Consumer Behavior

For Financial
Services

Objective
To examine the current status of buyer behavior
literature, so that some of this work can be
synthesized with the generic literature on services
marketing, as well as specific literature on financial
services, in order to consider the nature of buying
behavior for personal and corporate financial
services

Previous Work
Characteristics of Services and Their Implications for Buyer Behavior

The academic literature on services marketing has

developed from a number of sources and are based
on three assumptions (Zeithaml et al 1985):
Factors existed which distinguished services from goods
These factors posed special problems for service marketers
not faced by goods marketers
Services marketing required services marketing solutions

Characteristics of Services and Their Implications for

Buyer Behavior Cont
Intangibility
The main distinguishing feature, since services are processes or experiences
rather than physical objects and therefore cannot be possessed (Brown and
Schneider, 1988; Lovelock, 1981; Shostack, 1977)
Can be double-edged in the sense that services are not only impalpable but
also difficult for consumers to grasp mentally

Inseparability
The inseparability of production and consumption in services make production
and marketing interactive processes (Gronroos, 1978)
The front-line service employees play an important boundary spanning role
in the production of services, as do consumers themselves in their capacity as
partial employees (Bowen & Schneider, 1988)

Characteristics of Services and Their Implications

for Buyer Behavior Cont
Perishability
Services cannot be stored for some future time period, hence the need for
short distribution channels so that they can be produced on demand
(Bateson, 1977)

Heterogeneity
Services depend on input from both service employees and consumers for
their production, the quality of the service output very much depends on the
nature of the personal interactions of these parties
Makes the potential for variability in the service performance high

Characteristics of Financial Services

Fiduciary Responsibility
Refers to the implicit responsibility of financial services
organization for the management of their customers
funds and the nature of the financial advice supplied to
their customers

Two-way Information
Rather than being concerned with one-off purchases, they
involve a series of regular two-way transactions between
buyer and seller usually over an extended period of time

Understanding Consumer Buying Behavior

In spite of the recent attention which had been paid to the
field of services marketing and the ensuing efforts to develop
conceptual models and managerial paradigms, relatively less
attention was being given to developing an understanding of
consumer buying behavior for services (Murray, 1991)

Consumer Buying Behavior as a Decision Process

Engel-Kollat-Blackwell model
Problem recognition
Information search
Evaluation of alternatives
Purchase decision
Post-purchase behavior
Strongs (1925) AIDA
Awareness
Interest
Desire
Action
Based on the assumption that buyers will pass through a cognitive,
affective, and behavioral stage when there is a high degree of involvement
with a product category which is perceived to have a high degree of
differentiation of products within it

Criticisms of Consumer Buying Behavior Models

Criticized by Tuck (1976) on the grounds that they could not
be tested and lacked specificity of variables
Foxall (1991) noted that the models were all founded on a
rational decision sequence which assumed too rational a
consumer and did not offer any empirically testable
hypotheses
Turnball (1991) criticized the buying behavior models for
assuming a discrete and ordered process

Alternative Framework Bakers Composite Model

of Buyer Behavior
Comprise four different disciplinary explanations of choice behavior,
together with six key concepts:

Selective perception
Hierarchy of needs
Hierarchy of effects
Post-purchase dissonance
Buy tasks
Buy phases
Characteristics of goods

Endeavors to synthesize key variables in order to provide a useful

framework for marketers and academics alike to structure their thoughts
and actions around a particular problem
An additional variable was required to act as a catalyst for the model to
work: specialized knowledge & experience of persons familiar to the
specific product-market interface being studied

Industrial/International Marketing & Purchasing

Group
Sets out to conceptualize industrial marketing and purchasing as an
interactive process which takes place within the context of longterm relationships between buyers and sellers
Represents a significant shift from the more traditional view of
marketing to match the needs of passive customers in an atomistic
market (Ford, 1990)
Built on four factors:

Both buyer & seller being active participants

Buyer-seller relationship being frequently longer term
Both parties often becoming institutionalized into set of roles
Close relationships often being considered in the context of continuous raw
materials or component supply

Consumer Buying Behavior in Financial Services

In the services marketing & financial services
marketing literature the conceptual and empirical
work is not as well developed; reasons for this may
be three-fold:
Due to problem with the conceptual models themselves in
that they do not lend themselves to empirical testing (Tuck
1976; Foxall, 1991)
Not clear whether these models are necessarily the most
appropriate conceptual frameworks
There has been a lack of appropriate measures of salient
dimensions for testing concepts

Consumer Buying Behavior in Financial Services

Cont
Empirical work focus has been on specific issues in relation to
buying behavior
Laroche & Manning (1984) found that although banks tended
to be recognized by name, there was no clear association of
brand concept, and that a correlation existed between
demographic differences and this process
These empirical studies highlight the importance of factors
such as confidence, trust & customer loyalty

Bank Selections
Common choice criteria's:

Dependability and size of the institution

Location
Convenience and ease of transactions
Professionalism of bank personnel
Availability of loans

Personal consumer is more interested in the functional quality

dimension of financial services rather than the technical
quality dimension

Application of Some Organizational Buying

Behavior Models..
The application of the interaction model by the IMP group
The application of the stages of purchase process put forward
by Robinson et al (1967) and Brand (1972)
Webster and Wind Model (1972)

Buyer-Seller Relationships
Looked at the perspective of the seller and not the individual
or corporate buyer (Yorke, 1990)
Commercial customers had favorable attitudes to long-term
bank relationships (Teas et al, 1988)

Responsive to customers requests

Initiated interaction with customers
Knowledgeable about customers business and business needs
Developed close informal working relationship with customers

Buyer-Seller Relationships cont

The traditional marketing mix approach does not fully cover
the relationships that exist between consumers and service
providers (Booms & Nyquist, 1981)
As far as consumers are concerned they are indeed actively
involved in shaping up a service offering due to the
inseparability of production and consumption
Watson (1986) offered two conceptual frameworks:
Examining the steps involved in building a relationship
Describing the communication tasks required at each stage of the
process relationship building

Relationship between buyer and sellers needs to be built on

mutual trust and commitment

Buyer-Seller Relationships in Financial Services

Clear need for financial services suppliers to establish initial
relationships with their prospects while at the same time
maintaining and developing long-term relationships with
existing customers

Based on customer trust and confidence

Conclusion
It is apparent that there is a noticeable absence of any general
conceptual framework that describes how consumers buy
services
There is a real need for marketing theories and concepts to be
developed specifically for services
The framework adopted by the interaction approach already
has potential for general application in services as well as
financial services
Further research needs to be done and suggested areas would
include:
Application of the IMP Model to services
Development of concrete measurement tools for the empirical testing
of this applied model