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IJBM
31,5
Obstacles to upgrading customer
value-in-use in retail banking
Ilkka Lähteenmäki and Satu Nätti
Unit of Marketing, Oulu Business School, University of Oulu, Oulu, Finland
334
Abstract
Purpose – Improving capability to generate value for customers is seen as a way to create a new
competitive edge, but developing the related organisational capabilities involves facing several
obstacles that stem from the producer-orientation of the retail-banking business. This paper aims to
focus on defining and describing those obstacles.
Design/methodology/approach – An in-depth, qualitative single case study of a European retail
bank was conducted.
Findings – A retail bank can find it challenging, first, to understand the deepest meaning and
character of customer value and, second, to harness the organisational attributes to deliver that value.
The main barriers lie in the strong producer-oriented way of doing business, a lack of employee
commitment, a strong product and sales orientation, a restrictive network, difficulties in seeing the
profitability aspect of a new mindset, lack of conceptualisation and proper segmentation, and finally,
silo-style bank organisations.
Research limitations/implications – The research is focused on the retail-banking industry, while
the findings are transferable to other retail finance businesses.
Practical implications – Enhancing value creation may provide a competitive edge, but developing
that edge means facing several obstacles, which may jeopardise the calculated positive return on
investment. For management, understanding the value of the banking service in the customer’s own
context is critical.
Originality/value – Developing customer experience and value-in-use has been suggested as a good
starting point for customer orientation. However, research on its implications for organisations and
potential obstacles to implementation remains scarce. This paper offers a detailed view on the
organisational development necessary to generate value-in-use in a retail-banking context.
Keywords Retail banking, Customer orientation, Customer perceived value, Value-in-use, Banking,
Customers
Paper type Case study

