Profitable Customer Management: A Study in Retail Banking

The increasing focus of relationship marketing and customer relationship management (CRM) studies on issues of customer profitability has led to the emergence of an area of research on profitable customer management. Nevertheless, there is a notable lack of empirical research examining the current practices of firms specifically with regard to the profitable management of customer relationships according to the approaches suggested in theory. This thesis fills this research gap by exploring profitable customer management in the retail banking sector. Several topics are covered, including marketing metrics and accountability; challenges in the implementation of profitable customer management approaches in practice; analytic versus heuristic (‘rule of thumb’) decision making; and the modification of costly customer behavior in order to increase customer profitability, customer lifetime value (CLV), and customer equity, i.e. the financial value of the customer base. The thesis critically reviews the concept of customer equity and proposes a Customer Equity Scorecard, providing a starting point for a constructive dialog between marketing and finance concerning the development of appropriate metrics to measure marketing outcomes. Since customer management and measurement issues go hand in hand, profitable customer management is contingent on both marketing management skills and financial measurement skills. A clear gap between marketing theory and practice regarding profitable customer management is also identified. The findings show that key customer management aspects that have been proposed within the literature on profitable customer management for many years, are not being actively applied by the banks included in the research. Instead, several areas of customer management decision making are found to be influenced by heuristics. This dilemma for marketing accountability is addressed by emphasizing that CLV and customer equity, which are aggregate metrics, only provide certain indications regarding the relative value of customers and the approximate value of the customer base (or groups of customers), respectively. The value created by marketing manifests itself in the effect of marketing actions on customer perceptions, behavior, and ultimately the components of CLV, namely revenues, costs, risk, and retention, as well as additional components of customer equity, such as customer acquisition. The thesis also points out that although costs are a crucial component of CLV, they have largely been neglected in prior CRM research. Cost-cutting has often been viewed negatively in customer-focused marketing literature on service quality and customer profitability, but the case studies in this thesis demonstrate that reduced costs do not necessarily have to lead to lower service quality, customer retention, and customer-related revenues. Consequently, this thesis provides an expanded foundation upon which marketers can stake their claim for accountability. By focusing on the range of drivers and all of the components of CLV and customer equity, marketing has the potential to provide specific evidence concerning how various activities have affected the drivers and components of CLV within different groups of customers, and the implications for customer equity on a customer base level.

Vision based indoor positioning in a retail environment

Modern smart phones often come with a significant amount of computational power and an integrated digital camera making them an ideal platform for intelligents assistants. This work is restricted to retail environments, where users could be provided with for example navigational in- structions to desired products or information about special offers within their close proximity. This kind of applications usually require information about the user's current location in the domain environment, which in our case corresponds to a retail store. We propose a vision based positioning approach that recognizes products the user's mobile phone's camera is currently pointing at. The products are related to locations within the store, which enables us to locate the user by pointing the mobile phone's camera to a group of products. The first step of our method is to extract meaningful features from digital images. We use the Scale- Invariant Feature Transform SIFT algorithm, which extracts features that are highly distinctive in the sense that they can be correctly matched against a large database of features from many images. We collect a comprehensive set of images from all meaningful locations within our domain and extract the SIFT features from each of these images. As the SIFT features are of high dimensionality and thus comparing individual features is infeasible, we apply the Bags of Keypoints method which creates a generic representation, visual category, from all features extracted from images taken from a specific location. A category for an unseen image can be deduced by extracting the corresponding SIFT features and by choosing the category that best fits the extracted features. We have applied the proposed method within a Finnish supermarket. We consider grocery shelves as categories which is a sufficient level of accuracy to help users navigate or to provide useful information about nearby products. We achieve a 40% accuracy which is quite low for commercial applications while significantly outperforming the random guess baseline. Our results suggest that the accuracy of the classification could be increased with a deeper analysis on the domain and by combining existing positioning methods with ours.

Keittiömaailman matkassa 20 vuotta : Tutkimus erään keittiökalustevalmistajan johtavan markkina-aseman rakentamisesta ja säilyttämisestä

