THE APPLICATION OF NONPARAMETRIC METHODS IN THE ANALYSIS OF TREATMENT EFFECT AND THE EFFECT OF THE

ADVERTISEMENTS ORDER IN MAKING MARKETING DECISIONS IN BANKS

Olgica Bošković1

Univerzitet u Beogradu, Ekonomski fakultet olga@ekof.bg.ac.rsSvetlana Popović

Univerzitet u Beogradu, Ekonomski fakultet ceca@ekof.bg.ac.rs

Abstract: In Serbia, there are 33 banks with 2383 branches, and one can expect growing competition and increasing battle for customers in the future. Foreign sources of liquidity shrink, so they will have to rely more on domestic depositors in their funding strategy. There are less prudential borrowers, so less profitable investments. Therefore it is important to understand what are the clients’ bank selection factors. They show which criteria are important for customers’ choice, but also what customers expect from the banks out of providing quality services. That is why bank selection criteria are linked to service quality. Key words: nonparametric methods, Gart's test, bank competition, bank marketing mix

INTRODUCTION

Understanding key preferences of customers, indicates what should be in the focus of bank advertising messages. In order to understand customer expectations, there is a need to analyze the customer reaction on current advertisements- to see, among other this, the treatment effect (for example, what is emphasized in that message) and the importance of message order (for example, how important it is to be the first bank that introduces the new service). Nonparametric counterparts to standard statistical testing procedures are typically used either when an assumption violation that invalidates the standard test is suspected, or in situations where the response variable of interest is not susceptible to numerical measurement, but can be ranked. A common example of this second setting is provided by studies of preference in marketing. For instance, a consumer may be asked to rank a new product in order of preference among several current brands. As market researchers, we tend to focus on crosstabulations that offer paired tests of proportions and generally take the results right to the portion of the final report that details the statistical results.

In Serbia, banks are the dominant financial institutions and as such have important role in financing the economic activity. During 1990s they were facing great difficulties in business. The economy was in severe recession causing banks poor operating results, banks were largely undercapitalized, illiquid and insolvent, financial markets were completely undeveloped, there was an inadequate legal framework. After reforms 2001, the situation started to improve, new laws were brought, number of banks were privatized and some were recapitalized, so the state share in banking sector declined sizeable. Number of banks decreased from 86 in 2001 to 39 in 20062, but foreign ownership of banks

1 Article is the result of Project 179 0282 Dusan Mesic, 2006, Ulazak stranih banaka u zemlje u tranziciji, Udruzenje banaka Srbije, Bankarstvo, br 7/8, 48-58, str. 55

rose. Foreign banks entry increased competition and facilitated the process of bank mergers and acquisitions. After 2002 bank credit activity boom started, as illustrated on the Graph 1.

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Graph 1. Domestic credit provided by banking sector in Serbia (% of GDP)Source: Worldbank Databank, http://databank.worldbank.org/ddp/home.do

Such growth of bank credit activity was influences largely by the prevailing growth model- based on demand financed with credits, remittances and foreign direct investments. Banks enabled households and corporate sector access to foreign sources of financing. Domestic saving was not enough to cover investment demand, so opening the country to foreign funding brought sizeable capital inflows and significant current account deficits. Banks invested largely in the national debt and consumer credit and less in productive investments, so the rise of credit activity had limited impact on productivity growth and the creation of strong export base, which diminishes long- run growth capacity. Investments are key driver for increasing of economic performances and domestic savings are important factor of the investments level. In high growing countries, national saving rate is 20-25% or even higher. For reaching higher growth rates, domestic saving rates in Serbia should be also high in proportion to GDP. Unfortunately, savings in Serbia were low as a percentage of GDP (from -9.5% of GDP in 2002. to 6.3% of GDP in 2010)3. Global economic crisis and problems in EU countries caused sources of financing to decrease, because the access to finances in the world financial markets became more difficult and expensive. World markets became illiquid, grown distrust caused a huge increase in the risk premiums. Lower availability of capital inflows and domestic credit negatively influenced domestic demand and private consumption. Deterioration of the countries credit rating and the growth of credit risk mean that foreign sources are more expensive, so banks will have to rely more on domestic deposits in their funding strategy. On the other side, there are less prudential borrowers, so less profitable investments. Non performing loans accounted for 24,6% of total loans to companies, and 9,1% of total loans to households4. That is why one can expect growing competition and increasing battle for customers in the future. Data shown on graphs 2. and 3. illustrate previous statements.

3 Worldbank databank 4 Kontrola poslovanja banaka, Izveštaj za IV tromesečje 2011.godine, Narodna banka Srbije

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Graph 2. Growth rates of bank loans and total balance sheet (assets)Source: National bank of Serbia, Statistics

Graph 2. shows that although total bank loans and total balance sheet sum are continuously growing, growth rates have decreasing trend. Constant increase in the share of loans in assets indicates a relative decrease of other bank investments, and growing significance of credits to bank performances. This confirms the previous view that banks will be faced with the problem of diminishing opportunities for profitable investments and the less prudent loan seekers.

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Graph 3. Growth rates of bank liabilitiesSource: National bank of Serbia, Statistics

The growth rate of domestic savings, both dinar and in foreign currency, is decreasing. Foreign liabilities growth rate also is lowering, except in 2009 due to loans taken by 2 banks in foreign ownership. In 2011 household deposits made more than 38% of bank balance sheet, which means they are very significant source of financing, and in the future one can expect harder battle for new deponents.