Introduction
Despite retail banks attempting to improve levels of customer satisfaction, the business
has suffered from declining customer loyalty in recent years. Fragmented demand and
intensified competition have forced banks into price competition, reducing costs and
dropping the level of face-to-face customer service (see e.g. Jagersma, 2006). In addition,
online banking products and services, and the related automation, have changed
service production radically (Acharya et al., 2008; Sarel and Mamorstein, 2003).
Amidst ever-increasing competition, existing ways of gaining a competitive edge
seem to be neither sufficiently effective nor durable. Developing customer perceived value
may provide a new means to differentiate a service offering from that of competitors (e.g.
Strandberg et al., 2012; Meyer and Schwager, 2007; O’Loughlin et al., 2004; Roig et al.,
2006; Bick et al., 2004). However, as Frow and Payne (2007) have noted, few companies
International Journal of Bank
Marketing yet understand the meaning of customer value, in terms of what it looks like and
Vol. 31 No. 5, 2013
pp. 334-347
how their managers can galvanise the organisation to deliver it exceptionally well.
r Emerald Group Publishing Limited
0265-2323
DOI 10.1108/IJBM-11-2012-0109 Authors have contributed equally.
We suggest this is also true of the retail-banking sector, although the idea Obstacles to
of customer orientation in that business is not new. Banks have traditionally been upgrading
physically close to their customers through their extensive branch networks.
The introduction of internet banking was predicated on a customer need for digitised value-in-use
banking services, and while encouraging its use, banks have also tried to maintain the
impression of having close relationships with their customers by maintaining some
face-to-face interactions. In spite of the current trend for internet banking, some banks 335
recognise that a relationship strategy emphasising interaction, customisation and
confidence building in their customer relationships is effective (Camarero, 2007; Molina
et al., 2007), hence many customers are still offered personal advisors. However, it
seems customers are not satisfied and do not feel they are gaining enough value from
banking services. For example, O’Loughlin et al. (2004) argue that financial services
providers continue to promote bank policies that are adverse to consumer interests,
resulting in diminishing service quality and restricted delivery channels (see also
Wong et al., 2008).
Thus, it seems that in the present retail-banking business, the customer is a target
of marketing activities, not the origin of plans for and maintenance of the service
experience. We suggest that banking services are too often devised, developed and
delivered without sufficient understanding of related customer activities, everyday
practices and life, that is, of customers’ value creation (see e.g. Payne et al., 2008).
Banking services are to a very great extent provider oriented. They are products of a
producer-centred mindset that gives primacy to the bank’s own practices and processes
(cf. Heinonen et al., 2010; also Vargo and Lusch, 2004, 2008a).
It seems as if even the most innovative developments of the customer experience in
retail banking are still based on a logic where the customer is “forced” to participate
in the bank’s process and tools (e.g. in the promotion of internet banking). This is
not necessarily the evil intention of banks. Implementing customer orientation
is challenging in any context (e.g. Gummesson, 2008; Vaux Halliday, 2002) and in retail
banking, certain characteristics cause inertia militating against change. Although
deregulation has increased competition, efficiency and flexibility in the bank sector
since the 1980s (Lähteenmäki, 2006, p. 23), banks have long been subject to regulation,
which is why bankers are focused on developing intensively internal production
procedures, and may find it more difficult to shift the focus to customer value
(Batiz-Lazo and Wood, 2001). In addition, financial services are today more heterogeneous
and delivered through multiple channels, which provokes fragmentation and further
difficulties in internal integration and collaboration across multiple channels and service
producers in the network of service producers (see e.g. Plé, 2006).
The above-mentioned challenges are particularly pressing because the process of
customer value creation demands a variety of organisational capabilities be integrated
(see e.g. Grönroos, 2006; Gummesson, 2008). Service providers should be able to
integrate all customer-targeted actions into a coherent entity. In addition, the bank
should understand how its customers will further integrate the service generated by
that entity into “their own activity system”, that is, their value creation process
(Heinonen et al., 2010, p. 542).
Given the noted challenges, the path to customer centricity may necessitate
remarkable changes to an organisation’s management system, culture, structure and
processes (see e.g. Shah et al., 2006). However, the level of existing knowledge of the
development needed from service producer-centred logic towards being a co-creator of
value in the customer’ process is still generally low (see e.g. Frow and Payne, 2007;
IJBM Heinonen et al., 2010), and especially in a specific context like retail banking. There
31,5 are plenty of general studies of barriers to implementing relationship marketing or
market orientation in different contexts (e.g. Jaworski and Kohli, 1993; Piercy, 1998;
Vaux Halliday, 2002), and specifically in a retail-banking context (Nielsen et al., 2003;
Kolar, 2006; Harris, 2000; Bennett and Durkin, 2002). Those studies are reviewed at the
end of the following section. However, value creation is always very context-specific
336 (e.g. Grönroos, 2006) and the studies mentioned were often conducted in other contexts,
or, those that are specific to retail banking lack a link with the value creation discussion,
being more concerned with comparing different market areas (Nielsen et al., 2003),
exploring specific market development (Kolar, 2006) or only one aspect of customer
orientation, like organisational culture (Bennett and Durkin, 2002). Facilitating value
creation and improving customer experience seems to be a very attractive way to
create a new competitive edge in retail banking (e.g. O’Loughlin et al., 2004).
Nevertheless, developing such capabilities may give rise to several managerial
challenges in the retail-banking context. Our aim is to offer a holistic view on
organisational obstacles to upgrading customer value-in-use in retail banking. The
following theoretical section defines the main concepts involved, before the aim of
providing a holistic understanding is addressed by using an explorative case method.

