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Re-branding of Banks in Pakistan and its impact on banking customers

A Thesis Submitted to Lahore School of Economics

By

Musawir Masood

For

Award of Degree of Masters of Business Administration in

(Marketing)

RESEARCH COMPLETION CERTIFICATE

Certified that Musawir Masood, id No.14P01570 has carried out and completed the research project entitled “Re-branding of Banks in Pakistan and its impact on banking customers” under my supervision for requirement for the award of Degree of Master of business Administration by Lahore School of Economics.

      Research supervisor

    (Shama Razi)          Lahore School of Economics

Table of Contents

Acknowledgement 4

I would also like to extend my gratitude to my friends and family who stood by me and supported me throughout the course of this project. 4

Abstract 5

Introduction 5

Literature Review 7

Research Objectives 11

Hypothesis Formulation 12

Methodology 13

Theoretical Framework 14

Results 15

Measurement Model Testing 15

Hypothesis Testing 17

Findings 21

Implications and suggestions 23

Conclusion 23

References 24

Appendix 27

Appendix A 28

Questionnaire 28

Flash cards 33

Appendix B 37

Acknowledgement

I would like to express my gratitude to all those who helped and saw me through this project. I am especially gratefully to my supervisor, Ms.Shama Razi, who continuously guided me throughout the process and provided me with valuable suggestions to upgrade my thesis. Without her enlightening criticisms, expert guidance and patient instructions, the completion of this thesis would not have ever been possible.

I would also like to extend my gratitude to my friends and family who stood by me and supported me throughout the course of this project.

Abstract

Rising competition in the industry has forced all commercial banks to look for ways in which they can set themselves apart while providing identical financial products and services. It has been under the light of such circumstances that multiple banks have opted to rebrand their organizations. They have invested heavily in these rebranding efforts.

This study will employ quantitative tools to better understand the impact of these rebranding efforts on the average banking consumer. This study will not only help to better understand the consumer perceptions but will also determine whether the decision made to go for rebranding was the right one or not.

Introduction

When it comes to financial institutions, banks in particular, the role of marketing is neglected and importance is given to the financial side of things. It has only been recently that the banking sector in Pakistan has started to pay more and more attention towards building brands. The credit of this goes to the ever increasing competition among the top commercial banks operating in the country. Multiple commercial banks have recently gone through the process of rebranding in order to set themselves apart in the market.

The banking sector of Pakistan is being regulated by the State Bank of Pakistan. A wide spectrum of financial institutions operate under the umbrella of the State Bank that include the commercial banks, specialized banks, investment banks, Islamic banks, microfinance institutions, leasing companies and insurance companies. These institutions offer a range of products and services both on the assets and liability sides. The National Financial Inclusion Strategy (NFIS) 2015 has started to increase the financial inclusion nationwide across all institutions but the commercial banks still by far the predominant players as they account for 90% of the total financial assets in the system.

The public sector banks operating within the country include National Bank of Pakistan, The Bank of Punjab, Sindh Bank, Bank of Khyber and First Women Bank. Some of the leading private banks include Askari Bank, Allied Bank Limited, MCB Bank Limited, Bank Alfalah, Bank AL Habib, Faysal Bank, HBL, Habib Metropolitan Bank and JS Bank.

The NFIS introduced by the government is making it easier for both individuals and businesses to have access to the banking services. The Basic Banking Account (BBA) is one of the initiatives of the NFIS. This type of account can be easily opened with minimal paperwork. Opening of Smart Branches is another initiative under NFIS which allows individuals residing in far flung areas to have access to basic banking services. Another initiative includes availability of biometric verification through NADRA at multiple branches making it easier to verify individuals and hence easier to open their bank accounts.

All of these initiatives have contributed toward increasing competition among the top banks operating in the country and has forced them to reduce their processing and turn around timings. It is now easier for individuals and businesses to open a bank account than it has been ever before. The only question that remains is which bank to choose. Here is where branding comes in to play.

