We rarely visit banks nowadays but, on the one odd occassion that we do pop into a local branch to deposit a cheque or collect an FD receipt or whatever, many of us get waylaid by bank staff trying to sell credit card, personal loan, mutual fund, stock trading / DEMAT account, and other financial products.
Waylaying branch visitors to sell products is called “Ambush Marketing” (not very creative, I agree).
There’s nothing new about Ambush Marketing. I’ve written about it Avant La Lettre.
- I bought a Unit Linked Investment Policy (ULIP) from the branch of an MNC bank where my then salary account was held. More at Puzzle Versus Mystery: Who’s To Blame For The Great Recession.
- I described a botched attempt at ambush marketing in How Banks Can Boost Branch Sales, and took the opportunity to outline a playbook that banks could follow to boost their in-branch sales.
But Ambush Marketing has come a long way since then. Apparently, it’s now the most effective sales tactic employed by the Indian banking industry.
On my recent visit to the branch of a Top 3 private sector bank, the branch operations manager helped me to accomplish the objective of my visit and, when I was about to leave the branch, pitched me a new health insurance product. In short, he followed the exact ambush marketing playbook that I’d published years ago.
Had I been in the market for health insurance, I could see myself buying the product forthwith. (I referred it to my friend and she did purchase it.)
From this datapoint of one, I’d like to jump to the conclusion that my aforementioned playbook has led to the blockbuster success of ambush marketing.
There’s no equivalent of ambush marketing in digital banking.
I’m guessing that’s why banks continue to grow their branch networks despite the fact that a majority of customers have turned to digital banking channels for checking account balance, downloading statements, and carrying out other everyday transactions.
Many of us don't know anyone who has been to a bank branch in a long while. But that's probably just a reflection of what we don't know.
There are more branches in USA today than 2000. Despite Internet, Despite Mobile. Despite Millennials. https://t.co/YBvp7yFf5u pic.twitter.com/03QpF0QMUY
— Ketharaman Swaminathan (@s_ketharaman) August 5, 2020
Some of you may be wondering what is a bank doing in health insurance. That’s understandable since banking and insurance are two different industries.
What we’re seeing here is a partnership model called Bancassurance whereby the insurance industry gains access to customers of banks and pays a hefty commission to banks for the privilege of selling its products to them.
Just to be clear, banks are only doing the ambushing (or at most, the early stages of selling). Once the branch staff ambushes the customer, the insurance company typically connects with him or her. Ergo, you’ll find insurance sales reps hanging around bank branches, especially the ones that attract a lot of footfall. In short, even in bancassurance, insurance companies only manufacture, sell and service insurance policies.
It’s not just BFSI products. Ambush Marketing has now expanded to cover products from other industries in a new paradigm that I call Embedded Retail.
For example,
- Banks are advertising for mobile phones.
Bank advertising for iPhone 13.
BNPLs increasingly looking like shopping apps.
Embedded Shopping / Retail is gaining traction.
With Google killing Plex, Embedded Finance is losing steam. pic.twitter.com/wTJbCM0ZsL— GTM360 (@GTM360) November 27, 2021
- Banks are selling white goods, consumer electronics products, and other consumer packaged goods. What you see in the following exhibit is an ad from a leading private sector bank. Yes, repeat bank, not white goods or electronics retailer.
- As part of platformication strategy, McKinsey tells banks to sell flowers. (I haven’t come across any bank that actually does that, though.)
I get why a customer might buy a loan from a car company instead of a bank but I can't fathom why a customer would buy flowers from a bank instead of a florist. https://t.co/nmyyQk5lbu via @McKinsey . #Platformication #Marketplace
— Ketharaman Swaminathan (@s_ketharaman) October 30, 2020
- While I have no independent confirmation of this, I heard from an ex-Banker that, during his tenure as branch manager at this leading private sector bank, tellers used to sell books to customers while dispensing or collecting cash.
- I once kidded that banks will start selling groceries in their branches at some point!
In all these cases, banks are leveraging their extensive distribution network to sell third party products that have nothing to do with banking – or even financial services.
The success of bancassurance and embedded shopping / retail models speaks to the salience of distribution over production in a free market capitalism.
But anything with the term “ambush” in its name can’t be all good?
People attribute misselling as the biggest evil of ambush marketing by banks.
- I claim to this day that the MNC bank that sold me the ULIP product 10 years ago engaged in misselling.
- A 66 year old woman goes to get FD receipts from HDFC Bank and gets sold a 30 year guaranteed return insurance product.
It’s notoriously hard to make a missselling charge stick.
Besides, different people have different financial needs, wants and risk profiles. It’s Marketing 101 for banks to respond by creating products and services to appeal to different consumer segments.
Therefore, I don’t agree with the popular discourse of tarring ambush marketing with the broad brushstroke of misselling.
Instead, I’ll repeat the following ProTip on Caveat Emptor that I’d issued at the end of my post entitled Ten Ways To Protect Yourselves From Fraud:
ProTip: Free markets offer a lot of choice and freedom to engage in commercial transactions. But, while nobody will say this explicitly, they also expect consumers to own their actions instead of seeking the government’s intervention for each and every thing. There’s a good reason why Caveat Emptor has been a best practice since the times of the Roman Empire thousands of years ago!
Going by the guidance given by the following tweeple to bank customers, it looks like people are taking my Caveat Emptor ProTip seriously!