Customer involvement and interaction in retail banking: an examination of risk and condence in the purchase of nancial products

Barry Howcroft and Robert Hamilton

University of Loughborough, Loughborough UK, and

Paul Hewer
University of Stirling, Stirling, UK
Abstract Purpose The purpose of the paper is to examine bank customer involvement and the importance of risk when contemplating the purchase of nancial products. Design/methodology/approach The paper is a discussion of the literature on customer involvement, risk and interaction forms the basis for a series of focus discussion groups and facilitates the design of a questionnaire. The questionnaire is used to collect information on bank customer involvement and condence when purchasing a comprehensive range of nancial products. The data is analysed using cluster analysis. Findings The paper nds that the clusters provide evidence to suggest that the market consist of a number of distinctive customer segments. Although the research suggests that the market might be changing and becoming more active, the majority of bank customers are still essentially passive. Research limitations/implications The sample size means that it is not fully representative of the UK banking population. The ndings also raise a number of issues, which require further research, such as, the possibility that customer involvement could be used as the basis for segmenting the customer base. Practical implications There appears to be an overwhelming customer need for more product information and more involvement with banks. This has major implications for the banks in formulating and implementing relationship management strategies. Originality/value The paper provides new insights into the importance of customer involvement when purchasing a range of nancial products. Keywords Banking, Customers, Banks, Consumer behaviour, Financial services Paper type Research paper

An executive summary for managers can be found at the end of this article.

Introduction
For several decades the nancial services markets have been gradually becoming more competitive as, inter alia, developments in technology and deregulation have eroded the usefulness of branch networks as effective barriers to entry and created the opportunity for new players to enter the market. During this same period society has also been changing with, amongst other things, a noticeable trend towards greater consumer empowerment. In the UK, examples of greater empowerment are clearly discernible in the trends towards individuals taking responsibility for their own pension arrangements and tax return, etc. Harris (2000) has also argued that developments in electronic online banking have the potential to empower customers and make them more pro-active in the banker-customer relationship.
The current issue and full text archive of this journal is available at www.emeraldinsight.com/0887-6045.htm

Against this background of change and increased competition, the paper reports the ndings of some exploratory research into customer involvement and risk when purchasing a comprehensive range of nancial products. The paper was, therefore, prompted to some extent by the need to better understand consumer involvement in an environment, which appears to be gravitating towards greater consumer empowerment. However, the paper was also motivated by the research of Foxhall and Pallister (1998) and Aldlaigan and Buttle (2001), which suggested that the conventional measures of customer involvement might not apply in a nancial services setting. Specically, Foxhall and Pallister compared Zaichkowskys (1985) personal involvement inventory scale (PII) with Mittals (1989) purchase decision involvement scale (PDI) and found that although both scales performed well, in a nancial service context, rational involvement is more dominant than emotional involvement. Aldlaigan and Buttle compared Zaichkowskys PII scale with Kapferer and Laurents (1985) consumer involvement prole (CIP) and similarly concluded that certain dimensions of involvement in each of the two scales were irrelevant in nancial services and that a new customised scale could be of value.
Received: July 2005 Revised: January 2006 Accepted: January 2006

Journal of Services Marketing 21/7 (2007) 481 491 q Emerald Group Publishing Limited [ISSN 0887-6045] [DOI 10.1108/08876040710824843]

481

Customer involvement and interaction in retail banking Barry Howcroft, Robert Hamilton and Paul Hewer

Journal of Services Marketing Volume 21 Number 7 2007 481 491

The paper, therefore, tries to explain why the conventional measures of customer involvement do not necessarily apply in nancial services. It also presents some ndings on the importance of risk and condence when purchasing nancial products, which might be useful in developing a revised scale. By ascertaining the views of bank customers on their involvement and interaction with banks in the search and purchase of a range of nancial products, the paper will also provide some insights into bank customer behaviour. Section 2 of the paper, accordingly provides a review of the relevant literature, section 3 discusses the research methods and section 4 presents the research ndings and interprets the results. The paper concludes by identifying a number of important strategic implications of the ndings for banks.

Customer involvement and banker-customer interactions

There has been considerable discussion about how best to dene and measure the construct customer involvement (Zaichkowsky, 1985). These discussions have been protracted because interactions can be associated with advertisements, promotional material, service provision and purchase decisions. As such they do not necessarily involve physical involvement and an individual can, for example, interact with a company by simply reading a brochure or by watching an advertisement on television. Moreover, in the nancial services sector, a bank can perform numerous automated transactions without any ongoing physical interaction with its customers. These examples also indicate that involvement can vary according to frequency and duration. For example, reading a brochure will typically take longer than watching an advert on television but the former will probably occur less frequently than the latter. In an attempt to understand what determines the level of involvement, Houston and Rothschild (1978) and Bloch and Richins (1983) classied it into three dimensions, which Zaichkowsky (1985 and 1986) subsequently used as the basis for constructing the PII scale. The PII scale consists of the following three dimensions: 1 Personal: inherent interests, values or needs that motivate individuals towards an object. 2 Physical: the characteristics of the object that causes differentiation and increased interest. 3 Situational : something that temporarily increases relevance or interest towards an object. Kapferer and Laurent (1985) developed the customer involvement prole (CIP) measure using ve similar dimensions: 1 Interest: the personal interest an individual has in an object. 2 Pleasure: the hedonic or emotional appeal or pleasure an individual derives from an object. 3 Sign value: the extent to which an object reects or expresses the individuals self. 4 Importance risk: the perceived importance of the negative consequences of making a bad purchase. 5 Risk probability: the perceived probability of making a bad purchase. These dimensions reect concepts, such as, inherent interest, pleasure, differentiation, values, relevance, need and risk, etc. However, academic research has shown that the majority of 482

