Challenge of de-marketing in banking industry

The defines marketing as the management process through which goods and services move from concept to the customer. It includes the coordination of four elements called the 4 P’s of marketing: identification, selection and development of a product; determination of its price, selection of a distribution channel to reach the customer’s place, and development and implementation of a promotional strategy.

Marketing therefore is a form of communication between an entity and its customers with the goal of selling a product or service to them. Communicating the value of your product or service is a key aspect of marketing.

At the height of the fierce competition that succeeded the banking consolidation exercise between 2005 and 2006, a damaging tactic crept into the industry. It was called ‘de-marketing,’ which can be construed as a direct opposite of marketing.  De-marketing is the deliberate creation and spreading of false information about a company and its management to destroy public confidence and cause it to lose patronage.

This practice became so widespread and threatening that it became a subject of hot exchange in one of the Bankers Committee meeting in 2006 with some bank chief executives reporting their colleagues who were deploying this nefarious tactic against their banks, to the Central Bank of Nigeria (CBN).

Realising the threat of this practice to the health of the industry and the need to decisively combat it, the CBN issued a circular dated April 2012, 2006. The circular was signed by the Director of Banking Supervision, CBN, Mr Ignatiuos Imala.

Titled ‘The unethical and unprofessional practice of de-marketing colleagues/other banks in the industry by spreading false rumours,’ the circular among other things  stated that “When the banking industry had 89 banks, some of the weak institutions made efforts to de-market others by circulating false distress lists and negative information all in the name of competition.  They were then warned at the Bankers Committee followed by CBN clarification to the public.

“With the emergence of 25 strong banks, post consolidation and the existing large terrain for all to professionally and profitably do normal banking business for the growth of the economy, such practice is not only unacceptable but condemnable.

“Information reaching the CBN indicates that the unethical and unprofessional practice of spreading false stories to de-market other banks has again started to emerge in the system.  This shows that the industry still harbours some operators/officers who still conduct themselves unprofessionally.

Consequently, the CBN warns the staff of all banks to desist forthwith from this condemnable and unethical practice.

All banks’ Chief Executive Officers were then advised to immediately address all their staff to heed this warning as any proven case of de-marketing by any means and spreading false rumours or negative comments against other banks would henceforth be sanctioned as follows:

“The bank officer (s) involved in the exercise will be dismissed and blacklisted for unethical and unprofessional behaviour, and the banks’ MD/CEO will be issued with a letter of warning by the Governor of the CBN and the letter will be made public, while a re-occurrence could also lead to such CEOs receiving a stiffer sanction.

“All are advised to comply in the interest of the industry and the economy. We are also inviting the general public to report any staff of a bank or banks involved in such unethical conduct to the CBN.”

Another warning against de-marketing

A similar but stronger warning was issued in 2008 when the unethical practice resurfaced in the industry. Dated October 21st, 2008, and signed by Imala, it was titled, “Circular to all banks   de-marketing of banks by other banks.”

In the circular, the CBN, among other things stated that “The CBN has again noted with serious concern the recent practice whereby some officers of deposit money banks engage in the de-marketing of other banks through disparaging comments and the use of negative text messages.   This development, which constitutes a threat to the safety and soundness of the banking system, is unprofessional, unethical and unacceptable.

“Banks and their staff are by this circular reminded that the responsibility for ensuring the safety and soundness of the banking system is a collective one for all stakeholders.  Banks are therefore advised to caution their staff on this practice as henceforth, any staff of a bank found to be involved in such an act will be summarily dismissed and blacklisted.

“Also, if another staff of the same bank is involved in such a practice, the institution will face severe sanctions including but not limited to a monetary fine of N10 million. Appropriate channel will be opened by the CBN for the report of such unwholesome practice by banks’ customers and the general public.

“Furthermore, in the overall interest of the banking system, all banks are advised to enthrone an appropriate corporate culture that would guide against such practices in the future.”

This warning succeeded in purging the industry of cases of de-marketing however only for another eight years.

Re-emergence of de-marketing

Recent developments show a re-emergence of de-marketing tactics in the banking industry aided by actions of the regulatory authorities.

On July 4, 2016 the apex bank announced the removal of the board of Skye Bank and the appointment of a new one. But prior to the announcement, the social media was awash with rumours that the bank was distressed, and that the CBN had taken over the bank.

Though the CBN Governor, Mr Godwin Emefiele while announcing the board changes, emphatically stated that the bank and in fact no bank was distressed, to many people, the announcement was a confirmation of the rumours.

