The impact of geographical factors on churn prediction: an application to an insurance company in Madrid's urban area

Geography has previously been noted as a decisive factor in business literature. This paper provides evidence of the significant role geography plays in customer lapse behaviour in an urban environment. This novel approach is based on the idea that the customers who cancel all policies and leave the company are not randomly distributed; rather, a mimetic performance of close individuals is noted. The physical proximity of the customer to the geographical focus (strategical centre, as insurance offices) and the interaction with nearby customer are spatial factors that increase (or decrease) the probability of churning. An empirical analysis using more than 7000 spatially georeferenced offline customers of a Spanish insurance company in the urban area of Madrid (Spain) demonstrated that the customer's proximity to offices of such insurance company under study decreases the probability of churning, whereas high lapse risk was detected in customers in the surroundings of the company's competitor branches. In addition, we identified spatial autocorrelation in churn probability, thus demonstrating that the probability of churn of a customer increases if nearby customers churn.     

Customer experience in omni-channel banking services

The banking industry is experiencing rapid and widespread changes due to advances in technology that go hand-in-hand with the customer demands for real-time, personalized and seamless banking experience. Along with this development, omni-channel orientation is becoming an inherent feature of banking services. However, its role has not yet been thoroughly understood, specifically in this context. The purpose of this study is to create in-depth understanding of how do customers experience omni-banking services and what are the key factors related to their experiences. We identify both actual critical events and imaginings, positive and negative that are related to the forming of customer experiences and suggest both theoretical and managerial implications based on the results.     

Loyalty-based management

Despite a flurry of activities aimed at serving customers better, few companies have systematically revamped their operations with customer loyalty in mind. Instead, most have adopted improvement programs ad hoc, and paybacks haven't materialized. Building a highly loyal customer base must be integral to a company's basic business strategy. Loyalty leaders like MBNA credit cards are successful because they have designed their entire business systems around customer loyalty--a self-reinforcing system in which the company delivers superior value consistently and reinvents cash flows to find and keep high-quality customers and employees. The economic benefits of high customer loyalty are measurable. When a company consistently delivers superior value and wins customer loyalty, market share and revenues go up, and the cost of acquiring new customers goes down. The better economics mean the company can pay workers better, which sets off a whole chain of events. Increased pay boosts employee moral and commitment; as employees stay longer, their productivity goes up and training costs fall; employees' overall job satisfaction, combined with their experience, helps them serve customers better; and customers are then more inclined to stay loyal to the company. Finally, as the best customers and employees become part of the loyalty-based system, competitors are left to survive with less desirable customers and less talented employees. To compete on loyalty, a company must understand the relationships between customer retention and the other parts of the business--and be able to quantify the linkages between loyalty and profits. It involves rethinking and aligning four important aspects of the business: customers, product/service offering, employees, and measurement systems.     

High tech the old-fashioned way. An interview with Tom Siebel of Siebel Systems. Interview by Bronwyn Fryer

There is a growing awareness among corporations that the quality of the customer experience they provide directly affects their bottom line. Many are turning to high-flying software maker Siebel Systems for help in managing those relationships. The young company holds a leadership position in an explosive market-enterprise application software. But customer satisfaction, not dot-com chic, is foremost on the mind of Siebel Systems' founder, chairman, and CEO, Tom Siebel. The buttoned-down Siebel rejects the freewheeling management style and culture that characterize many Silicon Valley companies. As the former CEO of Gain Technology and a former executive at Oracle, Siebel believes in putting customers ahead of technology, discipline ahead of inspiration. In this interview, conducted at the company's San Mateo, California, headquarters, Siebel describes how this obsessive focus on customer satisfaction has been the driving force behind the company's success. He talks about how the organization remains true to its core values: a deep commitment to providing customer satisfaction; responsible fiscal practices that have created a cash-positive business amid today's cash-negative dot-coms; and general professionalism. "The notion of dressing in jeans and a T-shirt to greet the CEO of a major financial institution who just got off the plane from Munich is not acceptable," he says. Siebel Systems rejects the concept of going to war with rivals; instead, the CEO says, the company has forged an ecosystem of partnerships that allows it to support and integrate its own systems with other companies' software products and ultimately ease the customer's software installations. Indeed, Siebel says, the CEO's most important job is to understand what customers need and deliver that.     