It is under these circumstances that large public and private sector banks such as the Bank of Punjab and Bank Alfalah opted for rebranding their organizations. The rebranding process was not only restricted to cosmetic changes such as changes in the logo, new slogans, and modernized branches but these organizations also inducted fresh MTO batches from reputable institutions on higher wages and made them go through intensive training sessions to incorporate new customer centric values into them. TVCs were made to emphasize the importance of individual customers for a bank instead of conventional advertisement that only highlighted the features of a new financial product. These banks have invested heavily into rebranding their organizations.

Literature Review

Branding is the process involved in creating a unique name and image for a product or service in the consumers\' mind. Branding aims to establish a significant and differentiated presence in the market that attracts and retains loyal customers. The growth of branding took place during the era of the industrial revolution, when markets over the world were flooded with dozens of identical products. Thus there emerged a need for differentiating these products from one another and an alternate way to identify which product has better quality than the other.

Muzellec and Lambkin (2006) defines rebranding as the creation of a new name, term, symbol or design for an established brand, in order to create a differentiation in the mind of stakeholders and competi¬tors. Adding prefix “re” to ‘brand', the word ‘rebrand' implies the action of ‘branding again' or ‘brand renewal, refreshment, makeover, reinvention or renaming among other synonyms (Merrilees & Miller, 2008). Lomax and Mador (2006) states that once the company has a clear idea as to why the rebranding is necessary and what it expects only then the execution of the rebranding strategy can be started. The key success factor in rebranding is to include the internal stakeholders in the process. Every rebranding process should be evaluated with regards to its initial goals (Stuart and Muzellec, 2004). Kaikati (2003) points out that the company must develop both communication networks and training programs, to disperse the new brand message throughout all levels of the company. Corporate rebranding necessitates synergy among marketing, strategy and human resource management. It is often observed that the process is more complex and time consuming than the companies anticipate (Hatch & Schultz ,2003).

Service quality is often conceptualized as the comparison of service expectations with actual performance perceptions (Zeithaml, 1990). On an operational level, research in service quality has been dominated by the SERVQUAL instrument, based on the so called gap model. The central idea in this model is that service quality is a function of the difference scores or gaps between expectations and perceptions (P ± E). It has been proposed that service quality is a multidimensional concept (Parasurama., 1985). Five key dimensions of service quality have been identified. Reliability is defined as the ability to deliver the promised service dependably and accurately. It is about keeping promises ± promises about delivery, pricing, complaint handling, etc. Responsiveness can be described as the willingness to help customers and provide prompt service. This dimension stresses service personnel\'s attitude to be attentive to customer requests, questions and complaints. Assurance is the service quality dimension that focuses on the ability to inspire trust and confidence. Empathy is the service aspect that stresses the treatment of customers as individuals. Finally, tangibles is the service dimension that focuses on the elements that represent the service physically. While the SERVQUAL instrument has been widely used, it has also been widely criticized.

Light & Kiddon (2009) identified that the modern banking customers are more demanding than they used to be long ago and that it is the bank's responsibility to ensure product brand trust because information flow in the society today is faster than ever which affects the customer and the bank. Silver & Berggren (2010) contested that corporate branding is not that easy to achieve in the banking industry, mainly because the bank's products are intangible in nature and such products can be easily imitated and usually launched at the same time by the competing banks. Makasi et al. (2014) established that rebranding has positive effects on customer perception and that it can be used as a marketing tool to gain competitive advantage. It also has a positive impact on the financial performance of an organization. It is however not certain that the brand will perform positively after undergoing rebranding as there are many studies reveal downsides to rebranding. Branca and Borges (2012) did not find any evidence of a positive impact of corporate rebranding on firm value in Portuguese firms. M'Sallem et al. (2009) studied the effects of renaming a bank and reported that both customer satisfaction and brand attitudes were not affected by brand renaming. However the bank's personality perception was to some extent modified.

