Bank strategic positioning and some determinants of
bank selection
Recently, banks have found
themselves facing more
aggressive competition,
uncertainty and unlimited
opportunities. No bank can
offer all products/services and
be the best/leading bank for
all customers. They are forced
to find a new basis for compe-
tition. A bank must examine
its strengths and opportuni-
ties and take a competitive
position in the competitive
marketplace. Discusses some
strategic issues related to
bank positioning. A number of
ways in which distinctive
positions can be developed
and maintained have been
identified. A well-integrated
application of technology and
staff through operations that
respond to customer needs
encourage customers to use a
whole range of banking prod-
ucts/services rather than just
a few. It also helps to build
loyalty by creating deeper and
fuller customer relationships.
Surveys how a bank has been
selected and perceived from
the point of view of its cus-
tomers in relation to its com-
petitors in that marketplace.
Reveals that in Sweden, there
is no single leading bank in all
financial areas, but there are
a number of leaders: a leader
in terms of deposit base, a
leader in terms of loans out-
standing base, a largest bank
in terms of assets, and a niche
leader bank. Shows that
functional quality is a more
important factor than tradi-
tional marketing activities.
As expected, convenience of
location, price and advertising
had a minor impact on bank
selection.
International Journal of
Bank Marketing
14/6 [March 1996] 12–22
© MCB University Press
[ISSN 0265-2323]
[ 12 ]
Mosad Zineldin
Associate Professor in Marketing and Banking, School of Business,
Stockholm University, Stockholm, Sweden
Introduction
Banks are in the process of moving into a
more competitive financial atmosphere, with
a wide variety of financial products/services.
No bank can offer all products and be the
best/leading bank for all customers. They are
forced to develop a differentiated strategy in
order to find a new basis for competition.
There are a number of ways in which distinc-
tive competitive positions can be developed
and maintained. A key way to building a
strong competitive position is through prod-
uct/service differentiation which creates a
clear image of the bank and its products/ser-
vices in the eyes and minds of customers.
Strong competitive positions can be main-
tained by building barriers to competitive
action by various means. Examples include
developing a “reputation” through:
• creating customer satisfaction by deliver-
ing products/services for the benefit of both
personal and corporate customers;
• using proprietary technology in an equip-
ment-based product/service (e.g. home or
private bank);
• recruiting, developing and retaining the
most talented staff in order to be able to
deal with and treat customers with trust,
respect and the highest ethical standards;
• using superior technology and
products/services as the means for build-
ing broader and deeper relationships and
recognizing the importance of continuity of
customers.
Our concern here is with the role of position-
ing in guiding the development of marketing
strategy for products/services that compete
on more than just image. This entails deci-
sions on substantive attributes that are
known to be important to customers and that
relate to product performance, price, cus-
tomer relationship, and service availability.
What is positioning?
Positioning is an attempt to distinguish the
bank from its competitors along real dimen-
sions in order to be the most preferred bank
for a certain market segment or prospect. It is
an attempt to have a clear or unique position
in the marketplace. Also, positioning is a
competitive marketing tool that goes beyond
image-making. The image-making bank
seeks to cultivate an image in the customer’s
eyes and mind. Positioning is a process of
establishing and maintaining a distinctive
place and image in the market for an organi-
zation and/or its individual product offerings
so that the target market/prospect under-
stands and appreciates what the organization
stands for in relation to its competitors. Ries
and Trout (1986) hinted at this, stating that:
In the communication jungle out there, the
only hope to score big is to be selective, to
concentrate on narrow targets, to practice
segmentation. In a word, “positioning”. The
mind, as a defence against the volume of
today’s communications, screens and rejects
much of the information offered it. In gen-
eral, the mind accepts only that which
matches prior knowledge or experience.
Millions of dollars have been wasted trying
to change minds with advertising. Once a
mind is made up, it’s almost impossible to
change it. Certainly, not with a weak force
like advertising.
In a competitive marketplace, a “position”
reflects how consumers perceive the prod-
uct’s/service’s or organization’s performance
on specific attributes relative to that of the
competitors (Kotler, 1994). Thus, banks have
to either reinforce or modify customers’ per-
ception or image. Positioning plays a pivotal
role in marketing strategy, since it links mar-
ket analysis, segment analysis and competi-
tive analysis to internal corporate analysis.
In short, the term positioning refers to how a
bank wishes to be seen in a given market-
place, what its values are, and its overall
image. A bank can occupy a position as a
large bank, a global bank, a friendly bank, a
niche bank, or an efficient bank.
If a bank can position itself favourably
within a particular marketplace, relative to
competitors, it can earn high rates of return
or profits irrespective of average profitability
within the market. Competition and prof-
itability pressures mean that banks must be
increasingly responsive to market considera-
tions in terms of their positions, management
and market strategies, their internal and
Mosad Zineldin external infrastructure, their use of informa-
Bank strategic positioning tion technology, and their ability to innovate
and some determinants of and differentiate.
bank selection
International Journal of
Bank Marketing
14/6 [1996] 12–22
Position building
A common feature of recent market develop-
ments is that traditional banks have lost a
substantial proportion of their domestic
business to essentially non-bank competition.
In an era in which intense competition will
be greatly facilitated by technology, the need
to differentiate products/services and main-
tain market position will necessitate that
banks become increasingly market oriented.
This will result in a commensurate emphasis
being placed on the quality and efficiency of
management in order to occupy a favourable
competitive position. The key to success in
obtaining a favourable position in the com-
petitive marketplace is offering value to
actual and prospective customers based on
their needs and wants. Urban and Star (1991)
postulate:
If we are to make good positioning deci-
sions, we need to know:
1 What dimensions do consumers use to
evaluate competitive marketing
programs – how many are there, and what
should they be named?