1. BANK COMPETITION IN SERBIA

For a bank to attract new customers, it is important to understand the criteria by which customers choose a particular bank. Whether the decision is based on the price of bank services (interest rates) or some other parameters that characterize the non-price competition. Studies have shown that in Serbia the demand for bank loans is not interest rate sensitive.

Medium Gallup 2007 survey of financial literacy of citizens in Serbia showed that just over a quarter of respondents use the interest rate as the criteria when making decisions on borrowing (Dimitrijevic, 2007,100). According Dimitrijevic only 20% of financial sources of companies are bank credits, the rest are own sources, direct foreign loans, accounts payable, informal lending. In the previous period, loans rose despite the increase in interest rates. This indicates that the non-price parameters of competition are more significant in the process of bank selection in Serbia.

Non-price competition is marketing strategy in which a firm tries to distinguish its services or products from competitors on the basis of attributes like brand name, design, packaging, advertising, sponsorship etc. instead on price. In promotion activity it highlights the distinctive benefits or features of its products. Banking sector in Serbia is characterized by many competitiveness disadvantages, like insufficient management efficiency, the quality of management team and leadership, know-how competences, organizational structure, etc. Stronger competition on domestic bank market will make differences between them more visible and will facilitate the process of mergers and acquisitions, as a way of capital strengthening of the banks. Improvement in competitiveness in the banking sector should be based on: improvement of service quality, permanent competence development, adequate motivation system of employees, innovation, improvement of leadership and management skills, flexible organizational structure and modern technology (Barjaktarevic et al., 2010). First step in that process is to understand customer preferences or what are the clients’ bank selection factors. They show which criteria are important for customers’ choice, but also what customers expect from the banks out of providing quality services. That is why bank selection criteria are linked to service quality.

New Global Competitiveness Index5 ranks Serbian financial system on the 96th place out of 142 countries with the score 3,7 (7 being maximum). According to availability of financial services Serbia is ranked as 103 and according to affordability 93 (Schwab ed., 2011). This means quite low competitiveness rank of banking sector, since banks are the dominant financial institutions (Banks account for 92,4% of total balance sheet of financial sector in Serbia6).

The level of competition on the banking market in Serbia could be analyzed based on the indicators of competition and concentration: share of top 5 or 10 banks in the total balance sheet and Hirschman-Herfindahl index (HHI)7. Indicators for the period 2002-2011 are shown on the next graph:

5 The World economic forum publishes every year The Global Competitiveness Report in which it ranks countries based on the Global Competitiveness Index. Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity. It is calculated as the weighted average of 12 different aspects of productivity and competitiveness. Financial market development is one of them and is ranked on the basis of 8 indicators.66 Sektor osiguranja u Srbiji, Izveštaj za 2011.godinu, Narodna banka Srbije, april 2012, str. 57 HHI is the measure of market concentration and is calculated by squaring the market share of each bank in an observed category (balance sheet, deposits, credits etc.), and then summing the resulting numbers. The HHI number can range from close to zero to 10.000. Market with a result of less than 1.000 is competitive marketplace, there is no concentration. If HHI is from 1.000-1.800, it is a moderately concentrated marketplace, when the result is 1.800 or greater it is a highly concentrated marketplace.

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Graph 4. Indicators of competition and concentration on Serbian banking marketSource: National bank of Serbia; Stephan Barisitz, Sándor Gardó, Financial Sector Development in Serbia: Closing Ranks with Peers, Focus On European Economic

Integration, Oesterreichische National bank, 2/08, 94-119, pg.118 for HHI data for 2003 and 2004

The share of top 5 banks in Serbia in the total balance sheet of banking sector was stable in the previous decade, oscillated between 45% and 50%. In the first quarter of 2012. exactly half of total bank loans were granted by those banks and they hold 53% of total household deposits8. So almost a half of the assets of 33 banks in Serbia is in the balance sheet of only 5 banks. This could mean they are in a position similar to oligopolistic and they dominate market conditions. On the other side, the share of top 10 banks in total balance sheet has growing trend and one can expect stronger competition between them. Beside, HHI is significantly below the level of 1000, which indicates the competitive market, although it has a continuously growing trend since 2007.

2. IMPORTANCE OF BANK MARKETING

Marketing concept in the banking industry began to emerge in mid-1950s. Until then, banks were strictly professional, cold, impersonal institutions that were supposed to make an austere impression of seriousness and great importance in the public. They were just a supplier of needed services. There was no need to emphasize services like checking accounts, savings or credits. Marketing started to emerge in the banking industry, in USA, in the late 50s. Banks suffered increasingly stronger competition from other types of financial institutions, so they were in a struggle to retain existing and attract new deponents. At the time bank marketing was not in the form of the “marketing concept” but in the form of the "advertising and promotion concept". That is when the idea of customer satisfaction began, it was thriving during the next decade and in 1970s it became an integral part of banking services. The marketing approach to banking involves such planning and implementation of procedures to

8 Kontrola poslovanja banaka, Izveštaj za I tromesečje 2012.godine, Narodna banka Srbije

develop, distribute and bring to the consumers bank services and products, which will be on mutual interest of the consumers and the bank, and will make it possible for the bank to achieve its goals (Higgins and Platonov, Ed., 1998, 186). It is customer oriented and includes a high degree of flexibility in designing the services according to clients’ needs. Marketing approach in banking includes: development and implementation of appropriate marketing strategy, collecting and processing large amounts of data from both the internal and the external environment, development of new services and products and bringing them to consumers, and management of the whole set of the bank's marketing activities.