individuals do not have an inherent interest or derive much pleasure from nancial services. Brown (1952) introduced the term behavioral loyalty to describe customers that were loyal because of inertia rather than because of any strong feelings of brand loyalty. Subsequent research has also shown that behavioural (or spurious) loyalty is prevalent in nancial services because there is a lack of differentiation in the market place (Watkins, 1990; Knights et al., 1994; Dick and Basu, 1994; Ennew and Binks, 1996; Colgate and Hedge, 2001). In contrast, the academic literature generally places particular emphasis on risk and need, and it was, therefore, decided to focus attention on these two dimensions of customer involvement. In examining each of these two dimensions in turn, risk perceptions are generally regarded as being associated with unpleasant experiences, which emanate from unanticipated or uncertain consequences when purchasing products (Bauer, 1960). However, risk and its relationship with involvement is important because these two constructs play an important role, as explanatory and motivational variables, in understanding various facets of customer behaviour when contemplating product purchases (see, for example, Dholakia, 2001; Mitchel, 1999; Laaksonen, 1994; Richins et al., 1992; Laurent and Kapferer, 1985) In order to understand how risk and involvement determine customer behaviour Kaplan et al. (1974) identied several dimensions of risk. Psychological risk is concerned with exposte reactions to making a purchase, such as worry or regret. The other dimensions are essentially functional risks and arise from cognitive processing of specic aspects of product related information. As such, they include nancial risk, which is concerned with the cost considerations of a purchase; physical risk, which is concerned with any physical harm that might be associated with purchasing a product; and social risk, which is concerned with the possibility of attracting unfavourable attention and response from purchasing a particular product. Other cognitively-evaluated types of risk, which arise from the objective features of a product or service, include performance risk, which is concerned with how well the product will perform relative to expectations; and time risk, which is concerned with the amount of time invested by the customer when making a purchase. From this brief exposition of the dimensions of risk it is apparent that different types of product have different inherent risks. Moreover, these inherent risks become salient to the customer when interacting with the product in terms of thinking about it and contemplating a purchase (Bettman, 1973). In order to relate the concept of risk to nancial services, it is necessary to examine the fundamental characteristics of nancial products. In the rst instance, the relevant literature recognises that nancial products are not homogeneous (Shostack, 1977). This suggests that they have inherent risks, which are specic to the different categories of nancial product. This is important because it has been shown that the risk perceived by a customer when contemplating a product purchase will determine the complexity and extensiveness of cognitive processes and, therefore, it will inuence the nature of the interaction in terms of it duration and intensity (see, for example, Celsi and Olson, 1988; Gemunden, 1985; Laurent and Kapferer, 1985). This apart, it is difcult to reconcile the general academic literature on risk and involvement with the purchase of nancial products and service. This is undoubtedly due to the unique characteristic of nancial

Customer involvement and interaction in retail banking Barry Howcroft, Robert Hamilton and Paul Hewer

Journal of Services Marketing Volume 21 Number 7 2007 481 491

products, which distinguish them from products and other types of service (Zeithaml et al., 1985). The literature on risk in nancial services accordingly adopts a different approach to the one advocated in the wider academic literature. In essence, it is primarily concerned with psychological risk, nancial risk, performance risk and time risk but particular emphasis is placed on what the literature refers to as risk aversion and perceived risk (Bateson, 1989; Betts, 1994; Gwinner et al., 1998, Dholakia, 2001). Risk aversion is primarily concerned with security and the fear of loss and, as such, it can be mitigated by deliberation and customers seeking advice from suppliers in an attempt to build up their knowledge and understanding of alternative product offerings. Within nancial services, risk aversion can also be used to explain why customers purchase certain types of nancial product. For example, the fear of loss may be the primary motive behind a customer purchasing an insurance policy or a pension plan. However, it is not the primary reason for purchasing or opening a current account, where the dominant need is to have a reliable and convenient method of depositing money and paying bills. Perceived risk is synonymous with performance risk and is concerned with uncertainty of outcome when purchasing a nancial product. Once again, this varies according to the fundamental characteristics of different nancial products. Using the previous examples, there is generally little uncertainty associated with opening a current account and consequently, there is relatively minimal effort involved in monitoring its outcome. However, with an investment product or a pension plan the eventual outcome is uncertain and, therefore, the customer needs to monitor the investment or devolve this responsibility to the nancial provider. In the wider service literature Lehtinen (1983), Bowen and Larsson (1989) and Hocutt (1998) have shown that customer involvement either during the search or at the point of purchase can reduce levels of perceived risk. Similarly, researchers such as Bateson and Hui (1987), Bateson (1989), Parker and Ward (2000) Harris et al. (2001), and Youngdahl et al. (2003) have shown that increased levels of customer involvement can increase levels of customer condence when making product choices. To explain how customers in nancial services reduce risk, Chant (1987) utilised the concept of customer need and identied two important considerations: the need to identify good from bad products, and the need to monitor and enforce the anticipated outcomes from the purchase. Chant claimed that both considerations are essentially met by customers engaging in a process of search, participation and discussion prior to purchase. In other words, customer involvement prior to purchase may actually reduce levels of risk and increase levels of customer condence in their ability to purchase good nancial products. Normann and Haikola (1986) also used the idea of customer need to differentiate and classify heterogeneous nancial products. They identied two fundamental or basic needs: the rst is concerned with the need to transfer money. It is typically referred to as a transaction and because it requires only a small amount of information exchange it is usually standardised and automated via standing orders, direct debits and online banking. The second fundamental need is concerned with the need to balance consumption over a period of time and is primarily concerned with deposit and lending products. Gupta and Torkzadeh (1988) developed 483

this analysis further by introducing an additional customer need, namely, the need for specialist advice prior to purchasing more complicated nancial products, and Storbaka (1994) made a distinction between this specialist advice, which invariably involves a fee and general advice, which is typically free of charge and is present in most nancial service encounters. Discussion and deliberation would, therefore, appear to be an indication of involvement when contemplating the purchase of a nancial product. However, although they are a common theme within the literature they reveal themselves in a number of different ways. For example, Bateson and Hui (1987) and Bateson (1989), emphasise the degree of control exercised by customers in the service process, and Suprenant and Soloman (1985), focus on the level of customer participation. Similarly, Lehtinen (1983), Bowen and Larsson (1989) and Hocutt (1998) concentrate on how customer engagement in either the service encounter or the search prior to purchase can reduce risk and uncertainty.

Research methods
In order to understand customer involvement and behaviour in nancial services, it was decided to ascertain how customers interact with their banks when purchasing a comprehensive range of nancial products. Four generic categories of nancial products were identied as broadly representing customer need as suggested by Normann and Haikola (1986), Gupta and Torkzadeh (1988) and Storbaka (1994). The product categories in question were as follows: . primary current accounts, i.e. where customers have several current accounts, the one that is most frequently used; . general insurance products, such as house contents, building and motor insurance; . lending or credit products, such as, personal loans and mortgages; and . specialist or complex investment products, such as, investments in stocks and shares, or pensions, etc. To facilitate the design of a questionnaire, three focus discussion groups were arranged in London (the South of England), Leeds (the North) and Oakham (the Midlands). The London group consisted of males and females aged between 18-29 years old in the B socio-economic group, i.e. middle class people accounting for approximately 16 percent of the UK population. The Leeds group consisted entirely of females aged between 30-45 years old in the C1 (lower middle class people accounting for approximately 28 percent of the population) and C2 (skilled working class people representing about 24 percent of the population) socio-economic groups. The Oakham Group consisted of B and C1 males aged between 48-65 years old. Having introduced the purpose of the research and dened involvement as an unobservable state of motivation, arousal or interest (Rothschild, 1984) an interview schedule was used to promote discussion on the four generic categories of nancial product. The schedule was based on Houston and Rothschilds (1978), and Kapferer and Laurents (1985) dimensions of involvement. It consisted of the following main themes: . To what extent were group participants intrinsically interested in nancial products?