2 How important is each of these dimen-
sions in the decision process ?
3 How do we and the competition compare
on these dimensions ?
4 How do consumers make choices on the
basis of the information ?
However, the purpose of this section is to
explore the feasibility of approaching a bank
positioning strategy from a somewhat differ-
ent angle. The theoretical framework can be
traced back to earlier thinking in product/ser-
vice positioning and classification. Scholars
working in the manufacturing sector (includ-
ing both consumer and industrial goods) have
stressed the significance of positioning strat-
egy as a tool for differentiating the offering
and creating a competitive advantage. It is
equally important in the service sector.
Serious attempts have been proposed for
classifying services and for developing a
service positioning strategy (e.g. Kotler, 1980;
Lovelock, 1983; Ries and Trout, 1986; Schmen-
ner, 1986; Stemper, 1990). In searching for a
bank-positioning strategy, at least four posi-
tioning strategies are available. They are
described below:
1 Institutional positioning.
2 Product/service line positioning.
3 Distribution/delivery system and staff
positioning.
4 Segment positioning.
Banks have to consider positioning strategies
as a pluralistic philosophy and approach to
the marketplace. In this context, a given posi-
tion (an overall position) for a given bank in a
given marketplace is a result of a pluralistic
level of sub-positionings.
Institutional positioning
This aspect of positioning is concerned with
the scope of operations. A bank has to decide
whether to operate on a domestic/national,
local/community, regional, international/
multinational, or global basis although it is
possible to select more than one base.
Product/service line positioning
This aspect of positioning is concerned more
with the nature of the product. A bank can
decide whether to offer its products/services
as a customer banking orientation (multi
functional retail products to private
customers), corporate banking orientation
(a complete product package for business),
speciality banking orientation (specific prod-
ucts for specific market segments, e.g. mort-
gages, venture financing) or investors bank-
ing/trust banking orientation (savings and
investment products).
Distribution/delivery system and staff
positioning
The delivery system in a bank is a mix of
human resources, locations, and equipment.
Developments in technology and information
systems have enabled banks and other finan-
cial and non-bank institutions to access tar-
get markets. Automated teller machines
installations (ATM), electronic funds transfer
(EFT), credit cards, home banking terminals,
and point of sale (POS) terminals have
enabled banks to offer their customers a
quick and efficient product/service twenty-
four hours a day. The human skills must be
developed to gain every possible competitive
advantage out of technology and to forecast
trends in technology so that new opportuni-
ties are identified early.
Using an effective and profitable mix of
locations, physical facilities, information
technology, and human resources is a vital
aspect for developing a bank’s competitive
position in the marketplace. However, not all
banks are the same in designing their delivery
system mix. For example, a bank’s large cor-
porate customer may need to do their busi-
ness at the main facility. Smaller corporate
customers may be better served by branch
offices. Some retail customers may continue
to prefer branches with people in them and
others may prefer to conduct their transac-
tions at ATMs. By combining people (e.g.
[ 13 ]
Mosad Zineldin tellers) and technology, we can distinguish
Bank strategic positioning four broad delivery system positioning strate-
and some determinants of gies available to banks:
bank selection
1 High technology – High people.
International Journal of 2 High technology – Low people.
Bank Marketing
3 Low technology – High people.
14/6 [1996] 12–22
4 Low technology – Low people.
High technology – High people
High technology banks are market leaders
and pioneers in systems development and
implementation. They are larger global and
multinational banks which emphasize deeper
penetration among corporate customers with
multinational subsidiaries, offering new
complex product/service packages, making
specific efforts to create, establish, and
develop a high quality service mix in order to
transfer customers into long-term, multi-
service clients. They have placed tremendous
faith in the ability of technological develop-
ment to solve a wide variety of problems. In
addition, they have a philosophy that there is
no reason to believe that human resources
would be any less useful than technology (e.g.
Citibank, USA; Crédit Agricole, France; Bar-
clays, UK).
High technology – Low people
International/multinational banks, high
technology followers, but less people-inten-
sive than the market leaders. Their invest-
ment per worker is less than their investment
in technology and they reduce people invest-
ment and intensity in many services at many
branches. Primarily corporate banks provide
transaction banking products/services using
the latest and best technological innovations.
One advantage of this position is the ability to
take the best of innovations in other markets
and transport it to one’s markets without
bearing the costs of innovation.
Low technology – High people
Primarily consumer national/regional banks
in personal markets, they believe that most
services require a core element of personal
contact that will be very difficult, if not
impossible, to reduce through technology. For
example, while the use of ATMs will continue
to increase, customers will still demand inter-
action with tellers for certain transactions.
They invest more in employing better-skilled,
better paid and better motivated employees.
They also utilize some technology for basic
services (transaction and savings activities)
in a more cost-efficient manner. These banks
emphasize labour efficiency.
Low technology – Low people
An alternative position for smaller regional,
local or community banks (which often avoid
competing with large banks) is to offer a
[ 14 ]
limited number of simple product/services
to specific customers (e.g. mortgage loan
products for house owners simple money
transaction services using POS terminals,
small consumer loans, simple savings and
investments services). The type of
products/services needed for such a specific
target market does not need special skilled
human resources or the latest technology.
Technology is expensive. Thus, a minimal
degree of technology and some skilled tellers
can run these banking activities. The main
point is that banks with low technology-low
people investment and intensity can be
highly profitable through appropriate overall
positioning (e.g. JP Bank, Sweden).
