Chapter 2

REVIEW OF RELATED LITERATURE

In the previous chapter, elaborated attempts were made to elucidate broad

concepts related to Permission Marketing. This chapter relates to the

research framework of the problem. It includes enough background of the

study, based on a survey of related research literature. It will highlight the

importance of problem and make reasoning for selection of the problem for

further investigation. Moreover a decisive review of related literature in the

relevant field of study leads to the selection of a major sub area for added

analysis on one hand, as well as authentication of the earlier proved or

established facts on the other. This chapter will also perform these two

functions. Some of the studies reviewed for the purpose of this study are as

follows:

2.1 Internet Marketing

Marketing is a well-developed methodological science and is constantly

changing its rules according to the needs and developments which are taking

place in and around it. To establish itself in the new era, it has begun

adapting new methods. Both execution and management of marketing have

adopted the new role of electronic communication and data transfer media.

The terms virtual marketing, web-based marketing and interactive marketing

refer to the use of the Internet and related technologies to achieve goals and

objectives.

There are two perspective of viewing virtual marketing; the first is the internet-

centric to look at internet-based marketing as a medium that provides added

value to all stakeholders which includes customers, investors, and the media.

The second perspective is traffic-centric, which advocates the use of the

internet for the branding strategies, tactics and programs. This view promotes

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driving traffic to the website of the marketing organization, by executing

external means such as banner ads, sponsorships, and e-mail campaigns.

Internet is a new medium of communication that presents an innovative

approach towards traditional marketing techniques. It offers unique

opportunities to create real-time interaction with customers. Internet provides

marketers, the ability to create one-to-one conversations with customers.

Through customization and personalization softwares, marketers can

understand customer’s individual needs better, faster and accurate.

Personalization helps in providing special offers to customers with specific

interests, stated by them earlier. Pricing strategies can reflect best customer

buying habits and loyalty patterns and detailed online product/service

information can shorten buying cycles. All these strategies have the potential

to build stronger relationships with customers. The added advantage is that it

works for 24 hours a day, 7 days a week and 365 days a year.

With the success stories of companies, market share together with the rapidly

increasing adoption of the internet is becoming need of the day.

Organizations had realized that they must have an effective internet

presence, if they want to prosper, or possibly even survive. According to

Porter (2001) the key question is not, whether to deploy internet technology or

not. If organizations want to remain competitive they have to put in.

Although Internet is not commonly used for sale of products by organizations,

it is still important in increasing awareness of their products and brand values

through online advertising on their own sites or on third-party sites. Peter

(1998) suggests that communication from new medium is different from

traditional communication. According to him, style of communication has

changed and therefore online customer service is now possible. Hoffman and

Novak (1996) pointed out that in internet the relationship of sender and

receiver of information is affected by web-based environment.

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2.2 Email Marketing

Liberalization of markets had led to the integration of world economy. As a

result market forces determine profitability for any organization. Organizations

actively market their products and services by various methods using internet

as a medium. Online marketing/e-marketing involves the use of the internet

medium to market goods and services through virtual shops, which are the

websites of marketers. Through this channel, one can get information about

the product or service provided by the organizations. Therefore, online

marketing has revolutionized the marketing landscape for both the companies

and for online customers.

Researchers and practitioners of e-mail marketing had agreed that marketing

using e-mails is one of the most effective online marketing tools for several

reasons. E-mails are used for marketing of products and services because it

provides cost effectiveness, better results, fast responses and

personalization. E-mail marketing is becoming integrated source for

communication as good number of customers prefers to get the desired

marketing information by e-mail. Email is therefore emerging as a vital link

between marketer and consumer that can provide customers rich information

about products and services of various organizations. According to the study

conducted by emarketer (2001) four-fifth of e-mail marketing messages are

responded within 48 hours, as compared to traditional direct marketing

method in which it takes six to eight weeks for the same response. Forrester

(2001) in their study had revealed that e-mail marketing helps a marketer to

start a conversation with customers and in further developing a relationship,

which is mutually benefited for both, the consumer and marketer. With the

rapid development of e-commerce, e-mail has become an important tool of

marketing communication. Therefore, e-mail marketing is becoming a major

marketing tool for marketers (Tezinde, Smith, and Murphy, 2002;

MacPherson, 2001). Rettie (2002) stated that success of e-mail marketing

31

depends on various factors of interest. Vriens et al. (1998) had developed a

direct mail response process model, presented in figure 2.1, which describes

the process and steps involved in direct mailing.