Value-in-use in retail banking: theoretical foundation


Value-in-use
According to many sources of theory, the basis used to plan and conduct all service
encounters should be the customer’s value creation process (Vargo and Lusch, 2004,
2008a; Payne et al., 2008; Grönroos, 2008; Heinonen et al., 2010). To be more specific,
the customer value creation process includes those “processes, resources and practices
which customers use to manage their activities” (Payne et al., 2008, p. 85). It is
important to understand this customer logic and “take a step towards a more holistic
understanding of the customer’s life, practices and experiences, in which service is
naturally and inevitably embedded” (Heinonen et al., 2010, p. 533). The goal is to
support the customer’s value creation process with the company’s actions in different
service encounters: defined as that interaction involving emotional, behavioural and
cognitive aspects (Payne et al., 2008) relevant to the customer.
Value is not what is termed value-in-exchange, embedded in products or services,
but value-in-use (e.g. Grönroos, 2006; Ballantyne and Varey, 2006), where value is not
produced by the supplier, but by the customers themselves. Consequently, the
customer is seen as a co-creator of value interacting with the supplier at different
stages of the process to acquire the resources required to support the customer’s own
value creation (Payne et al., 2008; Heinonen et al., 2010; Grönroos, 2011; Grönroos and
Ravald, 2011). The aim is to find “the structural fit between a service and a customer’s
life” (Heinonen et al., 2010, p. 533). Thus, although a bank might create and communicate
value propositions (Payne et al., 2008; Grönroos, 2006), service organisations cannot
unilaterally pre-determine and deliver value to customers. The final value is created by
the customer (Grönroos, 2008). Facilitating value co-creation is said to play an important
role when seeking to develop a good customer experience (Prahalad and Ramaswamy,
2004; Frow and Payne, 2007).
To return to our specific context of retail banking: In the traditional producer-
oriented mindset, the bank creates encounters between itself and the customer for
selling purposes and in some cases to support the use of the banking service (e.g.
contact centres). However, the customer has to stop or suspend his or her primary
process to use the banking service needed. To give a simple example, in the process Obstacles to
of purchasing property, the buyer needs financing to complete the process. That upgrading
requires them to contact the bank, which typically means the interruption of the
primary process (the property purchase) in order to access the (secondary) banking value-in-use
service. In other words, the customer is expected to integrate with the bank’s process
and to use the banking service in the bank’s context – and in order to do that, to halt the
primary activity chain. The value for the customer is expected to be formed through 337
embedded value (i.e. the value built within the service), through value-in-exchange
(e.g. Grönroos, 2006).
Where such a mindset dominates, since the customer value creation process and
related potential for value-in-use are not understood, the bank can only partially
optimise the customer experience. It might do that in the course of occasional customer
meetings or on the internet, for example, but will usually be restricted to only one
channel and one product area at a time.
Generating value-in-use is about considering the customer’s life context. Doing so
involves looking for activities apparently unconnected to the specific transaction in
question to identify those that confer opportunities to broaden the interaction.
The process of identifying such opportunities will enable the bank to suggest how the
banking service may be naturally embedded into the customer’s life and practices.
To return to our example of a property purchase: customers who have informed their
bank that they are considering buying a new home might receive a notification via
mobile phone relating to available properties close to the customers current location.
Moreover, the message might include average prices in that specific area. Such logic
could offer a basis for the definition of a relevant banking service, and it need not stop
with traditional services like mortgages, as the bank could offer other relevant services
like information and third party services by mobilising its network partners (home
insurance or removal services, for example). The bank could participate in the most
important aspect of value creation for the customer, the value-in-use in the customer’s
own context.