Segment positioning
Trying to provide all things to all people is
difficult, if not impossible in a competitive
marketplace. Many financial institutions are
selecting a few key target markets and con-
centrating on trying to serve them better than
their competitors. Broadly speaking, con-
sumer and corporate banks have three main
targeting choices. They can attempt to
become financial supermarkets, low-cost
producers, or market nichers:
• A financial services supermarket strategy
is only appropriate for a few, very large,
diversified banks and financial institutions
such as Citicorp, American Express.
• Low cost producers offer limited services at
discount prices and compete on price. The
most obvious examples are discount bro-
kerage firms and money market funds that
offer limited services efficiently.
• Speciality or niche banks primarily focus
on the needs and desires of a particular
market segment with a particular product
mix such as mortgage loans, venture
financing, special trade markets and indus-
try sectors. Many regional and national
banks have adopted niching strategies,
targeting market segments where they have
key strengths and experience. Not surpris-
ingly, many small and medium-size institu-
tions are targeting commercial customers
and prospects and avoiding intense compe-
tition for consumer business.
In practice, few banks endeavour to service
all the needs of all potential customers. Com-
binations of institutional, product/service
line, delivery system and staffing, and seg-
ment positioning provide a bank with four
possible strategies. In the very broadest
terms these four strategies are:
1 All customers’ orientation in all
needs/matters and at all levels.
2 Specific customers’ orientation in all
needs/matters and at all levels.
Mosad Zineldin 3 All customers’ orientation in specific
Bank strategic positioning needs/matters and at specific levels.
and some determinants of 4 Specific customers’ orientation in specific
bank selection needs/matters and at some levels.
International Journal of
Bank Marketing The customers-needs approach requires that
14/6 [1996] 12–22 banks target their business towards one or all
customers, and towards satisfying some or all
of their needs and wants. A bank has to
analyse and consider its strengths and weak-
nesses, its market opportunity, and its com-
petitors.
All customer’s orientation in all
needs/matters and at all levels
Using this strategy often requires that the
bank creates and profitably offers a wide range
of product/service packages for all consumer
and corporate customers in many interna-
tional and/or national and local markets. The
bank has to invest significant resources (e.g.
technological, operations, and human).
Citibank, with its multiple links, levels, prod-
ucts/services, quality, and high efficiency, is
an example of a bank using a global strategy:
Every day, around the world, Citibankers
apply the Citicorp Vision as they work to
ensure exceptional levels of customer satis-
faction. Citibank’s Global Consumer busi-
ness is one of the largest providers of con-
sumer services in the world. Citibank’s
consumer banking operations comprise
three main lines of business: branch bank-
ing, credit and charge cards, and private
banking. Combined, these businesses oper-
ate in 41 countries and territories, and they
serve approximately 45 million consumer
relationships (Citicorp, 1993).
Nordbanken in Sweden, with its national
emphasis as its market base, is another exam-
ple of a bank seeking such a strategy:
Nordbanken’s aim is to be a good all-round
bank for private individuals, companies and
institutions in Sweden. Using this platform,
it will systematically continue its efforts to
develop attractive full-service banking pack-
ages for its customers (Nordbanken, 1993).
Such banks strive to dominate their market.
Given the multiplicity of customer needs and
wants, of segments, and product/service
offerings; such a strategy is most risky and
complex to manage.
Specific customers’ orientation in all
needs/matters and at all levels
The bank in this position will also provide a
wide range of products/services, but not to all
customers. Instead, it will target a specific
segment or customer groups (e.g. personal
customers, corporate customers: large
medium, or small companies, etc.). Customer
segmentation is a very essential factor for
such banks. Such a bank needs to invest more
in employing highly competent experience
staff to deal with a specific customer groups
and their needs. Some banks may decide to be
full-service providers in the retail markets and
to manage a lesser product line in the corpo-
rate or trust markets. By the same token, other
banks might decide to offer a full service pack-
age to one main segment of its customer mar-
ket and a narrow product/service line to the
balance of its customer market.
All customers’ orientation in specific
needs/matters and at specific levels
This strategy usually requires that the bank
provides more advanced products or special
services within selected areas. To do this, a
bank must differentiate its specific products/
services from those of its competitors.
Specific customers’ orientation in specific
needs/matters and at some levels
By not serving all needs and all customers, a
bank can minimize the resources required.
The investment capital requirements will
probably be relatively small. Such a specialist
or niche bank needs to emphasize its unique-
ness. Innovation and creativity are vital for
such a strategy.
This strategy calls for the bank to satisfy
unsatisfied customers’ need and wants, to
meet a specific need better than other banks,
or to specialize in serving small customers
who are neglected by larger banks. However,
the main point and philosophy in a niche
bank is specialization. For example, the busi-
ness idea of J P bank in Sweden is to offer a
small number of simple products and ser-
vices which give its clients a distinct added
value. J P bank states that it offers lower
interest rates than competitors. A niche bank
must differentiate itself from its competitors
on both the range and convenience of its prod-
ucts/services.
Finally, the critical point is that overall
positioning is an integrated body of compo-
nents. For example, Citibank has built a posi-
tion as a global consumer and finance bank.
Such banks would not position themselves as
they do without concurrently and compara-
bly positioning their product/service lines,
communication, pricing, staffing, segment
structure and profitability.
Research methodology and
instrument
As previously discussed, banking has oper-
ated in a relatively stable environment for
decades. However, today the industry is fac-
ing dramatically aggressive competition in a
new deregulated environment. Those banks
that do not consider the new atmosphere and
build and protect their competitive position
[ 15 ]
Mosad Zineldin will probably become victims of that aggres-
Bank strategic positioning sive competition.
and some determinants of The main purpose of this section is to inves-
bank selection tigate and define the competitive position for
International Journal of each Swedish commercial bank in the com-
Bank Marketing petitive marketplace and to identify the major
14/6 [1996] 12–22
attributes which bankers and customers use
in determining the overall perception of a
given bank and its services offered.