Figure 2.1: Direct Mail Response Process Model

(Source: Vriens et al, 1998)

Rettie (2002) states that there are three stages involved in effective e-mail

marketing response process model as shown in figure 2.2. The three stages

include: getting the recipient to open the e-mail, attracting him/her to pay

attention to the e-mail and persuading him/her to click. Therefore, the

response rate depends on the e-mail subject line, e-mail contents and on the

attitude and life style of recipient. The factors which triggers increase in

response rate include subject line, e-mail length, incentive and number of

32

images. The model defines the characteristics of email and explains its

linkage with the characteristics of the potential customer.

Figure 2.2: Basic E-mail Marketing Response Process

(Source: Rettie, 2002)

Rettie and Chittenden (2003) in their study identified the factors which were

associated with the success of e-mail marketing. According to them there

exists a significant correlation between the number of links in an e-mail and

click through rate. According to them, higher response rate occurs if e-mail

subject lines were catchy, on the other side if e-mail is lengthy, it will lead to

low response rate. Therefore in order to reap the benefit of e-mail marketing,

it should be properly segmented and targeted keeping demographic and

lifestyle pattern of respondents in mind.

Rettie, Grandcolas and Payne (2003) compared e-mail marketing with other

forms of internet marketing and had identified the key advantages of e-mail

marketing. Respondents were asked to register at a music website for a

customized email newsletter. After two weeks an e-mail questionnaire was

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sent to respondents. They highlighted that respondents liked the “permission

component” .They had suggested that respondents were more optimistic for

e-mails which were more relevant and useful for them. According to them, if

e-mails were given on high frequency, it may not give desired results and will

lead to deletion of e-mail without reading or may sometimes lead to

unsubscription. There is low marginal cost involved in sending e-mail

messages; therefore marketers often send too many mails which annoy the

recipient. Thus it is desirable to have such a technology which automatically

sensors and decides the adequate frequency of messages.

2.3 Permission Marketing

Milne and Gordon (1993) discussed the role of customer permission along

with volume, targeting and reward in the context of direct mails. However,

their reference is based on how an individual provide permission to share his

or her personal information with others. In other words, they had viewed

permission as a tool for establishing privacy rather than to enhance targeting.

Godin (1999) proposed a new theory of Permission Marketing and stressed

on the importance of Permission Marketing. According to the study, consent

of customer influences marketing communication programs.

According to Cecil (1999) Permission Marketing persuades only those

selected customers and prospects who raise their hands or volunteer

themselves. Permission Marketing is defined as promotional e-mail to

recipients who consented to receive commercial messages from the sender,

typically by signing on website of the company (IMT Strategies, 1999). Sheth,

Sisodia and Sharma (2000) have proposed the concept of customer-centric

marketing. They stressed that marketing become advantageous if both

marketers and consumers participate in shaping of marketing mix.

According to Phelps, Nowak and Ferrell (2000) individuals like to control how

personal information about them is used by marketers, the kinds of

advertising mail that they receive and the frequency of such advertising e-

34

mail. Krishnamurthy (2000) had identified six characteristics of Permission

Marketing. The most important characteristic is that the permission must be

obtained in an explicit rather than an implicit manner. Hence, permission

seeking process must be clear and devoid of deceptive tactics. According to

Macpherson (2001) Permission Marketing is a process in which if a customer

gives permission to receive promotions, he/she tends to become loyal and

profitable customer. According to the study by Preference Services (2001)

Permission Marketing practices are adopted by organizations to reap various

benefits out of it. According to this study, organizations were using

Permission Marketing practices because it provides long-term competitive

edge over others make better relationships with existing and potential

customers and therefore help in minimizing marketing expenditure. According

to this study, majority of the responding companies think it is a good idea to

contact only those consumers who want to learn more about their products

and services. This shows that there is a strong tendency to move towards

permission based communication as shown in figure 2.3.

Figure 2.3: Cost Effectiveness of Permission Marketing

(Source: Preference Service, 2001)

Kolettis (2002) identifies five important principles of Permission Marketing.