Bank marketing strategy connects bank with the market, it is a process, method or model that enables the bank to concentrate its limited resources on the best opportunities in order to increase sales and achieve its specific goals on the target market. Since the major goal of any market player is profit, bank marketing strategy is the basis for the strategic planning process in banks. The first step in formulating bank management strategy is the determination of the market where it will offer its services and products, targeted market for each kind of service or targeted market segments. This step requires high level of precision, since different markets or market segments may require different approaches, and different objectives could be achieved.

The next step in developing bank marketing strategy is the formulation of long-run and short-run goals for each market and market segment. Goals must be realistic, achievable with available resources and represent a base for further strategic planning process- how to achieve them. Crucial part of marketing strategy is marketing mix, which represents a tool to achieve banks objectives on each market or market segment. It is a combination of activities, elements and characteristics of bank services specially developed or adapted to targeted markets and market segments used to best market bank products. After marketing strategy development, the next step is the strategic planning process. In service industries of this type, where competition can move very quickly and new players can enter easily, there is a constant need to think strategically about what is going on. In response to increasing complexity and change in the financial services industry, banks have turned to strategic planning. That is the process of using systematic criteria and rigorous investigation to formulate, implement, and control strategy, and formally document organizational expectations (Hopkins et al., 1997, p.637). It includes development of plans and budgets for the implementation of defined marketing strategy. Strategic planning must be spread through bank organization, connecting the corporate objectives with business and operational goals and targets, for timely response to external changes. Monitoring of market situation gives the information about the bank business activities and changes in market situation which present the feedback for adjustments of marketing strategy and strategic plans.

2.1. Marketing mix in banking industry

The service marketing mix is known as an extended marketing mix, it consists of 7 P’s compared to the 4 P’s of a product marketing mix. Product marketing mix elements are: Product, Pricing, Promotions and Placement. For the optimum service delivery, three more elements are necessary: People, Process and Physical evidence. The first element of bank marketing mix is the product mix- service combination offered to the customers to satisfy their needs. Since the bank market is highly regulated, they all offer the same type of products. No brand can be marketed with unique selling proposition in long run, since it will be copied. That is why most often the investment costs of developing new products are too high in relation to potential benefits, so the banks tend to focus on some specific ideas related

to products which they can use quickly. In development of bank products, there are three groups of products: core, formal and augmented. Core products define the business of a bank, and banks no matter of market segment they target, always offer them. They serve the full range of customer segments and do not have strong marketing content. They are the basis for the development of more sophisticated products. Formal products are usually the combination of two or more core products, with strong marketing content and adjusted to some specific customer needs. Augmented products are further modifications of formal products. That is value added bank product or service- with some auxiliary benefit attached.

In the case of services, pricing is more difficult than in the case of products. Bank must take into consideration labor, material cost and overhead costs and then add a profit margin. Bank profitability depends on the ability to obtain funds at the lowest possible prices and sell them with the larger difference between lending and deposit interest rates. Determining prices is limited by various factors that are beyond the direct control of the bank, such as the rate of inflation and inflation expectations, rate of required reserves and the rate of central bank’s interest rate, level of risk present in bank business etc. That is why in banking industry, marketing has no immediate and dominant price impact. It is easier to determine not the cost of a specific service but the profitability of all services of that type offered by the bank. By managing the profitability of banking services on different target markets and their segments, a bank can make them attractive to customers and compete with other banks offering similar services on the same markets.

The most important element in distribution strategy is the place where the service will be located. Distribution means delivery of the products or service at the right time and at the right place. It refers to channels that are used for the distribution of services to clients and all methods which customers may use in order to obtain them. Traditionally, the basic distribution channel for bank services is extensive network of local branches characterized by comfortable premises, personal contact with employees and fixed operating hours. Changes in the way of living and IT technology render the role of banks and the pattern of bank services consumption. The banks are forced to adopt, they must offer their services to the customers when and where required, in order to meet the clients' increased demands on the speed, form and content of services. They must increase the flexibility of offering services through the development of modern system of services distribution- telecommunication systems, ATMs, post offices, internet, home banking services, etc. The choice of methods of bank services distribution, ensuring the smooth functioning of this system and its constant upgrade and improvement are important part of bank marketing strategy. This provides new opportunities for the differentiation of bank services and in the center of that process must be the analysis of clients’ behavior.

The goal of the promotion is to inform and persuade individuals to accept a certain product, service or idea. It stimulates the demand through the communication. The first task of any marketing campaign is to inform the potential customers. Since intangible nature of bank services, their customers rely more on subjective impression. When the bank is offering a new product, it informs prospective customers through market promotion. The second task of promotion is to persuade clients to buy services offered by a given bank instead similar products other competing banks. So, promotion involves communication or exchange of information, and communicative activities aimed at convincing the customer of the necessity to come to the bank for a financial service. There are a lot of reasons why people consume different material and non-material goods. Understanding incentives of customers to use services from a given bank and decision making mechanism that chooses a specific bank

service enables bank to influence those decisions and boosts the demand for its products and services. Active exchange of information with clients helps understand the bank selection criteria. That is why promotion is the critical marketing tool for achieving bank strategic goals. One of the elements of the service marketing mix is people. People define a service, they can make or crush the organization. That is why service offering firms are investing in special trainings for their employees in interpersonal skills and customers service with a focus towards customer satisfaction. Like in other service industries, employees are very important for banks, since banking is labor intensive. Their competence will determine the quality of the bank and how well it operates. On the other side, unlike the machines, people can be in a different mood, they have different cultures, aspirations, attitudes, feelings. So, beside having necessary knowledge and skills for servicing the customers, it is important to motivate them adequately and to have appropriate human resources management.