The de-marketing assault, however, was not limited to Skye Bank. The regulatory action induced a flight to safety among bank customers, which caused most banks to experience some form of deposit withdrawals.

However, some bankers and members of the public decided to exploit the situation to spread various false and damaging information against banks that are doing well by every indices of performance just in the bid to poach their customers.

Checks revealed that Heritage Bank, a young but rising star of the industry is the latest victim of these false and damaging assaults.

Facts beyond de-marketing

According to the 2015 financial statement of Heritage Bank released April this year; the bank recorded gross earnings of N24.2 billion and posted a profit after tax of N1.1 billion. This was made possible via customers’ deposit of N312 billion while the bank also gave out N175 billion loans during the year. Also, in March the CBN appointed Heritage Bank as partner for the pilot phase for its N3 billion Youth Entrepreneurship Development Programme, to mention a few.

The above definitely are not indications of distress or a bank tending towards distress. Yet there have been barrage of de-marketing assaults against the bank to convey wrong impressions about its financial status. The de-marketers of Heritage Bank have sought to undermine it with two sets of malicious and false information

First, they sought to undermine the image of the bank with a political colouration, by labelling it as a bank owned by the Senate President, Dr Bukola Saraki.

“Heritage Bank is a Saraki bank,” they claim.   Yet, even at inception in 2013, Saraki’s family had less than 10 per cent in Heritage Bank. Available record shows that ownership is more diluted today due to additional capital from new investors.

In addition, some of the de-marketers sought to tie the bank with the former chairman of Skye Bank, Mr Tunde Ayeni. They claimed that Ayeni is a majority shareholder, that he borrowed so much money from the bank, as a result of which the CBN will soon ‘take over’ the bank as it did Skye Bank.

After re-circulating these falsehoods without success, the demarketing machine turned its searchlight on the financial health of the bank. “The bank is distressed; the CBN would soon sack the management,” they falsely claim.

The issue of the N2 billion NNPC funds in the care of banks over which CBN banned some banks from foreign exchange market did not help matters. Despite the fact that some aspect of the TSA directive absolves the banks of any wrong doing, as well as  the fact that the issue was a case of dollar shortage to meet repayment schedule, the CBN conveyed the impression that the banks concealed the NNPC funds.

Also while the NNPC funds were in the custody of 15 banks, only nine banks were reported to be involved. Heritage Bank was also included in the nine banks, despite submitting to the CBN a schedule of repayment for the NNPC funds under its care. Thus, the CBN, despite its warnings against de-marketing unconsciously fuelled the wave of misinformation and falsehood about the health of these banks, including Heritage Bank.

The sins of Heritage Bank

Some analysts said the main cause of this wave of de-marketing assault on Heritage Bank is its rapid success in catapulting itself into the ‘Tier 2’ category of banks in the country.

This started with its daring entry into the industry in 2013, emerging from the ashes of the defunct Societe Generale Bank. Despite the pessimism about its viability and ability to compete in a fiercely competitive industry, the bank commenced with a verification exercise and payment of about N21 billion to depositors of the defunct SGBN. This was a feat considered impossible by most industry watchers.

And while the industry was still grappling with the fact of its emergence in the industry, Heritage Bank made a daring bid for the former Enterprise Bank. In addition to winning the bid, the bank made the payment for the acquisition in record time, while the management successfully integrated the two banks without any crisis or rancour.

Added to these is the bank’s innovative deployment of technology to render banking services in unprecedented style as reflected by its ‘Experience Centers’. Heritage Bank has also succeeded in carving a niche as an ‘SME Friendly bank’ due to its  success in promoting and supporting micro, small and medium (MSMEs) businesses, a space largely neglected by the existing banks.

The de-marketers of performance

The above are the realities which the de-marketers of Heritage Bank are trying to hide from the banking public. Some of them are ignorant tools in the hand of politicians hoping to acquire ownership of the bank by triggering a regulatory action. A top industry analyst described them as politicians who want to reap where they have not sown; adding that they want to deny the hardworking management and shareholders of the bank the harvest of their labour. “The other groups of de-marketers are unscrupulous bankers who are afraid of the rising profile of Heritage Bank. Bereft of ideas or strategies to compete professionally they resorted to deliberate and malicious falsehood to halt the ascendance of boldness, vision, hard work and innovation showcased by the progress of Heritage Bank,” the analyst said