International Journal of Bank Marketing

An exposition of consumer behaviour in the financial services industry

Antony Beckett Paul Hewer Barry Howcroft
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Antony Beckett Paul Hewer Barry Howcroft, (2000),"An exposition of consumer behaviour in the financial services industry",
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 An exposition of consumer behaviour in the financial
services industry
Keywords
Downloaded by Symbiosis International University Hinjewada At 23:22 28 July 2016 (PT)
Financial services,
Consumer behaviour,
Focus groups,
Qualitative techniques, Trust,
Relationship marketing
Abstract
Deregulation and the emergence
of new forms of technology have
created highly competitive market
conditions which have had a cri-
tical impact upon consumer beha-
viour. Bank providers must,
therefore, attempt to better un-
derstand their customers in an
attempt not only to anticipate but
also to influence and determine
consumer buying behaviour. The
paper accordingly presents and
develops a model which attempts
to articulate and classify consu-
mer behaviour in the purchasing of
financial products and services.
The theoretical insights generated
by this model are then used to
examine qualitative research data
gained from focus group discus-
sions on consumers' attitudes to
their financial providers and their
financial products. Finally, these
findings are examined for the
potential insights they provide to
bank providers attempting to
identify appropriate strategies
which are conducive to increased
customer retention and
profitability.
The authors gratefully
acknowledge the financial
assistance provided by
NCR's Knowledge
Laboratory in conducting
this research.
International Journal of Bank
Marketing
18/1 [2000] 1526
# MCB University Press
[ISSN 0265-2323]
Antony Beckett
Senior Lecturer in Marketing, University of the West of England, Bristol, UK
Paul Hewer
Research Fellow, Loughborough University Banking Centre, Loughborough, UK
Barry Howcroft
Professor of Retail Banking and Director of Loughborough University Banking
Centre, Loughborough, UK
Introduction
In this paper a model is presented and
developed which attempts to articulate and
classify consumer behaviour in the
purchasing of financial products and
services. The theoretical insights generated
by this model are then used to examine
qualitative research data gained from focus
group discussions on consumers' attitudes to
their financial providers and their products.
Within the traditional structure and
operation of the financial services industry,
consumers had little choice in terms of
selecting financial instruments and delivery
channels. The rigid structure of the industry,
combined with the operation of cartels,
meant that consumers had to accept the form
and price of both financial instruments and
delivery channels. Switching between
financial providers generated little, if any,
long-term benefit and forced the consumer to
incur disruption and financial cost.
Consumers were, therefore, locked into
buying patterns and had little incentive to
change. However, deregulation and the
emergence of new forms of technology have
created highly competitive market
conditions which have had a critical impact
upon consumer behaviour. Consumers are
now more disposed to change their buying
behaviour when purchasing financial
products. As a consequence, bank providers
are less certain that their customers will
continue to bank with them or that they will
be able to rely upon the traditional banker-
customer relationship to cross-sell high
value, so-called ancillary products.
In an era where customer retention and the
ability to cross-sell products to existing
customers are critical in determining
profitability, it is important that banks
respond strategically to these changes. Bank
The research register for this journal is available at
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providers must, therefore, attempt to better
understand their customers in an attempt not
only to anticipate, but also to influence and
determine consumers' buying behaviour.
Accordingly, this paper details a model
through which to understand the behaviour
of consumers when purchasing a range of
financial products. Finally, these findings
are examined for the potential insights they
provide to bank providers attempting to
identify appropriate stages which are
conducive to increased customer retention
and profitability.
Consumer behaviour matrix
To better understand consumer behaviour in
the context of the financial services industry,
a matrix has been developed which is based
on the work of Dwyer et al. (1987) and Thibaut
and Kelly (1959). The approach is based upon
the ``ideal type'' methodology outlined by
Max Weber (1949). Weber sought to
characterise phenomena into broad groups
or ideal types which represented the self-
conscious and ``one-sided accentuation'' of
the most significant features of social
phenomena. Once classified into groups, the
constituent elements of the phenomena being
observed can be analysed. The rationale for
this approach is that complex social
interactions rarely, if ever, operate to a set
pattern like elements in the physical
sciences. Rather than postulate general
theories that describe behaviour in all
contexts, ideal types describe forms of
behaviour in certain contexts which
facilitate the construction of hypotheses
about reality. The ideal type expresses what
Weber described as an ``objectively possible''
course of actions within a relevant frame of
reference (Parsons, 1951). Behaviour is,
therefore, dependent upon both the nature
The current issue and full text archive of this journal is available at
http://www.emerald-library.com
[ 15 ]
 Antony Beckett, Paul Hewer
and Barry Howcroft
An exposition of consumer
behaviour in the financial
services industry
International Journal of Bank
Marketing
18/1 [2000] 1526
Downloaded by Symbiosis International University Hinjewada At 23:22 28 July 2016 (PT)
Figure 1
Consumer behaviour matrix
[ 16 ]
and the context in which it occurs. An ideal
type will therefore possess a number of
distinguishing characteristics, constructed
by the researcher to describe the
complexities of behaviour within a
particular frame of reference.
customer participation and level of contact
Weber argued that the key to developing
ideal types was to identify characteristics
that shaped both the form of the ideal type
and the frames of reference. It follows that in
developing ideal types which characterise
consumer buying, it is necessary to identify
the underlying constructs which determine
consumer behaviour within a particular
environment or frame of reference. Ideal
types, therefore, reflect certain underlying
constructs or imperatives, and individual
buying behaviour is shaped to accommodate
them. This is consistent with the work of
Fishbein (1967) which links attitudes and
outcomes, arguing that individuals' attitudes
toward certain outcomes motivate
behaviour.
From a review of the literature on
consumer-buyer interactions, it is possible to
identify two principal factors that motivate
and determine individual contracting
choices, namely involvement and
uncertainty (Bateson, 1989; McKechnie, 1992;
Harrison, 1997; Ennew and McKechnie, 1998).
By placing these factors on to a simple
continuum running from high to low, it is
possible to construct a two-dimensional
matrix of consumer behaviour (see Figure 1)
which provides greater insights into the
possible range of interaction modes. This
matrix describes the purchasing/contracting
alternatives available to consumers to
structure their interactions when acquiring
products and services. Each quadrant
represents a different combination of
involvement and uncertainty (referred to as
consumer confidence in the matrix) and thus
a different mode of interaction to
accommodate consumer needs when
purchasing different financial products and
services.