Research into customer loyalty has focused primarily on product-related or brand loyalty, whereas loyalty to service organizations has remained underexposed (Gremler and Brown, 1996). Frequently, a high positive correlation between the constructs of satisfaction and product loyalty is reported. With regards to service loyalty, perceived service quality is often viewed as a key antecedent (Dick and Basu, 1994). However, there are a number of reasons why findings in the field of product loyalty cannot be generalized to service loyalty (Keaveney, 1995). Service loyalty is more dependent on the development of interpersonal relationships as opposed to loyalty with tangible products (Macintosh and Lockshin, 1998), for person to person interactions form an essential element in the marketing of services (Czepiel, 1990). Furthermore, the influence of perceived risk is greater in the case of services, as customer loyalty may act as a barrier to customer switching behavior (Guiltinan, 1989). In addition to the behavioral and attitudinal approach to customer loyalty, it has been argued that there is also a cognitive side to customer loyalty (Lee, 1980). In this sense, customer loyalty is frequently operationalised as the product or service that first comes to mind when making a purchase decision (Dwyer, 1987); the product or service that is a customer\'s first choice among alternatives (Ostrowski., 1993) or price tolerance (Anderson, 1996).

Service quality is often conceptualized as the comparison of service expectations with actual performance perceptions (Zeithaml, 1990). On an operational level, research in service quality has been dominated by the SERVQUAL instrument, based on the so called gap model. The central idea in this model is that service quality is a function of the difference scores or gaps between expectations and perceptions (P ± E). It has been proposed that service quality is a multidimensional concept (Parasurama., 1985). Five key dimensions of service quality have been identified. Reliability is defined as the ability to deliver the promised service dependably and accurately. It is about keeping promises ± promises about delivery, pricing, complaint handling, etc. Responsiveness can be described as the willingness to help customers and provide prompt service. This dimension stresses service personnel\'s attitude to be attentive to customer requests, questions and complaints. Assurance is the service quality dimension that focuses on the ability to inspire trust and confidence. Empathy is the service aspect that stresses the treatment of customers as individuals. Finally, tangibles is the service dimension that focuses on the elements that represent the service physically. While the SERVQUAL instrument has been widely used, it has also been widely criticized.

Research Objectives

Multiple banks in Pakistan have gone under rebranding. Their rebranding efforts have not only been restricted to cosmetic changes such as changes in the logo or slogan but have been extended to the point of incorporating the new values within their fresh and existing employees through extensive training programs.

Past researches have tried to understand the impact of changing the bank's logo on customer perceptions and brand recall in India but no such study which evaluates the impact of such rebranding initiatives has been conducted in Pakistan.

This study will try to determine:

• The extent to which different banks have made efforts to rebrand their organization and its financial services.

• The extent to which an average consumer is aware of the rebranding efforts.

• How these rebranding efforts impact the banks image in the minds of an average banking customer.

• In what way the rebranding efforts have impacted the perceived service quality in the minds of the consumer.

• What impact these rebranding efforts have on customer loyalty.

• The extent to which customers perceive the bank to be modernized after the rebranding process.

Hypothesis Formulation

H0: Rebranding efforts do not have a significant relationship with bank's recognition

H1: Rebranding efforts have a significant relationship with bank's recognition.

H0: Rebranding efforts do not have a significant relationship with bank's image.

H2: Rebranding efforts have a significant relationship with bank's image.

H0: Rebranding efforts do not have a significant relationship with perceived service quality.

H3: Rebranding efforts have a significant relationship with perceived service quality.

H0: Rebranding efforts do not have a significant relationship with perceived modernization.

H4: Rebranding efforts have a significant relationship with perceived modernization.

H0: Rebranding efforts do not have a significant relationship with customer loyalty.

H5: Rebranding efforts have a significant relationship with customer loyalty.

Methodology

This research is exploratory in nature and quantitative approach will be used. Self administered questionnaires will be used in order to collect relevant data. Flash cards will also be used bearing old and new logos of commercial banks such as Bank Alfalah and Bank of Punjab which have undergone rebranding recently in order to aid the respondents. 200 respondents will be selected via random sampling within ten different bank branches located in Lahore city. The data regarding the rebranding efforts made by three large commercial banks of Pakistan will be collected through an interview conducted with one of the senior executives of each bank. The data will be processed using statistical software SPSS and Amos.

The validity and reliability of the instruments will be tested. Confirmatory Factor Analysis (CFA) will be used. Factor loadings of each item will be generated and evaluated. Cronbach's Alpha will be used in order to test for reliability of the model. The results will be then analyzed to study the impact of rebranding on various variables concerning consumer perception.