These five principles act as a guiding force for the marketers. Firstly,

permission must be granted by the customer, i.e. it cannot be presumed by

35

the marketer on its own. Secondly, consumers grant permission only if they

perceive that there is some benefit for them which may include offer, content

or rewards. Thirdly, once permission is gained, it has to be monitored by the

marketer. If marketer crosses a boundary or do something that offends the

consumer, he/she can instantly revoke the permission. Fourthly, permission

cannot be transferred and therefore measuring permission intensity becomes

important. Barwise and Strong (2002) suggested that explicit permission is

essential for consumer acceptance of the service. Consumer must

understand that he or she is entering an ongoing two-way relationship, but

they should be able to control volume of messages being sent. Permission

Marketing has various characteristics that set it apart from traditional

marketing (Marinova et al., 2002).

The growth of the market, the profusion of new technologies and their

convergence has opened many new opportunities for marketing promotions

and advertisements. The consumer is not always asked for his or her

permission before, therefore, permission could be seen as the ability for the

consumer to specify, whether or not, he or she is interested in a message

(Barnes, 2002).The premise of Permission Marketing is to initiate, sustain and

develop a dialogue with customers, building trust, and over time lifting the

levels of permission, making it a more valuable asset (Godin, 1999; Kent and

Brandal, 2003). Krishnamurthy (2000) proposed the classification of spam

and permission based e-mails. According to the researcher spam refers to

unsolicited mail, for which no prior permission had been obtained by the

marketer. Spam is not permitted and comes in following variants: pure spam,

spam with opt-out, and spam from a friend, deceptive consent, and

permission by association, lock-in and permission creep as shown in

figure2.4.

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Figure 2.4: Variants of Spam & Permission Marketing

(Source: Krishnamurthy, 2000)

Wathieu (2000) provides the rationale of Permission Marketing, and

highlighted its usefulness for both customers and organizations using

Permission Marketing practices. Krishnamurthy (2001) identifies three

circumstances which lead to the high permission intensity: high information

quantity, high information quality and information usability. The researcher

proposed a comprehensive cost-benefit conceptual framework as shown in

figure2.5.

The framework helps in capturing the consumer’s experience with a

Permission-Marketing program. The researcher advocates that “higher the

level of consumer interests in the Permission Marketing program, the greater

the level of participation in the program”. The researcher also stressed that

“higher the perceived benefit, higher the interest of the consumer in the

Permission Marketing program”

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Figure 2.5: Comprehensive Cost-Benefit Framework

(Source: Krishnamurthy, 2001)

Tezinde, Smith and Murphy (2002) elaborated that Permission Marketing is

more relevant and useful, if it contains affiliation in terms of customer

commitment and personalization. Seeking of the permission should not be the

objective for organizations deploying Permission Marketing; rather they use it

with utmost customization, relevance and rewards. The greatest application of

Permission Marketing practices lies with maintaining consumer interest.

Nielsen (2002) argued that instead of marketers seeking permission, it should

be the consumer who should request for information. According to his study,

customers seek information and marketers provide that information on

request. The researcher also quoted the example of Amazon.com in this

regard, showing how a customer makes a request and gives permission.

Consent of customers matter because unsolicited e-mails may lead to

consumers’ frustration and thus hampers the image and brand value of any

organization (Barnes and Scornavacca, 2004).

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Chaffey (2003) suggested that marketing communications requested by the

customers have a significant impact along with advanced response rates, in

comparison to any other unsolicited marketing communication, not desired by

the customer. In the study, it was pointed out that unsolicited e-mail does not

generate buying behavior. The researcher quoted that smart organizations

gain permission by showcasing benefits and rewards. Nath and Gupta (2006)

had recognized that Permission Marketing is still a novice concept in Indian

context and most of the organizations are unaware of this latest marketing

tool. They identified different techniques which can be used for gaining

permission that include: offers, entry to contests, rewards, discount coupons,

etc. They argued that the central tenant of Permission Marketing is “to market

with prior approval”. Permission Marketing is not a known concept among

Indian masses. The reason for lack of awareness is due to lack of self interest

among the masses.

E-mails are used frequently, but few customers actually subscribe to

promotional e-mails. Out of those who had given their permission for such

promotional communications were not satisfied with the content and the

relevance of such messages. Government had also played a role in this

direction and enacted the law relating to unsolicited promotions; however it is

more relevant in the domain of telemarketing, mobile marketing and SMS

marketing. According to study, organizations that sent high frequency of

messages does not influence buying pattern of consumer. Organizations treat

this concept as an investment strategy and do not expect the returns at a

time, rather they have to make it viable by having a strategic approach by

giving benefits in terms of information, discounts or rewards to those who

accepts invitation and gives their consent to the organizations.