It is postulated that consumer
``involvement'' in the buyer-seller
interchange incorporates a number of
subsets: customer control (Bateson, 1989),
(Chase, 1978). Similarly, it is assumed that
uncertainty or ``confidence'' is largely
determined by perceptions of risk, which are
determined by the complexity of the product
being purchased and the certainty of
outcome associated with that product
(Shostack, 1977). In addition to these product
specific considerations, the model
necessarily incorporates ``exogenous'' factors
or ``institutional'' factors which influence the
consumer's disposition to purchase financial
products. These factors relate to the
importance of trust and loyalty and to the
degrees and modes of consumer participation
which, within the context of this study, are
defined as relating to alternative delivery
channels.
These considerations are important
because the limitation of previous consumer
behaviour models (Nicosia, 1966; Engel et al.,
1968; Howard and Sheth, 1969; Bettman, 1979)
stems from the factors hypothesised to
explain consumer motivation and behaviour,
particularly in the creation and maintenance
of relationships. Previous models have
tended to focus on the extensive role of
information in shaping and directing
rational choice. Nicosia (1966), for example,
identifies the search and evaluation of
information; Howard and Sheth (1969) link
the amount of information held with the
extent of learning and thus problem solving;
Engel et al. (1968) identify information input
and processing as central elements in
decision making; Bettman (1979) recognises
that individuals have limited capabilities for
processing information and this limitation
affects their decision-making activities. The
common causal link in all of these
approaches can be summarised as:
information attitude purchase. As an
explanation of behaviour this form of linkage
is not only predominant in the social
sciences, but can also be clearly identified in
behavioural economics (Katona, 1960;
Scitovsky, 1976). All of these models are
based on information which is necessarily
assumed to be freely and readily available;
little reference is made to the context in
which information is found and used.
Academics have thus argued that such
models are largely unverifiable empirically
because they do not offer testable hypotheses
(Tuck, 1976; Foxall, 1991). It can also be
suggested that they are inappropriate for the
 Antony Beckett, Paul Hewer
and Barry Howcroft
An exposition of consumer
behaviour in the financial
services industry
International Journal of Bank
Marketing
18/1 [2000] 1526
Downloaded by Symbiosis International University Hinjewada At 23:22 28 July 2016 (PT)
understanding of financial services
purchasing as they typically focus upon one-
off purchases rather than recurrent ones
(McKechnie, 1992). Consumers of financial
services in this way frequently cannot
calculate costs and benefits and it is because
of this inability that they create
relationships. These earlier models in this
manner tend to ignore consumer
involvement with the purchase and their
ability or confidence when making purchase
decisions (Morgan and Hunt, 1994).
The advantage of the consumer behaviour
matrix, as an approach to understanding
consumer buying and contracting behaviour,
is that it draws on the economics (Simon,
1957), consumer behaviour (Bloch, 1982;
Bloch and Richins, 1983) and psychology
(Thibaut and Kelly, 1959) literature and
combines it into a single framework. The
rich diversity of literature in these areas is
brought together to create ideal types of
behaviour which can be applied to actual
buying and contracting in financial services.
In this way, the consumer behaviour matrix
places observed behaviour within an overall
context. By identifying the underlying
factors influencing buying and contracting
behaviour and linking these very directly
with consumer needs, the rationale for
consumer interactions and relationships can
be more readily analysed.
Forms of consumer behaviour
The model outlines four ideal types of
consumer behaviour; each will be examined
in turn for the insights they provide for
understanding consumers' buying behaviour
in the context of financial services.
Repeat-Passive
In this quadrant consumers display low
levels of involvement with the financial
product as they are fully aware of the
product's salient features. Given the low
levels of involvement and the limited
perception of uncertainty, these consumers
can be described as ``passive'' in the sense
that they will make repeated interactions
without actively seeking alternatives. This
repeated pattern of purchase behaviour,
which is described as ``behavioural loyalty''
in the literature, has been extensively
researched. Brown (1952) and Johnson (1973,
1982), for example, have identified markets
and social factors which encourage or coerce
individuals into repeated behaviour patterns.
Their work indicates that considerations,
such as the absence of a motivating event to
encourage search for alternatives and a lack
of choice or a lack of an incentive to alter
purchasing patterns, encourage consumers
to maintain existing purchasing patterns. In
maintaining their existing patterns of
purchase, these consumers are adopting a
``bounded'' rational approach to their buying
and contracting behaviour (Simon, 1957).
Accordingly, having selected a heuristic to
guide their behaviour, such as a brand
example, this behaviour is repeated until a
better alternative becomes available. Making
repeated purchases from a single source or
type also reduces the ``cost'' of purchasing by
limiting uncertainty, whereas a more
rational approach may expose the consumer
to uncertainties which could result in
financial loss. This form of repeat purchase
behaviour is common in fast-moving
consumer goods (FMCG) markets where
consumers use brands and brand identities to
determine purchasing behaviour.
Rational-Active
In this quadrant it is postulated that the
consumer's involvement in terms of the
process dimensions of control, participation
and contact is high and so too is their
confidence in terms of product complexity
and certainty of outcome. It is these active
consumers that economic theory has viewed
as the norm, possessing the ability and
inclination to make carefully considered
purchase decisions across all choice
environments. In terms of ideal types these
consumers are rational or rationally
inclined.
Eztioni (1988) notes that rationality can be
defined in a number of forms and argues that
individuals make decisions in a more or less
rational manner depending on the nature of
the choice environment and item purchased.
Examples of individuals approximating
rationality would include purchases of
commodity goods and services such as petrol,
milk, orange juice, flour and so forth. Within
these purchase environments the consumer
can articulate requirements and uses short-
term contracts to structure the purchase.
These contracts are described by MacNeil
(1978, 1980) as ``discrete'', because they have a
clear beginning, are of a short duration and
possess a definite end. No interactions are
expected after the transaction, there is a
clear division of benefits and costs, disputes
are settled through reference back to the
original contract and the switching costs
between contracts are low. Discrete
contracting is a reflection of the
characteristics of the product or service
transacted and the underlying rational
behaviour of the decision-maker.
