | -There is lack of product differentiation hence the mortgage offers being given by one Bank are almost similar to the ones being given by the other therefore there is worry of mass defections since such moves do not have costs of defecting. – Cross-selling is critical as a strategy to keep customers at SBK |
Table 1: SBK Porter’s 5 Analysis (Michael Porter, 1979)
PESTEL Analysis
PESTEL is a situational analysis tool that highlights the external factors that affect the institutions in this case SBK whereby the Bank does not have a tool of dealing with it internally. Some of these factors include political, economic, social, technological, environmental as well as legal environment.
| FACTOR | IMPACT |
| POLITICAL – SBK has been enjoying political stability since its inception with the only exception being during the elections years where there is a bit of instability more profoundly evident in 2007. – Political goodwill backed by proper policies that have facilitated the operations of banks in the country. | -Increase in foreign investment since the investors have trust in the economy. -Economic stability that has made it possible for firms to plan for long term returns. -Improved living standards due to increased access to financial opportunities. |
| ECONOMIC – Stable currency and exchange rates – Positive GDP growth rates | -The human development index has improved as a result the access to healthcare, education, basic amenities among other things has equally improved. |
| SOCIAL – Increased purchasing power due to the access to the credit facilities. – Expanding middle class – Improved entrepreneurial culture in the country | -Improved social status as well as the quality of lives. -Expansion of business due to improved access to credit as well as purchasing power of the customers. Improved well-being of the citizenry. |
| TECHNOLOGICAL – Growth of digital banking as an alternative to traditional banking – The introduction of social media marketing as well as a tool for customer engagement. | -Reduced costs of operating the business. -Increased efficiency in the manner in which the business operates. -Increased profits as well as convenience to the customers who use the services. |
| ENVIRONMENTAL – Investment in Environmental Programs – Awarding of tenders to “green” organizations that engage in sustainable behavior. | -The banks have participated in CRS projects that have led to protection of the environment. This is key in ensuring environmental sustainability. -It has increased awareness of the need to protect the environment. |
| LEGAL – The repeal of Banking Act in 2019 – Regulation such as the Consumer Protection Act
| -The Banks can now lend at higher interest rates hence the ability to earn more interest. -The consumers are ready to initiate law suits in the event the offer promised is in contravention with their rights. |
Table 2: SBK PESTEL analysis
Internal Analysis
| SWOT Analysis | |
| STRENGTHS -Great brand perception, Standard Bank group is the continent with estimated assets worth $156-billion. -High quality of services hence a great brand reputation. -Loyal customers. | WEAKNESSES -Invested banking only Concentrated in Nairobi -Loan turnaround cycle has made it difficult for SMEs to secure loans or mortgages. -High staff turnover. |
| OPPORTUNITIES -Expanded middle class offers a great opportunity. -Healthy GDP growth -Increased purchasing power. | THREATS -Increase in the number of Saccos offering almost similar products. -The introduction of M-pesa as well as other non-banking financial competitors. -Limited supply of investment banking marketing experts. |
AC3.1 Marketing Objectives
- To increase market, share in the retail marketing section of SBK by 6 percent in the period of three years.
- To increase the number of customers within the current target group of middle class income earners by 10 percent in a span of three years.
- To increase the uptake of mortgages by 5 percent in span of five years.
Strategic Options to Achieve These Goals
Segmentation
The market will be segmented on the basis of income that one earns. This is to mean there will be categories of the middle income earners where they will be divided into the lower middle class income earners and the upper middle class earners, this is in line with Andaleeb (2016). There will be mortgages that will be tailored for the upper middle class income and those that will be set aside for the lower middle income earners. It is evident that the people earning a net income of about Ksh. 50,000 per month will be segmented in the lower middle class income earners. At the same time, the upper middle class income earners will include those earning a net income that is above Ksh. 100,000 per month. This means that there will be two categories of mortgages that will be designed for the market in line with these two segments.
Targeting
Out of the two market segments, it is clear that the segment that will be targeted will be those earning a net income of about Ksh. 50,000 per month (Ernst & Dolnicar, 2018). This is based on the fact that the huge segment of those earning a net income of Ksh. 100,000 per month is already having mortgages either with SBK or any other bank hence the penetration within the market should be about those earning less than that amount. The segment is underserviced in fact there are no mortgages for them currently even though they have a stable income that can be key in helping them achieve such.