Kundenzufriedenheit als Steuerungsinstrument in einem Versicherungsunternehmen – nur Schall und Rauch oder ökonomisch sinnvoll?

Customer behavior is managed by customer satisfaction in two dimensions: Insurer can profit by a higher customer loyalty und in addition, by a sensitive price behavior of customers. The findings of moderating effects are mean considered and thus, customer satisfaction is a too strong indicator of economic success in established concepts. To mange an insurance company effective, it is a good advice to implement a model that is specific for each company. This model should respect the heterogeneous factors of influence due to customer satisfaction by multidimensional instruments. Hence, insurer may identify drivers of service and work with analysis of correlations to describe the coherence between customer satisfaction and economic success exactly. The alignment for customer satisfaction is worth for traditional insurance companies, but only, if customer satisfaction is understood as an economic valued management that is culturally based in the firm. Manager should account for this suggestion to follow a sustainable story in a saturated competitive environment.     

Acquisition,affinity and rewards: Do they stay or do they go?

Customer relationship management seeks to understand how to generate profitable customers who enter into a long-term relationship with a firm. In this paper, we examine the role of modes of acquisition and retention programmes on customer lifetime in the context of a credit card issuing bank. While other papers have studied retention programmes such as loyalty card and reward card, there is no published study in the credit card context. Using a rich data set on nearly 5,000 customers observed over a three-year period, we are able to provide detailed insights about the efficacy of these strategies. We show that affinity cards customers and customers acquired through direct mail have longer lifetimes. We also find that reward card programmes generate customers with a shorter lifetime. Finally we re-examine the link between long-life customers and profitability and find that the relationship is weak, consistent with recent findings.     

Branding and relationships: Customer and supplier perspectives

This paper explores and investigates the role of branding within financial services. Specifically, the study aims to assess the importance of branding and its associated elements including brand image and brand experience in the relationships that exist between consumers and their financial brands. It aims to achieve this through research, which identifies gaps between the managerial and consumer perspectives on branding in relationships in retail financial services. It is well established that the characteristics of services are different from those of manufactured goods and that service personnel play a central role in the services experience. Moreover, the concept of relationship marketing within services proclaims the importance of one-to-one relationships between businesses and customers as well as relationships between consumers and their brands. Drawing from the fields of brand management, relationship marketing and services marketing, this research aims to investigate the perceptional differences between consumers and suppliers in relation to the importance of branding in financial service relationships. The research findings indicate that brand experience appears to be far more salient than brand image in shaping and building meaningful and lasting brand perceptions and promoting customer retention.     

On the potential for Twitter to add value in retail bank relationships

It is argued that research within financial services marketing has omitted to pay sufficient attention to social media in banking contexts generally and its potential impact on retail bank relationships in particular. At a general level, this research study explores the advent of social media and the manner of its deployment in financial services. Specifically, this article reports on the deployment of Twitter in bank–customer communications. Accordingly, a content analysis of 400 Tweets sent from a range of financial service providers to their customers was conducted. A literature-based model allowed for the classification of these Tweets as either customer acquisition, engagement or retention-oriented. Findings indicate that Twitter is mainly used for customer engagement, but scope is identified for their more meaningful deployment in relation to customer acquisition and retention.     

The one number you need to grow

Companies spend lots of time and money on complex tools to assess customer satisfaction. But they're measuring the wrong thing. The best predictor of top-line growth can usually be captured in a single survey question: Would you recommend this company to a friend? This finding is based on two years of research in which a variety of survey questions were tested by linking the responses with actual customer behavior--purchasing patterns and referrals--and ultimately with company growth. Surprisingly, the most effective question wasn't about customer satisfaction or even loyalty per se. In most of the industries studied, the percentage of customers enthusiastic enough about a company to refer it to a friend or colleague directly correlated with growth rates among competitors. Willingness to talk up a company or product to friends, family, and colleagues is one of the best indicators of loyalty because of the customer's sacrifice in making the recommendation. When customers act as references, they do more than indicate they've received good economic value from a company; they put their own reputations on the line. And they will risk their reputations only if they feel intense loyalty. The findings point to a new, simpler approach to customer research, one directly linked to a company's results. By substituting a single question--blunt tool though it may appear to be--for the complex black box of the customer satisfaction survey, companies can actually put consumer survey results to use and focus employees on the task of stimulating growth.     