A View into the World of Kitchen: Development and retention of a leading position in the market of kitchen interiors - a case study of 20 years. This study focuses on the development of a kitchen interiors company, presently called Novart Inc., into the leading company of the industry from 1980´s to the present. The objective of the study is to describe the effects of strategic choices, the decisions of the management and the owner´s direction and control to the build up and the retaining of the leading position in the market. From theory point of view, strategic choices refer to com-pany purchases as corporate-level strategies, and business and marketing strategies. The empirical research was carried out in two phases and it is based on various company documents and records, and on the intensive interviews of seven key executives in the company. An abductive research design was utilized. The company gained the leading position in the kitchen market in Finland by company purchases, and the company has been able to retain the position. Firstly the goal was to expand to retail market and, secondly, the company has maintained the balance of supply and demand by closing the purchased production units when needed. The simultaneous use of these two strategic goals is a kind of a new observation, and the strategy may be suitable only for market leaders. During the latter part of the research period the strategy of com-pany purchases has been abandoned and the leading position in the market has been main-tained by developing systematically business and marketing capability. In the business and marketing strategies the distribution channels and the brands have been emphasized. During the research period the company has almost totally abandoned the long distribution channels and started to use its own channels built and named after the main brands. These are A la Carte, Parma and Petra. At the moment, in the beginning of the 21st century, a new distribution channel, the concept of the Kitchen World, is being built in addition to the channels mentioned above. The management´s decision making and the implementation the decisions have been well-considered. The executives emphasized the valuing of the importance of the decisions dif-ferently except the two decisions named the most important ones, i.e., the decisions to start own production of the raw material and to concentrate the business only to one company. The executive staff has also succeeded in managing crisis and threats of bankruptcy, and the company has been managed profitable. During all the four terms of ownership: Puolimatka Corporation, the Hankkija/Novera Corporation, the ownership period of the "bank", and the Nobia Corporate the ownership direction and control has been somewhat different. All the owners have paid attention to economic issues. The direction of cash flows and investments was at its strongest during the Hankkija/Novera term. For the last owner Nobia the production and marketing of the kitchen interiors has been the core business, which thus has strengthened the business and marketing capabilities of the target company of this research. A common denominator during all the four terms of ownership has been owners' trust gained by the professional skills of the management of the target company. This has lead to greater independence of the management of the company and less owners´ direction. Keywords: leading position, marketing strategy, management decisions, acquisition, corporate governance

Does relationship marketing improve customer relationship satisfaction and loyalty?

Purpose - This study investigates the relationship marketing (RM) strategy of a retail bank and examines whether - after its implementation - customer relationships were strengthened through perceived improvements in the banking relationship and consequent loyalty towards the bank. Design/methodology/approach - A survey was conducted on two profitability segments, of which the more profitable segment had been directly exposed to a customer oriented RM strategy, whereas the less profitable segment had been subjected to more sales oriented marketing communications. Findings - No significant differences were found between the segments on customers’ evaluations of the service relationship or their loyalty toward the bank. Furthermore regression analysis revealed that relationship satisfaction was less important as a determinant of loyalty in the more profitable segment. Research limitations/implications - This study was conducted as a case study of one specific branch of a bank group in Finland, which limits the external validity of its results. It was not possible to ascertain if, or to what extent, customers of the more profitable segment had received the intended RM treatment. Other limitations are also discussed. Practical implications - Customer orientation is desirable within retail banking and more studies are needed on the differential drivers of loyalty across customer profitability segments. By identifying the aspects of a banking relationship that are more highly valued among more profitable customers than among less profitable customers, bank managers would be able to more effectively devise appropriate strategies for different segments. Originality/value - The study contributes to the RM literature and marketing of financial services by providing empirical evidence of the effects of RM activities on customer relationship perceptions in different profitability segments.

Understanding Customer Loyalty and Disloyalty The Effect of Loyalty-Supporting and -Repressing Factors (first edition sold out, 'print on demand' 60 €)

Customer loyalty has been a central topic of both marketing theory and practice for several decades. Customer disloyalty, or relationship ending, has received much less attention. Despite the close relation between customer loyalty and disloyalty, they have rarely been addressed in the same study. The thesis bridges this gap by focusing on both loyal and disloyal customers and the factors characterising them. Based on a qualitative study of loyal and disloyal bank customers in the Finnish retail banking market, both factors that are common to the groups and factors that differentiate between them are identified. A conceptual framework of factors that affect customer loyalty or disloyalty is developed and used to analyse the empirical data. According to the framework, customers’ loyalty status (behavioural and attitudinal loyalty) is influenced by positive, loyalty-supporting, and negative, loyalty-repressing factors. Loyalty-supporting factors either promote customer dedication, making the customer want to remain loyal, or act as constraints, hindering the customer from switching. Among the loyalty-repressing factors it is especially important to identify those that act as triggers of disloyal behaviour, making customers switch service providers. The framework further suggests that by identifying the sources of loyalty-supporting and -repressing factors (the environment, the provider, the customer, the provider-customer interaction, or the core service) one can determine which factors are within the control of the service provider. Attitudinal loyalty is approached through a customer’s “feeling of loyalty”, as described by customers both orally and graphically. By combining the graphs with behavioural loyalty, seven customer groups are identified: Stable Loyals, Rescued Loyals, Loyals at Risk, Positive Disloyals, Healing Disloyals, Fading Disloyals, and Abrupt Disloyals. The framework and models of the thesis can be used to analyse factors that affect customer loyalty and disloyalty in different service contexts. Since the empirical study was carried out in a retail bank setting, the thesis has managerial relevance especially for banks. Christina Nordman is associated with CERS, Center for Relationship Marketing and Service Management at the Swedish School of Economics and Business Administration. The doctoral thesis is part of the Göran Collert Research Project in Customer Relationships and Retail Banking and has been funded by The Göran Collert Foundation.

