South African Business Bank Customers’ Product Utilisation and Likelihood to Recommend

Abstract

The financial meltdown that started in 2007 resulted in many banks revisiting their strategies to increase income. Two of these strategies include increased cross-selling of products, as well as higher levels of net promoting of the bank, its products and the relationship managers. From a banking point of view, a long-lasting relationship with their customer base is imperative, and most banks manage their customer base differently based on the value or potential value of the customer as expressed in terms of turnover. This classification is applied in the banking industry, where banks partition their customer bases into groups or segments that spend at different levels. The aim of this study is to determine the differences between business-banking segments with regard to their likelihood to recommend and product utilisation. For this purpose, the client base of a commercial bank in South Africa was utilised and the focus fell on small, medium and large business segments of a particular bank; since the bank applies different levels of CRM to their respective segments. The focus on South Africa as a country in this study is mainly because it is the only African member of the BRICS and therefor plays a critical role as a conduit for trade and investment flows into the continent. The data were sourced from two databases; and over 20,000 respondents were analysed. Only those business customers that were subjected to customer experience evaluation were extracted from the bank’s database. Classification of the bank’s customers is based on the annual group turnover of the customer; and it is in line with the guidelines set out by the Institute of Chartered Accountants in England and Wales. The findings show that small business segments that are served through the most basic relational processes show stronger inclination to recommend the bank to others. This raises the question of whether the more expensive CRM processes the bank used for medium and large business segments are truly delivering in customer value, and are thus cost effective. Especially since the more costly processes (for medium and large business segments) do not seem to deliver exponentially higher recommendation levels. In general, the results of this study could be used for more effective planning and resource allocation, and for creating optimal structures in the bank. One question that arises is how to provide solutions to different customer segments more effectively given the complex and challenging banking environment.