CASE 9 TEACHING NOTES
Electronic Banking Services: High-Tech or Low Touch?
Stephan Martin
OBJECTIVE: The objective of this case is to explore the transition from
conducting business within a physical structure to conducting business on-line.
QUESTIONS:
1. Analyze the impact of Internet banking services on the components of
the services marketing mix.
The services marketing mix include seven variables that a company can control
or the seven Ps as they are also known. In the case of online banking, however,
the issue of control is somewhat arguable. Is it really possible for a bank to
control the physical environment in which a customer decides to log in the bank
network? To a certain extent, it is. If the customer does not own a computer and
uses the bank’s facilities then the bank may still exert some kind of control on the
physical environment. However, for the majority of customers, the attraction of
online banking is also the ability to pay one’s bills from the comfort of one’s own
home, which should be a pleasant environment. The problem, in this case, is that
the bank loses some degree of control over its customer’s service experience.
Another illustration of the remote characteristic of online banking is the fact that
neither employees nor managers are around the user. Hence, the other variable
that traditional banks have control over, i.e. its employees, is also lost in the case
of online banking. The very nature of online banking services is a solitary act in
which no employees nor any of the bank physical settings may have an impact
on the customer. Again, this variable becomes controllable in the eyes of
customers and banks if users make use the bank’s facilities. To a certain extent,
banks may still influence their customers greatly through their people via the
telephone or e-mail. Most Internet banking users wishing to make a request while
on the net have the recourse of phoning their bank or e-mailing it. Hence, the
lessons here for the bank is to have its employees trained to handle telephone
inquiries.
In terms of process, the bank seems to have much more control in delivering its
services. The bank chooses the kind of interfaces that customers will use, it
provides the network infrastructure that enables banking transactions and it may
also tie its basic services with other related services such as e-commerce. The
bank has selected a wide variety of platforms to deliver its services ranging from
telephones to TV to the Internet and mobile phones without forgetting its retail
outlets. Given the high involvement of customers using online banking services,
the bank was also able to build on their customer knowledge of current services
and transfer this capacity to new platforms such as wireless phones.
Finally, in terms of price, production and promotion, the bank is still very much in
control of these variables. In particular, Internet banking offers valuable new
ways to personalize its promotional efforts. Customers may now be reached
directly and individually and their attention is almost guaranteed since
promotional messages would appear alongside a user’s bank statement.
2. Is the servuction model still a valid framework to explain a customer’s
experience?
The servuction model provides a framework for understanding the consumer’s
experience. The model is composed of the service provider’s visible part (the
bank), its invisible part (the organization and systems), the other customers and
the contact personnel. In the case of a customer using an online banking service,
one could argue that the visible environment disappears along with the other
customers and to a certain extent, the contact personnel. Alone in front of a
computer, the consumer’s experience is not affected by anyone else but himself,
the computer and his own environment.
The benefits of the customer’s experience which is usually derived from his or
her interactive experience with each of these elements is now altered. A new
model emerges which may look like this:
Invisible organization
Interface (computer, phone…)
Customer
Contact personnel
Environment of
customer’s choice
What are the consequences of the new model for the consumer’s service
experience? For one, service firms will inevitably pay more attention to everyone
that comes into contact with the consumer. Traditionally, many firms
underestimate the importance of telephone operators yet for the online banking
user, telephone operators will be the first personnel to come into contact with
them. Hence, the role of contact between customers and the organization will be
of increased importance for banks providing online services.
Another consequence of the new model for the consumer’s service experience is
the ability to control service quality before it reaches the consumer. The
argument goes that, apart from technical problems for which the bank has no
control over, every online banking customer will benefit from the same quality of
service. In other words, an online service process is similar to that of using an
ATM machine. The process is piloted before it is made available to the public and
once in place, all users should be served with the same level of quality.
Aside from these two remarks, it seems that the new model is not drastically
different from the original one. Services are still place and time dependent
because online banking has to be delivered wherever the customer is and, in
aggregate terms, customers would tend to log in at times that is convenient to
them. For example, some online traffic analysts have shown that there is a higher
demand for online services during 12 noon and 1pm, that is during office
workers’ lunch break.
3. Evaluate the role of customers as partial employees
Customers doing their banking online are definitely more involved in running their
own finances compared with the ones who do not. The increasing popularity of
online banking at Merita Nordbanken shows to what extent basic banking tasks
are becoming routine tasks. The automation of routine tasks allows customers to
be more involved and in control of their accounts but proportionately decreases
the control of the bank over its customers.
For example, the customer who is now familiar with the types of services that his
or her bank is providing online is perhaps more likely to switch to another online
banking service provider than a regular customer. The increasing involvement of
customers and the lack of interaction with bank personnel would tend to make
the bank as the embodiment of a service bundle and nothing more. In other
words, entry barriers for these types of services are low and competitors should
be able to provide the same services fairly quickly. Hence, the increasing
customer involvement is making the role of contact personnel ever more crucial
to retain customers in this particular industry. It also suggests that banks will
have to provide a wider variety of content and services in order to keep their
customers.
In order to educate and train its customers as partial employees, the bank has
devised a clever online interactive script which users may use to familiarize
themselves with the services offered by the bank. This self-teaching feature has
a double-edge. It further reduces the amount of interaction with employees and
contributes to add more distance between customers and employees. Because
of this reduced amount of human interaction, the bank may suffer from the lack of
loyalty of its customer base.
Finally, and from the point of view of a non-Finnish student, the ability of using
online banking services in English has helped me to stay partially in charge of my
own finance. For instance, when I need to get in touch with the bank for
operations that are not feasible online, I often feel frustrated because I cannot
expect employees to understand or speak to me in English. Hence, my role as a
partial employee using online services is raising my expectations too high for
what the ‘brick and mortar’ bank is able to provide for me.
4. How should future services be promoted?
The bank’s vision is to be its customer’s leading banking partner, the best
supplier of electronic banking services and the most cost-effective financial
service institute. At the moment the bank seems to benefit from a positive image
in terms of network banking services. It is actively pursuing this avenue to
differentiate itself from others while also appearing as the leader in this kind of
service. To a large extent, the bank has based its positioning in terms of service
differentiation. It is recognized as being efficient in delivering its services; it trains
its customers and remains consistently reliable.
One aspect, however, that could be emphasized in future promotional efforts is
their ability to differentiate from competitors through their personnel. As much as
technology enthralls the banks’ customer base, it needs to communicate that
there are people behind the organization’s zeros and ones.
The promotion should be clearly targeted and manage their customer’s
expectations. For instance, offering an online service in English would
automatically suggest that one can walk-in any bank and be serviced in English,
yet this is not the case in all branches.
The promotion should also emphasize the reliability of its services. This kind of
message would reduce consumer fears about variations in performance. The
variety of platforms available to consumers should also be exploited to convince
those who do not have their own Internet connection.