Corporate greed: its effect on customer satisfaction,corporate social responsibility and corporate reputation among bank customers

Corporate greed has received increasing attention in recent years with various stories hitting the headlines, particularly after the global financial crisis and the ensuing negative attitudes toward banks. Customer satisfaction and corporate social responsibility are known to have a positive effect on corporate reputation among customers, but perceived corporate greed is likely to impede their effect. Corporate greed, customer satisfaction, corporate social responsibility and corporate reputation are considered, and a research model is proposed. Results indicate that the effect of corporate greed is stronger on corporate social responsibility than on customer satisfaction, implying that corporate social responsibility activities may be futile if the company is perceived to be acting greedily by its customers. Thus, perceptions of corporate greed need to be dealt with swiftly, to enable management to enhance the corporate reputation of the firm.     

Antecedents of brand loyalty in South African retail banking

With new banks entering the South African market and consumers generally not satisfied with their current bank, brand loyalty in the banking sector is receiving greater attention. A gap in the literature exists regarding the issues of bank loyalty and their antecedents in South African retail banking because of the few studies available in the South African context, the new competitive environment in the banking sector, the multi-cultural nature of the market, and the likely switching behaviour by customers. The South African context is a multi-cultural environment and therefore offers a unique background as most previous brand loyalty studies have been in mono-cultural contexts. The purpose of this study was to investigate the antecedents of brand loyalty, including satisfaction, brand relationship quality, customer advocacy, and brand trust in retail banking. We report on a survey of 351 banking customers through SEM using AMOS. While the findings are generally supportive of previous studies, some surprising results are discussed and implications for both theory and practice are highlighted.

     

Customer value analysis in financial services

This study investigates what creates value for customers and how providers can improve value for their customers. A comprehensive analytical model with a four-step approach is presented and applied in the field of financial services. In a first step, the main customer value drivers are identified and five value dimensions are derived, based on qualitative interviews with customers. These results are then compared to value assumptions made by customer-contact employees, and gaps between customer and employee perceptions are analysed. Based on these identified gaps, a multitude of implications for managing company customer value at the normative, strategic, and operational level of management are derived, and finally implications of findings for service marketing practice and research are discussed.     

Customer readiness to co-production of mobile banking services: a customer-only co-production perspective

This paper aimed to identify the antecedents and corollary of customer readiness for co-production in customer-only co-production services using mobile banking services as a context. Using a structured questionnaire, data were gathered from a sample of mobile banking customers in Ghana and the UK and the data analysis was facilitated by structural equation modelling. From the findings, the antecedents were customer socialisation, customer self-efficacy and customer motivation and the corollary was service productivity. The findings provide managers of customer-only co-production or technology-based services particularly mobile banking services with the specific factors that can be managed strategically and tactically to enhance customer readiness for co-production and service productivity. This study is one of a kind to conceptualise and empirically identify the antecedents and corollary of customer readiness for co-production within the customer-only co-production context. However, as the study was limited to mobile banking services, future studies might test the research model in other customer-only technology-based services.

     

Customer values and CSR image in the banking industry

The authors analyse the role that collectivism and novelty seeking play in the formation process of corporate social responsibility (CSR) image in the Spanish banking industry. Two multisampling analyses of a structural equation model are performed on a sample of 1124 customers. The findings of the article allow the authors to anticipate CSR image based on (i) the congruence between the company and its CSR initiatives, (ii) the attribution of motivations for the company to implement CSR and (iii) corporate credibility in developing CSR initiatives. The findings also show that collectivists and innovative customers process information differently to individualists and conservative customers.     