[ 17 ]
 Antony Beckett, Paul Hewer
and Barry Howcroft
An exposition of consumer
behaviour in the financial
services industry
International Journal of Bank
Marketing
18/1 [2000] 1526
Downloaded by Symbiosis International University Hinjewada At 23:22 28 July 2016 (PT)
[ 18 ]
Consumers will tend towards discrete,
rational contracting to structure their
buying behaviour, whenever possible,
because it enables them to reduce transaction
costs and to exert a high degree of control
over the purchase decision (Etzioni, 1988). To
purchase in an ``instrumentally rational''
manner, the individual consumer is assumed
to possess sufficient ability and information
to enable them to make clear comparisons
between competing products and thus make
an informed choice. If the information is not
available or the consumer lacks the ability to
make choices, they have to move away from
``instrumental'' rationality as discrete
contracting is no longer an effective means of
structuring the transactions.
No purchase
This quadrant describes consumers who,
because they have no involvement with the
financial product and do not possess the
ability or the confidence to make transaction
decisions, make no purchase. Individuals
who leave significant sums of money on
deposit rather than purchase financial
services that could generate greater returns
are an example of this behaviour. This is not,
strictly speaking, an interaction mode and is
hardly (if at all) discussed in the banker-
customer relationship literature. However, a
significant amount of marketing activity is
directed at individuals in this quadrant, in
an attempt to increase their awareness of
alternative products and convince them of
their relative merits.
Relational-Dependent
In this quadrant consumers are highly
involved, but are not in control due to the
complexity of the product and uncertainty of
eventual outcome and this reduces consumer
confidence. In order to make choices, the
consumer will seek advice and help from
banks or third parties and can, therefore, be
described as ``dependent consumers'' who
form relationships to reduce uncertainty and
structure their pattern of purchases.
Relational contracting does not fit easily
into the concept of either an active or a
passive interaction, but it is clearly an
important aspect of the banker-customer
relationship. It emerged from the work of
MacNeil (1978) and Williamson (1975, 1985),
who recognised that in particular contexts
rational-active and repeat-passive
contracting were not effective in structuring
exchange. It is used in highly uncertain
environments where consumers lack the
information to make rational decisions yet
perceive that differences in quality exist
between competing products or services. In
this instance they will want to make
informed choices and have to draw on the
assistance of more informed third parties.
The relationship then effectively replaces the
information search and processing activities
found in repeat-passive and rational-active
contracting. Trust plays a critical role in this
relationship and the role of professional
associations is to protect consumers from
third parties acting opportunistically[1].
Research method
Based upon the success of previous research
(Harrison, 1997) and following Shostack's
(1977) recommendation of understanding
consumers' evaluation processes by standing
``in the shoes of consumers'', it was decided to
use focus discussion groups with consumers.
However, due to the budgetary constraints of
the project it was found that only three such
groups could be convened. Accordingly, we
sought to obtain views from a cross-section of
the UK population of varying ages, socio-
economic groupings and locales. In this
manner three groups were organised through
professional recruiters in London (the South
of England), Leeds (the North) and Oakham
(the Midlands). Each group consisted of
seven people and lasted for approximately
two hours. The London group consisted of
males and females aged 18-29 years old in the
B and C1 socio-economic groups. The Leeds
group consisted of C1 and C2 females aged
between 30-47 years old and the Oakham
group consisted of B and C1 males aged
between 48-65 years old. Each of the
participants was paid a small amount, as
were the recruiters. All the discussions were
taped and transcribed to permit further
analysis and coding. In total 21 people took
part in the research. An interview schedule
was devised which focused on the main
issues of interest, but also permitted the
respondents to introduce topics which they
perceived as important in their relations
with financial service institutions.
The main objective of these groups was to
obtain further insights into consumer
behaviour when purchasing a range of
financial products. The data were therefore
analysed using a keyword approach which
included identifying either specific words,
themes or issues which commonly occurred
within and across the discussion groups. To
facilitate this approach it was decided to
classify financial services and products on
the basis of consumer need as advocated by
Normann and Haikola (1986). Accordingly,
the discussions focused on the following
generic products: transaction services, i.e.
 Antony Beckett, Paul Hewer
and Barry Howcroft
An exposition of consumer
behaviour in the financial
services industry
International Journal of Bank
Marketing
18/1 [2000] 1526
Downloaded by Symbiosis International University Hinjewada At 23:22 28 July 2016 (PT)
those associated with current accounts; basic
insurance services products, i.e. house
contents and car insurance; and finally,
investment services, i.e. PEPs, TESSAs,
stocks and shares, pensions, etc.
It was decided to structure the discussions
under each of these three generic products
and to ask the respondents to relate their
experience of purchasing these financial
products to the rest of the group members.
The degree of consumer involvement was,
therefore, explored in terms of the degree of
contact, control and personalisation in the
buyer-seller interchanges for each of the
generic products. Structuring the
discussions in this way also allowed us to
ascertain whether or not consumer
confidence varied according to the
complexity of the financial product. In
addition, we sought to understand the kinds
of relations consumers had with their
financial providers, and whether they used
constructs such as loyalty and trust.
Research findings and the
consumer behaviour matrix
The material gained from the focus group
discussions can be used to illustrate and
provide insight into each of the quadrants
outlined in the consumer behaviour matrix.
Repeat-Passive
Evidence from the focus group discussions of
consumers acting in a repeat-passive mode of
behaviour included their relationships with
banks providing their current accounts.
From the interviews it became apparent that
consumers were confident in their ability to
open a current account and that the choice of
bank was often determined by convenience
considerations such as the location of the
branch in relation to where they worked and
lived. As one of the respondents in the
Oakham group, who had been with Lloyds
bank for 35 years, explained:
Because it was about 15 yards from where I
worked and in those days that was important
(Male, BC1, 48-65 years old, Oakham).
Or as one of the female respondents in the
London group suggested:
...because I'm from a remote village in
Northumberland and the only bank in the
village was Barclays, so if I didn't go to
Barclays I would have had to travel into
Newcastle, so it seemed the easiest thing to do
(Female, BC1, 18-29 years old, London).
