Chapter 3: Financial Services Customers

Learning outcomes
At the end of this session, the student will
• be aware of the importance of integration of
consumer behaviour into marketing strategies
• evaluate customer behaviour theories, b2c and b2b
with reference to financial services
• consider how important theories of customer
satisfaction, dissatisfaction, inertia, loyalty,
switching, word-of mouth, risk and trust effect
financial services marketing.
• develop arguments for strategies built around
customer behaviour (demand-side) in the marketing
of financial services
Session structure
• Perspectives of consumer decision-making
• Risk and involvement
• Satisfaction and dissatisfaction
• Customer loyalty, word-of-mouth
• Trust
• Business behaviour
– Decision-making units
– Relationships and power
 Consuming financial services
• Understanding of financial services customer:
personal consumer or business customer central
to sustainable marketing
• Different perspectives of consumer-decision-
making
• Understanding consumer behaviour only way of
dealing with such challenging issues as trust, risk
and loyalty in financial services.
• Credit crunch could provide an opportunity for
FIs to rethink their marketing from a customer-
based perspective
B2C behaviour
• Consumer behaviour exhaustively studied in
marketing with a number of different
approaches e.g. rational and experiential
• Financial services can be hard to grasp and
so consumers may not always behave
rationally
• Experiential model acknowledges the less
rational aspects of consumer behaviour
 Rational model of consumer decision-making
Stage in decision-making Situation
Need recognition Car fails MOT so badly that repair bills exceed what the car
is worth. You have no money to replace it.

Search Check your bank loan rates, ask parents, note supermarket
loan rates while shopping, check with friends, class
mates for loan opportunities
Pre-purchase evaluation Three choices:
existing bank loan - not particularly good rate
supermarket loan attractive rate but borrowing money
from supermarket a bit weird
loan from parents but has ‘strings’, also want to
demonstrate independence
Purchase/consumption Choose supermarket loan, best rate and why not? Sign
agreement and repayment arrangements
Post-purchase evaluation Seem to have got a good rate when chatting to colleagues
and seeing adverts from competing loan suppliers. As
to the car, well that’s a different story. How bound up
are these two ‘purchases’?
 Risk & involvement
• Intangibility and complexity of financial services increases
level of perceived risk
• Search qualities not available so consumers rely on
experience or credence qualities of financial services.
• Involvement refers to the amount of effort that a customer
(b2c or b2b) will put into processing the information for a
purchase.
• Decisions about investment would usually involve high
levels of involvement and use of cash machine would be
low involvement.
• A lack of involvement has been found to be quite common
in UK consumers of financial services.
 Experiential view of consumer behaviour
Consumer attributes Desired consumer experience Financial service implication
cynical integrity/honesty corporate image, sustainable and
ethical practices
knowledgeable meaningfulness fitting their lifestyle/needs

time poor relevance product development

tribal tribal validation tribes or segments – variables,

interactions?
individual customisation individualising the experience

demanding-ness excellence in expectation recognising that one size does

not fit all

experience seeking participation acknowledging and harnessing

the consumer in the service
experience

Adapted from Stuart-Menteth et al., 2006

1. What are the differences between the two approaches in
understanding consumer behaviour?

2. Discuss the consumer attributes? An attribute is a consumer quality

or characteristic.

3. Discuss the importance of the customer experience in financial

services marketing e.g. Tribes rather than segments

4. Recognizing the input of the consumer in the experience or

relationship

5. How can integrity and honesty be communicated in the

marketplace.

6. What are the implications of a consumer being inconsistent for FIs?

 Satisfaction & dissatisfaction
• Customers seek to achieve a goal and satisfaction with the
service is a measure of achieving that goal. Satisfaction also
contributes to the following:
– Loyalty: role of satisfaction in customer loyalty is stronger than any costs
incurred in switching to a competitor so banks need to achieve high levels
of satisfaction (Beerli et al., 2004)
– Share of Wallet: Customers of are more likely than credit card customers
to purchase additional services
– Word of Mouth: Bank customers have the highest likelihood to tell friends,
family and colleagues about their bank. Word of mouth is an important
and low-cost means of customer acquisition for financial services
organizations.
• Dissatisfaction is not the opposite of satisfaction. Sources of
dissatisfaction may not be the same as the sources of
satisfaction.
• It is important to eliminate ‘dissatisfiers’ (sources of
dissatisfaction) and to work on ‘satisfiers’.
• If customers are dissatisfied they may not leave a FI but they are
unlikely to increase their ‘share of wallet’ with that FI.
Satisfaction is envisaged as the gap between expectations and
perceptions. FIs need to manage customer expectations appropriately
and then ensure that these expectations are met.

Customer satisfaction can lead to loyalty, increased share of wallet i.e.

the customer spends more at that FI.

Word of mouth very important as a measure of attitudinal loyalty

Dissatisfaction is distinct as a measure from satisfaction.

Implications are that it needs to be investigated separately from

satisfaction and sources of dissatisfaction identified and removed.

Share of wallet is the amount of an individual’s financial services

‘spend’ that a particular FI currently has (see Chapter 5 for a fuller
explanation)
Loyalty
• Loyalty is thought to be a combination of attitude
and behaviour.
– customers need to have a favourable attitude towards
the FI
– demonstrate repeat purchase behaviour with the FI
• Without favourable attitude, switching to another FI
is possible.
• Many customers are loyal on a behavioural basis
only
• Loyalty unlikely happen without customer
satisfaction but satisfaction does not necessarily
lead to loyalty.
 repeat behaviour
high low

Loyalty: long term Latent loyalty:

relationship with occasional contact
high with an existing FI,
multiple products,
an advocate of the open to cross-
FI selling

relative attitude

Spurious loyalty: No loyalty: high

inertia or likelihood likelihood of switching,
low of switching. only restricted by high
Susceptible to price switching costs. Inert
changes and and may be vocal critic
competitor offerings of FI

Loyalty in financial services, adapted from Dick and Basu (1994)

 Business behaviour
• Businesses expected to be more informed about financial
services.
• Small businesses however may resemble personal customers
• Relationships need to be built over time
• Perceptions are that FIs lend to start-up companies but
expect returns too soon. On the other hand FIs have
responsibilities to their other stakeholders in terms of
managing their lending.
• Power in B2B relationships may lean more towards the
company than the FI i.e. the larger the company, the greater
the power.
Decision-making in a small Gatekeeper: other
business for an expansion loan business partner who
restricts selection of
providers
Initiator: business partner
recognises need for
expansion loan to
purchase more equipment
Decision-
making Buyers: both business
partners sign loan
unit agreement with
eventual provider

Influencer: colleague Decision-maker: in

with whom partners this case this role is
play tennis talks played by the initiator
positively about her who decides on final
loan providers
Summary
• This chapter has been concerned with the customer in
financial services, whether B2C or B2B.
• Customers can use rational models of decision-making in
selecting financial services with decision-making units
often playing a role. Experiential approach also suggested
by postmodern contributions to marketing.
• Satisfaction and dissatisfaction are not the same, FIs must
understand how to satisfy customers and remove causes
of dissatisfaction.
• Customer loyalty operates at attitudinal and behavioural
levels with many customers being inert.
• Business behaviour can be expected to be more informed
but small businesses require special treatment.