The empirical information and data for the
research originated from three sources. The
first source is the annual report and accounts
of each of the 14 commercial banks operating
in Sweden. The basic data used in determin-
ing the market position of each bank consist
of a Balance Sheet, a Source and Uses of
Funds Statement, and an Appropriation of
Income Statement for each bank for each
analysed year (i.e. 1991-1993). The second
source is personal interviews with the four
largest banks. The third data set was
collected by means of a customer question-
naires.
Because questions about bank-customer
relations can be considered as sensitive and
personal we determined that conducting a
mail survey with bank consumers was a more
feasible and reliable method of gathering
primary data than other communication
modes. Mail surveys are typically perceived
as being more impersonal, providing more
anonymity and respondents can take their
time to answer at their convenience. Because
of the large number and the wide geographic
area of the population, it was necessary to
take a sample of the population.
A systematic sample of 400 names was select-
ed at random from the available city telephone
directory of two large cities (i.e. Stockholm and
Gothenburg) and two small cities (i.e. Bor-
laenge and Uppsala). One hundred names were
selected from each city; one name from the top
of every tenth page of the two large cities, one
name from the top of the fifth page of Uppsala
city, and one from the top of every page of Bor-
laenge city; (alternating among the three
columns) Stockholm and Gothenburg were
selected as they represent a highly competitive
banking environment. Uppsala and Borlaenge
were selected to broaden the range of
consumer included in the sample.
Only adult persons primarily involved in
decisions concerning financial services were
asked to respond to research questions. A
total of 268 questionnaires were finally
received. Fifty-two respondents had no rela-
tions with commercial banks or had no sig-
nificant commercial bank relations and were
not able to give reliable opinions. A total of
216 questionnaires were considered as com-
pleted, acceptable and usable, which was 54
per cent of the total sample.
[ 16 ]
Emphasis was placed on confidentiality by
guaranteeing anonymity of respondents’ and
banks’ names. The main battery of the ques-
tionnaires was related to customers’ prefer-
ences, attitudes, and perceptions of their
banks and their services.
Results
The competitive environment
Today, there are two main categories of bank
in Sweden: commercial banks which are
limited liability companies and savings
banks. Traditionally, commercial banks spe-
cialized in providing short-term credit to
business, and savings banks on mobilizing
domestic savings and channelling it to the
housing sector and local government. By the
end of the 1980s, all bank categories had the
legal right to compete in all types of bank
operation and activity.
In 1993 there were 14 commercial banks in
the Swedish financial market. Of these 14
banks, eight were Swedish and six were
owned by foreign banks, with a total of 1,891
branches at the end of 1992 (a ratio of one
commercial branch per 4,600 people).
Although the Swedish banking system is
concentrated, there is considerable competi-
tion among the various financial institutions.
Table I shows that the commercial banking
market is controlled by the three major banks
in the country: S-E Bank, Svenska Handels-
banken (HB), and Nordbanken (NB) which is
owned by the State.
As shown in Table I, the current operating
environment within Sweden has been domi-
nated by the three major banks. Over 80 per
cent of the commercial banking industry’s
assets were owned by the three largest banks
at the end of 1993. Foreign banks had only one
to three per cent of industry’s assets between
1991-1993.
Total assets in the Swedish commercial
banking sector showed negative growth. As
shown in Table I, the decline across all com-
mercial banks was nearly 5 per cent (SEK 57
billion) between 1991-1993. The decline at the
three large banks was approximately 4 per
cent. The expansion of the 1980s, financial
crisis of the early 1990s, loan quality prob-
lems including the collapse of the real estate
market, weak credit demand stemming from
the economic slowdown, and a considerable
effort by businesses to shift from short-term
financing to longer-term funds contributed to
the negative growth in bank assets.
The growth and financial strength of the
commercial banks are also measured in
terms of the increase in assets financed by
funds or deposits available from customers.
Customer deposits generate funds and rev-
enue for the bank. These indicators are of
Mosad Zineldin further interest in that they are considered
Bank strategic positioning reliable measures of confidence in the bank-
and some determinants of ing system. However, our investigation shows
bank selection that the volume of commercial bank deposits
International Journal of increased by SEK 68 billion from approxi-
Bank Marketing
mately SEK 511 billion in 1991 to SEK 579
14/6 [1996] 12–22
billion (13 per cent) by the end of 1993. During
the same period, the volume of loans out-
standing fell by 16 per cent at all commercial
banks. On the other hand, total outstanding
bank loans fell at the three largest banks by
nearly 12 per cent.
The decline stemmed partly from restric-
tive actions by banks concerned about repay-
ment prospects and sensitive to capital pres-
sures. This decline could be also due to cus-
tomer efforts, in response to uncertain eco-
nomic conditions, to save more and to delay
purchases of durable goods and to reduce
high debt-to income levels they had built up
in earlier years. There was also aggressive
competition from other forms of financial and
non-financial institutions.
Market share is measured by the total SEK
or dollar value of customer deposits held by
the bank in the market, compared to compet-
ing banks in the area. At the end of 1993, the
three largest banks held approximately 80 per
cent market share on the total deposits. In the
lending market, the same three banks domi-
nate the market, with over 80 per cent of the
total loans-outstanding.