A Relationship Mediated Theory of Internal Marketing (summary section only)

This report presents a new theory of internal marketing. The thesis has developed as a case study in retrospective action research. This began with the personal involvement of the author in an action research project for customer service improvement at a large Australian retail bank. In other words, much of the theory generating ‘research’ took place after the original project ‘action’ had wound down. The key theoretical proposition is that internal marketing is a relationship development strategy for the purpose of knowledge renewal. In the banking case, exchanges of value between employee participants emerged as the basis for relationship development, with synergistic benefits for customers, employees and the bank. Relationship development turned out to be the mediating variable between the learning activity of employee participants at the project level and success in knowledge renewal at the organisational level. Relationship development was also a pivotal factor in the motivation and customer consciousness of employees. The conclusion reached is that the strength of relationship-mediated internal marketing is in combining a market focused commitment and employee freedom in project work to achieve knowledge renewal. The forgotten truth is that organisational knowledge can be renewed through dialogue and learning, through being trustworthy, and by gaining the trust of employees in return.

Ratkaiseeko raha? : Tulospalkkiojärjestelmään ja työympäristöön liittyvien kokemusten yhteys esimiesten työtyytyväisyyteen ja työmotivaatioon

The aim of this study was to investigate the relationship between merit pay system and work environment and foremen´s work satisfaction and work motivation. There has been a lot of investigation on rewarding. Less research has been done on previous surveys among the merit pay systems and motivation investigations. According to former surveys, rewarding systems cannot be released from its context. Therefore this survey expanded to deal with work environment. It was also essential to investigate different dimensions of extrinsic and intrinsic motivation and equity of rewarding. Investigation or work motivation and work satisfaction was challenging because both of these concepts have been investigated under quite traditional frame of reference of work motivation theories. In some surveys, the concepts have not been even separated or they have been used even as synonyms. The data were collected with the 193 foremen working in the profit centers of the different chains of the company in the field of retail trade. The questions were: Are the experiences of merit pay system and work environment related to foremen´s work satisfaction and work motivation? Are the backround variables related to foremen´s work satisfaction and work motivation? The data collection was carried out by an electronic inquiry during May 2010. 137 replied from foremen working under merit pay system. The research material was analyzed with PASW-software. Various analyzing methods were used: factor analyses, regression analyses and group of different parametric and non-parametric analyses. In contrast to theoretical framework in the factor analyses work satisfaction and work motivation clustered into the same dimension. As a main result the atmosphere, possibilities to influence and the atmosphere of leading were strongly positively related to foremen´s work satisfaction and work motivation. According to regression analyses these factors were able to explain 55 % of the foremen´s work satisfaction and work motivation. The best explanatory variable was atmosphere. Instead, the backround variables (age, sex, working years, group of profession, education) were not associated with work satisfaction and work motivation.