However, others factors taken into account
by some consumers when making this
decision included the influence of friends and
family and finally the image and reputation
of the provider. The influence of family
members appeared especially significant in
the London group, which contained the
youngest group of consumers interviewed:
It was mainly that my family have always
banked with Barclays and my first ever
account was opened at Barclays. (Male, BC1,
18-29 years old, London).
I've banked with NatWest from the beginning
because my Mum and Dad were there.
(Female, BC1, 18-29 years old, London).
For these younger consumers another
concern was the overdraft limits available to
them and the amount of interest they would
be charged.
I suppose the overdraft is the key thing ...
whichever one offers you the biggest and you
feel the most comfortable with. (Male, BC1, 18-
29 years old, London).
An interesting point, which arises from these
comments, is that once consumers have made
their original decision they appear to settle
into a repeat-passive mode of contracting
even though the reasons for their choice may
have been fulfilled or altered. For example,
they typically remain with the same bank,
despite having moved to a location where
their bank is no longer the most convenient
or despite the fact that their loan or overdraft
facilities have expired.
Furthermore, when the discussions probed
the issue of loyalty, many respondents tended
to deny that they were loyal to their financial
providers. This was despite the fact that
many had banked with the same financial
institution for most of their lives. This
unwillingness to switch providers was
attributed to the ``hassle factor'', as one of the
Leeds discussants stated:
When you're working full-time, you haven't
got the time to do it (switch), you don't want
the hassle. (Female, 30-47 years old, C1 and 2,
Leeds).
Or as another respondent explained:
I think you stick with them as long as they
keep you happy, as soon as they double your
bank charges then you would look around for
some other options, but I think while it's all
running smoothly you don't change your
account ... because I have standing orders and
all sorts ... it would be a hassle to leave
(Female, 30-47 years old, C1 and 2, Leeds).
The responses enable us to draw some
tentative conclusions as to why consumers
appear to remain loyal to the same financial
provider even though, in many instances,
they hold less than favourable views toward
them. First, they appear to perceive little
differentiation between financial providers;
second, consumers appear primarily
motivated by convenience and inertia; and
[ 19 ]
 Antony Beckett, Paul Hewer
and Barry Howcroft
An exposition of consumer
behaviour in the financial
services industry
International Journal of Bank
Marketing
18/1 [2000] 1526
Downloaded by Symbiosis International University Hinjewada At 23:22 28 July 2016 (PT)
[ 20 ]
finally, consumers associate high switching
costs in terms of potential sacrifice and effort
with changing banks.
From the empirical evidence, we can also
conclude that consumers exhibit behavioural
loyalty, rather than attitudinal loyalty,
towards their financial providers (Brown,
1952; Betts, 1994; Ennew and Binks, 1996).
Behavioural loyalty is characterised almost
exclusively by repeat-passive purchasing,
whereas attitudinal loyalty involves holding
positive or negative attitudes towards service
providers. It is, therefore, possible to
distinguish between those customers who are
``wholly loyal'' in both their attitudes and
behaviour, and those who are only ``partially
loyal'' in terms of their behaviour. In the
light of the findings we are able to suggest
that one way in which a financial provider
may shift consumers from a rational-active to
a repeat-passive mode of contracting is to
promote the time-saving potential and
convenience implications of its standing
order and direct debit services to its
customers. These appear to function as a
barrier to switching, thus ``locking'' the
consumer into a long-term repeat-passive
relationship with their financial providers.
The findings also indicate the kinds of
conditions which may prompt consumers to
switch from a repeat-passive to a rational-
active mode of interaction. If we analyse the
reasons why consumers suggested that they
had transferred their accounts to alternative
providers we find that these can include
lifestyle changes, such as getting married, or
moving house. More importantly, however,
the levels of customer service they receive
and how the financial institutions had
``handled'' their problems, i.e. the financial
provider's response when the consumer's
account was overdrawn, and administrative
errors such as being charged excessive
overdraft rates. For example, one of the
female respondents spoke of how she had
been charged a fee for going overdrawn and
how this had made her feel:
It puts you on edge if something goes wrong
just once, they didn't tell me they just took it
(Female, 18-29 years old, BC1, London).
Having incurred such problems it appeared
common for consumers to then re-evaluate
the service they were receiving and thus
consciously decide to stay or transfer. This is
very important as advances in technology are
reducing the costs associated with changing
bank providers, i.e. reducing the ``hassle
factor'' and thereby increasing the
consumer's propensity to change banks.
Rational-Active
Evidence from the focus group discussions of
consumers acting in a rational-active mode of
consumption indicated that this was more
likely to occur for purchases of basic
insurance products. In this context, many of
the consumers expressed fairly high levels of
confidence, participation and control in
making the purchase decision. Moreover,
although brands and reputation were
important in creating customer awareness,
many appeared to regard price as the most
important criterion. As one of the male
respondents explained:
(It's) who gives the cheapest ... you select the
viable options, companies that you know that
aren't going to go bankrupt, you then
investigate and once you've got the
information you make an educated decision
based on your findings (Male, BC1, 48-65 years
old, Oakham).
This respondent's use of the word ``educated''
is interesting as it indicates the perceived
level of control people believe they exert
when making this decision. This view was
echoed by a number of the older respondents
in the Oakham focus group. For example,
another male respondent suggested that he
would use a broker to obtain quotes for motor
insurance, but rather than relying solely on
this source of information he would also
obtain quotes for himself:
He goes for it, I go for it ... that's my loyalty. I
don't pay over the odds (Male, BC1, 48-65
years old, Oakham).
This emphasis on price can also be
illustrated through the comments of one of
the female respondents in the Leeds focus
group, who spoke of the excellent service she
had received from Direct Line when she
made a claim. However, when questioned on
how she would behave if they subsequently
increased her premium she admitted:
If the premium goes up, I'll be ringing around,
I won't be that loyal (Female, 30-47 years old,
C1 and 2, Leeds).
In this manner, many of the discussants
appeared to switch their insurance providers
far more regularly than they did providers of
current accounts and investment products. It
can therefore be suggested that their
behaviour bore many similarities with a
rational-active mode of consuming which is
typically characterised by the consumer's
high involvement and confidence in
understanding insurance products. In this
way, they were able to assess and compare
insurance instruments primarily on the
basis of price, but also on the basis of other
considerations such as excesses charged, no
claim discounts, etc.