Market share, rather than profitability, pro-
vides the bank manager with the “crystal-
clear picture” of the market segments from a
comparative view point. It gives the manager
a reliable indication of long-term viability in
customer attitudes and market segments. In
addition – and as Zineldin (1992) stated,
“Banking is unique. It is not like many other
industries” – banking services are not
absolutely price-sensitive, higher product
quality can justify higher prices and some
services will be highly profitable and rela-
tively price-insensitive while others may be
very marginal or even negative in rate of
return. Market share on deposits and loans
can be used as a more stable and sensible tool
in evaluating bank’s relative performance
with competitors facing similar external
conditions. Hence, profitability must always
be considered in conjunction with the market
share and customer attitude which is based
on customer needs and response.
Some different banks’ performances and
positions can also be shown in Table I. A bank
that is leader in term of deposits base does
not need to be a leader in loans base. Nord-
banken (NB) is a bank that has a large base of
deposits and a relatively small loan portfolio
in relation to customers’ total deposits. That
bank has four million private individuals
accounts and has a very strong position in the
salary deposits in the market. The bank’s

Table I
Commercial banking industry in Sweden: lending, deposits and assets (SEK Billion)
Lending Deposit Total assets
1991 1992 1993 1991 1992 1993 1991 1992 1993
S-E Banken 224.4 246.5 203.6 131.9 138.6 153.1 348 384 356
Handelsbanken 161.1 164.2 143.9 138.1 136.1 147.4 355 319 320
Nordbanken 150.5 152.1 126.6 130.7 154.2 159.1 259 267 251
Gota Banka 71.7 63.7 34.4 40.1 36.1 38.8 95 89 75
Foreningsbanken 60.0 54.5 49.3 58.6 57.5 60.2 96 81 83
Ostgota Enskilda Bank 10.1 8.4 8.0 6.5 6.4 8.3 12 11 12
JP Bank 0.9 0.5 0.6 0.2 0.4 0.7 2 2 2
Bohusbanken 1.5 1.1 1.3 0.8 0.9 1.3 2 2 2
Total: Swedish banks 680.2 691.0 567.6 506.9 530.2 568.9 1,169 1,155 1,101
ABN AMRO Bank 3.4 8.0 6.4 0.3 0.5 7.7 5 13 13
Banque Indosuez Sverige 1.4 1.9 1.6 0.4 0.1 0.1 7 7 7
Crédit Lyonnais Bank 2.2 3.2 1.5 2.1 1.5 1.7 2 5 5
Midland Montagu Bank 1.4 0.5 0.2 1.4 0.1 0.1 2 2 1
Citibank 0.8 1.5 1.1 – – 0.1 1 2 2
OKO Banken (Sverige)b 1.9 0.7 – 0.4 0.6 – 2 1 –
Total: foreign banks 11.1 12.8 10.8 4.3 2.8 9.9 17 30 28
Total: commercial banking sector 691.1 703.8 578.4 511.2 533.0 578.8 1,186 1,185 1,129
Notes:
a As from 31 December , 1993, Gota bank became a wholly owned subsidiary of Nordbanken
b As from December 1992 converted into a branch

– Figure is not available or has no significant effect on the total

[ 17 ]
Mosad Zineldin main competitors in the deposits area are the
Bank strategic positioning savings banks. NB has a leading position as a
and some determinants of business partner for the government, munici-
bank selection
palities and county councils. NB with Sweden
International Journal of as its base, has subsidiaries and branch
Bank Marketing
offices in five foreign countries including
14/6 [1996] 12–22
Norway.
S-E Banken (S-E) on the other hand, has a
larger outstanding volume of loans to house-
holds and companies than customers’ total
volume of deposits. One important segment
for S-E bank is high-income earners and
wealthy customers. However, at the end of
1993, S-E Banken had an average share of 25-
30 per cent of the Swedish corporate market.
S-E Banken has subsidiaries and branch
offices in 14 different foreign countries (none
of them in Nordic countries).
Handelsbanking (HB) has an outstanding
volume of loans that almost equalled cus-
tomers’ total deposits at the end of 1993. In
1993, HB moved its position forward where
customer satisfaction is concerned. It consid-
ers Norway, Denmark and Finland as natural
domestic markets. The bank has subsidiaries
and branch offices in nine foreign countries
including three Nordic countries with total
assets in these countries of SEK 20 billion at
the end of 1993. The bank’s units concentrate
mainly on Nordic-related business.
Foreningsbanken (FB) is a commercial
bank that focuses its operations on the farm-
ers’ segment in the agricultural sector. FB’s
units are concentrated mainly around vil-
lages and small towns. It occupies a strong
position as a leading bank with over 50 per
cent market share in the agricultural sector.
It also competes with other banks in other
financial areas.
JP Bank has residents of Stockholm as a
key target group using on the spot presence
and unconventional means at low cost, close
to its target group and open at times that
meet their needs.
ABN AMRO Bank (Sverige) is a bank that
attempts to target corporate business in a
careful and selective manner. The principal
area of activity is to provide credits and other
financial services to Swedish corporations.
Banque Indosuez’s (Sverige) core area of
banking services is to finance the interna-
tional trade and export transactions.
Citibank (CB) in Sweden is also a bank that
concentrates its resources to build a strong,
long-term and close relationship with a lim-
ited number of customers. CB’s core financial
services are cash management, export financ-
ing, and risk management products including
foreign exchange and derivatives trading.
Most foreign banks in Sweden concentrate
their interest on the corporate segment.
[ 18 ]
However, it appears that although the
Swedish banking system does not suffer from
regulatory barriers or government restric-
tions, which reduce competitiveness, foreign
banks have a limited presence in the Swedish
financial market. In 1986, 12 foreign banks
were in Sweden, the number has gradually
reduced and today five of them remain in the
market. Foreign banks had at the end of 1993
below 2 per cent of the total deposits and loans
outstanding. Midland Montagu Bank is an
example of a bank that failed to compete with
Swedish banks in private banking market.