Campylobacter jejuni and C. coli in Finnish poultry production

Campylobacter, mainly Campylobacter jejuni and C. coli, are worldwide recognized as a major cause of bacterial food-borne gastroenteritis. Epidemiological studies have shown handling or eating of poultry to be significant risk factors for human infections. Campylobacter contamination can occur at all stages of a poultry meat production cycle. The aim of this thesis was to study the occurrence and diversity of Campylobacter in broiler and turkey production in Finland. In summer 1999, 2.9 % of slaughtered broiler flocks were Campylobacter-positive. From the isolated strains 94 % were C. jejuni and 6% were C. coli. During years 2005-2006 one turkey parent flock, the hatchery, six different commercial turkey farms and different stages of the slaughterhouse were monitored during one and the half year. No Campylobacter were detected in either of the samples from the turkey parent flock or from the hatchery using the culture method. Instead PCR detected DNA of Campylobacter from the turkey parent flock and samples from the hatchery. Six out of 12 commercial turkey flocks were found negative at the farm level but only two of those were negative at slaughter. Campylobacter-positive samples within the flock at slaughter were detected between 0% and 94% with evisceration and chilling water being the most critical stages for contamination. All of Campylobacter isolates were shown to be C. jejuni. Campylobacter-positive turkey flocks were colonized by a limited number of Campylobacter genotypes both at the farm and slaughter level. In conclusion, in our first study in 1999 a low prevalence of Campylobacter in Finnish broiler flocks was detected and it has remained at a low level during the study period until the present. In the turkey meat production, we found that flocks which were negative at the farm became contaminated with Campylobacter at the slaughter process. These results suggest that proper and efficient cleaning and disinfection of slaughter and processing premises are needed to avoid cross-contamination. Prevention of colonization at the farm by a high level of biosecurity control and hygiene may be one of the most efficient ways to reduce the amount of Campylobacter-positive poultry meat in Finland. With a persistent low level of Campylobacter-positive flocks, it could be speculated that the use of logistic slaughtering, according to Campylobacter status at farm, might have be advantageous in reducing Campylobacter contamination of retail poultry products. However, the significance of the domestic poultry meat for human campylobacteriosis in Finland should be evaluated.

Campylobacter jejuni and C.coli in Finnish poultry production

Campylobacter, mainly Campylobacter jejuni and C. coli, are worldwide recognized as a major cause of bacterial food-borne gastroenteritis (World Health Organization 2010). Epidemiological studies have shown handling or eating of poultry to be significant risk factors for human infections. Campylobacter contamination can occur at all stages of a poultry meat production cycle. In summer 1999, every broiler flock from all three major Finnish poultry slaughterhouses was studied during a five month period. Caecal samples were taken in the slaughterhouses from five birds per flock. A total of 1 132 broiler flocks were tested and 33 (2.9%) of those were Campylobacter-positive. Thirty-one isolates were identified as C. jejuni and two isolates were C. coli. The isolates were serotyped for heat-stable antigens (HS) and genotyped by pulsed-field gel electrophoresis (PFGE). The most common serotypes found were HS 6,7, 12 and 4-complex. Using a combination of SmaI and KpnI patterns, 18 different PFGE types were identified. Thirty-five Finnish C. jejuni strains with five SmaI/SacII PFGE types selected among human and chicken isolates from 1997 and 1998 were used for comparison of their PFGE patterns, amplified fragment length polymorphism (AFLP) patterns, HaeIII ribotypes, and HS serotypes. The discriminatory power of PFGE, AFLP and ribotyping with HaeIII were shown to be at the same level for this selected set of strains, and these methods assigned the strains into the same groups. The PFGE and AFLP patterns within a genotype were highly similar, indicating genetic relatedness. An HS serotype was distributed among different genotypes, and different serotypes were identified within one genotype. From one turkey parent flock, the hatchery, six different commercial turkey farms (together 12 flocks) and from 11 stages at the slaughterhouse a total of 456 samples were collected during one and the half year. For the detection of Campylobacter both conventional culture and a PCR method were used. No Campylobacter were detected in either of the samples from the turkey parent flock or from the hatchery samples using the culture method. Instead PCR detected DNA of Campylobacter in five faecal samples from the turkey parent flock and in one fluff and an eggshell sample. Six out of 12 commercial turkey flocks were found negative at the farm level but only two of those were negative at slaughter. Campylobacter-positive samples within the flock at slaughter were detected between 0% and 94%, with evisceration and chilling water being the most critical stages for contamination. All of a total of 121 Campylobacter isolates were shown to be C. jejuni using a multiplex PCR assay. PFGE analysis of all isolates with KpnI restriction enzyme resulted in 11 PFGE types (I-XI) and flaA-SVR typing yielded nine flaA-SVR alleles. Three Campylobacter-positive turkey flocks were colonized by a limited number of Campylobacter genotypes both at the farm and slaughter level.In conclusion, in our first study in 1999 a low prevalence of Campylobacter in Finnish broiler flocks was detected and it has remained at a low level during the study period until the present. In the turkey meat production, we found that flocks which were negative at the farm became contaminated with Campylobacter at the slaughter process. These results suggest that proper and efficient cleaning and disinfection of slaughter and processing premises are needed to avoid cross-contamination. Prevention of colonization at the farm by a high level of biosecurity control and hygiene may be one of the most efficient ways to reduce the amount of Campylobacter-positive poultry meat in Finland. In Finland, with a persistent low level of Campylobacter-positive flocks, it could be speculated that the use of logistic slaughtering, according to Campylobacter status at farm, might have be advantageous in reducing Campylobacter contamination of retail poultry products. However, the significance of the domestic poultry meat for human campylobacteriosis in Finland should be evaluated.