At the same time, organizations compensate those who had not granted

consent, as it will enhance the brand image of the organization in the long

run. Government should be more authoritative in order to have such laws

39

which can be useful in maintaining customer privacy in a broad manner. The

laws would be such that it will be better for all to have access and should be

supported with proper implementation of the same. Therefore, consumers

should be selective, careful and logical while subscribing or giving permission

for any kind of promotional messages/ mails.

Permission Marketing has to be viewed as a bizarre technique to be adopted

by the organizations to market the product, especially to few but profitable

customers, who are ready to be the customers and had provided their

permission. Permission Marketing practices should be such, which create a

reaction in the customer mind to give permission and at the same time

customer can balance the cost benefit analysis in terms of giving permission.

Permission Marketing emphasizes on securing customer’s consent or

approval prior to engaging in further marketing activity.

According to Nath and Gupta (2009), marketing with interruptions does not

result into better marketing targets. Just dumping money into any form of

interruption marketing does not lead to achievement of targets unless there is

attention of potential customers. Instead of interrupting consumers with

unsolicited messages, Permission Marketing empowers consumers to

volunteer and to build up a relationship over time.

The central tenet of evolution lies in the fact, that the concept of Permission

Marketing is giving the stranger a reason to pay attention, while interruption

marketers hold people hostage. It will focus on attraction and retention of

customers by using the mechanism of offer and acceptance or an agreement.

Permission Marketing essentially involves one of the two approaches – opt in

marketing or opt out marketing.

Opt in Marketing is applied where consumer had given a clear and pre

permission to market them by some agreement between the marketer and the

customer, for example the agreement between yahoo and its user, where

user had given the permission to yahoo to send selective promotional

40

messages. This permission becomes valid in terms of agreement as

customer had submitted by reading the terms and conditions and granting

consent while submitting those interests as shown in figure 2.6 which shows

how ING Vysa Bank had used the method of opt in.

Figure 2.6: Opt in Marketing

(Source: www.netbanker.com)

Opt out Marketing is undertaken by the firm where the marketing firm will

automatically engage in sending promotional messages unless the customer

does not indicate his/her apprehension and is not willing to participate in this

process. An opt-out policy is where an existing customer receives electronic

communication usually on the basis of a prior relationship without providing

explicit permission as shown in figure 2.7, how Bank of America had uses opt

out method.

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Figure2.7: Opt Out Marketing

(Source: www. bankofamerica.com)

2.4 Permission based E-mail Marketing

Permission-based e-mail marketing is a useful tool of contemporary

marketing. It is very cost-effective method to market offerings to both existing

and new customers. Permission based e-mail has emerged as the cost

effective technique for driving sales and building powerful brand loyalty

among the potential customers. Permission Marketing appeals to advertisers

because it enables global diffusion of communication messages, while

enabling customization without sacrificing the economies of scale of a one-

source message originator. Like few other media channels, opt-in e-mail

potentially results in synergies even though multiple audiences are targeted

and multiple themes are used. According to Rosenspan (2001) Permission

Marketing is only the beginning of an interactive marketing system and

provides few benefits. According to Swanson (2000); Rizzi (2001) and

Rosenthal (2001) permission based e-mails provides better means of

communication and reaches target audiences promptly. According to Yager

42

(2001) Permission Marketing respects the privacy of targeted customers who

have actually expressed interest in the product and a level of trust and

responsibility with them which further lead to brand loyalty. According to Book

(2004) in order to market well, organizations should use an integrated multi-

channel marketing strategy, where the key focus should be on permission

based e-mail. He argued that by using this technique, organizations are able

to synchronize customer marketing activities with the overall business

activities. Figure 2.8 describes how multi channel strategy including

permission based email drives customer lifecycle.

Figure 2.8: Multi Channel Marketing Strategy

(Source: Book, 2004)

Won et al. (2004) investigated the role of consumer’s e-mail subscription

status (i.e., permission-based versus unsolicited e-mails) on their intention to

read the message and their attitude towards advertisements. According to

them, subject line of a message had a substantial impact on the audience’s

intention to read the message and their attitude towards these messages.

They found that the participants who had given the permission for promotional

e-mails had showed higher scores. Similarly, Merisavo and Raulas (2004)

43

found that majority of consumers who had given their permission in form of an

opt-in email list reportedly purchased from a particular brand in less than six

months of the reading of message. It becomes necessary for an organization

to adopt a multi channel strategy as it will maximize the revenues and loyalty

among customers by appropriate use of permission based e-mail marketing.