Customer involvement and interaction in retail banking Barry Howcroft, Robert Hamilton and Paul Hewer
.

Journal of Services Marketing Volume 21 Number 7 2007 481 491

To what extent did they perceive any signicant differences between competitors? To what extent did they purchase nancial products to impress friends or express themselves? To what extent were they condent in their own ability to make good purchases?

In brief the discussions revealed that participants regarded providers of nancial products as being essentially the same. In general, there was a singular lack of interest in nancial products and the younger and less afuent participants revealed less interest and condence in their ability to make good product choices, compared to older and more afuent group members. However, all of the groups recognised that nancial products were not homogeneous and argued that whereas transaction based products were essential to the immediate needs of modern-day life, investment and insurance based products were conducive to alleviating concerns about future security. The older, more afuent group (Oakham) also believed that some customers, albeit a minority, did get intrinsic pleasure from nancial products and cited playing the stock market as an example. The discussion groups agreed that levels of customer involvement were determined by the generic nature of products and customer proles. For example, they expressed a lack of knowledge and understanding of nancial products in general but with more complicated products, the groups expressed a feeling of uncertainty. When this issue of uncertainty was discussed in more detail it became clear that the participants believed that they were not always in a position to know whether they had made the best choice when purchasing complicated nancial products. This problem was primarily caused by the intrinsic nature of nancial products and was particularly acute with complicated, long-term investment and pension type products. As a consequence, the question as to whether a purchase had been good or not, could not be easily answered at the point of purchase. The groups also felt that the problem was exacerbated by a lack of transparency in the sales literature and the frequent use of jargon and specialised nancial terms. In this respect online banking was regarded as useful for transaction banking but the general consensus was that the proliferation of nancial information on the internet made it difcult to make informed purchase decisions. This point of view is supported by authors, such as, Ogilve (1996), Mols (2001) and Yaklef (2001), who argue that there is little evidence of truly interactive online sites in nancial services. It was agreed, however, that uncertainty was mitigated by talking to different providers prior to purchase and by customer deliberation, i.e. shopping around and looking at the alternative product offerings in terms of price, promotional material, and the track record and reputation of alternative providers. Finally, in probing deeper into Rothschilds (1984) denition of involvement, the participants suggested that within nancial services, willingness to switch was probably the best single indicator of customer involvement. This possibility, which has also been suggested by Aldlaigan and Buttle (2001), could be motivated by customer dissatisfaction with the underlying service or by price, etc. but it could also reect customer willingness and condence to search for the best products on offer. 484

In summary, the focus groups revealed that participants were generally not intrinsically interested in nancial products and did not perceive any signicant differences between providers. Neither did they typically purchase nancial products to impress friends or express themselves. In contrast, the overriding consideration when purchasing nancial products was the customers need to deliberate and talk to providers prior to purchase. This apparently reduced risk at the point of purchase by increasing customer knowledge and understanding of nancial products, and as such, it increased customer condence in their ability to make the best product choices. Based on the literature review and the ndings from the focus discussion groups a questionnaire was designed and piloted on university personnel. It was then mailed to 1,500 bank customers in England aged between 18-65. The addresses were obtained from a mail broker but despite using pre-stamped, pre-addressed return envelopes and a modest nancial incentive in the form of a prize draw, this resulted in only 244 useable responses. The low response rate of 16.3 percent was a little disappointing but to some extent it probably reected the condential nature of the questionnaires. It did however raise a number of important questions. For example, to what extent was the relatively low response rate indicative of the respondents disinterest in nancial affairs and apathy towards banks? Another major concern was the representativeness of the sample. When compared with recent UK statistics (Social Trends, 1999; Advertising Association, 1998), it was found that the sample was over-representative of middle age groups (between 35-45 years old) and under-representative of younger customers (between 18-24). The sample was also biased towards customers in the higher income groups (i.e. . 30,000). This prole might, therefore, be reecting the fact that wealthier customers are generally older and have relatively more experience and interest in nancial services than their younger counterparts. The questionnaire, shown in Table I, focuses on the selection and purchase of a range of nancial products and consists of ve questions and 24 variables. Variables 1-8 focus on involvement in an attempt to ascertain how customers reduce the risk associated with nancial products. Specically, variables 1-4 capture elements of customer deliberation, i.e. shopping around and trying to make comparisons between the alternative product offerings, and variables 5-8 ascertain the importance of talking to somebody and seeking nancial advice prior to purchase. Variables 9-12 use switching as a general indication of customer propensity to be involved. Variables 13-16 relate to customer knowledge and understanding of nancial products, and variables 17-20 relate to uncertainty at the point of purchase, i.e. the extent to which customers believed that they were in a position to make a good purchase. As such, they attempt to ascertain the extent to which deliberation and talking to somebody prior to purchase, increases customer condence at the point of purchase by increasing customer knowledge and reducing uncertainty. The remaining variables (21-24) provided additional insight into the socio-demographic proles of the respondents. Questions 1-5 relate to the four different categories of nancial product under examination: primary transaction or current accounts; general insurance based products; lending or credit based products; and specialised investment based

Customer involvement and interaction in retail banking Barry Howcroft, Robert Hamilton and Paul Hewer

Journal of Services Marketing Volume 21 Number 7 2007 481 491

Table I Questionnaire items used for cluster variate

Question no. Question Variate no.

Financial services attitudes: Q1 I tend to deliberate a lot prior to purchasing . . . My current account My insurance products My credit-based products My investment-based products Q2 It is important to talk to somebody prior to purchasing . . . My current account My insurance products My credit-based products My investment-based products Q3 I frequently consider switching providers in respect of ... My current account My insurance products My credit-based products My investment-based products Q4 I possess a good knowledge and understanding of ... My current account My insurance products My credit-based products My investment-based products Q5 I felt unsure when purchasing . . . My current account My insurance products My credit-based products My investment-based products Socio-demographic variables: Q6 What is your current (gross) annual household income? Q7 Age last birthday Q8 Which of the following qualications do you possess? Q9 How many dependent children do you have?

