Consumer Buying Behavior in Financial Services: An Overview By: Sally McKechnie

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Consumer Buying Behavior in Financial Services
An OverviewBy Sally McKechnie
Article 46

• Presented by Farrah Dang

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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

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Previous WorkCharacteristics 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

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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)

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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

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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

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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)

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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

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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

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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

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Industrial/International Marketing Purchasing
Group

• Sets out to conceptualize industrial marketing
  and purchasing as an interactive process which
  takes place within the context of long-term
  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

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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

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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

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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

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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)

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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

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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

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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

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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