Determinants of bank selection
and customers’ perceptions of a
bank and its products
As we earlier stated, trying to be all things to
all customers is difficult, if not impossible in
a competitive marketplace. Many banks are
selecting a position that concentrates on few
key market targets/segments and
products/services. Bank respondents were
asked about their competitive positions and
how they wish to be in the marketplace.
To be a leading bank in the market for large
Nordic companies and institutions is one
main goal of S-E Banken. It is a bank seeking
a leadership position in the market for large
Nordic companies and institutions. It has
built a strong position in debt-related prod-
ucts/services in the money and capital mar-
kets for Nordic borrowers.
NB tends to be primarily a consumer bank
serving a broad customer base. That bank has
a strong position in the salary and pension
payments market. The bank’s main strategy
is to utilize economies of scale by providing
its private customers with efficient, simpli-
fied, and standardized banking services at
competitive price.
HB is a bank that attempts to occupy a mar-
ket position as a universal bank in the Nordic
countries. FB is a niche bank that built its
strategy to support and help the farming
community, attacking new entrants where
necessary. It occupies a strong position as a
leading bank in the agricultural sector. FB
provides an example of a bank that differenti-
ates itself and attempts to meet unsatisfied
needs and wants and to meet specific needs
better than other banks.
So far the discussion of positioning has
been generated from the point of view of the
bank’s concept of how it considers itself and
what it wants to be in the marketplace. How-
ever, because positioning is significant to
customers in that it provides a basis for com-
paring alternative choices in the market-
place, we need to investigate how a bank has
Mosad Zineldin been selected and perceived from the point of in the choice of their bank. These factors
Bank strategic positioning view of its customers in relation to its com- were:
and some determinants of petitors in that marketplace. 1 Trust and confidence (81 per cent).
bank selection The customer was asked to indicate the first 2 Price competitiveness on loans and other
International Journal of impression that comes to his/her mind about services (66 per cent).
Bank Marketing
their main bank and other competing banks. 3 Flexibility in tailoring services (adapta-
14/6 [1996] 12–22
18 possible position descriptions have been tions) (43 per cent).
used. From the customers’ perspective, the 4 Contacts with bank decision-maker (42 per
most frequent position descriptions men- cent).
tioned are summarized in Table II. S-E 5 Speed of the decision and of processing
Banken has a clear position as a bank for transactions (36 per cent).
large corporations, Handelsbanken has a
Gupta and Torkzadeh (1988) surveyed 500
position as a bank with excellent product/ser-
residents of Winnipeg, Canada. They dealt
vice quality, Nordbanken and FB as a family
with questions related to the importance of
banks, Ostgota Enskilda bank as a regional
services offered by a financial institution in
bank, and J P bank is known as a niche bank.
the customer’s process of selection and the
Most foreign banks are not well known. But,
level of performance of these services by the
25 per cent of respondents considered Crédit
institution patronized. The results showed
Lyonnais as a global bank.
that the most important factors are the care-
The investigation reveals that 80 per cent of
ful management of the accounts, rate of inter-
respondents had a relationship with one of
est paid, politeness and courtesy, and proce-
the three big Swedish banks, and there is no
dures for transactions.
crystal-clear leading bank in all financial
In another survey, Laroche et al. (1986)
areas, but there are a number of leaders: a
found that speed of service, and factors relat-
leader in terms of deposits base, a leader in
ing to the competence and friendliness of
terms of loans outstanding base, a niche
bank personnel were the major factors which
leader bank and a large number of
consumers in Montreal, Canada, perceived as
followers.
important in their selection a bank. Conve-
Regarding the determinants of bank selec-
nience of location only ranked fourth of the
tion, our analysis produced five valid criteria
most important ten factors. Most media
which represent dimensions by which cus-
advertising was perceived as having little
tomers evaluate and perceive the attributes of
impact on the selection decision.
their banks, i.e. service quality, credit avail-
Many earlier studies and results indicated
ability and price competition, delivery sys-
that locational convenience was concluded to
tem, promotion and reputation and differenti-
be the primary choice determinant. Our
ation. Somewhat, similar surveys have previ-
general hypothesis is that there exist major
ously been conducted. Zineldin (1995) sur-
differences between the determinants of bank
veyed 300 business firms in Sweden. One of
selection before and after the 1990s. Hence,
his objectives dealt with the major factors
locational convenience to either a customer’s
that determine the choice of principal bank.
home or work, although not important, is the
From 179 valid responses, five factors were
major determinant in selecting a bank in the
identified as most important for corporations
1990s.
The reasons for this are not difficult to
Table II
understand. Through the late of 1980s and the
Customers’ image of competing banks
early 1990s, the nature of banking industry
Description 1 2 3 4 5 6 7 has altered as a result of a combination of
Market leader 13 12 – – – – changes in competitive and market condi-
Market challenger – – 13 12 – – – tions. Today, most customers can choose
Market nicher – – – – 4 13 14 whether to bank in person at a branch, at a
Technologically innovative 9 8 12 – – – – POS, EFT, banking centre, at another compet-
Friendly bank 9 4 6 5 3 – – ing bank, or even over the PC or phone – any-
Excellent product/service quality 18 20 7 5 4 – – thing he/she wants, 24 hours a day, seven
Domestic/national bank 8 7 6 – 11 13 10 days a week. Locational convenience is a
Regional bank – 4 11 7 18 33 10 predetermined factor and can be considered
Bank for families – 8 20 – 18 13 10 as an infrastructure element that all banks
A bank for small/medium businesses – 8 – 17 28 6 10 must have. Today’s telecommunications,
A bank for large corporations 33 19 7 – – – – ATMs, computers, home banking, credit
cards, etc. would appear to minimize many
Note: locational inconveniences. Thus, the tradi-
1: Skandinaviska Enskildau Banken (S-E Banken); 2: Svenska Handelsbanken; 3: Nord- tional great importance of a close bank or
banken; 4: Gota Bank; 5: Foreningsbanken; 6: Ostgota Enskilda Bank; 7: J B Bank bank branch to customers’ home or work is
[ 19 ]
Mosad Zineldin no longer the most important factor in select- bank selection. As shown in Table III, the
Bank strategic positioning ing a bank. average score for convenience of location was
and some determinants of Table III provides the results for the ques- 3.1 and ranked as important by only 31 per
bank selection tion related to customers’ selection of a bank. cent of respondents. The average score for
International Journal of A list of 19 potential factors was identified. advertising was as low as 1.42 and ranked as
Bank Marketing The factors included most of those found important by only 8 per cent of respondents.