Potential obstacles for generating value-in-use


Changing a mindset is challenging. The depth of change needed in an organisation for it
to fully benefit from a relationship marketing strategy may necessitate profound
change to the management system, culture, structure and organisational processes
(Shah et al., 2006) but the task is often underestimated (Piercy, 1998), and that can lead
to short-term and superficial improvement (Harris, 2000).
There are many potential organisational barriers to customer-oriented change.
Most often, those barriers relate to structural, systemic or strategic aspects of an
organisation (Harris, 2000). Considering the structural and systemic aspects, removal
of barriers between organisational functions or dismantling of silos is often a prerequisite
to developing customer orientation (Nielsen et al., 2003). This follows because the manner
in which the various departments interact appears to be an important determinant
of customer orientation, as is how organisational reward systems support these
cross-functional activities and knowledge sharing (Jaworski and Kohli, 1993). Also
(Ruekert 1992) emphasises the value of rewarding personnel when building
organisational customer orientation.
A high degree of cross-functionality facilitates the ability to generate value-in-use,
because, as mentioned previously, the latter often requires a contribution from various
actors at the organisational and network levels. In relation to cross-functionality, an
IJBM organisation will require internal communication systems capable of supporting
31,5 the sharing of customer information between actors both vertically and horizontally,
and the absence of such may hinder the development of customer orientation
(e.g. Harris, 2000).
With regard to the effect of organisation culture along company’s path towards
customer centricity, Piercy (1998) highlights the critical role of people in the customer
338 interface. It is also suggested that it may be useful to empower employees at the lower
levels of the organisation to make decisions (Jaworski and Kohli, 1993). Furthermore,
Nielsen et al. (2003) suggest that providing IT-systems to support front-line employees
in banks is just as important, because if staff cannot access sufficient organisational
and knowledge-related support, the potential benefits of empowerment can easily
be lost.
However, in retail banking the organisational culture is considered to be relatively
stable, formal, inflexible and risk-averse and creating strong resistance to change
(Kolar, 2006). This may be a challenging starting point for implementing value-in-use
logic where marketing is no longer seen as only one function in the organisation,
but part of every organisational activity (Grönroos, 2006).
Bennett and Durkin (2002) studied the progress of retail banks towards a
relationship-oriented selling culture. The study identifies the key facilitators of developing
a relationship marketing orientation to be actions promoting employee involvement and
empowerment; facilitating internal knowledge sharing; action supporting employees at
the customer interface and reasonable measures taken to spur workers to adopt a
customer orientation. Walsh et al. (2004) also noted that developing and maintaining
a customer-relationship focused approach in a bank may require the organisation to
adopt a type of structure more akin to network models that facilitate inter-functional
communication, delegation of responsibility and attractive reward systems.
The following sections define the methodology and data behind the research, and
the paper then proceeds to the analysis and findings of the case study.

Methodology
The chosen method for this paper is an explorative, in-depth, single case study.
Qualitative research methods are appropriate, because there were no exact, prior
theoretical constructs of what constitutes the change needed in a retail-banking
organisation in relation to the phenomenon in focus (Shaw, 1999). For the same reason,
this case study is explorative. One very information-rich case was chosen to reveal the
process of developing customer experience and value creation in the retail-banking
context and the related obstacles facing such efforts. The case study method supports
researchers in their work to form a holistic understanding of a complex phenomenon in
focus (Yin, 2003, p. 2; Kovács and Spens, 2005).
This study was preceded by a pre-study, which involved a meeting with a
representative, either from senior management or the business development unit of all
the banks active in the same local market. The bank chosen for the case study was
selected because of its stated strategy of developing customer-centric practices
extensively. The decision of the case company to do so offered a great opportunity to
examine this phenomenon in the banking context in a longitudinal manner. This case
was both intrinsic and instrumental (Stake, 1995). The case itself was interesting to
investigate, and the case study made analytical generalisations possible (Yin, 2003, p. 10).
Secondary data including earlier customer satisfaction surveys and other
documents from the case company were used to provide background information.
Primary data were gathered in a workshop, development sessions and thematic Obstacles to
interviews and through participatory observation throughout the process (see Table I). upgrading
One of the authors was involved in the development process, gathering data from its
different phases. Before the interviews, the researcher facilitated a workshop in which a value-in-use
group of four managers created a common understanding of the value-in-use
concept based on the existing theoretical understanding and with the help of a few case
examples. In the two following development sessions, a researcher and one of the 339
bank’s managers (who was responsible for the research) created a loose framework of
the meaning of the value-in-use concept in this specific context. In a subsequent
executive board meeting attended by all the participating managers, the model was
presented and further refined following discussion.
The model was then used in the interviews to alert the managers to the potential
of the concept and to discuss the obstacles that could impede its implementation.
We wanted to understand how informants saw the value-in-use idea in the banking
context compared to the prevailing value-in-exchange logic. Thematic interviews
permit intensive interaction between a researcher and interviewee (see e.g. Kovács and
Spens, 2005). The whole senior management of the bank (nine people) was interviewed.
Interviewees were first asked to describe the competition in their own business area,
then to relate their own views on the development of a customer-centric orientation, the
possibility of creating a competitive edge through use of this concept and also what the
potential obstacles in the process might be. Finally, the discussion proceeded to
address innovation in banking and how customer relationships influence innovation
activities. The informants represent the retail bank’s deepest understanding of the
current banking business and strategic possibilities – and in addition have the ability
to change that logic. The analysis of the interviews was presented in the final
development session and workshop with the bank’s executive to verify the results.
The case study method supports an abductive research logic, enabling interplay
between and simultaneous development of theoretical and empirical material (Kovács
and Spens, 2005). Our approach was abductive in the sense that theoretical and
empirical understanding grew in the course of developing the value-in-use idea in the