Organizations reap advantages in terms of less cost on retaining customer

and by increasing the wallet share of customer. Customers become loyal to

the brand for which they give permission to hear. The entire process starts

with analyzing customer needs, followed by development of campaign and

ultimately ends with the execution as shown in the figure 2.9.

Figure 2.9: Permission Marketing Process

(Source: Book, 2004)

Permission based e-mail marketing, had emerged as a best practice that

allows organizations to take advantage of e-mail’s low cost at one end and

building consumer trust on the other end. In comparison to other forms of

online advertising as well as non-permission based marketing, permission

based e-mail marketing provides better results and performance (Waring and

44

Martinez, 2002). According to Brodeur (2000) permission e-mail campaigns

strengthen a company’s online community of users by providing various

benefits. Merisavo and Raulas (2004) highlighted that opt-in e-mail list

consumers recommends the products to their friends. According to Epsilon

Study (2009) consumers around the world are using online communication

tools and are responding to permission-based email in various ways based on

their country of origin. As per the study, in order to reach consumers at the

right time with the most appropriate message, it is crucial that marketers

understand consumer behavior first and then properly encode their message,

followed by right frequency and time management to ensure success. The

study also stressed that financial services companies who send customers

permission-based e-mails reap bonus in form of enhanced credibility and

brand loyalty. The research also revealed that the prime reason why

consumers subscribed to receive e-mail from financial services companies is

to get updated information.

Nath and Gupta (2008) in their research survey acknowledged the future of

permission based e-mail marketing. According to them, masses consider this

concept to be beneficial for them in the long run. The concept of Permission

Marketing will be a useful concept in the future, primarily, because of finite

time and limited attention of the customers. The idea is to understand the

lifetime value of the customer and allocate resources in accordance with

these values. While permission based e-mail marketing is proposed to have

several advantages, the concept is having various concern areas. Acquiring

customer who had given permission is the underlining concern; Permission

Marketing proves to be a restricted customer acquisition tool. Tezinde et al.

(2002) had found similar implications. According to them; it is complicated to

deploy Permission Marketing, because obtaining permission of the customer

is difficult. Heinonen and Strandvik (2003) argued that consumer’s willingness

to receive and respond to marketing communication can be viewed as a

45

function of content and context of the message. According to them,

communication is more important and more effective than mare permission

seeking because it assumes consumer attention rather than merely

permission. Tezinde et al. (2002), argues that, Permission Marketing as a

technique of personalized and interactive marketing suffers from limitations in

terms of “segmentation”, “privacy” and “spam”. When devising plans for e-

mail marketing communications, marketers need to plan for outbound e-mail

marketing, where e-mail campaigns are used as a form of direct marketing to

encourage trial and purchases. Permission-based e-mail is an effective tool

for building relationships with customers online.

2.5 Consumer Behavior

In contemporary business environment it is need less to say that customer

holds the key for the success of any business. Therefore, understanding of

the consumer behaviour is an essential task performed by marketers who

believe in understanding consumer behavior and its factors. Study of

consumer behaviour is basic to all marketing activities and requires sound

understanding of consumer needs and wants. To identify unsatisfied

consumer needs, marketers have to engage themselves in extensive

marketing research. By doing so, they can discover psychological and social

needs of consumers. It is evident that in order to design new products, study

of consumer behavior is required irrespective of the nature of the industry.

Marketers need to understand how consumers make his decisions.

Understanding of the consumer behaviour becomes more complex as no two

consumers are alike. Things become more complex in case of services like

banking, insurance etc. According to Schiffmann and Kanuk (2004)

“Consumer Behavior” refers to the behaviour that consumers display in

searching for, purchasing, using, evaluating, and disposing of products and

services that they expect will satisfy their needs. The study of consumer

behaviour is the study of how individuals make decisions to spend their

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available resources; time, money and energy. It includes the study of what

they buy, why they buy, when they buy, where they buy, how often they buy.

Consumer behavior has emerged as one of the most important area of study

for marketing practitioners.

The essence of modern marketing management is the consumer centricity

and therefore each activity should be directed towards satisfaction of

consumers. The dawn of new millennium has pushed the whole world into

age of an unprecedented velocity where loads of information and

communication travel at supersonic speed supported by technological

advances in almost every field. This had changed the way of doing business.