14/6 [1996] 12–22
significant in previous studies as well as a This would support our hypothesis. It would
number of new factors. Respondents were also support similar results found in the
asked to rate the importance of each of these Gupta and Torkzadeh (1988) study, and in
dimensions on a scale of 5 (very important) to some extent, Laroche et al. (1986) study.
1 (completely unimportant). From the bank customers’ point of view,
As expected, we found that convenience of friendliness and helpfulness of personnel
location was not the major determinant in (4.42), account accuracy in transaction man-
agement (4.20), and efficiency in correcting
mistakes (4.00) clearly emerged as the most
Table III
important determinants of bank selection.
Determinants of bank selection
The results imply that functional quality is a
Mean importance Percentage of more important factor than traditional mar-
rating on 5-point respondents indicating keting activities. Moreover, the results indi-
Factor scale (mean scores) factor is very important cate that the performance of contact person-
Reputation 3.08 38 nel, word-of-mouth/reputation, and techno-
Recommendation by others 2.55 8 logical based services may compensate for an
Interesting advertising 1.42 8 overall lower score on factors such as full
Convenience of location 3.10 31 service provider (2.82) and first with new
Opening hours 3.36 31 supporting, facilitator and different services
Friendliness and helpfulness of personnel 4.42 69 (2.17) which represent technical quality.
High technological services (ATMs, etc.) 3.10 31 Functional quality refers to how the
Full service provider 2.82 15 customer receives service and technical qual-
First with new supporting, facilitator and ity refers to what the customer receives
different products/services 2.17 15 (Grönroos, 1990; Gummesson, 1993).
Offer more detailed information and knowledge Also, because most banks offer almost the
of customer’s accounts, portfolio and services same product/service, factors such as recom-
offered 3.08 31 mended by others, interesting advertising,
Price competitive on loans 3.33 31 full service provider, and supporting or facili-
Price competitive on savings 3.17 23 tator services appear to be less important in
Price competitive on service charges 3.42 39 selecting a bank. The top ten determinants of
Safety of funds and high confidence 3.16 16 bank selection are summarized in Table IV.
Speed of service and decision making 3.67 31 The higher mean scores factors are placed
High ability of flexibility in loan negotiations 3.25 31 first, although with different frequency rank-
Accuracy in transaction account management 4.20 61 ing. Clearly, factors relating to functional
Efficiency in correcting mistakes 4.00 46 quality or how the customers wishes to
Availability of loans 3.82 46 receive banking services such as friendliness
and helpfulness, account accuracy in transac-
tion management efficiency in correcting
mistakes, and speed of services and decision
Table IV process are particularly important.
Top ten determinants of bank selection As also expected, price competitiveness was
Mean importance Percentage of shown as even less important than for exam-
rating on 5-point respondents ple speed of service and decision making.
scale (mean scores) indicating factor is This would support Zineldin’s (1992, 1995)
Factor X Rank very important view, which assumes that banking services
are unique and differ from most other service
Friendliness and helpfulness of personnel 4.42 1 69 industries. The price or cost factor is not the
Accuracy in account/transaction management 4.20 2 61 most important one in the banking industry.
Efficiency in correcting mistakes 4.00 3 46 Because banking services are produced in
Availability of loans 3.82 4 46 interaction with the customer, bank selection
Speed of service and decision making 3.67 5 31 is more influenced by the way in which the
Price competitive on service charges 3.42 6 39 customer expected to perceive the services.
Opening hours 3.36 7 31 To determine the importance of services
Price competitive on loans 3.33 8 31 offered by a bank in the customers’ process of
High ability of flexibility in loan negotiations 3.25 9 31 selection and the level of performance of
Price competitive on savings 3.17 10 23 these services by the bank, we asked the
[ 20 ]
Mosad Zineldin respondents to rate the actual perceived ity and delivery system were 4.00 and 4.42
Bank strategic positioning attributes of their banks. The analysis shown respectively. This would reflect the impor-
and some determinants of in Table V, produced five valid criteria which tance of reliability and responsiveness of the
bank selection
represent dimensions by which respondents banking services for the customers. Reliabil-
International Journal of evaluate their business relationship with ity can be defined as the ability to perform the
Bank Marketing
14/6 [1996] 12–22 banks. The aim was to measure how impor- desired service accurately and consistently.
tant bank customers perceived a number of Responsiveness is the willingness to provide
attributes to be, in relation to their selection prompt service and help customers.