Positioning
The mortgage for the lower middle class income will be indeed positioned as the economy mortgages that are meant for those earning less than the current category or segment that qualifies to take the available mortgages in the market (Liu et al., 2019). The mortgages will be positioned as those meant for the lower middle class as a way of ensuring there is parity with the upper middle class.
Tactics that will be used
The message will be tailored to create awareness as well as create the desire among the target audiences as to why they should take up the options available. It is key that there is need for them to relate to the product and identify themselves with it. In the case, the lower middle class have a huge interest in owning homes and purchasing land in Kenya. Through these two options SBK will be able to tailor make the mortgages that can be repaid in a period of five years as opposed to the current ones that are being repaid in 20 years. The value of the mortgages will not be normal Ksh. 7.5 million and above but instead it will be a flexible amount within the range of Ksh. 500,000 and Ksh. 1 million. This is affordable to the lower middle class and the level of uptake will also be high.
AC5.1 Implementation of the chosen Strategy
The strategy will be implemented by communicating the strategy to all the members of the team that are dealing with retail marketing of the mortgages. They will be informed of who the target market is as well as the positioning approach that should be taken when communicating to the customers. There will be assigning of targets to each and every member of the team. Each of the individuals in the marketing team will then be given the mandate to sales the mortgages and be able to file their report on the market perceptions about the product among key other feedback.
AC6.1 Metrics the organization will use to monitor performance and success
- Sales volume metric.
- Profitability metric.
- Market share metric.
- Market penetration level metric.
- Customer Acquisition rate metric.
Task 2
- a)
The key issue in the audit that shaped the content of the marketing plan. Were the issues to do with competition level in the industry, affordability of the existing mortgages, massive use of smartphones and access to internet to most of the target customers and poor concentration of Stanbic Bank branches in Kenya.
The high level of competition
There is high level of competition in the banking industry when it comes to the issue mortgages is indeed a huge concern. The most affected part of the plan that competition affects is the issue of segmentation of the market. This is based on the understanding that the players in the market are interested in selling their products hence they are ready to appeal to anyone who falls within their target customer hence the need to ensure that Stanbic is able to segment its own market so that it does not focus on all the customers in the banking sector but rather just a few that fall within it is range of the target customer within its segments. This will be key in reducing the amount of resources that would have otherwise been wasted on people who do not amount to potential customers. It will also ensure that the company is able to make the message and ensure that it suits its target market based on the segments that it has. Since everyone is competition for customers, there is need to segment so that one can be able to have a better understanding of who they are dealing with so that it can be easy to address them and appeal to them.
Unaffordability of the existing mortgages
COVID-19 pandemic has certainly changed the dynamics in Kenya’s banking sector. There a huge number of people who have lost their jobs or businesses and those that were planning to invest in given key areas that are critical asset financing such as land, construction and building of homes and houses have all be put to a halt. The few people that are now working are not able to afford the current mortgage options that are being offered by Stanbic Bank. This is key issue that is going to affect the positioning part of the plan. The Bank has positioned itself as an executive bank which has certainly created the perception that it is an expensive bank offering very expensive mortgages which is not really the case. It has been established that a huge number of people that were earning over Ksh. 100,000 gross salaries that used to be part of the target market. Since the beginning of the Corona Virus pandemic, it is clear that a huge number of people have had their salaries slashed meaning they are now earning below Ksh. 100,000 meaning they are no longer part of the target market. Under the current structure the product will not be affordable hence the need to come up with an effective way that will ensure that the mortgages can be afforded by many and not just a few people that earn over Ksh. 100,000. It is because of this that the issue of market penetration becomes necessary.
Massive use of smartphones and access to internet to most of the target customers
It is clear that a huge number of people in the country are currently using smartphones and have access to internet with estimates showing that with the COVID-19 pandemic more people have access to digital communication platforms more than before. This has been based on the fact that more people are working from home which has forced some of them to install Wi-Fi services or ensure that they have mobile internet services. In terms of the plan, the most affected part will be the tactics. Instead of implementing them using the traditional communication platforms such as the TV adverts or billboards there will be use of digital ads that will be channeled through various digital platforms such as all the social media platforms ranging from company’s Facebook page, Twitter account, YouTube channel as well as the company website that will be able to give the much needed information to those who may interested. There is need to create a perception that the tactics that will be employed will be aimed at addressing the needs of the target audience. The use of the digital platforms will ensure easy communication that will be cheaper and reach to a wider audience.
Poor concentration of Stanbic Bank branches in Kenya.