In modern era, consumer behavior plays an equal role in giving (or not giving)

permission to marketers for obtaining and using information, reward or

benefit. Since production, consumption, and disposition systems are

becoming more complex and wide varieties of goods are at the discretion of

consumers, it becomes necessary to have desired relevant information of

available goods and services. Information so obtained either by the internal

search or external search triggers consumer behavior.

Information of products and services is essential to make decisions, therefore

obtaining and providing information often comes at a cost. Consumer

behavior reflects the value proposition for both consumers and marketers.

Both the parties need to balance these costs and reap the benefits of

obtaining and providing information in order to make the best decisions.

2.6 Online Consumer Behavior

Online consumer behavior is different from offline consumer behavior, online

consumer behavior is generally influenced by factors relating to ease,

convenience and trust. Online shopping has become a habit among

“generation next” consumers. They shop online for products and services

such as travel tickets, fashion goods and cinema tickets. People search about

various products using various infomediaries and if satisfied they buy online.

47

This trend is seen for less involvement goods and services, although for high

involvement purchases such as cars and real estate, people use internet

mainly as a search and information seeking tool. Another important feature of

the interactive marketing communications is that they can be tailored

according to an individual at a relatively low cost, unlike in traditional media

where the same message tends to be broadcast to everyone. Importantly, this

individualization can be based on the intelligence collected about site visitors

and then stored in a database and subsequently used to target and

personalize communications to customers to achieve relevance in media.

The number of online consumers is rapidly growing day by day. The rate is

varying in various parts of the globe, with more online consumers in

developed countries than that of developing or less developed ones. It is

evident that changing life-style and rapid technological development can be

considered responsible behind the growth of the electronic buying behaviour.

Internet is used in various stages of decision making process from the initial

scan to the more detailed comparison and even for final check before

purchase.

De Kare-Silver (2000) developed a framework known as the electronic

shopping test in which he suggests that the criteria for purchase include

product characteristics, familiarity and confidence and consumer attributes.

Initially internet users may restrict themselves in searching information but as

their confidence grows their use of internet also increases.

Moe and Fader (2004) believes that through analyzing click stream behaviour

and patterns of repeated visits, it may be possible to identify directed buying,

browsing or searching behavior. Research by Reicheld and Schefter (2000)

showed that acquiring online customers is expensive for start up companies.

The research also revealed that by retaining just 5% more customers, online

companies can boost their profits by 25% to 95%. Personalization and mass

48

customization can be used to tailor information content on a web site and opt-

in e-mail can be used to deliver it to add value.

Perea et al. (2004) highlighted that while consumers are increasingly

shopping online, it is not clear what drives them to do so. There are various

factors including ease of use, enjoyment and consumers traits that will

determine whether an individual will be an avid Internet shopper or a stranger

to online medium of shopping.

Hoffman and Novak (1996) focused on the impact of demographics,

specifically, race and gender on online shopping behavior. Internet is

becoming a great promotion and tracking vehicle. There are products and

services which are ideal for online selling such as books, travel tickets and

financial services. Consumers are no longer at any informational

disadvantage when buying products or services online and can get

information from various sources using internet as shown in figure 2.10

Figure 2.10: Information Searching

(Source: www.aon.com/india)

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2.7 Banking

Banking business is one of the oldest service businesses in India. It was in

1786, when the first Indian bank i.e., The General Bank of India was set up.

During the years various banks like Bank of Bengal (1809), Bank of Bombay

(1840) and Bank of Madras (1843) came into existence. With establishments

of more banks, it had become necessary to streamline the functioning and

activities of commercial banks. Therefore, the Government of India came up

with The Banking Companies Act, 1949 which was later changed to Banking

Regulation Act 1949 that paved way for Reserve Bank of India (RBI).

RBI was vested with extensive powers for regulation and supervision of banks

operating in India as the apex banking authority (www.rbi.ac.in). RBI is

therefore, acting as a regulator, supervisor and controller of all banks which

are operating in India. RBI is also to known as “Banker of Banks”, as in case

of any financial need, the last resort is none other than RBI. Banks all over

the world are evolving at a faster pace. Banking sector in India is no

exception.

Over the years, banking sector had undergone many changes including

nationalization, use of technology, and liberalization. Banking sector has been

going through constant changes during the last decade. These changes were

caused by establishment and bankruptcy of new commercial banks; changes

in monetary policy; establishment of foreign capital banks, bank mergers and

acquisitions. Because of so many changes which are happening in the

banking sector, the level of competition has increased.