of a bank, as well as to measure the gap On the other hand, it is evident from Table
between customers’ expectations and their V that the customers are least satisfied with
actual satisfaction. The results of such analy- the rate of interest charged on loans, the rate
sis shape the customers’ assessment of the of interest paid on savings, and service
quality of a particular service or dimension. charges. Also, banks do not need to invest
When there is a discrepancy between cus- more funds in traditional marketing activi-
tomers’ expectations or the importance of a ties, such as advertising and promotion. Such
particular service and management’s under- investments have less impact on customers’
standing of customer expectations/impor- selection of a bank. The reputation gap was a
tance, perceived service quality or customers’ considerable factor. This could be due to the
satisfaction will suffer. Management’s failure Swedish financial crisis between 1990-1993.
to identify customer desires accurately is one Confidence in the Swedish banks declined
kind of quality gap (Zeithaml et al., 1990). during the financial crisis. But, banks have to
However, Table V reveals that for customers conduct the necessary actions and strategies
the most important criteria used in selecting to minimize the gaps between the expecta-
a bank was related to service quality and tions and customers’ experience. The persis-
delivery system. The scores for service qual- tence of gap may lead to conflict arousal and
the bank can suffer from disappointed cus-
tomers. An unsatisfied bank customer is
Table V probably a potential customer for a compet-
Important attributes for bank selection and customers’ satisfaction ing bank. Also, word-of-mouth from a disap-
pointed and unsatisfied customer may cause
Mean Mean the bank’s image to deteriorate.
Attribute factor satisfactory importance Gap
Service quality
Range of services offered 3.33 2.82 +0.51 Conclusion
Information on services 3.17 3.08 –0.09
Safety of funds and confidence 3.09 3.16 –0.07 In banking today, the different actors offer a
Speed of services process 2.67 3.67 –1.00 wide variety of products/services. Every
Account and transaction accuracy 3.40 4.20 –0.80 bank has to consider how to build and protect
Efficiency in correcting mistakes 3.20 4.00 –0.80 its competitive position. They are forced to
Average scores 3.14 3.49 find a new basis for competition. A bank must
Credit availability and price competition examine its opportunities and take a position
Rate of interest charged 1.92 3.33 –1.41 in the marketplace. Positioning is an attempt
Rate of interest paid 1.92 3.17 –1.25 to distinguish the bank from its competitors
Service charges 2.30 3.42 –1.14 along real dimensions in order to be the most
Flexibility in loan negotiations 2.69 3.25 –0.56 preferred bank for a certain market segment.
Availability of loans 2.61 3.82 –1.21 Consequently, strategic positioning has
Average scores 2.29 3.40 become increasingly relevant and important
Delivery system for the banking industry. The study high-
Convenience of location 3.17 3.10 +0.07 lights the importance of effective market
Opening hours 2.97 3.36 –0.39 positioning and has examined the concept of
Telecommunication/technology 3.17 3.10 –0.07 bank positioning and different approaches
Friendly/helpful personnel 3.40 4.42 –1.02 that a bank can use to occupy a competitive
Average scores 3.18 3.50 position in the competitive marketplace.
Promotion Attention has been focused on the strategies
Advertising 2.07 1.42 +0.65 and approaches that a bank can use in posi-
Average scores 2.07 1.42 tioning itself in the competitive marketplace
Reputation, word-of-mouth and differentiation (e.g. institutional, product/service, delivery
Reputation 2.29 3.08 –0.79 system, and segment positioning). The study
First with new products/services 2.29 2.17 +0.12 also reviews different variables and bases for
Recommended by others 2.57 2.55 –0.02 bank positioning in the retail and corporate
Average scores 2.38 2.60 markets.
[ 21 ]
Mosad Zineldin This paper suggests that using only one or
Bank strategic positioning two approaches is often insufficient to occupy
and some determinants of a competitive position in the competitive
bank selection marketplace. Thus, there is no substitute for
International Journal of using a combination or integration of several
Bank Marketing approaches, bases, and indicators at the same
14/6 [1996] 12–22
time. A well integrated application of technol-
ogy and staff encourage customers to use a
whole range of banking products/services
rather than just a few. It also helps to build
loyalties by creating deeper and fuller cus-
tomer relationship.
Because positioning is significant to cus-
tomers in that it provides a basis for compar-
ing alternative choices in the marketplace, the
present study surveyed how a bank has been
selected and perceived from the point of view
of its customers in relation to its competitors
in that marketplace. Our analysis produced
five dimensions by which customers evaluate
and perceive the attributes of their banks, i.e.
service quality, credit availability and price
competition, delivery system, promotion,
reputation and differentiation.
From the bank customers’ point of view,
factors relating to functional quality such as
friendliness and helpfulness of personnel,
accuracy in account transaction manage-
ment, efficiency in correcting mistakes, and
speed of service and decision making clearly
emerged as the most important determi-
nants of bank selection. However, the results
imply that functional quality is more impor-
tant than traditional marketing activities.
Convenience of location, price and advertis-
ing had a minor effect in a bank selection. As
also expected, price competitiveness was
shown as even less important than for exam-
ple speed of service and decision making.
However, designing a high quality and effec-
tive delivery system mix could have a major
short and long-term impact on banks’ com-
petitive positions. The results also indicates
that the performance of contact personnel,
word-of-mouth, and the technological based
services may compensate for an overall
lower score of factors such as full service
provider.
Finally, the results of this analysis can
be used as a message from the customers to
the banks. The message is short and clear.
Be reliable, reassuring and responsive. A
survey of customers’ perceptions of the com-
peting banks and their attributes is essential
in providing the bank manager with a visual
representation of the customers’ view on
the bank’s attributes and position in the
marketplace.
References and further reading
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[ 22 ]
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Grönroos, C. (1990), Service Management and
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Gummesson, E. (1993), Quality Management in
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Gupta, Y. and Torkzadeh, G. (1988), “Re-designing
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