V1 V2 V3 V4

Wards method of cluster analysis was used because it is a common technique that is both: . a hierarchical procedure, as it moves in a stepwise manner to form an entire range of clusters; and . an agglomerative method, as clusters are formed from the combination of existing clusters starting with each observation (Hair et al., 1998). The measure of similarity was the Squared Euclidean distance measure. To determine how many clusters should be formed, an examination of both the agglomeration schedule and the dendrogram (Hair et al., 1998) suggested that either a sixcluster solution or a ve-cluster solution might be the most appropriate. To arrive at the best solution, from both a statistical and a practical viewpoint, a number of other factors were considered. Firstly, both solutions were compared on the basis of distinctiveness using the Levene statistic, i.e. testing the homogeneity of variance for each variable among the clusters (Norusis, 1997), and the values of the F ratio, taken from the Anova. Compared with the ve-cluster solution, the six-cluster solution for both measures provided more variables that were signicantly different (at the 0.05 level). Further supporting evidence for the distinctiveness of the six-cluster solution came from the results of a multiple comparison procedure, based on the Bonferroni test (Norusis, 1997). Further analysis of the characteristics of the six-cluster solution suggested that the latter solution would allow a greater understanding of bank-customer interactions and would also make the results more dynamic. This issue is addressed in more detail in the interpretation section of the analysis. In order to determine whether or not the chosen six cluster solution was stable (or reliable) as well as distinctive, a non-hierarchical clustering procedure (K-means clustering) was performed on the data using the cluster centroids from the Wards method as the initial seed points (Hair et al., 1998). This approach facilitates: ne-tuning of the results and validation of the nal cluster solution (Milligan and Cooper, 1987). To test for an acceptable level of agreement between the two clustering methods the Kappa Coefcient, which may be used as an objective measure of stability (Punj and Stewart, 1983), was calculated. Table II shows the consistency between the results of the two clustering methods with 192 (78.7 percent) of the 244 cases appearing in the same clusters. The Kappa coefcient (0.743) also indicated an acceptable level of agreement (Cramer, 1998) between the two methods. Table II also highlights, in terms of the number of observations in each cluster, the similarity between the two clustering methods. Table III, as well as providing further support for the distinctiveness and reliability of the nal solution, provides information that is essential to the interpretation of the solution (Hair et al., 1998), i.e. the nal cluster centroids; the F values; and, the levels of signicance for each of the 24 variables. Based upon an analysis of the F values, which test for differences between the means of the clusters (McDougall and Levesque, 1994), the most inuential factors appear to be: the importance of talking to somebody prior to purchasing a current account (V5: F 45:27) and credit-based products (V7: F 44:84); knowledge and understanding for insurance and credit-based products (V14 and V15: F 30:17); and uncertainty for investment (V20: F 25:59) and insurance485

V5 V6 V7 V8

V9 V10 V11 V12

V13 V14 V15 V16 V17 V18 V19 V20 V21 V22 V23 V24

products. Respondents were invited to respond on a ve-point Likert Scale ranging from Strongly Disagree to Strongly Agree. In addition, four socio-demographic questions (Q6-9) were included to differentiate customers on the basis of their income, age, education and dependent children. Given that the research is essentially exploratory it was decided to use cluster analysis to examine the data. Cluster analysis facilitates pattern recognition within exploratory studies and is a way of simplifying and portraying the structure in a set of data (Everitt and Dunn, 1991, p. 6). The method attempts to maximise the homogeneity of objects (e.g. customers) within the clusters, while simultaneously maximising the heterogeneity between the clusters (Hair et al., 1998). Support for adopting this methodology comes from Punj and Stewart (1983) when they state . . . important use of cluster analysis has been made in seeking a better understanding of buyer behaviours by identifying homogeneous groups of buyers.

Customer involvement and interaction in retail banking Barry Howcroft, Robert Hamilton and Paul Hewer

Journal of Services Marketing Volume 21 Number 7 2007 481 491

Table II Measuring agreement between the wards method and the k means method
Clusters (%) 1 2 Ward method 3 4 5 6 Total 1

Research results
This section provides a discussion of the results and relates the main characteristics of each cluster to risk, involvement, and customer condence when purchasing nancial products. In interpreting the results, deliberation, talking to somebody, and willingness to switch were taken as indicators of increased customer involvement. Similarly, knowledge and understanding, and uncertainty when making the purchase were taken as indicators of customer condence to distinguish good from bad products, at the point of purchase. The basic objective of this exploratory research was to examine customer involvement, perceptions of risk and condence when purchasing a comprehensive range of nancial products. Cluster one: action inert customers Cluster one comprised only 13.1 percent of the respondent sample and was the second smallest cluster in the analysis. It possessed the highest annual household income, ranging from 40,000 upwards; members had professional qualications and were aged between 36-45 years old. The involvement of these customers was moderately high. They exhibited the lowest levels of deliberation for three of the four products under consideration but felt that it was fairly important to talk to somebody. In terms of switching behaviour, these customers were not willing to switch and revealed the lowest levels of switching behaviour for each of the nancial products under consideration. In contrast, however, condence levels were very high as revealed by the

K-means method 2 3 4 5
9.4 (3)

Total

3.1 13.1 (1) (32) 8.9 3.6 7.1 23 (5) (2) (4) (56) 72.1 18.6 9.3 17.6 (31) (8) (4) (43) 3.4 3.4 3.4 86.2 3.4 11.9 (1) (1) (1) (25) (1) (29) 2.1 6.3 81.3 10.4 19.7 (1) (3) (39) (5) (48) 2.8 11.1 2.8 5.6 2.8 75 14.8 (1) (4) (1) (2) (1) (27) (36) 13.9 19.3 16 16.4 18 16.4 100 (34) (47) (39) (40) (44) (40) (244)

87.5 (28) 5.4 75 (3) (42)

Note: The value in parenthesis is the count within each cell and total by clustering method Source: Measure of agreement: kappa value 0.743

based products (V18: F 25:84). The socio-demographic characteristic that proved to be the most inuential factor in differentiating between clusters was the level of education (V23: F 73:67).