Type of the meeting Attendees from the bank Duration

Introduction, basis for understanding Group of 4 managers 1 h 30 min


Development session Manager responsible for the research 2h
Development session Manager responsible for the research 2 h 30 min
Workshop Executive board (all the interviewed) 1 h 30 min
Interview Head of personal bank 1 h 30 min
Interview Deputy CEO 1 h 30 min
Interview Head of digital services 1h
Interview Head of business planning 1h
Situation report of the research process Manager responsible for the research 2 h 30 min
Interview Director, human resources 1h
Interview Director, corporate customers 1 h 30 min
Interview Head of marketing 1 h 30 min
Interview Manager responsible for the research 2h
Interview A branch manager 1h Table I.
Development session Manager responsible for the research 4h Research data gathering
Workshop Executive board 1 h 30 min in time-based order
IJBM workshops, development sessions and interviews. Data analysis and data gathering
31,5 occurred simultaneously, which is also typical of qualitative and abductive research
(Stake, 1995, p. 9). The data were analysed with the help of content coding, theme-
based categorising and mind mapping while themes arose from the data. The authors
agreed with the organisation that the name of the company and the informants would
remain confidential.
340
Empirical analysis: organisational obstacles to upgrading customer
value-in-use in retail banking
The theoretical review has highlighted two important aspects of the structural/system
level and cultural impediments to the change towards more customer-oriented
business. The following empirical analysis is structured to reflect those aspects.

Cultural obstacles
General banking logic. According to our data, a company wishing to position itself as a
facilitator of value-in-use instead of value-in-exchange, would be required to adopt a
customer-centric way of doing things (see e.g. Vargo and Lusch, 2008b; Heinonen et al.,
2010). The data suggest the main obstacle to implementing that new logic is the fact that
retail banking is traditionally very service-provider oriented, meaning that the starting
point has been the bank’s processes, and the customer has been required to adjust to that
situation. There are certain inertial forces like the history of regulation, and a relatively
stable, formal and risk-averse culture (Kolar, 2006). However, progress towards the value-in-
use logic will demand a change in the mindset prevailing among bank senior management:
For a bank, it is difficult to think out of the box, to see and understand the need of the
customer and how the bank could create value (Head of personal bank).

Customer orientation and solution-based offerings will lead to wider understanding of


customer needs (Head of Marketing).
Consequently, the prevailing logic holds that it is challenging to contribute to value-in-use,
since the interaction is planned primarily from the perspective of the bank, rather than
starting from the customer’s primary process. Under the prevailing logic, the bank
improves mainly encounters in which the customer interacts with the bank’s processes,
such as its chosen channels, digital devices or customer contacts in a branch. Banks have
tried to get closer to customers, for example, by opening service points in shopping centres
or opening branches at the weekend. However, these efforts do not seem to serve customer
orientation particularly well, or to have addressed the lack of customer contact – not
to mention the failure to address the customers’ primary value creation processes and
associated needs. The focus is characteristically short-term:
The customer should feel the bank offers help, not pushes him/her to do things that the bank
has decided (Head of Marketing).