 Antony Beckett, Paul Hewer
and Barry Howcroft
An exposition of consumer
behaviour in the financial
services industry
International Journal of Bank
Marketing
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In addition it is possible to suggest that the
type of delivery channel used by consumers
may have an important role to play in
engendering this rational-active mode of
consuming. The focus group discussions
revealed that for many of the respondents the
decision-making context for motor and house
insurance tended to be at-a-distance
exchanges, typically telephone or direct
banking. In this respect, one might conclude
that one of the effects of using direct delivery
channels (i.e. the telephone and Internet)
may be to commoditize the product. In this
situation the consumer cannot rely upon
face-to-face communication for the
establishment of trust; therefore, they place
emphasis on the price differentials between
financial providers. One significant
consequence of this is that the consumers
appear less behaviourally loyal to financial
institutions. That is to say, whereas for
transactions-based current accounts
consumers tended to stay with the same
provider, for insurance-based products
switching between providers every couple of
years was more typical. In essence,
consumers did not regard themselves as
being loyal or having a relationship with
providers of basic insurance products.
Moreover, this lack of loyalty and having no
feeling of being in a relationship was
reinforced by the fact that most discussants
had no communications with their insurance
companies apart from a letter each year
informing them of the increase in premiums.
Relational-Dependent
Evidence from the focus group discussions of
consumers acting in a relational-dependent
mode of consuming included their behaviour
with respect to purchasing complex financial
instruments such as investment and pension
products. From the discussions it soon
became apparent that many of the
respondents expressed a lack of confidence
and knowledge with respect to the decision-
making context for these products.
Consequently, they were more likely to
employ the services of an independent
financial adviser. As a male respondent in
the Oakham group suggested:
I think investment products are increasingly
difficult, increasingly complex (Male, BC1, 48-
65 years old, Oakham).
To counter this perceived complexity and
risk, consumers would often seek the
assistance of a personal adviser when
deciding upon investment products, such as
PEPs, TESSAs and pensions. This was
perhaps most pronounced in the Leeds group
where three of the women spoke of the long-
term relations they had with their personal
advisers. One of the respondents suggested
why she had chosen to employ the services of
a personal adviser:
At the end of the day you know you're talking
to somebody who's confident about what
they're talking about (Female, 30-47 years old,
C1 and C2, Leeds).
However, one respondent in this group spoke
of how a financial broker had mismanaged
her financial affairs and in explaining why
she had used a broker in the first instance,
she illustrated the degree of ``trust'' that
consumers instil in this relationship:
You trust them because you think they know
what they're talking about and know more
than you do (Female, 30-47 years old, C1 and
C2, Leeds).
The men in the Oakham group also spoke of
their use of personal advisers in this fashion,
emphasising their own perceived lack of
confidence and knowledge when making
such decisions:
They know you and you feel you're getting
genuine advice and you feel that you're
talking to somebody that knows what he or
she is talking about (Male, BC1, 48-65 years
old, Oakham).
For the consumers in the London group,
which contained the youngest group
interviewed (aged 18-29), the question of how
to invest one's money was also perceived as
more complex than for other financial
products. However, rather than obtaining
independent professional advice as the older
women (aged 30-47) in the Leeds group, and
the older men (aged 48-65) in the Oakham
group had suggested, they tended to go to
their banks and building societies for such
advice. This was most evident in the
purchase of PEPs where one of the men
suggested how his financial provider had
simplified this decision for him:
Banks help you, they give you a lot of
literature and they'll talk to you for about an
hour, they'll ask you how much you've got
and they'll put them (PEPs) into three
categories, whether you want high risk,
medium risk or low risk and they group
particular PEPs (Male, 18-29 years old, BC1,
London).
Another male respondent similarly spoke of
how his building society had made this
decision easier by:
...break(ing) it down ... what will suit your
needs ... what is going to be best for me ... for
my PEP. I didn't get independent advice, but
my building society basically told me about
the best deals and which was going to suit my
needs (Male, BC1, 18-29 years old, London).
These latter responses suggest that banks
and building societies might already be
targeting consumers in the socio-economic
[ 21 ]
 Antony Beckett, Paul Hewer
and Barry Howcroft
An exposition of consumer
behaviour in the financial
services industry
International Journal of Bank
Marketing
18/1 [2000] 1526
Downloaded by Symbiosis International University Hinjewada At 23:22 28 July 2016 (PT)
[ 22 ]
group represented by the London focus
discussion groups, i.e. young people aged
between 18-29 in the BC1 socio-economic
groupings.
The results certainly identified an
apparent lack of consumer confidence in
purchasing many of these investment
products. Moreover, the lack of confidence
was compounded by the inherent risk of
these products because not only are they
intangible, but they are complicated and
perhaps more significantly their outcome is
not immediate. For example, pensions and
investments typically do not mature until
some time in the future. This future date
could range from between five and 40 years
and, therefore, the consumer cannot easily
and certainly not immediately ascertain
whether the purchase has been good or bad.
As a consequence, consumers of these
investment products seek reassurance and,
therefore, place emphasis on brand image
and past performance. In particular,
however, the focus discussion groups
revealed the importance of trusting a third
party. In a sense, the purchase decision and
the subsequent monitoring of performance is
delegated, in many instances, to a third
party. This third party could be an
institution, but the research reveals that in
many instances trust is personalised, being
based on having a relationship with a
reliable and respected financial adviser.
Consumer behaviour and delivery
channels
The results of the focus discussion groups
also enable us to examine further the role
which the choice of delivery channel has in
the context of explaining consumers'
decision-making behaviour for financial
products. The importance consumers place
upon the ``how question'' in the decision-
making situation, that is the context in which
they decide and the degree of personal
contact they appear to desire, means that we
can add a third dimension to the previously
outlined consumer behaviour matrix. This
third dimension encapsulates the importance
of the type of delivery channels consumers
appear to want to use for each of the
previously outlined consumer behaviour
ideal types (see Figure 2).