Theoretical Framework

      

Results

Table 1. Respondent's profile

Profile      N=255

Gender Male 173

Female 82

Age 18-25 years 71

26-35 years 118

36-45 years 42

>46 years 24

Education Inter 25

Graduation 143

Masters 87

Number of bank accounts 1 113

2 106

3 and above 36

Measurement Model Testing

Confirmatory factor analysis (CFA) was conducted in order to determine the validity of the measurement model. The overall fit of the structural model was determined using parameters such as chi-square statistics, Comparative Fit Index(CFI), Goodness of Fit Index(GFI) and Root Mean Squarre Error of Aproximation(RMSEA). The measurements (X2 =56.257, CFI= .713, GFI= .973, RMSEA= 0.052) show that the structured model fitted the data well.

Table 2. Summary of factor loadings

Factor Items     Standardized Factor Loadings

Re-Branding Efforts

RB1:How much has the company invested in the new media plan .71

RB2:To what extent the logo has been redesigned .78

RB3:The organization came up with a new slogan .88

Recognition

R1: Which bank comes to your mind when you see this picture? .66

R2: The slogan written on the flash card shown belongs to which bank? .72

R3: Have you come across any advertisement of this Bank? .75

Perceived Service Quality

Q1: This bank has employees that are willing to give you personal attention? .79

Q2: This bank has your personal interest at heart? .74

Q3: You are going to get prompt service at this bank? .64

Bank Image

I1: This bank is an honest bank. .62

I2: This bank is well established in the banking industry. .72

I3: I often hear positive reviews about this bank from my friends and family. .65

Perceived Modernization

PM1: This bank would have modern looking equipment and fixtures. .64

PM2: This bank would have the latest online banking systems in place. .67

PM3: This bank would have clean, attractive and convenient public areas. .71

Brand Loyalty

L1: You are willing to pay higher price for the services of this bank. .77

L2: You constantly compare the offerings of this bank to other bank. .68

L3: I would be recommending this bank to my friends and family. .72

Hypothesis Testing

H1: Rebranding efforts have a significant relationship with bank's recognition.

H1 is accepted as the P-value for this relationship is 0.01, which is significantly low and therefore the null hypothesis is rejected. More over the t-statistic value which is 3.483 is considerably far from zero which depicts that there is significant impact of rebranding efforts on the bank's recognition. Rahul (2015) also found that a change in the rebranding efforts specifically the logo made it easier for the consumers to recognize the bank. The rebranding process certainly improves the recognition of a brand, Makasi (2014). Yusuf (2015) found the rebranded logo of a bank to be the most effective rebranding effort which made the bank standout in the minds of the consumer. Loughlin (2004) highlighted that the financial services are becoming more and more monotonous and it is only these branding efforts which set the service providers apart in the minds of the consumer.

H2: Rebranding efforts have a significant relationship with bank's image.

H2 is accepted as the P-value for this relationship is 0.04, which is significantly low and therefore the null hypothesis is rejected. More over the t-statistic value which is 2.565 is considerably far from zero which depicts that there is significant impact of rebranding efforts on the bank's recognition. Rahul (2015) also found that an increase in the rebranding efforts such as a change in the logo improves the image of the bank in the eyes of the average consumer. Chhibber (2015) stated that the main reason why banks rebrand is in order to attract the young generation.

H3: Rebranding efforts have a significant relationship with perceived service quality.

H3 is rejected as the P-value for this relationship is 0.10, which is greater than 0.05 and therefore the null hypothesis is accepted. Rahul (2015) finding were contradictory as it found a significant relationship between re-branding and perceived service quality also an increase in perceived range of services along with it.

H4: Rebranding efforts have a significant relationship with perceived modernization.

H4 is accepted as the P-value for this relationship is 0.02, which is significantly low and therefore the null hypothesis is rejected. More over the t-statistic value which is 1.041 is considerably far from zero which depicts that there is significant impact of rebranding efforts on the perceived modernization. Rahul (2015) also found a significant relationship between a new logo and consumers perceiving the bank to be more modern as a result of it.

H5: Rebranding efforts have a significant relationship with customer loyalty.

H5 is rejected as the P-value for this relationship is 0.53, which is greater than 0.05 and therefore the null hypothesis is accepted. Makasi (2014) found a significant relationship between the rebranding efforts and customer loyalty which is contradictory to our findings.