Table III Six cluster solution of the K-means cluster analysis with initial seed points from the Wards method
Variables V1(Del) V2 (Del) V3 (Del) V4 (Del) V5 (Talk) V6 (Talk) V7 (Talk) V8 (Talk) V9 (Sw) V10 (Sw) V11 (Sw) V12 (Sw) V13 (K&U) V14 (K&U) V15 (K&U) V16 (K&U) V17 (Unc) V18 (Unc) V19 (Unc) V20 (Unc) V21 (Inc) V22 (Age) V23 (Edu) V24 (Child) Cluster1 2.18 (L) 3.26 (L) 3.53 (L) 3.79 3.38 3.26 4.00 4.00 1.29 (L) 1.21 (L) 1.74 (L) 1.56 (L) 4.29 4.18 4.18 4.18 (H) 1.21 (L) 1.24 (L) 1.53 (L) 1.41 (L) 4.10 (H) 3 3 2 Cluster2 3.47 3.70 3.55 3.68 4.13 3.55 4.00 3.91 2.49 2.83 2.74 2.66 4.09 3.79 3.79 3.32 2.13 2.60 2.85 3.15 2.28 3 2 2 Final cluster centres Cluster3 Cluster4 2.18 3.51 3.59 3.95 1.56 1.56 2.10 2.49 3.08 3.44 3.08 3.08 4.36 4.10 4.10 3.69 1.64 1.90 2.23 2.56 3.32 2 4 (H) 2 (L) 3.25 3.95 3.90 3.85 2.03 1.90 2.15 2.90 2.03 3.18 2.93 2.83 4.28 4.08 4.08 3.73 1.58 1.75 1.95 2.40 2.95 2 1 (L) 2 Cluster5 3.48 4.27 4.32 4.36 3.48 3.34 4.18 4.05 2.00 3.73 2.93 2.57 4.45 4.25 4.25 4.02 1.66 2.00 2.14 2.18 3.94 4 3 2 (H) (H) (H) (H) Cluster6 2.70 3.45 3.68 3.68 2.73 2.85 3.60 3.83 2.73 3.10 2.85 2.85 3.63 2.63 2.63 2.58 1.95 3.10 3.53 3.65 3.23 2 4 (H) 2 F Value 11.890 5.866 3.983 3.067 45.266 30.800 44.841 15.573 9.044 22.512 6.504 9.779 6.534 30.173 30.173 17.146 7.656 25.842 23.101 25.593 17.063 7.352 73.671 1.424 Sig. 0.000 0.000 0.002 0.011 0.000 0.000 0.000 .000 .000 .000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.216

(L) (H) (H)

(L)

(L) (L) (L) (L) (H) (H) (H)

(H) (H) (H)

(H) (H) (H)

(L) (L) (L) (L) (H) (H) (H)

(H)

(L)

Notes: Current account: V1, V5, V9, V13 and V17; Insurance products: V2, V6, V10, V14 and V18; Credit based products: V3, V7, V11, V15 and V19; Investment based products: V4, V8, V12, V16 and V20

486

Customer involvement and interaction in retail banking Barry Howcroft, Robert Hamilton and Paul Hewer

Journal of Services Marketing Volume 21 Number 7 2007 481 491

scores for knowledge and understanding, and uncertainty. The respondents believed that they possessed a good knowledge and understanding of the four categories of nancial products and exhibited the strongest disagreement with the assertion that they felt unsure when making purchases. A moderate level of involvement and a signicant reluctance to switch nancial providers suggests that customers in cluster one are not actively involved with their nancial services providers. However, high levels of condence combined with the emphasis on talking to somebody and low levels of switching behaviour is probably more indicative of customers who are both sophisticated and highly satised with their nancial provider. In this respect, this group of customers are probably exhibiting what Knights et al. (1994) referred to as action inertia. Cluster two: repeat passive customers Cluster two comprised 23 percent of the respondent sample and was the largest cluster. It possessed the lowest annual household income, ranging from 10,000 to 19,999; members were aged between 36-45 years old and were educated to O or A Level standard, i.e. they left school at either 16 or 18 years old and did not obtain a university education. These customers expressed agreement with the importance of deliberation and, in particular, with the need to talk to somebody when selecting nancial products. The group, therefore, ostensibly exhibited a high degree of involvement. However, in terms of switching behaviour, although not as extreme as cluster one, these customers were generally unwilling to switch providers. In contrast to cluster one, condence levels were very low and customers exhibited the second lowest levels for knowledge and understanding of all the groups except for cluster six. Similarly, in terms of being uncertain when selecting nancial products, these customers had the second highest level of uncertainty; with cluster six once again exhibiting the highest level. On the basis of these characteristics, customers in cluster two have the lowest levels of condence as indicated by the highest levels of uncertainty and the lowest levels of knowledge and understanding of all the groups. Moreover, although these customers recognise the importance of deliberation and taking to somebody, i.e. being involved with their nancial services provider, it does not mean that they necessarily do. Retail banks in the UK currently focus their relationship strategies on the most protable segments of their customer base. As customers in this cluster are the poorest of the six clusters, their lack of actual and potential protability probably precludes them from having a close involvement with their nancial providers. As such these customers are referred to as repeat passive in so much as they tend to remain with the same provider, primarily because of their low levels of condence. Cluster three: emerging on line customers Cluster three comprised 17.6 percent of the sample and was the third largest. The customers possessed an annual household income of between 20,000 and 29,999, had a university education and were the youngest cluster in the sample, aged between 26-35 years old. These customers expressed agreement with the importance of deliberation for insurance, credit and investment based products, but disagreed that it was important when changing a current 487

account. They strongly disagreed, however, that it was necessary to talk to somebody when selecting nancial products. In fact, this group exhibited the lowest scores for the importance of talking to somebody for each of the four products. However, in terms of switching behaviour, this group had the highest propensity to change providers. This group of customers were also fairly condent. They believed that they possessed a high level of knowledge and understanding of nancial products and did not feel uncertain when purchasing such products. The customers in this cluster appear to be fairly condent in terms of knowledge and certainty, but the three components of the involvement dimension are not as easy to interpret. In fact they appear contradictory insomuch as the customers strongly disagreed with the importance of talking to somebody but expressed agreement with the importance of deliberation and had the highest propensity to switch nancial providers. However, there is evidence to suggest that educated, younger customers are more disposed to use online banking (see, for example, Sathye, 1999 and Jayawardhena and Foley, 2000) and this might be reducing their need to talk to somebody. As the youngest cluster and university educated, this group of customers may, therefore, be revealing an emerging banker-customer prole, which supports Harris (2000) assertion that online banking may be empowering customers and eroding inertia. Cluster four; emerging repeat passive customer This cluster was the smallest comprising 11.9 percent of the respondent population. It had the same age prole as cluster 3, between 26-35 years old but in contrast, it had the lowest educational qualications (O levels or equivalent) and the second lowest income in the 10,000-19,000 range. The interaction prole reveals slightly higher levels of involvement and condence than cluster three but they were much less inclined to switch nancial providers. To some extent they exhibit characteristics, which are similar to Knights action loyalty. However, their similarity with cluster two, in terms of education and income, raises the possibility that they might evolve into the sort of mature customers depicted by this cluster. This interpretation assumes that as these customers mature their nancial requirements will increase. However, if this increased nancial need is not matched by a commensurate increase in the willingness of the banks to become more involved, condence levels could decline, producing an enforced repeat passive prole not too dissimilar to cluster two. Cluster ve: rational-active customers Cluster ve comprised 19.7 percent of the sample population and was the second largest cluster. Customers possessed income of between 30,000 and 39,999 and were the oldest in the sample, aged between 46-55 years old, with professional qualications. Involvement levels were very high and customers exhibited the highest levels of deliberation for each of the four products. The importance of talking to somebody was interesting insomuch as it revealed the highest scores in the sample for credit and investment based products and was only marginally less important when purchasing a current account or an insurance based product. In addition these customers also revealed fairly high levels for willingness to switch. Condence was similarly high (the second highest score next to cluster 1) and customers strongly agreed with