Service process is the way in which a service is delivered to customers. It includes all activities from the product conceptive stage to its marketing at branch level. They can make a uniqueness to a bank product and bring a competitive advantage for the bank. Processes show the ability of a bank to perform the entrusted tasks. They have their own course and are conducted according to appropriate procedures. It is important how well are those procedures (for example loan procedures) designed in terms of duration, complexity and flow, because they must lead to customer satisfaction with the service he purchased. Services are intangible in nature, but to create a better customer experience some tangible elements are added to the service. Making the intangible commodity tangible is a great challenge to the bank. They tend to do it in a different ways. Since bank services are largely provided in branches, their appearance significantly influences clients’ impressions. Banks establish standards for external and internal appearance of branches, so that clients have always the same impressions. Other strategies are imaginative designing of bank stationery used by customers or packaging, for example product brochures, catchy brand name or pictorial design which can represent a specific product. All this can contribute building a positive image of the bank.

2.2. Promotion

Promotion means activities that communicate the merits of the product and persuade the targeted customers to buy it (Kotler and Armstrong, 2006, p.110). It consists of two components: personal and impersonal communication about the product or service. Personal communication is a promotional presentation made on a person-to-person basis with a potential client. Nonpersonal communication includes activities like advertising, sales promotion, and public relations. Marketers attempt to develop a promotional mix as a combination of personal and impersonal communication that effectively and efficiently communicates their message to target customers. Higgins and Platonov (p.206) distinguish tree kinds of bank promotional activities: corporate information advertising, corporate image promotion and product advertising. Corporate information advertising promotes the bank as an institution that offers its customers the whole range of different bank products, for example signboards on the bank building or symbols on city maps. Corporate image promotion has a goal of forming the positive bank image in the public. It is customized for each targeted market segment, since customer behavior may be very different on each segment. Creating and maintaining a positive image of the bank requires consistent long-term promotional activities like developing the exterior and interior design of the bank's branches, presentation of some bank products, long-term regular public relations functions, different programs of sponsorships etc. Product advertising promotes specific bank products or activities. When promoting one product, marketer should hold to unified policy of

communication with customers and include, where proper and possible some elements which promote the bank's positive image in a specific target segment. Usually there are six elements of service promotion mix: advertising, sales promotion, public relations, personal selling, direct marketing and event and experience.

Through sales promotion a company offers different short term incentives to customers to motivate the purchase or sell of a product. That is one time selling effort like the discount on price, free gifts, buy one get one free, couponing, accessories etc. Sales promotion tools have a goal to gain the attention by communicating the offer that will not be available again to purchase a specific product or service. The disadvantage is that many customers tend to be less brand loyal in the long run and if this tool is too often used customers may became insecure about a given product if it is reliable or appropriately priced. That is why each sell promotion activity must be carefully budgeted and compared with the next best alternative. Sale promotion in finance industry has a goal to attract new clients, increase deposits or a number of creditworthy loan seekers. Although coupons, special offers and price discounts are dominant sales promotion methods, in banking and generally finance industry price based promotion can be complicated and not always appropriate. Despite the fact that price competition can be sometimes even forbidden9 or it’s not desirable10, price setting for financial services is quite complicated and sometimes potential customers find lower price as a signal for lower quality. That is why there is an opinion it is the best to combine sale promotion with advertising.

Public relations is a communication of a firm with different publics like customers, employees, shareholders, government etc. in order to achieve mutual understanding. Majority of those communication efforts has marketing purpose. It includes activities, like creation and maintenance of corporate identity and image, charitable involvement, media relation for the spreading of good news, crisis management etc. Public relations has great importance for banks and usually they have public affairs officers whose task is to create publicity. For financial services, important part of public relations is gaining publicity in specific financial journals.

Personal selling is an effective tool for achieving the bank's strategic goals on certain target markets and their segments. It is the two- way communication tool between the bank and an individual or a group in order to inform them and persuade to take a specific action. Increased competition on financial market forced banks to develop comprehensive relationship with their clients. Long-term person-to-person contact is especialy important in retail banking and crutial for private banking. Personal promotion implies direct personal contact between a client and the bank through their authorized representatives. During the ensuing negotiations the bank's officer informs the customer about services available through the bank, offered conditions, advantages and benefits of using given services, and also suggests that the customer make practical steps to obtain certain bank services. Such communication is very flexible, it can be adjusted to a specific client, so that it can satisfy his information needs and motivate him to use bank services. He can exchange oppinion with the bank representative and together they can find the best solution for his problems.

9 Regulation Q in USA introduced in 1933 in accordance with Glass-Steagal act, prohibited banks from paying interest on demand deposits and imposed maximum rates of interest on various other types of bank deposits.10 For example “gentleman agreement” between the governer of the National bank of Serbia and banks on not raising deposit rates during Saving week in 2011.

