Editorial: Wherefore customer loyalty?

Abstract

One of the most interesting business experiences over the last ten or so years has been to see how retail financial services and banking in particular have developed in terms of attempting to understand consumers, what they want and how to market effectively to them. From one of the most traditional of retail industries, banking has grown into one driven by technology and, finally, at the beginning of the 21st century one that is really trying to understand the need to conceptualise consumer behaviour appropriately. This metamorphosis has at least partly been as a result of the new market entrants such as Virgin, and traditional retailers such as Marks & Spencer and Tesco, venturing into the financial services arena. It is also due to the development of both consumer-based interactive technology, primarily the Internet, and improved database technology for the banks. Whereas previous generations of bankers took customer loyalty as a given, the new generation of banks know that lifelong customers are a thing of the past and that customers can and will change their bank if their expectations are not met by their existing provider. The increase in competition described above has done a lot for financial services. Virgin's approach of 'identify a genuine customer need, design products to meet that need' was hardly rocket science but it brought with it a desire to focus on the customer and ensure that what was said was clear and uncomplicated, 1 and many of the multi-channel entrants that came into the market followed the Virgin lead in the information provided and manner with which they communicated to customers. While the language may have become easier to understand, the nature of the relationships banks have with their customers today are, if anything, more complex than ever before. The Internet has changed how people seek information and how quickly and effectively they can compare competing offers. The traditional approach to service is no longer adequate or necessarily appropriate, and the task to deliver equally high levels of service across channels is a particularly difficult one to manage effectively. The adoption of customer relationship management (CRM) in banking has been very much in line with the general shift from a transaction-based model to a relationship-based one with the focus being on the acquisition, development and retention of profitable relationships. Customers can no longer be taken for granted in an interactive, computer literate world. So while the customer has become a more sophisticated, value-driven user, the bank has available to it innovative technologies to ensure that attrition rates are limited. Valued customers require truly personalised services and this means knowing what customers want and do not want and then ensuring that they get it. In this edition of the Journal Sally Dibb highlights the focus on the customer relationship where, through customer interactions, businesses can identify the potential value of customers resulting in a potential shift to measuring success by share of customer rather than market share. If share of customer becomes the important focus then the organisation must seriously consider individual customer value in terms of the profitability of the