Customer involvement and interaction in retail banking Barry Howcroft, Robert Hamilton and Paul Hewer

Journal of Services Marketing Volume 21 Number 7 2007 481 491

the assertion that they had knowledge and understanding of the four nancial products and accordingly disagreed that they felt unsure when purchasing them. In this respect these customers appear to be reinforcing Foxhall and Pallisters (1998) nding that rational involvement is prevalent in nancial services. Cluster six: emerging prot potential customers Cluster six comprised 14.8 percent of the sample population, the customers were aged between 26-35 years old, university educated and had an annual income of between 20,00029,999. The analysis revealed that these customers had fairly low levels of involvement. To some extent they did deliberate when purchasing nancial products, but the levels of deliberation were relatively low, especially for investment products. With regard to speaking to somebody, the respondents believed that it was fairly important for investment and credit based products, but less important for current accounts and insurance products. The group, nevertheless, shared a high willingness to switch nancial providers. In terms of condence, this cluster exhibited the lowest level of knowledge and the highest levels of uncertainty in the sample. This suggests that these customers perceive high levels of purchase risk, which ceteris paribus means that they should have high levels of involvement. Conversely, the low levels of involvement might explain why the levels of condence are so low. In this respect, this cluster might be indicative of a customer segment that is not only intrinsically disinterested in nancial products, as evidenced by low levels of involvement and condence, but also a little fearful and mistrustful of banks, as revealed by fairly low levels of talking and deliberation, and high levels of switching behaviour. If this interpretation is correct, these customers present an important strategic challenge for banks, especially as their age, education and income prole indicates that they have future prot potential. As such they should be targeted with relationship strategies that will increase involvement, condence and satisfaction.

Conclusions and strategic implications

Even though the paper is exploratory, and the sample was not fully representative of the UK banking population, the results have a number of important strategic implications. For example, the dominant customer segment, which was cluster two (repeat passive), indicated that the majority of respondents lacked condence in their ability to choose good nancial products. These customers also revealed a desire to have more information about products and emphasised the need for increased involvement with nancial services providers, via greater deliberation and talking. The validity of these ndings and the need for greater deliberation is underlined by the fact that the Cruickshank Report (2000) highlighted similar considerations when it emphasised the need to educate bank customers and introduce greater transparency into bank advertising and documentation. The need to talk to providers prior to purchase is clearly part of this education process but talking to banks is also becoming more problematic as branch closures and the ensuing pressure on call centres, have made it more difcult and certainly more time consuming to talk to banks. Moreover, although branch closures have been facilitated, to 488

some extent, by the introduction of internet banking, it has been suggested that the internet is not an ideal substitute for talking to somebody, especially, when contemplating the purchase of more complicated nancial products (Durkin et al., 2003). Unless these issues are addressed, the majority of customers will continue to lack condence when purchasing nancial products. Being cynical one could ague that if a lack of customer condence is associated with passivity and low switching behaviour, banks have little incentive to address these issues. However, considerations such as the move toward greater consumer empowerment, increases in educational standards and greater use of internet banking, will increase customer expectations and might well lead to an increase in customer behaviour depicted by clusters three and ve. These factors combined with higher levels of competition and the trend towards commoditisation of nancial markets, strongly suggest that banks will have to place more emphasis on educating and developing closer relationships with their customers. The net result of these strategies could well be a signicant increase in the number of action inert customers revealed in cluster one. However, relationship management strategies are expensive and a bank, like any other joint stock company, needs to see a return on its strategic efforts. This consideration, therefore, raises the question as to whether these strategies should be targeted at the sort of customers depicted in cluster 6 (and possibly 3 and 5) rather than at the entire customer base. Finally, the results also contain some interesting ndings, which warrant further research. Inter alia , customer involvement appears to differ according to the type of nancial product being purchased and this raises the possibility that banks can use more complicated products to generate interest and, if required, create closer relationships with their customers. Similarly, the paper has shown that banker-customer involvement and, specically, perceptions of risk and condence might be used to segment the customer base. This approach could, therefore, provide an alternative approach to more conventional segmentation based on age, wealth, income, life cycle, etc.

References
Advertising Association (1998), Marketing Pocket Book, Advertising Association, London. Aldlaigan, A.H. and Buttle, F.A. (2001), Consumer involvement in nancial services: an empirical test of two measures, International Journal of Bank Marketing, Vol. 19 No. 6, pp. 232-45. Bateson, J.E.G. (1989), Managing Services Marketing Text and Readings, Dryden Press, Hinsdale, IL. Bateson, J.E.G. and Hui, M.K.M. (1987), Perceived control as a crucial perceptual dimension of the service experience, in Surprenant, C. (Ed.), Add Value to your Service, American Marketing Association, Chicago, IL, pp. 187-93. Bauer, R. (1960), Consumer behaviour as risk taking, in Hancock, R. (Ed.), Dynamic Marketing for a Changing World, American Marketing Association, Chicago, IL, Proceedings of the 43rd Conference of the American Marketing Association, pp. 389-98.