Understanding customer experience

Anyone who has signed up for cell phone service, attempted to claim a rebate, or navigated a call center has probably suffered from a company's apparent indifference to what should be its first concern: the customer experiences that culminate in either satisfaction or disappointment and defection. Customer experience is the subjective response customers have to direct or indirect contact with a company. It encompasses every aspect of an offering: customer care, advertising, packaging, features, ease of use, reliability. Customer experience is shaped by customers' expectations, which largely reflect previous experiences. Few CEOs would argue against the significance of customer experience or against measuring and analyzing it. But many don't appreciate how those activities differ from CRM or just how illuminating the data can be. For instance, the majority of the companies in a recent survey believed they have been providing "superior" experiences to customers, but most customers disagreed. The authors describe a customer experience management (CEM) process that involves three kinds of monitoring: past patterns (evaluating completed transactions), present patterns (tracking current relationships), and potential patterns (conducting inquiries in the hope of unveiling future opportunities). Data are collected at or about touch points through such methods as surveys, interviews, focus groups, and online forums. Companies need to involve every function in the effort, not just a single customer-facing group. The authors go on to illustrate how a cross-functional CEM system is created. With such a system, companies can discover which customers are prospects for growth and which require immediate intervention.     

Customer concentration and M&A performance

This paper examines how the target's customer concentration affects merger performance. We find that the acquirer purchasing a customer-concentrated firm experiences significantly lower stock market returns and worse long-run operating performance. The effect is more pronounced when customers face lower switching costs or the target undertakes a higher level of relationship-specific investments, exhibits higher cash volatility, or is acquired by a less well-known company. Further analysis shows that the negative association is mainly driven by corporate customers, while relatively safe government customers moderate the effect. We also find that shared major customers, overconfident CEOs, and poor corporate governance are more likely to increase the likelihood of customer-concentrated acquisitions. Overall, our findings suggest that higher customer concentration leads to lower value creation in mergers.     

Bank image in the UAE: Comparing Islamic and conventional banks

This study investigates how bank customers in the UAE view Islamic banks versus conventional banks and whether this image affects customer loyalties or selection of a bank. We distributed a questionnaire to a convenient sample of UAE bank customers that focused on five areas: bank image, bank products, service quality, cultural aspects and religious factors, in addition to demographic attributes of the sample. The main findings of this study are: first, most UAE bank customers prefer banking with Islamic banks, although they are not satisfied with the quality of products and services; second, customers generally have a positive image of whatever bank they dealt with; third, the regression analysis results indicate that the most important factor in choosing a bank was bank products followed by service quality and then religious factors; fourth, there is a significant difference between how customers perceive UAE Islamic banks versus conventional banks; fifth, there is a significant difference in how customers perceive UAE Islamic banks based on their gender, education and duration of the relationship; and finally, there is a significant difference in how customers perceive UAE conventional banks based on their gender.     

How does customer motivational orientation affect satisfaction?

This study examines the link between customer motivational orientation and customer satisfaction in the Chinese context. The customer motivational orientation–satisfaction model was tested on 349 Chinese bank customers in Macao, China. Results of structural equation modelling indicated that task-oriented and interaction-oriented customers were not equally responsive to the financial services provided. Specifically, task motivational orientation was directly and indirectly related to customer satisfaction through customer perceived service quality, whereas interaction motivational orientation only linked to customer satisfaction through customer perceived service quality as a mediator. The theoretical and practical implications of the findings are discussed.     

The customer has escaped

Every company makes choices about the channels it will use to go to market. Traditionally, the decision to sell through a discount superstore or a pricey boutique, for instance, was guided by customer demographics. A company would identify a target segment of buyers and go with the channel that could deliver them. It was a fair assumption that certain customer types were held captive by certain channels--if not from cradle to grave, then at least from initial consideration to purchase. The problem, the authors say, is that today's customers have become unfettered. As their channel options have proliferated, they've come to recognize that different channels serve their needs better at different points in the buying process. The result is "value poaching." For example, certain channels hope to use higher margin sales to cover the cost of providing expensive high-touch services. Potential customers use these channels to do research, then leap to a cheaper channel when it's time to buy. Customers now hunt for bargains more aggressively; they've become more sophisticated about how companies market to them; and they are better equipped with information and technology to make advantageous decisions. What does this mean for your go-to-market strategy? The authors urge companies to make a fundamental shift in mind-set toward designing for buyer behaviors, not customer segments. A company should design pathways across channels to help its customers get what they need at each stage of the buying process--through one channel or another. Customers are not mindful of channel boundaries--and you shouldn't be either. Instead, they are mindful of the value of individual components in your channels--and you should be, too.