Growing number of financial services companies like banks have adopted direct marketing as their main marketing strategy. “Direct marketing is marketing through various advertising media that interact directly with consumers, generally calling for the consumer to make a direct response”11. It is tailored to individual customer, it focuses on relationship building rather than a transaction. Attracting new customer costs more than the retention an old one, that is why for companies it can be more important to establish a long term relationship with fewer clients than short term relationship with more clients. To have loyal customers a firm must continuously deliver high customer satisfaction. Tools of direct marketing are mails, telephones, e-mails, internet that enable direct communication. With the information collected in an integrated database it is possible to find out the customer’s needs and satisfy them. Companies have a lot of information about their current and potential customers. This data is used in order to target the customer directly and establish and maintain a relationship while offering products or services. By participating in different events like trade fairs, export fairs, seminars etc. companies try to make people aware of them, make new contacts or renew old ones. Banks participate in different events trying to promote their products. They can also arrange trainings, seminars and conferences as the part of their promotion. Beside, banks are frequently sponsors of some events in order to improve their image. The attributes of an event are often associated with the sponsoring organization.

2.3. Role of advertising in commercial banks

Advertising is the most effective type of nonpersonal promotion. It is a paid, nonpersonal sales communication usually directed at a large number of potential customers. Through advertising company presents and promotes ideas, goods or services to persuade potential customers to purchase or take some action. It includes the name of a product or service and how that product or service could benefit the consumer. There are two types of advertising, product advertising, which involves selling products or services, and institutional advertising which involves the promotion of a concept, idea, or the goodwill of some organization. Financial service organization uses advertising in order to achieve short- term and long-term goals. The bank that wants to build a long-term name uses institutional advertising and bank that wants to promote its brand name or different services uses brand advertising policy. Advertising makes the service tangible in the mind of a client and gives him clear idea what does the service consist of.

Product and institutional advertising can be subdivided by its purposes: to inform, persuade, or remind. According to the informative view (constructive role of advertising), advertising creates a more elastic demand by providing information to customers. It creates initial demand for a product, and is used in the introductory phase of the product life cycle. According to persuasive view (combative role of advertising), advertising has a goal to improve the competitive status of a product, institution, or concept. It is used in the growth and maturity stages of the product life cycle. Such advertising is primarily conducted to change consumers’ tastes to advertiser’s advantage. In this case, advertising generates a less elastic demand for the product or service by increasing brand loyalty, eventually leading to 11 Kotler definition, acording to Angelica Andersson, Petter Cederbrink, Magnus Lövsund, Managing Customer Loyalty through Direct Marketing A Case Study of the Relationship between Länsförsäkringar Kalmar Län And Their Beneficiary Customers, Jönköping International Business School Jönköping University, Sweden, p.9

higher prices. It can even be anti-competitive and used to create entry barriers. Potential entrants may be faced with the initial high advertising costs which increase entry risk. Popular approach to persuasive product advertising is comparative advertising, which consists of direct comparisons with competitive products. Reminder-oriented advertising is used in the late-maturity and decline stages of the product life cycle. Its goal is to keep a product's name in front of the consumers or to remind people of the importance of a concept or an institution.

Important question for marketers is how to best allocate advertising expenditures on different medias. They all have advantages and disadvantages. Newspaper advertising can be tailored for individual communities, so local advertising is common. Beside, newspapers can reach large number of people in the community, but they have relatively short life time. Television has a significant impact on potential customers. It is characterized by mass coverage, repetition, flexibility, and prestige. Advertising can be on satelite or network TV where it can reach the whole world, national or local TV. Disadvantages are very high costs, temporary nature of the message, some public distrust, and lack of selectivity in the ability to reach specific target market segments without considerable wasted coverage. Advertising through direct mail is characterized by selectivity, intense coverage, speed, flexibility, complete information and personalization, but it’s costly, dependent on effective mailing lists and sometimes faced with consumer resistance. Radio advertizing is direct, with low costs, customized to targeted audience, it is flexible, but it has a short life time. Magazine advertising is characterized by selectivity, quality reproduction, long life and prestige but they lack the flexibility. Outdoor advertising like billboards communicates ideas quickly, enables repetition and can promote goods and services sold in the near, but the message must be very brief. There are other, less used medias like cinema, movies or posters on different vehicles- like taxi or buses.

Important part of bank advertising activities consists of invisible advertising like leaflets, pamphlets and manuals aimed to sell the specific service. Although this kind of advertizing is cheap, it does not attract new clients and its effectivness depends on personal selling. Stronger effects are obtained through more influential communication channels like television, radio, newspapers and magazines.

3. CUSTOMER EXPECTATIONS

When developing plans for advertising campaigns, bank must take care about efficiency. For these purposes, it makes special studies of customers' response to advertising and their perception of specific advertising moves. Beside it is necessary to monitor costs of advertising campaigns and the results of the bank's activities in the markets which may depend on the communication efficiency.

By studying consumers, firms can better understanding of the role of perception in consumer behaviour. They can significantly improve their marketing strategies when they have a knowledge on the psychology of how consumers feel, think and reason their way to a buying decision. Knowing how consumers are influenced by their environment, their information-processing abilities and their perception of a product can help companies to more effectively reach consumers.

