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Emerald Group Publishing Limited
Article Type: Editorial From: International Journal of Bank Marketing, Volume 32, Issue 3
There has been considerable change in the marketing of financial services since the financial crisis. Markets are beginning to recover from the effects of crisis, while consumers continue to use financial services cautiously. Caution has also affected how banks operate and their management of risk has become a defining characteristic of modern banking practices. Governments and regulatory authorities have implemented new regulations and oversight measures. The importance of the financial services sector for societal development became evident during the crisis, and the great responsibility entrusted to the financial services industry is now better appreciated than ever before.
This issue of the International Journal of Bank Marketing helps advance knowledge about responsible financial services markets and related marketing practices. The first paper studies how marketing strategy formulation can increase market share. The findings show that marketing strategy can be formulated and implemented so that it increases market growth, but that it does not increase return on assets (ROA). The findings indicate that market growth strategies need to be coupled with quality and that financial returns in the lending portfolio. The second paper develops a model for the analysis of banking risks in emerging markets, and the third paper studies customer expectations of bank corporate social responsibility during the Spanish banking crisis. The fourth paper finds that advisor-customer relationships are sometimes not as positive as how advisors may perceive them to be. Together, the four papers point to different ways of recognizing specific marketing practices that need to be improved by financial services professionals, especially in the years following the financial crisis.
The first paper, by Larry Pleshko, Richard Heiens, and Plamen Peev, studies how strategy can increase market share in banking. More specifically, they study the effect on market share of several strategic marketing concepts, including a firm's service focus, service growth, market coverage, marketing initiative, market growth, and market orientation. The empirical context for the study is credit unions in the state of Florida. Credit unions are member-owned financial cooperative that often have a strong local community focus. The data used in this study are obtained using a questionnaire distributed to 125 CEOs of credit unions. The study finds that an aggressively formulated strategy increases market share for credit unions. The study also finds that marketing strategy does not influence ROA. The implications are that credit unions that formulate aggressive strategies can grow their market share, but that they need to work on other aspects of their business to maximize ROA.
The second paper, by Aidan O’Connor, Francisco Santos-Arteaga, and Madjid Tavana, studies bank risk in emerging markets. As banking becomes more global, there are not only systemic risks that are affected by a bank’ decision to expand into a new country, but also the competitive landscape facing the bank changes due to cross-national variations. This research shows how a game theoretical model can be useful for analyzing the impact of foreign entrants into the banking system. The game theoretical model is designed for the analysis of emerging economies where inherent instability in the banking system may exist and the markets are underdeveloped. The analysis then focuses on the risks that banks may face in light of globalized competition. The authors propose a model for commercial bank foreign direct investment strategy, and for optimizing the interactions between government regulatory policies and the domestic banking industry, with a specific focus on emerging market economies.
The third paper in this issue by Andrea Pérez and Ignacio Rodríguez del Bosque is focused on corporate social responsibility (CSR). Banks are often referred to as an institution in society, meaning that they provide vital functions for the population. Banks are supervised and regulated so that they would be able to withstand crises and act responsibly with respect to their social mandates. This paper examines customer expectations of CSR within the context of the recent Spanish banking crisis. The authors collected data by means of a questionnaire administered to 648 customers of savings banks and 476 customers of commercial banks. The authors find that customers expect responsible action from their banks when there is a crisis. Interestingly, there are similarities in customer expectations of CSR practices, between customers of savings banks and customers of commercial banks. However, savings banks customers have greater expectations for CSR actions to be taken by their banks.
The fourth paper, by IngaLill Söderberg, James Sallis, and Kent Eriksson studies financial advice giving. This paper explains how the working alliance method – a concept adopted from psychotherapeutic theory – between financial services customers and advisors affects the advisor's understanding of the customer’ perceived risk preferences. The authors study how a working alliance between financial service customers and advisors affects the advisor's assessment of the financial service buyer's perceived risk preferences, and what role trust plays as a mediating variable. They collect data from 375 matched pairs of customers and advisors in an advice giving situation. The paper also finds that the role of trust is perceived differently by the advisor and the customer. Advisors see that as their clients learn to trust them they lose touch with the customers’perceived risk preferences, whereas customers do not perceive that their trust in the advisor has any relationship to their risk preferences. This result suggests that advisors lose touch with the risk preferences of trusting customers, and that psychological methods are needed if the advisor should actually understand customer perceived risk preferences. The implication of this research may be that financial advisors should get an education akin to other professional advisors, such as doctors and psychologists.
The topics addressed by the papers featured in this issue of the International Journal of Bank Marketing reflect the recognition that banks need to act responsibly. The research points out that emerging markets may suffer if this does not happen, that customers expect banks to act responsibly in crises, that growth in market share alone does not increase financial performance, and that advisors and bank customers may not fully understand each other. Understanding banking and financial services marketing includes the understanding of the impact that financial service firms have on society. The contributions in this issue increase our understanding of the balance between regulation, financial service firms’business models, and market expectations of the industry. The resulting understanding also helps advance marketing theories and provides the tools needed for improved understanding of the context and societal importance of financial services.
Hooman Estelami and Kent Eriksson