According to Foo, Duglas and Jack (2008) banking sector is an increasingly

competitive industry where the differentiation intensity of banking products

and services is very low. Currently, banking in India is more organized and

therefore had matured in terms of bank branches, product range and in reach

as shown in table 2.1

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Table 2.1: Report on Trend and Progress of Banking in India

(Source: www.rbi.ac.in)

2.8 Bank Marketing

Globalization of world economy and global economic reforms led to

deregulation of banking sector. This further evolved the concept of bank

marketing in Indian context. Consumers of banking services are now having

more choices available to them. As a result, banks have started exploring

new approaches for satisfying “stated” as well as “unstated needs” of

customers. Customers are now choice-empowered and therefore marketing

strategy of banks should be capable enough. Given the vast number of

products and services, marketer of financial services is challenged to

differentiate themselves from the competitors. Banks have to emphasize on

51

modern ways to enhance customer experience and relationship. Banks are

transforming themselves by providing new banking channels, such as the

mobile phone banking and on-line banking. Banks are using contemporary

marketing strategies to create interest of consumer in their products and

services.

Banks are evolving at a fast rate making themselves more accessible to their

customers any time and anywhere. Touch is becoming a key part of the

marketing strategy for banks. The bank also promotes itself and its range of

products/services using direct mail. Generally banks have different customer

segments to cater. Banks therefore will be successful if they offer the services

as required by the target group of customers (Zineldin, 2000). If the

information as communicated by the banks is reliable, it will lead to the

loyalty. Banking customers show a negative attitude toward those banks that

uses direct marketing strategies which includes unsolicited e-mails. Marketing

media include mail promotion, telephone, and e-mail promotions. Purchase

intention is significantly influenced by attitudes toward direct marketing media

rather than response channels.

2.9 Bank E- Marketing

Modernization has changed the way of life for people in different parts of the

world. Technological development has brought new ideas and modern ways

of living. Introduction of the Internet has revolutionized the whole world. The

case is no different for financial institutions like banks. Traditional banking

system has significantly been transformed into Internet based banking

system. Banks started to use the Internet not only as an innovative payment

method and to increase customer convenience, but also as a way to reduce

costs and enhance profits. Fierce competition between banks, both in retail

and wholesale banking, has forced banks to find new and profitable areas to

survive and grow. Internet makes revolutionary changes in banking system.

According to Nellis (1998) there is a remarkable difference in online consumer

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behaviour in different markets. Banking sector, all over the world, have been

subjected to a number of changes in recent times (Rajan, 1998). These

changes in banking structure and functions could have been because of both

internal and external forces. Banks in order to retain their existing customers

are adopting customer-centric business models. It is therefore, become

obvious that earlier, bank marketing focuses on volume of transactions, now it

has converged to customer centricity. Internet banking, tele-banking and

mobile banking have created a win-win situation for all involved in this

process as it provides convenience, information and knowledge to customers

and cost advantages to banks (Shaniesh and Chaudhary 2004). In today’s

scenario, technology plays a great role in financial institutions like banks and

as a result all the transformations are managed by technology. Therefore,

adoption of technology will make banks more profitable and reliable.

Frederick and Phil (2000) discussed that e-business has made customer

more loyal towards the organization and therefore banks are no exception.

Banks send personalized and targeted electronic messages to targeted

groups of customers and provide information of banking products, events and

offers. Therefore, online banking has become the hottest new customer

service trend for banks .Keeping this in mind, banks are also using social

networking sites and other channels as part of a non-traditional marketing

strategy.

The bank website had a positive effect on both customer loyalty and positive

word of mouth. In addition, website usability was found to have a positive

effect on customer satisfaction. The service quality, perceived risk factors in

terms of privacy and user input factors, are the dominant variables that

influence consumers' choice of electronic banking and non-electronic banking

channels. .According to Kassim and Abdulla (2006) both trust and attraction

have significant positive impact on relationship commitment with attraction

having a strong positive effect. It is necessary for bankers and policy makers

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to know the relationship between trust and attraction. Thus, banking

authorities should develop meaningful communications, which in turn will

influence the customers' intention to utilize internet banking services.

Technology had profound influences on services, and has altered the way

services are delivered (Bitner, Ostrom and Meuter, 2002). Electronic banking

is one technology that has streamlined transactions and helps banks in

improving service quality for customers (Australian Bankers Association,

2000). These changes in banking have forced banks to offer their customers

more options, giving more flexibility and choice for all customers (Laukkanen

and Pasanen, 2008). For this reason, Internet banking is an accepted way of

banking in most countries.