The bank should react into customer’s action and has the ability to explain the benefit of the
banking service for the customer in a long-term period (Head of personal bank).
A low level of interaction between the bank and its customer base does not necessarily
mean that the service must be a failure or that value is not created at all. However, a
lack of interaction means that the bank does not possess sufficient control over its
customers’ value creating processes, nor can it conduct a sufficient volume of encounter
processes to expand the scope and penetration of its service offerings. The bank leaves
the direct control of the use of the banking service to the customer alone (see e.g. Obstacles to
Grönroos, 2011; Grönroos and Ravald, 2011). upgrading
According to our data, it is evident that banking services are often presented as if
they were goods rather than services. This is based on one-off sale culture rather value-in-use
encouraging an ongoing relationship. The value-in-exchange view dominates, and the
bank is not capable of creating a constant, seamless interaction with its customers to
co-create value-in-use with them (Heinonen et al., 2010). However, those “banking 341
products” should be seen as one part of service encounters, not an object of exchange
in themselves:
In the current banking business, the product view is emphasised (Head of Digital Services).
According to our interviewees, the digitisation of banking services has transferred
the service encounters from physical branch networks to the electronic banking
environment, and the interviewees were concerned that banks were losing contact with
their customers. However, based on our interpretation the problem is not digitisation
and self-service per se, but the attitude and mindset in the organisation; it is marked by
the traditional goods-based banking logic, a lack of interaction with the customer and
consequently a lack of understanding of customers’ value creation.
Lack of commitment. The empirical data indicate that our informants found it
relatively easy to define what implementing value-in-use should involve, but saw the
corresponding change management of the company culture as very risky and time
consuming. Our data suggest that in general the motivation to change the business
culture is lacking. The mindset that militates against the establishment of a sufficiently
strong driving force for change was visible in the citing of results of customer
satisfaction surveys:
The customer satisfaction rate is still high enough (Head of personal bank).
A regulated business environment might lack the competitive push that would
stimulate the necessary change in organisational culture at the strategic level. Now the
case bank operates as a selling organisation and it seems as if any change towards a
more customer-oriented logic would need some driver emerging from outside the bank
that forces it to change. For the management, it would mean the change from sales
management into banking business management as a whole. In that world, acquiring
individual customer accounts is no longer the driver, but coordinating and maintaining
the relationship over the long term is. Moreover, for the bank, its market share would
cease to be the main business target, and be replaced by that of having a profitable
banking business in the selected market area.
At the operational level, given the emotional aspect of customer perceived value
(Roig et al., 2006), among other things, it is clear that bank employees play a crucial
role. Uncommitted employees dealing directly with customers can sour the whole
development process:

People who work in a bank view the banking business as a low-interest industry; the mental
backbone, pride, and even specialist attitude are missing (Head of Business Planning).

Internal marketing methods should be employed to increase the level of commitment


among staff (see e.g. Awwad and Agti, 2011; Molina et al., 2007). Moreover, how
performance is evaluated and with what metrics is enormously important: if goods-
based selling is rewarded, that is what the customer is going to get. The focus of a
firm’s measurement reveals a great deal about its strategic aims.
IJBM Strong product- and sales-orientation. In the case bank, managers’ and employee
31,5 competencies and focus were seen to represent the traditional inside-out banking logic:
they were product- and sales-oriented, and marked by a rather short-term approach to
customer service and encounters. In addition, the interviews suggested the language
used in the bank reflects a lack of customer orientation. Employees discuss products
not customer needs. To a certain extent, this competitive, product-oriented approach is
342 reflected in the level of empowerment of the staff:
Our employees in the network should be empowered [to advance] business development;
“we are a good bank” should be highlighted to facilitate employee satisfaction. Job satisfaction
should be better linked into business, starting from recruitment, and contributing to customer
satisfaction (Director, corporate customers).
The study shows that identifying the right attitude during recruitment is even more
important than conveying skills through training in nurturing the creation of good
customer experience. Considering that skills already integrated into the sales culture
are not easily replaced by new skills, special attention should be paid to developing a
new kind of approach, culture and management system that encourages workers in the
bank to support their customers in an integrated way.

Structural and system level issues


Restrictive network. The restricted network viewpoint emphasises the networked
nature of value creation (Vargo and Lusch, 2008a). A typical retail bank has a
large network of partners, subcontractors and other parties representing a typical
provider-oriented banking logic mainly supporting the direct sales goals of the
business. According to our data, the existing network reflects the dominance of
sales targets:
The bank should be a part of a service-based value chain, which should be at the core of the
customer’s processes (Head of Digital Services).