Gronroos (1984) in his examination of
service quality distinguished between
technical and functional dimensions. The
term ``technical quality'' referred to what the
customer gets from the service, whereas
functional quality relates to how the service
is delivered to the customer. This focus upon
the decision-making context can also be
found in the work of Parasuraman et al.
(1985) who suggested that ``quality
evaluations'' are made not only on the
content or outcome of the service, but also on
of the process of service delivery.
The focus upon the process of delivery is
represented by the Z axis in Figure 2. This
can be illustrated in terms of the two
extremes: at one end of the axis are electronic
fully automatic transactions while at the
other end stands face-to-face or interpersonal
communications. Furthermore, based upon
the findings from the focus group discussions
we are able to plot ``ideal'' modes of consumer
interactions for each of the three financial
products examined.
Repeat-Passive
In this context, the consumer has low levels
of involvement but high levels of confidence.
Moreover the consumer seeks the speed and
convenience of a short duration and low
contact form of transaction. In Figure 2, P1
refers to transactions typically associated
with a current account, such as standing
orders, direct debits and even money from an
ATM where the consumer has high levels of
confidence, but low levels of actual or
``intellectual'' involvement.
Rational-Active
In this context, the consumer has high levels
of involvement and confidence. In Figure 2
this is illustrated by P2 which represents the
purchase decision over basic car and house
contents insurance. In this instance
consumers have fairly high levels of
confidence and involvement; however,
because the delivery channel is more likely
to be at-a-distance, such as through a
telephone, or increasingly through a
computer, they are able to focus upon the
price of the ``commodity''.
Relational-Dependent
In this context, as in the rational-active
quadrant, the consumer has high levels of
involvement, but in contrast to the rational-
active mode they prefer face-to-face contact to
counter low levels of confidence. The
delivery mode must, therefore, be conducive
to a protracted discussion which engenders
trust and the formation of relationships. This
is typically resolved by discussions in which
consumers are able to gain information on
the complexity of different products, get their
questions answered but perhaps more
importantly establish the trustworthiness of
the financial provider or adviser. In Figure 2
this scenario is shown by P3 which
 Antony Beckett, Paul Hewer
and Barry Howcroft
An exposition of consumer
behaviour in the financial
services industry
International Journal of Bank
Marketing
18/1 [2000] 1526
Downloaded by Symbiosis International University Hinjewada At 23:22 28 July 2016 (PT)
Figure 2
Consumer behaviour matrix and delivery channels
represents the purchasing of complicated
investment products.
Strategic implications of consumer
behaviour ideal types
Each of the ideal types described in the
consumer behaviour matrix has implications
for financial providers' organisational and
marketing strategies, in that they give rise to
contingencies which demand a strategic
response. The following section accordingly
attempts to articulate these strategic
implications by emphasising the common
and recurrent themes of the focus discussion
groups. Where appropriate the authors have
interpreted these themes in the light of
trends which have either emerged or are
beginning to emerge in the marketplace.
Repeat-Passive
Consumers have traditionally used repeat-
passive behaviour to structure their
purchases of simple financial services,
especially ``transactions'' and, to some extent,
``deposits and loans''. Consumers' interest or
involvement in these services is limited, but
they still remain a necessity. However, in
order to limit cognition and the search costs,
or simply out of consumer inertia, purchases
tend to be repeated. Strategically the
challenge facing banks depends on whether
they are new entrants or existing players. In
order to gain business, new entrants have to
encourage consumers to move into the
rational-active quadrant, but existing players
need to retain customers by keeping them
within the repeat-passive quadrant (at least
in the short term) through improvements in
product/service provision. In the financial
services markets, it had been possible to
retain large numbers of consumers within
this quadrant simply because the perceived
benefits of switching were low and the costs
high, thereby making changes in the pattern
of buying behaviour prohibitively expensive.
However, increased competition and
consumer willingness to use new delivery
channels will reduce switching costs and
erode inertia, making it increasingly difficult
to retain consumers in the repeat-passive
quadrant.
Rational-Active
The strategic threat of rational-active
consumer behaviour for banks is that
consumers reappraise their repeat-passive
behaviour and as a result change their
existing patterns of buying behaviour.
Encouraging consumers to change their
behaviour requires the provision of a
financial product or service that is typically
cheaper and better than existing products.
Consumer involvement in the financial
product or service can also be increased and
cause existing patterns of repeat-passive
behaviour to be reconsidered. Direct selling
of insurance-based products, such as Direct
Line, has largely been based upon their
success in switching consumers out of the
repeat-passive quadrant into the rational-
active quadrant by raising levels of
involvement and offering a lower priced but
improved service. Financial products and
services associated with ``transactions'' and
certain types of ``investments'' have similarly
revealed a propensity to migrate from repeat-
passive into the rational-active quadrant.
No Purchase
No current strategic contingencies flow from
this quadrant, but the consumers within it
represent an important source of potential
new business. Banks need to adopt strategies
which raise levels of involvement and
increase consumer confidence so as to
encourage purchases of financial
instruments. One way to increase consumer
involvement may be to introduce delivery
channels which consumers feel comfortable
using.
Relational-Dependent
In strategic terms the relational-dependent
quadrant offers a potential basis for the
creation of differentiation. By forming a
relationship with a bank or individual, the
consumer prefers that relationship to
alternatives. The relationship enables the
[ 23 ]
 Antony Beckett, Paul Hewer
and Barry Howcroft
An exposition of consumer
behaviour in the financial
services industry
International Journal of Bank
Marketing
18/1 [2000] 1526
Downloaded by Symbiosis International University Hinjewada At 23:22 28 July 2016 (PT)
[ 24 ]
banks (or an individual) to differentiate itself
from competing alternatives. Companies
frequently use brands as the basis for
relationships between themselves and
consumers. Brands embody a cluster of
values and meanings which through
consumption are transferred to the
individual. A relationship exists between a
brand and an individual, where the
individual consumer prefers a particular
brand to all others and is prepared to pay a
premium for that choice.