It is evident that out of the 26 branches that the Bank has in Kenya, 80 percent of them are based in major towns with over 50 percent of them being based specifically in Nairobi. This means that there has been a perception that unlike its competitors such as KCB Bank and Equity Bank that in almost all parts of the country, the Bank is perceived to be an expensive and high end bank that is meant for the people in Nairobi. It is because of this reason that the most affected part of the plan is its objectives part. One of the main objectives is to increase the number of customers. This is based on the fact that the market potential is high in the banking industry and many opt to Bank with the competitors all because of the positioning that this Bank has taken thereby making it hard for the Bank to be able to attract new customers since many believe that is it meant for the limited few who are rich and based in the cities. It is because of this reason that there are fewer people who bank with this Bank when compared with some of its major competitors.
- b) The justification of the strategy
The strategy is justified based on the fact that the objectives are aimed at increasing the number of customers based on the fact that even though the mortgages are available, the customers that are able to take them up are indeed few. This is based on the fact that the company does not have enough customers. It is clear that most of the other banks have been able to establish a huge customer network for its mortgages which has been great in ensuring that that the mortgages are able to be taken by the qualified customers who are usually available. There are many potential customers who are digital but do not have the time to visit banks. If the process of acquiring new customers was digitized right from the advertising stage, then a huge number will be able to see what they need and in the process take up some of the mortgage options available therefore the use of this set of objectives is indeed effective and justified. When it comes to the objective of increasing the uptake of mortgages by five percent in the next five years. It is clear that when the current mortgages are given in smaller values for example instead of having mortgages that are worth millions of money thereby making it limited to a few people who can be able to take them up, there is need to ensure that there are mortgages that are worth less than a million Kenya shillings. This will make it appealing to many who will in turn be able to qualify. This will make it possible to increase the mortgage uptake by the target percentage. Once the increase in the number of customers has been realized, it will be easier to increase the uptake of the mortgages and in turn increase the market share of Stanbic Bank with regards to both the customers as well revenue.
The current segment of those who earn over Ksh. 100,000 is indeed quite unrealistic based on the fact that a huge number of people no longer have stable jobs and those that are still working are currently facing huge pay cuts. Less than 10 percent of the total workforce usually earn this kind of money as their gross salaries. It is clear that by coming up with a segment of the customers that earn over Ksh. 50,000 as opposed to the current segmenting amount, Ksh. 100,000 will be great in ensuring that more people are able to qualify for the mortgages even though the mortgages will be tailored to ensure that the value of the mortgage does not have to be in millions but instead it can be as less as Ksh. 50,000. This is key in ensuring that the potential of increasing the market share is realistic and more people are able to fall within the target market. There is need for the value of the mortgages to one that can be picked up by as many people as possible within the target market segment.
When it comes to targeting, there is need to target people who have the potential to take the loans and have the will power to do so. This is based on the fact that there is need to effectively use the target the audience that have the financial ability as well as are accessible on digital platforms so that when the products are being promoted they are able to take advantage of the same. The plan has effectively ensured that the media of communication with regards to advertising will majorly be through the digital platform. The nature of the campaign to market the product will also be done digitally which means the idea of targeting people that are able to make good use of digital information and they have the financial income that allows them to qualify for the mortgages.
The Bank had positioned itself as a high end urban bank that had products that were only meant for urban and high end customers. Through such positioning, the Bank has actually losing out on the rural customers or those who live and operate from suburban areas. The strategy of positioning the mortgage product as the economy mortgages is a move that try and persuade the market into believing that they are affordable and meant for the normal customers and not the high end customers as it has been the case with most of the products offered by Stanbic Bank.
Theoretical model that have been used in coming up with the plan as well as its implementation is SOSTAC model which is a marketing model that was developed by PR Smith in the early 1990s and later formalized in 1998 in his publication, Marketing Communications. There was need to understand the current situation the Bank is in for one to be able to have a detailed understanding of the current position of the Bank. It is through this that one would be able to audit the position of the Bank with regards to market share, profitability, the level of competition it faces among many other aspects. This was key in understanding the problem that the company face when it comes to its mortgage products and how best to solve it. Therefore, the SWOT analysis, PESETL analysis as well as the Five forces by Michael Porter were all necessary as of that point. It was also through though this model that the issue of objectives would be perfectly brought out so that one may be able to understand what are the things that the organization would like to address. It is the objectives that help set the stage for the plan with regards to strategy, tactics, action as well control and evaluation. In order words, it was the most effective model that would have been used in ensuring that all vital areas are addressed and there is room to assess whether the plan as well as its implementation was successful or not.
- c)
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