We should form networks with multiple actors (Head of Business Planning).


As a result of the change process introducing a more customer-centric way of banking,
network partners should also be involved in producing customer perceived value.
As mentioned several times before, there is always a primary process that just needs a
banking service to become complete. Network partners (like real estate agents) can
provide a bank with access to the customer’s primary process that is part of their lives.
From there, the banker can offer a relevant service by understanding the timing, place
and scope of the banking service in that specific situation from the customer point of
view (see e.g. Payne et al., 2008).
Difficulty in seeing the profitability aspect. It cannot be taken for granted that the
staff of an organisation will connect a customer-centric approach with profitability.
Many would see it as a policy that incurs cost without generating revenue (see e.g.
Gummesson, 2008). It is essential that senior management understand the potential
return on investment in order to determine the changes necessary in the business:
Customer experience and cost efficiency are not opposites (Head of Business Planning).
Our data indicate the main elements of positive return on customer experience to be a
lower turnover of customers, a larger share of customer spend and acquiring new
customers through the recommendations of very satisfied customers. Cost reduction
was also mentioned as an important aspect. The data suggest that banks typically
overinvest in customer-facing initiatives, which have little or no positive effect Obstacles to
on value-in-use: upgrading
Customer experience has to be built over several years; on the one hand, there have to value-in-use
be quick wins, but on the other, it will take a long time to have established ambassadors
(Head of personal bank).
Lack of conceptualisation and proper segmentation. The study indicates that
creating a good customer experience requires a harmonious and coherent service 343
portfolio, regardless of communication channel or the physical location of the
encounter between the customer and the bank. Therefore, conceptualisation was set
as one precondition of consistent customer experience across all delivery channels,
and the base for tailoring when a flexible offering is necessary to meet the demands
of customer value creation:
A concept based business needs strict management. In the bank, concepts are so poor that
they cannot be deployed, or employees try to find ways to avoid using them (Branch
Manager).
According to our data, the lack of conceptualisation spans several issues and
organisational levels in the bank: business processes are not planned according to
strategies and visions, and in particular are not planned from the value creation point
of view to facilitate the integration and interaction between the customer and the bank.
Sales support tools do not necessarily provide sufficient information on customer
needs, but segmentation is conducted purely based on this largely historic data, which
is insufficient to establish the customer’s primary processes or future needs. Our
informants acknowledged that the currently available data should be complemented
by richer, qualitative data on customers’ lifestyles and routines, and that the latter
would offer a more relevant foundation for segmentation too.
Organisational silos. Customer centricity can be implemented only if it is
orchestrated consistently throughout an organisation. Now it is understood that
holistic value creation often requires cross-functional integration and interaction
(e.g. Gummesson, 2008; Vargo and Lusch, 2008b; Grönroos, 2006). The case bank in this
study was organised in a silo style, in that it is an organisation arranged around
distribution channels (e.g. contact centre, online, branch network) and particular banking
services (e.g. payments, loans, cards). The existing organisational model makes it very
hard to offer holistic and seamless support for the value creation of the customer.
There are several consequences of the case bank having silo-style organisational
structure. These include the experience between two distribution channels not being
consistent; customer information not flowing from one channel to another; contacts
initiated with the customer not always being relevant to the customer and customer
contact being undertaken by various people (company workers and network actors).
Therefore, the silo-organisational style means offers are made to the customer to meet
only one specific need at a time and hence it becomes very difficult to formulate an
integrated solution to broader customer needs.