Expectations formed by the consumer before the purchase, play a significant role for the marketing department of any company and although they cannot control those expectations, they can, and to some degree must, steer their activities towards explaining, understanding and anticipating the choices made by the consumers. A company that can successfully anticipate trends in consumer behaviour will have a strategic advantage over its competition. If a company can lead the way in identifying consumer needs, it will be ahead of its competition in satisfying those needs, which will produce a good public image of the company. Pioneering the anticipation of needs will also enable the company to control the unexpressed, latent needs and to focus its efforts towards satisfying them. The expectations themselves represent a dynamic element in consumer behaviour that will change depending on previous experience, media influence, opinions of reference groups such as family, friends and acquaintances or co-workers. Expectations may depend on product performance, design, shape, quality, as well as the appearance of the place of purchase, service provided by the sales staff, costs and effort needed to acquire a product or a service. Values, beliefs and customs that are specific to certain subcultures, e.g. national, racial or religious affiliations, may heavily affect consumer expectations. The tendency in male population to express more product satisfaction has been identified as opposed to the female population which is characterized by the need to communicate more, be more informed on product quality and performance, and check the composition of the product as well as its declaration. Consumers today have more freedom than ever to choose between various alternatives and thereby cast their „economic votes“ for companies, which is also a parameter of business success. A decision for a specific product will incite an entire valuation system, starting from which products will be sold as well as how many, which features will they have and, to a certain extent, at which price will they be sold.

For a company to achieve its ultimate goal – creating and delivering superior value for the consumer, the first step must be to accurately define that value. Each consumer may define value differently, because it is such a subjective category, defined by the consumer’s accumulated purchasing experience as well as exposure to stimuli from the environment.

Banks spend billions of dollars developing advertising content, according to Evren Ors (2003, p.2) advertising expenses were estimated at 8.8% of net income before taxes for the industry, 8.9% for commercial banks and bank holding companies, and 4.7% for small banks and bank holding companies with less than $250 million in total assets. Theories of advertising and prior studies on framing, cues, and product presentation, suggest that advertising content can have important effect on consumer choice. But there is little field evidence on how much, how and what types of advertising content affect demand.

Evren Ors studies the role of advertizing in the profitability of commercial banks, a link between the bank product mix and the level of advertizing, how do the banks response to competitor’s advertising expenditures using data on U.S. commercial banks. Estimations obtained from Granger causality regressions and the simultaneous equations suggest advertising can have competitive effect in banking. He also founds that there might be an optimal advertising level.

Bertrand et al. (2009) made a direct mail field experiment that simultaneously and independently randomized the advertising content, price, and deadline for actual loan offers made to former clients of a consumer lender in South Africa. Research questions were: whether advertising content affects demand, how much advertising content affects demand, relative to price, through which channels persuasive advertising operates and does it trigger

intuitive or reasonable response. Using F-test, they found that advertising content had statistically significant effects on demand. There is some evidence that these content effects are economically large relative to price effects. Consumer response to advertising content does not seem to have been driven by substitution across lenders, and there is no evidence that it produced adverse selection. The advertising content treatments experiment were motivated primarily by findings from psychology and marketing that are most closely related to theories of persuasive advertising. Consumer sensitivity to the price of the loan offer will provide a useful way to scale the magnitude of any advertising content effects. Results on the individual content feature variable conditions also provide some insight into how much advertising content affects demand, relative to price. Authors also tested thematic groupings of content treatments with F-tests. These results shed some light on the mechanisms through which advertising content affects demand. Advertising content appears more effective when it is aimed at triggering an intuitive response rather than a reasonable response.

Athanassopoulos et al. (2001), studied the impact of commercial retail bank customer satisfaction on their behavioural responses, in the Athens, using personal interviews. They asked marketing managers and customers service managers from three different retail banks to describe which factors, according to their expert opinion, comprise the broader notion of customer satisfaction in retail banking. Then their answers were further probed by asking branch managers from four other retail banks to comment on suggested factors. It is expected marketing and customers service managers to have a solid, broad understanding of what satisfies bank customers. Because branch managers are closer to the customer and day-to-day encounters, their opinion was used as a filter in order to unveil the satisfaction factors that their experience has shown really matter for the consumers. They used confirmatory factor analysis (CFA) in order to examine the dimensionality of the customer satisfaction dimensions and the behavioural responses dimensions. The CFA hypothesised model was estimateded using the maximum likelihood estimation procedure. The basis of the statistical analysis was the covariance matrix of the observed responses. The model was six factor of customer satisfaction (employee competence, reliability, product innovation, pricing, physical evidence and convenience), and two behavioural responses (intention and decision to switch and word-of-mouth communications). They found that employee competence affects consumer behavioural responses, reliability seems to be a driving force of customers’ behavioural responses, physical evidence is a key factor toward the consumers’ behavioural responses, although product innovation has limited effect it is important, value for money does play an important role on the formation of consumer behavioural responses. According to authors banks should seek to develop strategies that enhance positive behavioural responses to customer satisfaction and prohibit negative ones.

Understanding key preferences of customers, indicates what should be in the focus of bank advertising messages. In order to understand those customer expectations, there is a need to analyze the customer reaction on current advertisements- to see, among other this, the treatment effect (for example, what is emphasized in that message) and the importance of message order (for example, how important it is to be the first bank that introduces the new service).

4. TREATMENT AND SEQUENCE EFFECT IN PROPAGANDA?????

One of the issues that can be analysed with statistics is the treatment and sequence effect in propaganda. Efficiency of economic propaganda, regardless of whether we’re talking about products or services, will depend on how successfully we can connect the message to the

consumer. For this type of research, statistical analysis of the data gathered often uses the contingency tables. Analysis of contingency tables is not a new achievement in statistical research, and the very first works on the subject of analysing categorical data date back to the year 1900, when K. Pearson12published a paper in which he defined the term "contingency". The idea to study tables with categorical data appeared many years earlier in fragments of works of other authors, but it was K. Pearson’s13work that really integrated the existing research and set the foundation for modern contingency table analysis. However, only in recent years has this field earned its rightful place in statistical theory and practice.