A successful rebranding process is likely to change consumer perceptions Makasi (2014).

A lot can be said about the extent of success reached by the rebranding efforts made by the bank if we analyze the results derived from the measurement of the variable brand recognition.

Figure 1: Result logo recognition.

Majority of the banking consumers faced no difficulty when it came to identifying the rebranded logo of the bank. Rahul (2015) also found out in his study conducted in India that a majority of customer could easily identify the rebranded logo and could associate it with the bank. It can be therefore said that the banking sector of Pakistan on the whole has done a proper job in communicating this rebranding effort to its potential consumers through various mediums.

Figure 2: Result slogan recognition.

On the other hand same cannot be said about the rebranding changes made to the slogan of the banks. Even though the split is nearly even but it is can be safely said that more effort needs to be made on the end of the banks to communicate the new rebranded slogan to their target audience. If we go into the details of the results it can be said that some banks like HBL have played their part fully in communicating their popular new slogan among the target market but when we look at the combined results the consumer faced difficulty in recognizing the rebranded slogans.   

Figure 3: Result advertisement recognition.

Fifty nine percent of the respondents could come up with an advertisement of the bank they were questioned about on the spot. This is a pretty satisfactory result on the part of the companies as it is quiet difficult for the consumers to remember an advertisement on their own let alone recognize it once it shown to them. This shows that the new media plan made as the result of the rebranding efforts has been considerably successful.

Findings

It was fond that rebranding efforts had little impact on how customers perceived the quality of services provided by a bank. It can be said until or unless the customers experiences the services themselves they did not drew conclusions based on the rebranding efforts that the banks have gone under. Moreover same can be said about the loyalty of the customers. Customers did not form loyalties to the bank solely based on the rebranding efforts that the bank performs. As the financial services is a risky business, it is essential for a bank to provide consistent error free services to a customer in order to gain their loyalties. The rebranding efforts do prove to be beneficial in areas such as improving the brand recognition among the target market. An average banking customer can easily recognize a bank based on its new vibrant logo, a catchy slogan or the engaging advertisement that these banks have come up with as a result of the rebranding. Moreover these efforts also contribute into upbringing the image of the bank. Customers generally perceived that if a bank is heavily investing into rebranding efforts it is likely to be doing well financially and is also involved in the process of constantly improving itself and its services in order to better cater to the needs of its consumer this not only improved the image of the bank in the minds of the consumer but also gained their trust.

As discussed earlier the consumers assumed that the bank is investing in improving itself and its services as a result of the rebranding efforts. The average customers also perceive that as a result of the rebranding the bank is investing into modernizing its branches and systems. Customers generally believed that the bank is going to have renovated branches once it has gone under rebranding, with open customer areas furnished with modern furniture and fixtures.

If we compare the rebranding efforts it was the logo of the bank that had the greatest impact on the minds of the customers. It was something that they recognized immediately and could associate the bank with it easily. The slogan was something that customers didn't paid heed to and didn't retain in their minds to the extent the banks wanted them to. The advertisements were still a popular medium among the consumers to stay informed about the efforts made on the part of the bank.

Implications and suggestions

Banks are doing well in terms of tapping the superficial factors that make up the perceptions in the minds of the target customers but when it comes to core factors such as perceived service quality and loyalty they lag behind and are unable to cater to such factors with their rebranding efforts. Moreover the new slogans that these banks come up with are not communicated effectively to the target audience. They need to either come up with catchier slogans or re-evaluate their media plans to communicate their slogan in a more effective manner. Research needs to be conducted and different ways need to be tested how banks can incorporate various areas such as communicating improved service quality through their rebranding efforts to their prospective customers. Brand loyalty is believed to come over time through consistent service performance and meeting the expectations of the consumers. Banks can work on these shortcomings and can further improve the impact of their rebranding efforts on their target market

Conclusion

Banks in Pakistan according to the findings have to a great extent achieved what they were set out to achieve through the rebranding efforts. They have successfully influenced the perceptions of an average banking consumers when it comes to improving the banks image, increasing recognition and communicating the modernization within the organization.

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