Customer involvement and interaction in retail banking Barry Howcroft, Robert Hamilton and Paul Hewer

Journal of Services Marketing Volume 21 Number 7 2007 481 491

Bettman, J.R. (1973), Perceived risk and its components: a model and empirical test, Journal of Marketing Research, Vol. 10, pp. 184-90, May. Betts, E. (1994), Understanding the nancial consumer, in McGoldrick, P.J. and Greenland, S. (Eds), Retailing of Financial Services, McGraw-Hill, London, pp. 41-84. Bloch, P.H. and Richins, M.L. (1983), A theoretical model for the study of product importance perceptions, Journal of Marketing, Vol. 47, pp. 69-81. Bowen, D.E. and Larsson, R. (1989), Organisation and customer: managing design and co-ordination of services. Customer participation, Academy of Management Review, Vol. 2, pp. 213-33, April. Brown, G.N. (1952), Brand loyalty: fact or ction?, Advertising Age, Vol. 23, pp. 53-5. Celsi, R. and Olson, J.C. (1988), The role of involvement in attention and comprehension processes, Journal of Consumer Research, Vol. 15, pp. 210-4, September. Chant, J. (1987), Regulation of Financial Institutions a Functional Analysis, Bank of Canada, Ottawa, No. 45. Colgate, M. and Hedge, R. (2001), An investigation into the switching process in retail banking services, International Journal of Bank Marketing, Vol. 19 No. 5, pp. 201-12. Cramer, D. (1998), Fundamental Statistics for Social Research: Step-by-step Calculations and Computer Techniques Using SPSS for Windows, Routledge, London. Cruickshank, D. (2000), Competition in UK Banking: a Report to the Chancellor of the Exchequer, The Stationery Ofce, London. Dholakia, U.M. (2001), A motivational process model of product involvement and consumer risk perception, European Journal of Marketing , Vol. 35 Nos 11/12, pp. 1340-60. Dick, A. and Basu, K. (1994), Customer loyalty: towards an integrated conceptual framework, Journal of Marketing Science, Vol. 22 No. 2, pp. 99-113. Durkin, M., McCartan-Quinn, D., ODonnell, A. and Howcroft, B. (2003), Retail bank customer preferences: personal and remote interactions, International Journal of Retail and Distribution Management, Vol. 31 No. 4, pp. 177-89. Ennew, C. and Binks, M. (1996), The impact of service quality and service characteristics on customer retentions: small businesses and their banks in the UK, British Journal of Management, Vol. 7, pp. 219-30. Everitt, B.S. and Dunn, G. (1991), Applied Multivariate Analysis, Edward Arnold, London. Foxhall, G.R. and Pallister, J.G. (1998), Measuring purchase decision involvement for nancial services: comparison of the Zaichkowsky and Mittal scales, International Journal of Bank Marketing, Vol. 16 No. 5, pp. 180-94. Gemunden, H.G. (1985), Perceived risk and information search: a systematic meta-analysis of the empirical evidence, International Journal of Research in Marketing, Vol. 2, pp. 79-100. Gupta, Y.P. and Torkzadeh, G. (1988), Re-designing bank service systems for effective marketing, Long Range Planning, Vol. 21, pp. 38-42. Gwinner, K., Gremler, D. and Bitner, M. (1998), Relational benets in service industries: the customers perspective, Journal of the Academy of Marketing Science, Vol. 26 No. 2, pp. 101-23. 489

Hair, J.F., Anderson, R.E., Tatham, R.L. and Black, W.C. (1998), Multivariate Data Analysis, Prentice-Hall International, Englewood Cliffs, NJ. Harris, G. (2000), The big four banks: dealing with the online challenge, Journal of Financial Services Marketing, Vol. 4 No. 4, pp. 296-305. Harris, K., Harris, R. and Baron, S. (2001), Customer participation in retail services: lessons from Brecht, International Journal of Retail & Distribution Management, Vol. 29 No. 8, pp. 359-69. Hocutt, M. (1998), Relationship dissolution model: antecedents of relationship commitment and the likelihood of dissolving a relationship, International Journal of Services Industries Management, Vol. 9 No. 2, pp. 189-200. Houston, M.J. and Rothschild, M.L. (1978), Conceptual and methodological perspectives in involvement, in Jain, S.C. (Ed.), Research Frontiers in Marketing: Dialogues and Directions, American Marketing Association, Chicago, IL, pp. 184-7. Jayawardhena, C. and Foley, P. (2000), Changes in the banking sector the case of internet banking in the UK, Journal of Internet Research: Networking and Policy, Vol. 10 No. 1, pp. 19-30. Kapferer, J.N. and Laurent, G. (1985), Consumer involvement prole: a new practical approach to consumer involvement, Journal of Advertising Research, Vol. 25 No. 6, pp. 48-56. Kaplan, L., Szybillo, G. and Jacoby, J. (1974), Components of perceived risk in product purchase: a cross-validation, Journal of Applied Psychology, Vol. 59 No. 3, pp. 287-91. Knights, D., Sturdy, A. and Morgan, G. (1994), The consumer rules? An examination of the rhetoric and reality of marketing in nancial services, European Journal of Marketing, Vol. 28 No. 3, pp. 42-54. Laaksonen, P. (1994), Consumer Involvement: Concepts and Research, Routledge, London. Laurent, G. and Kapferer, J. (1985), Measuring consumer involvement proles, Journal of Marketing Research, Vol. 22 No. 2, pp. 42-53. Lehtinen, J.R. (1983), Customer orientated service system, working paper, Service Management Institute, Helsinki. McDougall, G.H.G. and Levesque, T.J. (1994), Benet segmentation using service quality dimensions: an investigation in retail banking, International Journal of Bank Marketing, Vol. 12 No. 2, pp. 15-23. Milligan, G.W. and Cooper, M. (1987), Methodology review: clustering methods, Applied Psychological Measurement, Vol. 11 No. 4, pp. 329-54. Mitchel, V. (1999), Consumer perceived risk: conceptualisations and models, European Journal of Marketing, Vol. 33 Nos 1/2, pp. 163-95. Mittal, B. (1989), A theoretical analysis of two recent measures of involvement, in Srull, T.K. (Ed.), Advances in Consumer Research, Vol. 16, Association for Consumer Research, Duluth, MN, pp. 697-702. Mols, N.P. (2001), Organising for the effective introduction of new distribution channels in retail banking, European Journal of Marketing, Vol. 35 Nos 5/6, pp. 661-86. Normann, R. and Haikola, B. (1986), Winning Strategies in Financial Services: A Multiclient Study, The Service Management Group Oy, Helsinki.