Creating such brand loyalty demands that
the brand is in some sense unique, either in
terms of its physical properties or through
the values it communicates about those who
consume the brand. Brands and brand
loyalty are the basic building blocks of
differentiation advantage and this advantage
can only be created where consumers
recognise and value the features of the
product. If this is not the case, as is common
for products where low levels of involvement
exist, establishing brands and brand loyalty
is difficult. This problem of a lack of
differentiation in the marketplace affects
banks and financial products and services
generally and, therefore, makes it difficult to
create consumer relationships. Direct
providers of insurance and banking services
have generated differentiation by changing
the channel of distribution and this may
partly explain their success in entering the
industry. However, over a longer period their
success is likely to be imitated and their
differentiation advantages eroded. Moreover,
as we have seen, they are attracting
consumers who are acting on the basis of a
rational-active rather than a repeat-passive
heuristic to guide their actions.
Given that the contractual nature of
individual finance products is easily
imitated, creating and sustaining meaningful
differentiation on the basis of a ``good
product'' is likely to be extremely difficult.
An alternative approach might, therefore, be
to focus on the ``process of service delivery''.
As we have been able to demonstrate,
consumers have a predisposition to create
relationships and emphasise trust and
loyalty when they find it difficult to make
rational choices on the basis of available
information (Doney and Canon, 1997). In this
manner, complicated ``investment services''
appear to fall naturally into this relational-
dependent quadrant. Bank providers,
however, need to focus on the dynamics of
this quadrant in order to generate
sustainable competitive advantage.
Such an approach is implicit in the
relationship marketing literature (Berry
1983; Dwyer et al., 1987; Crosby et al., 1990).
An approach which is based on the premiss
that consumers create relationships with
companies on the basis of loyalty and trust
and this encourages them to make multiple
cross-purchases from a single supplier.
Moreover, loyalty and trust create barriers to
entry, thereby making it more difficult for
new players entering the market (Goodwin
and Gremler, 1996). Historically, this
approach has not been widely explored or
used in the financial service industry as
choice was traditionally limited and
consumers had little incentive to switch
between bank providers. However, this
situation no longer prevails as competitive
forces increasingly enable and encourage
consumers to adopt rational-active forms of
buying behaviour.
Conclusion
This paper has discussed and examined a
consumer behaviour matrix in the light of
research data obtained from focus group
discussions with a range of consumers on
their purchasing and monitoring of financial
services. The research findings have
demonstrated that consumers' purchasing
behaviour is greatly influenced by the type of
financial product being purchased, and this
is in keeping with the research of Bateson
(1977), Shostack (1977), McKechnie (1992) and
Betts (1994). This has enhanced our
knowledge of how consumers purchase
different financial products but perhaps
more significantly it has drawn our attention
to the role of delivery channels. In the light of
these findings we can postulate that one
important unintended consequence of the
introduction of new electronic-based delivery
channels may be to engender new at-a-
distance exchanges which will impact
considerably upon the ``process of service''.
The emphasis on trust and having a
relationship, especially in particular
contracting contexts, is also highly pertinent
to the strategies of financial service
providers. Increased competition and
developments in new delivery channels are
commoditising bank products and changing
consumer behaviour by increasing
consumers' propensities to switch banks and
make rational decisions in the purchase of
certain types of financial product. The ability
to retain customers and increase customer
profitability by cross-selling high margin
basic insurance and investment products is,
therefore, very important. In this respect, the
paper has made a contribution to our
existing knowledge and understanding of the
important behavioural factors involved in
 Antony Beckett, Paul Hewer
and Barry Howcroft
An exposition of consumer
behaviour in the financial
services industry
International Journal of Bank
Marketing
18/1 [2000] 1526
Downloaded by Symbiosis International University Hinjewada At 23:22 28 July 2016 (PT)
purchasing different categories of financial
product and the associated strategies which
financial service providers might adopt in
order to maximise customer retention and
profitability.
Note
1 The strength of the relationship between two
parties can be judged by the extent to which
the consumer will incur costs to consume
within their preferred relationship, even
where an alternative relationship exists. The
greater the costs the consumer is willing to
incur, the stronger the relationship and vice
versa. Often firms mistake repeat-passive
behaviour for the existence of a relationship,
assuming that consumers making repeat
purchases have a relationship with the firm.
That error of judgement is revealed when the
consumer is presented with an alternative
providing only marginal benefits and yet still
switches to the new alternative. The existence
of marginal benefits encourages the consumer
to switch into the rational/active ideal-type
and to reassess and possibly alter their
existing patterns of consumption. In this
instance consumers are not prepared to incur
costs and consume from their existing
provider and in any real sense a relationship
has not existed between the parties.
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International Journal of Social Economics 39:11, 859-874. [Abstract] [Full Text] [PDF]
17. Christer StrandbergDepartment of Social Sciences, Mid Sweden University, Sundsvall, Sweden Olof WahlbergDepartment
of Social Sciences, Mid Sweden University, Sundsvall, Sweden Peter hmanDepartment of Social Sciences, Mid Sweden
University, Sundsvall, Sweden. 2012. Challenges in serving the mass affluent segment: bank customer perceptions of service
quality. Managing Service Quality: An International Journal 22:4, 359-385. [Abstract] [Full Text] [PDF]
18. Arvid O.I. HoffmannDepartment of Finance, School of Business and Economics, Maastricht University, Maastricht, The
Netherlands and Network for Studies on Pensions, Aging and Retirement (Netspar), Tilburg, The Netherlands Heiner
FrankenDepartment of Finance, School of Business and Economics, Maastricht University, Maastricht, The Netherlands
Thijs L.J. BroekhuizenDepartment of Innovation Management and Strategy, Faculty of Economics and Business, University
of Groningen, Groningen, The Netherlands. 2012. Customer intention to adopt a feebased advisory model. International
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 19. Manshor Amat TaapAsian Institute of Finance, Kuala Lumpur, Malaysia Siong Choy ChongAsian Institute of Finance,
Kuala Lumpur, Malaysia Mukesh KumarCENTRUM Catlica, Graduate School of Business, Pontificia Universidad Catlica
del Per, Lima, Peru Tat Kee FongSchool of Business Management and Professional Studies, Management and Science
University, Selangor, Malaysia. 2011. Measuring service quality of conventional and Islamic banks: a comparative analysis.