When solving an empirical problem, researcher is forced to choose between various statistical methods in order to pick a method that will suit his/her experimental situation the most. For analysis of contingency tables, researchers are usually conflicted on whether to apply a typical

test (goodness of fit test, independence test, homogeneity test) or another appropriate test (e.g.McNemar’s test, Cochran’s test, Fisher’s Exact test, Kolmogorov-Smirnov’s test, Mantel andHaenzel test).

Development of statistical methodology and improvements in information technology have enabled the implementation of new types of research, which was instrumental to achieving higher levels of reliability of the conclusions from experimental results. Gart’s test has been used more widely so far in medicine (e.g.the sequence and treatment effects in medication) and psychology (implementation of various treatments). However, this test can successfully be applied to the analysis of economic phenomena, most of all to economic propaganda related research (Boskovic, 1997.). The test, if applied, will enable the separation of treatment effects from sequence effects of shown propaganda messages, on the potential buyer’s decision when purchasing a product. This ability to separate the effects favours Gart’s test in comparison to other quantitative methods that can be applied to data presented in contingency tables. Let’s take a look at a hypothetical example -two opinion polls were conducted, resulting in 2 samples of 205 potential buyers each, who were polled in two stores in Belgrade. Buyers were offered two brochures, and asked to answer the following question: which advertising message made them decide to buy the given product. Results from the polls are given in Table 2.1.a and Table 2.1. b. If we wanted to test for correlation between the purchase and the sequence of advertising

messages by using the test, we would have to formulate H0 as showing no correlation between the choice of advertisements shown and the sequence in which they were shown and H1

as showing the correlation between the choice of advertisements shown and the sequence in which they were shown.

Table 2. 1. a) Results of the first opinion pollBought because

Sequence of advertisements

Total

(A,B) (B,A)A 50 30 80B 15 110 125

Total 65 140 205Source: hypothetical example by the author, analysed withGraphPadSofware

12  Pearson K. (1900a), "On the criterion that a given system of deviations from the probable in the case of a correlated system of variables is such that it can be reasonably supposed to have arisen from random sampling", Psilos. Mag. 50, No. 5, pp. 157-175.13 Pearson K. (1900b), "Mathematical contributions to the theory of evolution in the inheritance of characters not capable of exact quantitative measurement" VIII, Psilos. Trans. Roy. Soc. Ser. A, No. 195, pp. 79-150

Table 2.1.b) Results of the second opinion pollBought because

Sequence of advertisements

Total

(A,B) (B,A)A 55 25 80B 45 80 125

Total 100 105 205Source: hypothetical example by the author, analysed with GraphPadSofware

After analysing the data from Table 2.1.a) and Table 2.1.b) we can see that the test statistics are

respectively = 57,5, p=0,0001 and =20,9 p=0,0001, and considering that the table value of 2distribution for d.f.=1 is 3,84, we can conclude that the calculated value of the 2 test is statistically significant and that a correlation between the choice of polls shown and the sequence of advertisements exists. Obviously, these two advertisements generate different effects, but we can not tell for certain to which extent is that difference caused by the advertisements themselves and to which extent by the sequence in which they appear.

If we wanted to confirm the research results, instead of 2 test we would have to apply another non-parametric test e.g. McNemar’s test which is widely used to analyse data in the before-after experimental design, when the purpose is to test the effects of two treatments on the same subjects in different time periods and when the data can be measured by applying a nominal scale. McNemar’s test is a type of non-parametric test, used on the level of nominal and ordinal measuring scale. It is applied to 2x2 contingency tables in order to determine whether the row and column marginal frequencies are equal. The test is named after Quinn McNemar who introduced it in 1947. McNemar’s test is applied to 2x2contingency tables, observing the outcomes of two tests on a sample of nelements. To test the existence of any kind of possible variance, 2x2 contingency tables have to be formed, in order to show the before and after

answers in a so called experimental design. McNemar’stest is in fact a test for paired dependent samples. It aims to establish whether there is correlation between dichotomous features of paired dependent samples. Dependency is defined as either the same elements under observation at two points in time (before and after treatment) or the same elements under observation subjected to two different treatments. Features of the contingency table will either bethe first and the second time orthe first and the second treatment. It shall be applied to 2x2 contingency tables for dependent samples. If we wanted to check the results, we could use the McNemar’stest and get the following results from the data illustrated in the tables

above: McNemar’s =4,3556p=0,0369for table 2.1.a)McNemar’s =5,1571 p=0,0232 for

table 2.1.b). After applying McNemar’s test we reach the same conclusion as with the test - there is dependency between the choice of polls shown and the sequence of advertisements.

However, the use of or McNemar’s test cannot give us precise information on how the buyers react to sequence of advertisements when shopping.

We can see from the table 2.1.a) that 160 buyers decided to buy upon seeing the first advertisement (50 buyers bought because of A after they read the advertising message in (A,B) sequence and 110 bought because of B after seeing the (B,A)sequence). The remaining people who were polled, decided to buy under the influence of the second message. The remaining 45 buyers decided as follows: 15 buyers bought because of A, after reading the messages in (A,B)

sequenceand 30 bought because of B, after reading the (B,A) sequence. We can see from the table 2.1.b) that 135 buyers decided to buy under the influence of the first advertisement (55 are buying because of A after reading the messages in (A,B) sequence, and 80 because of B after reading the messages in (B,A sequence). 80 buyers decided to buy under the influence of the second advertising message(45 because of A, after reading the messages in (A,B) sequence, and 25 because of B, after seeing the (B,A) sequence), whereas the sum of the row marginal frequency in the contingency table remains unchanged in comparison to Table 2.1.a). It is obvious that the two advertisements cause different effects, but we cannot say with certainty to which extent the difference is caused by the advertisements themselves,and to which extent by the sequence of their presentation.