Conclusions
In this study, we researched the main organisational obstacles faced by a retail bank
developing its customer orientation by encouraging a topical value-in-use mindset. Our
empirical data clearly showed that changing the mindset within a bank is not without
its challenges and requires change in the management system, cultural, structural and
IJBM processual aspects (see also Shah et al., 2006; Harris, 2000). Those obstacles were found
31,5 at both structure/system and cultural levels and in related business activities.
For a retail bank, it is challenging first to understand the deepest meaning
and character of customer value and second, to harness the resources of the
organisation to deliver that value. The main barriers arise from the strong
producer-oriented way of doing business, a lack of employee commitment, in the
344 strong product- and sales-orientation, the restrictive network, difficulties in seeing
the profit potential of adopting a new mindset, the lack of conceptualisation and
proper segmentation, and finally, in a silo-style bank organisation. At the same time,
these obstacles encompass the potential enablers of a competitive advantage. If a bank
wants to gain a durable competitive edge based on a strong capability to co-produce
value with its customers, addressing the obstacles described would present it with
an operational roadmap to do so.
Our study reinforces the idea of silos within organisational functions impeding
development of customer centricity (see e.g. Nielsen et al., 2003), and how important
a role reward systems have in facilitating cooperation and knowledge transfer
across functions (e.g. Jaworski and Kohli, 1993). The current study also touches upon
the importance of empowering employees involved with the customer interface
(e.g. Bennett and Durkin, 2002). However, our study draws a more detailed picture of
the situation in retail banks facing new challenges. It expands on the effects of a strong
producer-oriented mindset, illustrates the characteristics of a strong sales orientation
and the reasons behind it, shows how restrictive a company’s network can be and how
difficult it can be to understand the financial reasoning behind development needs.
In addition, the study confirms that business practices like conceptualisation and
segmentation have a role in the development towards customer centricity.
Although there now seems to be a view of how bank services should be developed,
it is very important to maintain a critical perspective and ask how far banks could go
along the road to customer centricity. The profitability and efficiency of the company
influence the right degree of commitment, and banks would need to investigate the
extent to which they could focus on value-in-use while maintaining a balanced
approach for each stakeholder group (see e.g. Gummesson, 2008) bearing in mind
the resources available to the organisation. Banks must also not lose sight of the
customers’ real experience, as Gummesson asks, “how intimate do they really want to
get with suppliers?” (2008, p. 317).
Although there are different conditions – and a really customer-oriented approach
demands much time and management effort – we believe that future changes in
regulation, competition and customer behaviour will ultimately trigger a change
in retail banking and force companies to focus on providing an integrated and holistic
value-in-use.

Limitations and avenues for future research


There are a number of research limitations in this study that give rise to future
research opportunities. Value creation, its elements, aims and its evaluation in service
relationships is always subjective and context-dependent. This study is context-bound
in the sense that the analytical generalisations are likely to prevail only in the specific
context of retail banking, although transferability to other financial sectors is possible.
Future research might identify challenges typical of other industries, as value creation
is always embedded in its specific context. Moreover, to discuss organisational
obstacles in a broader setting, qualitative studies with data representing different
industries would be required to guarantee a thorough empirical grounding for the Obstacles to
model – and that model could be tested with quantitative methods (see Whetten, 1989). upgrading
The case approach can provide the rich, deep description needed to suit the nature
of the phenomenon in question. However, customer data are missing from this study value-in-use
and our viewpoint has been predominantly managerial. Future studies could
investigate the customer viewpoint on value creation. Since the aim of the current
research was to offer a holistic picture of the phenomenon, it lacks any in-depth 345
exploration of detail, so for example, each individual barrier presented here could be a
focus of its own specific further study.

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About the authors


Ilkka Lähteenmäki, DSc (Econ. and Bus. Adm.), has worked in retail banking business
development for over ten years, both as a consultant and as head of development. His main
research interests relate to banking business development in general, with customer experience
being the most recent research focus. His dissertation on the development of the Finnish banking
industry was published at the University of Oulu in 2006.
Satu Nätti, DSc (Econ. and Bus. Adm.), is a researcher and teacher at the University of Oulu,
Finland. Her main research interests relate to professional services, customer-related knowledge
management, innovation net management and brand management in small and medium-sized
companies. She has published in such journals as Journal of Business and Industrial Marketing,
Journal of Service Management, Journal of Services Marketing and Service Industries Journal.
Satu Nätti is the corresponding author and can be contacted at: satu.natti@oulu.fi

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