International Journal of Quality & Reliability Management 28:8, 822-840. [Abstract] [Full Text] [PDF]
20. LiWei WuDepartment of International Business, Tunghai University, Taichung, Taiwan. 2011. Satisfaction, inertia, and
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21. Afzaal H. Seyal, Md. Mahbubur Rahim. 2011. Customer Satisfaction with Internet Banking in Brunei Darussalam: Evaluating
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23. Joyce K.H. NgaSenior Lecturer at Sunway University College, Petaling Jaya, Malaysia Lisa H.L. YongSenior Lecturer at
Taylor's University College, Subang Jaya, Malaysia Rathakrishnan D. SellappanSenior Lecturer at Taylor's University College,
Subang Jaya, Malaysia. 2010. A study of financial awareness among youths. Young Consumers 11:4, 277-290. [Abstract] [Full
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24. Michael D. ClemesFaculty of Commerce, Lincoln University, Christchurch, New Zealand Christopher GanFaculty of
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Christchurch, New Zealand. 2010. Customer switching behaviour in the Chinese retail banking industry. International Journal
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25. Arpita Khare, Anshuman Khare, Shveta Singh. 2010. Role of consumer personality in determining preference for online
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29. Jonas Nilsson, Anna-Carin Nordvall, Sofia Isberg. 2010. The information search process of socially responsible investors.
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30. Mukesh KumarCENTRUM Catlica, Pontificia Universidad Catlica del Per, Santiago de Surco, Peru Fong Tat
KeeManagement and Science University, Shah Alam, Malaysia Vincent CharlesCENTRUM Catlica, Pontificia Universidad
Catlica del Per, Santiago de Surco, Peru. 2010. Comparative evaluation of critical factors in delivering service quality of
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31. Yael SteinhartGraduate Management School, University of Haifa, Haifa, Israel David MazurskySchool of Business
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32. Dr Harjit SekhonAnne SunikkaHelsinki School of Economics, Helsinki, Finland Liisa PeuraKapanenNational Consumer
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33. Paurav ShuklaBrighton Business School, University of Brighton, Brighton, UK. 2009. Impact of contextual factors, brand
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34. Robert HinsonDepartment of Marketing, University of Ghana Business School, Legon, Ghana Nana Owusu
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36. Nicole Cook, Susan J. Smith, Beverley A. Searle. 2009. Mortgage markets and cultures of consumption. Consumption Markets
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 37. Catherine RickwoodUniversity of Sydney, Sydney, Australia Lesley WhiteUniversity of Sydney, Sydney, Australia. 2009. Pre
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University, Hayward, California, USA Swee L. ChiaLa Salle University, Philadelphia, Pennsylvania, USA. 2009. Assessing
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39. Jonas NilssonUme School of Business, Ume University, Ume, Sweden. 2009. Segmenting socially responsible mutual fund
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40. Joaqun AldsManzanoDepartment of Marketing, Facultat d'Economia, Universitat de Valncia and Ivie, Valencia, Spain
Carlos LassalaNavarrDepartment of Finance, Facultat d'Economia, Universitat de Valncia, Valencia, Spain Carla Ruiz
MafDepartment of Marketing, Facultat d'Economia, Universitat de Valncia and Ivie, Valencia, Spain Silvia Sanz
BlasDepartment of Marketing, Facultat d'Economia, Universitat de Valncia, Valencia, Spain. 2009. The role of consumer
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42. Katariina Menp, Sudhir H. Kale, Hannu Kuusela, Nina Mesiranta. 2008. Consumer perceptions of Internet banking in
Finland: The moderating role of familiarity. Journal of Retailing and Consumer Services 15:4, 266-276. [CrossRef]
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47. Katariina MenpDepartment of Management Studies, University of Tampere, Tampere, Finland. 2006. Clustering the
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50. Tina HarrisonThe University of Edinburgh, Edinburgh, UK Kathryn WaiteHeriot Watt University, Edinburgh, UK Phil
WhiteThe University of Edinburgh, Edinburgh, UK. 2006. Analysis by paralysis: the pension purchase decision process.
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54. Deirdre O'LoughlinUniversity of Limerick, Limerick, Ireland Isabelle SzmiginBirmingham Business School, University of
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 55. Audhesh K. PaswanDepartment of Marketing and Logistics, College of Business Administration, University of North Texas,
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North Texas, Denton, Texas, USA Ron HastyDepartment of Marketing and Logistics, College of Business Administration,
University of North Texas, Denton, Texas, USA Gopala GaneshDepartment of Marketing and Logistics, College of Business
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58. Naceur JabnounCollege of Business and Management, University of Sharjah, Sharjah, United Arab Emirates Hussein A.
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59. Carole PageDepartment of Management & International Business, Massey University at Albany, Auckland, New Zealand
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60. James F. Devlin Nottingham University Business School, Jubilee Campus, Nottingham NG8 1BB, UK; tel: +60 3 2148 5288
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ext. 167; e-mail: James.Devlin@nottingham.ac.uk . 2003. Monitoring the success of policy initiatives to increase consumer
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61. Jinkook LeeThe Ohio State University, Columbus, Ohio, USA Julia MarloweThe University of Georgia, Athens, Georgia,
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62. M. Angeles IniestaM. Angeles Iniesta is Associate Professor of Marketing at the University of Almeria, Spain.Manuel
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63. Alexandros KapoulasUniversity of Derby, UK William MurphyUniversity of Derby, UK Nick EllisUniversity of Derby, UK.
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64. Barry HowcroftLoughborough University Banking Centre, Loughborough University, Loughborough, UK Robert
HamiltonBusiness School, Loughborough University, Loughborough, UK Paul HewerUniversity of Stirling, Stirling, UK.
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65. L. MoutinhoDepartment of Management Studies, University of Glasgow Business School, Glasgow, UK P.A. PhillipsSchool
of Management Studies for the Service Sector, University of Surrey, Guildford, UK. 2002. The impact of strategic planning
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66. April Wright. 2002. Technology as an Enabler of the Global Branding of Retail Financial Services. Journal of International
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67. Per E. PedersenAssociate Professor, Agder College and The Norwegian School of Economics and Business Administration,
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68. Afzaal H. Seyal, Mahbubur Rahim, Rodney TurnerUnderstanding the Behavioral Determinants of M-Banking Adoption
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