Alongside improvements to the existing statistical methods, new methods were also developed that could provide answers to the new requirements rom users. This is how the sequence effect test was developed as well as the treatment effect test (Gart 1969.). Although Gart’s test has been in use for many years as one of the successful methods for analysis of contingency table data, especially in medicine where it enabled the measuring of the sequence and treatment effects in medication, as well as psychology for various treatment regimes, it found its place in the economic analysis as well. Gart’s test can be used to analyse economic phenomena, most of all economic propaganda. How do advertising messages impact the consumer is an important question for the contemporary marketing departments, and it is Gart’s test that can provide the separation between the treatment and sequence effects of advertising messages on the decision of the buyer to buy a certain product. This is why Gart’s test is used more often to analyse said effects than other tests which are used for contingency table analysis(2test, McNemar’stest and Fisher’s test). Gart’s test is used on paired observations distributed as shown in tables 3. and 4. where yarepresents the number of observations where advertisement A produced a positive result with regards to the purchase of the product, when in a pair of advertisements, advertisement A is seen first; y'ais the number of observations where advertisement A produced a positive result, when in a pair of advertisements, B is seen first; ybis the number of observations where watching the advertisement B results in a positive outcome when advertisement A is seen first; y'bis the number of observations where advertisement B results in a positive outcome when B is seen first; n is the number of observations when in a pair of shown advertisements A is the first one seen, and n' is the number of observations when B is the first one seen. Data has been analysed with Fisher’s exact test because these examples contain fixed marginal totals. Exact probability of realization (frequency) in a 2x2 contingency table has been provided as hypergeometric distribution:

(1)

Table 3.Data for treatment effect testsBought because

Sequence of advertisements

Total

(A,B) (B,A)A ya y’b ya+ y’b

B yb y’a yb+ y’a

Total n n’ n+n’

Table 4.Data for sequence effect tests

Bought because

Sequence of advertisements

Total

(A,B) (B,A)A ya y’a ya+ y’a

B yb y’b yb+ y’b

Total n n’ n+n’

New tables that resulted from the application of Gart’s procedure for data analysis from the first opinion poll are Table 2.1.a) 1.1 and Table 2.1.a) 1.2. From the acquired results we can conclude that the treatment effect p=0.13748015is higher than the sequence effect p=0,0000, or rather, that the decision to purchase the product was primarily made based on the content and quality of the advertising message and not the sequence.

Table 2.1. a) 1.1 Data for treatment effect tests for the tableBought because

Sequence of advertisements

Total

(A,B) (B,A)A 50 110 160B 15 30 45

Total 65 140 205Source: hypothetical example by the author, analysed with GraphPadSofware

Table 2.1.a)1.2. Data for sequence effect tests for the tableBought because

Sequence of advertisements

Total

(A,B) (B,A)A 50 30 80B 15 110 125

Source: hypothetical example by the author, analysed with GraphPadSofware

New tables that resulted from the application of Gart’s procedure for data analysis from the second opinion poll are shown in Table 2.1.b) 1.1 and Table 2.1.b) 1.2. Analysis of the acquired data confirmed that, in this case too, the treatment effect p=0,00070964is higher than the sequence effect p=0,00000297, or rather that the decision to purchase this product was primarily made based on the content and quality of the advertising message and not the sequence.

Table 2 .1.b) 1.1.Data for treatment effect testsBought because

Sequence of advertisements

Total

(A,B) (B,A)A 55 80 135B 45 25 70

Total 100 105 205

Table 2.1.b) 1.2. Data for sequence effect testsBought because

Sequence of advertisements

Total

(A,B) (B,A)A 55 25 80

B 45 80 125Total 100 105 205

5. CONCLUSION

Observing the polled participants, we found that their decision to buy something can be influenced both by the content and quality of the propaganda message as well as by the presentation sequence in a group of messages. If we establish that the consumers have a positive reaction to primary messages presented, and that their attention wanes over time, we can provide a clear indicator to the marketers that they should organize their media presence more efficiently, both in relation to time and presentation dynamics. On the other hand, if we establish that the targeted consumer segment has had a positive response to the content and impact of the message itself (as in our example above) it’s clear that it’ll be the duty of the marketers to organize a team of experts, including psychologists, that will dedicate their time to analyse the stimuli that moves the consumer, in order to create an effective propaganda message. Gart’s test was found to be efficient and simple to use. In the previous example we showed that it is possible to separate the treatment and sequence effects, where Gart’s method

was found to be superior to the test, McNemar’s test and Fisher’s test.

Modern business environment is turbulent with a tendency to be very aggressive with its participants. In the future, as today in a society frequently called “the consumer society”, companies will have to organise their activities primarily around consumer demands. Economic propaganda is a very efficient model for communication with clients, largely due to the development of technology and information technology, the fields with the biggest innovation booms today and identical future growth tendencies. We can freely say that the implementation of statistics has become the basis for all market research, and that, with the continuing development of methodology and testing models, their cooperation will continue to be successful in the future.

PAR RECENICA O UPOTREBI U MARKETINGU U BANKAMA/ IZ GLAVE

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