Bednar et al. (1995) states that technological changes are likely to have the

greatest impact on the banking sector over the next decade. Confirming the

impact, technology will have in future on the banking sector, Mols (2000)

argues that technology is likely to be a key factor driving change within the

banking sector for the foreseeable future. Gandy (1998) argues that

developments in technology have dominated the revolution in the banking

sector during the last decade. Technology has facilitated the proliferation of

new products and services, supporting new consumer demand

(Jayawardhena and Foley, 2000). Blattberg and Deighton (1991); Shani and

Chalasani, (1992) and Kara and Kaynak (1997) viewed internet as means of

tying the customers to the company through the development of detailed

customer database and the use of direct and relationship marketing. In order

to be competitive, banks must focus on customer retention and relationship

management, upgrade and offer integration and value-added services,

especially in the retail banking division (Deloitte Research, 2001). Yang and

Fang (2004) highlighted that internet-based tools helped banks to create and

customize offers to customers. Osarenkhoe and Bennani (2007) viewed that

by using “one-to-one” marketing through interaction and processing, banks

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can create a platform of knowledge like their website for customers as shown

in figure 2.11

Figure 2.11: E- Marketing by ICICI

(Source: www.icici.com)

2.10 Consumer Behavior towards Bank E- Marketing Efforts

In present time, the most popular tool for promotion of banking services is e-

mail marketing. Banks uses e-mail as a marketing tool because e-mail

marketing by banks not only promotes the services by giving offers but it also

interacts with the person and a potential customer can purchase the product

with help of this. (Gupta and Mittal, 2008).

Therefore, banks are promoting their products and services using various

techniques of electronic marketing thereby creating and communicating

unique value. The primary communication channel used by banks is e-mail

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marketing. E-mail communications provide touch points with banking clients,

keeping them engaged with bank financial services. Klang (2001) pointed out

that customers assess the behaviour of banks and makes judgment about

integrity of bank. Customers evaluate past email sending behavior of bank to

decide whether it has provided friendly advises protecting the interest of the

customers or has it been opportunists, before making any transaction

decision. The usage intention of internet banking, especially for outbound e-

mails could be affected by customers’ perceptions of credibility regarding

security and privacy offered by the bank (Wang et al., 2003). Perception of

lack of security has been identified as an important factor which affects the

use of email by banks (Kassim and Abdulla, 2006). According to Mailer Mailer

(2005), click-through rates are better for banks as compared to other

industries as shown in figure 2.12

Figure 2.12: E-Mail Clicking Rate

(Source: Mailer Mailer, 2005)

According to Synergistic Research Corporation (2009), one- fifth of internet

users who receive financial e-mails actually obtain a financial service as a

result. The market size of online banking is maturing; and therefore

competition is heating up. Consumers are no longer loyal towards any bank.

One- third online consumers who have a savings account are leaving the

primary bank they were associated with, because other competitive banks are

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giving them lucrative promotional offers like high interest rates on deposits,

low fees, gifts and identity theft insurance (Jupiter research 2009).

2.11 Conclusions

In the backdrop of the extensive literature review carried out, it can be seen

that literature has mainly emphasized on emergence of Permission Marketing

as a concept, Permission Marketing as a customer centric tool, benefits of

Permission Marketing, spam vs. Permission Marketing, response rate of

solicited e-mails, legislative frame work related to Permission Marketing,

privacy of customers etc. The literature also revealed that internet banking

has created a win-win situation for both banks and customers as customers

get information along with knowledge of products and services and banks

achieve cost efficiency in their marketing activities. It was also evident from

the literature that technology is going to play an important role in the banking

sector. This instigated the researcher to further visit the websites of various

banks operating in India to investigate, whether banks are using the concept

of Permission Marketing or not. The site map of banks didn’t reveal the use of

Permission Marketing except for some foreign banks operating in India.

Thus, the following conclusions were drawn for working purpose of the thesis:

1. Most of the researches have emphasized on obtaining permission and

leveraging the benefits of pre permission of the customer but had not

focused on the reasons why a customer gives permission.

2. Almost all the researches are general in nature which mainly discusses

about Permission Marketing as a concept, response rate, privacy of

customer, comparison with interruptive marketing etc. and have not

revealed any linkage to the banking sector, where there is big scope of

application of Permission Marketing and interactive computer

technologies as suggested by Bednar et al (1995).