Customer involvement and interaction in retail banking Barry Howcroft, Robert Hamilton and Paul Hewer

Journal of Services Marketing Volume 21 Number 7 2007 481 491

Norusis, M.J. (1997), SPSS 7.5 Guide to Data Analysis, Prentice-Hall Inc., Englewood Cliffs, NJ. Ogilve, C.W. (1996), Risks on the cyber-banking new frontier, Bank Management, pp. 14-18, May-June. Parker, C. and Ward, P. (2000), An analysis of role adoptions and scripts during customer-to-customer encounters, European Journal of Marketing, Vol. 34 Nos 3/4, pp. 341-58. Punj, G. and Stewart, D.W. (1983), Cluster analysis in marketing research: review and suggestions for application, Journal of Marketing Research, Vol. 20, pp. 134-48. Richins, M.L., Bloch, P.H. and McQuarrie, E.F. (1992), How enduring and situational involvement combine to create involvement responses, Journal of Consumer Psychology, Vol. 1 No. 2, pp. 143-53. Rothschild, M.L. (1984), Perspectives on involvement: current problems and future directions, in Kinnear, T.C. (Ed.), Advances in Consumer Research, Vol. 11, Association for Consumer Research, Duluth, MN. Sathye, M. (1999), Adoption of internet banking by Australian consumers: an empirical investigation, International Journal of Bank Marketing, Vol. 17 No. 7, pp. 324-34. Shostack, L.G. (1977), Breaking free from product marketing, Journal of Marketing, Vol. 41 No. 2, pp. 73-80. Social Trends (1999), The Stationery Ofce, London. Storbaka, K. (1994), The Nature of Customer Relationship Protability: An Analysis of Relationships and Customer Bases in Retail Banking, Swedish School of Economics and Business Administration, Helsingfors. Suprenant, C.F. and Soloman, M.R. (1985), Dimensions of personalisation, in Bloch, T.M., Upah, G. and Zeithmal, V.A. (Eds), Services Marketing in a Changing Environment, American Marketing Association Proceedings Series, Chicago, IL, pp. 52-5. Watkins, T. (1990), The demand for nancial services, in Ennew, C.T., Watkins, T. and Wright, M. (Eds), Marketing Financial Services, Heinemann, Oxford. Yaklef, A. (2001), Does the internet compete with or complement bricks-and-mortar branches?, International Journal of Retail and Distribution Management, Vol. 29 No. 6, pp. 272-81. Youngdahl, W.E., Kellogg, D.L., Nie, W. and Bowen, D.E. (2003), Revisiting customer participation in service encounters: does culture matter?, Journal of Operations Management, Vol. 21, pp. 109-20. Zaichkowsky, J.L. (1985), Measuring the involvement construct, Journal of Consumer Research, Vol. 12 No. 12, pp. 341-52. Zaichkowsky, J.L. (1986), Conceptualising involvement, Journal of Advertising, Vol. 15 No. 2, pp. 4-14-34. Zeithaml, V.A., Parasuraman, A. and Berry, L. (1985), Problems and strategies in service marketing, Journal of Marketing, Vol. 49 No. 1, pp. 33-46.

Executive summary and implications for managers and executives

This summary has been provided to allow managers and executives a rapid appreciation of the content of the article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benet of the material present. Its more than seven years since an independent investigation into banking services, ordered by the UK government, published a report which said that many consumers found it difcult to compare nancial products and there was clear evidence that consumers were not adequately informed about them. Consumers who were locked in to a provider (by inertia if nothing else) tolerated higher prices than those who actively shopped around and switched. Furthermore, it was in the banks interests to suppress switching. That was in 2000, so whats been happening since the Cruickshank Report was published? Increased competition among nancial institutions, including the increasing use of online banking, has ensured that banking services are more understandable, transparent and exible, and that retail customers are now far more knowledgeable about what they are buying and more involved in with their banking service provider. Or so you might have thought. Barry Howcroft, Robert Hamilton and Paul Hewer questioned bank customers of different ages and incomes from different parts of the UK to try to nd out: . To what extent were they intrinsically interested in nancial products? . To what extent did they perceive any signicant differences between competitors? . To what extent did they buy nancial products to impress friends or express themselves? . To what extent were they condent in their own ability to make good purchases? Participants were found generally not intrinsically interested in nancial products and did not perceive any signicant differences between providers. Neither did they typically purchase nancial products to impress friends or express themselves (for example, playing the Stock Market). In contrast, the overriding consideration when buying nancial products was their need to deliberate and talk to providers before purchase. This was expressed as a wish to reduce the risk of buying something inappropriate by increasing their knowledge and understanding of the products. Analysis of responses resulted in six clusters of customers with differing perceptions. Dominant was the cluster labelled, repeat passive which indicated that the majority lacked condence in their ability to choose, good nancial products. However, they demonstrated an, involvement in the process in their expressed desire to have more information about products, via greater deliberation and talking. Supporting the Cruickshank Reports ndings of the need to educate bank customers and introduce greater transparency into bank advertising and documentation, the results of this study note that talking to banks is becoming more problematic as branch closures and pressure on call 490

Corresponding author
Barry Howcroft can be contacted at: J.B.Howcroft@ lboro.ac.uk

Customer involvement and interaction in retail banking Barry Howcroft, Robert Hamilton and Paul Hewer

Journal of Services Marketing Volume 21 Number 7 2007 481 491

centers, have made it more difcult and certainly more time consuming to talk to banks. Moreover, although branch closures have been facilitated, to some extent, by the introduction of internet banking, it has been suggested that the internet is not an ideal substitute for talking to somebody, especially, when contemplating the purchase of more complicated nancial products. Unless these issues are addressed, the majority of customers will continue to lack condence when purchasing nancial products. Being cynical one could argue, say the authors, that if a lack of customer condence is associated with passivity and low switching behavior, banks have little incentive to address these issues. However, a move toward greater consumer empowerment, increases in educational standards and greater use of internet banking, will increase customer expectations and might well lead to an increase in customer behaviour depicted by those identied as, emerging on-line customers (who wanted discussion about insurance, credit and investment-based products, but did not feel it important when changing a current account) and, rational-active customers (who were condent they had the knowledge and understanding to buy nancial products). These factors, combined with higher levels of competition and the trend towards commoditisation of nancial markets, strongly suggest that banks will have to place more emphasis on educating and developing closer relationships with their customers.

The net result of these strategies could well be a signicant increase in the number of, action inert customers (not willing to switch, but with high condence levels for knowledge and understanding). Relationship management strategies are expensive and a bank, like any other joint stock company, needs to see a return on its strategic efforts. This consideration, therefore, raises the question as to whether these strategies should be targeted, rather than at the entire customer base, at the, emerging prot potential customers who might be indicative of a customer segment that is not only intrinsically disinterested in nancial products, as evidenced by low levels of involvement and condence, but also a little fearful and mistrustful of banks, as revealed by fairly low levels of talking and deliberation, and high levels of switching behaviour. If this interpretation is correct, these customers present an important strategic challenge for banks, especially as their age, education and income prole indicates that they have future prot potential. As such they should be targeted with relationship strategies that will increase involvement, condence and satisfaction. cis of the article Customer involvement and interaction in (A pre retail banking: an examination of risk and condence in the purchase of nancial products. Supplied by Marketing Consultants for Emerald.)

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints

491