Suolistopatogeenisten Escherichia coli -bakteerien esiintyvyys ripulipotilailla ja raa’oissa lihatuotteissa Burkina Fasossa sekä enterohemorraagisten E. coli -kantojen karakterisointi

Suolistopatogeeniset Escherichia coli -bakteerit eli ripulikolit aiheuttavat ihmisellä suolistoinfektioita. Kuten normaalimikrobiston E. coli -bakteerit, ne esiintyvät ihmisen lisäksi muiden nisäkkäiden, etenkin märehtijöiden, ja lintujen suolistossa. Lisäksi ne voivat esiintyä maaperässä ja vesistöissä. Ihminen voi saada tartunnan eläinperäisten elintarvikkeiden välityksellä tai juomalla eläinten tai ihmisen ulosteilla saastunutta vettä. Ripulikolit voidaan jakaa ainakin viiteen ryhmään perustuen niiden erilaisiin virulenssiominaisuuksiin: enteropatogeeninen E. coli (EPEC), enterotoksigeeninen E. coli (ETEC), enterohemorraaginen E. coli (EHEC), enteroinvasiivinen E. coli (EIEC) ja enteroaggregatiivinen E. coli (EAEC). EPEC aiheuttaa etenkin kehitysmaissa pikkulapsille ripulia. ETEC aiheuttaa turistiripulia ja vastasyntyneiden ripulia kehitysmaissa. EHEC aiheuttaa ripulia tai veriripulia, joka voi varsinkin pienillä lapsilla johtaa hemolyyttis-ureemiseen oireyhtymään (HUS) ja munuaisten vaurioitumiseen. EIEC aiheuttaa Shigellan kaltaista ripulia, joka voi olla veristä. EAEC on yhdistetty lähinnä pitkittyneisiin ripuleihin. Tutkimuksessa selvitettiin suolistopatogeenisten E. coli -bakteerien esiintyvyyttä Burkina Fasossa, josta ei ole saatavilla aikaisempaa tietoa ripulikolien esiintymisestä ihmisissä ja elintarvikkeissa. Ulostenäytteitä otettiin ripulia sairastavilta alle viisivuotiailta lapsilta maaseudulta kahdesta kylästä, Boromosta ja Gourcysta, ja maan pääkaupungista Ouagadougousta (110 näytettä). Lihanäytteitä (kanaa, nautaa, lammasta ja naudan suolta, jota käytetään ihmisravinnoksi) otettiin Ouagadougoun toreilla myytävistä kypsentämättömistä lihoista (120 näytettä). Näytteistä saadut bakteerisekaviljelmät tutkittiin monialukkeisella PCR-menetelmällä, joka tunnistaa viiden ripulikoliryhmän virulenssigeenejä. Lisäksi lihanäytteistä eristettiin 20 EHEC-kantaa shigatoksiinin stx-geenin havaitsemiseen perustuvalla pesäkehybridisaatiolla ja PCR-seulonnalla, ja karakterisoitiin mahdollisten virulenssiominaisuuksien selvittämiseksi. Tutkimus osoitti, että ripulikolien aiheuttamat suolistoinfektiot ovat yleisiä ripulia sairastavilla pikkulapsilla Burkina Fasossa. Ulostenäytteistä 59 % oli positiivisia. Useimmiten lapsilla esiintyi EAEC- (32 %) ETEC- (31 %) ja EPEC-patoryhmiä (20 %). EIEC- (2 %) ja EHEC-patoryhmiä (1 %) esiintyi vähän. Myös useamman patoryhmän sekainfektiot olivat yleisiä (24 %). Eri paikkakuntien välillä oli tilastollisesti merkitseviä eroja ripulikolien esiintymisessä. Gourcyssa ripulikoleja esiintyi useammin kuin Ouagadougoussa ja Boromossa. Tutkimuksessa kävi ilmi, että Ouagadougoun toreilla myytävissä lihoissa on paljon ripulikoleja. Lihanäytteistä 43 % oli positiivisia. Yleisimmin lihoissa esiintyi EHEC (28 %), EPEC (20 %), ETEC (8 %) ja EAEC (5 %). EIEC-ryhmää ei havaittu lihoissa. Myös useamman patoryhmän sekakontaminaatioita löytyi (17 %) lihoista. Ripulikolien esiintyvyydessä eri lihojen välillä ei ollut tilastollisesti merkitseviä eroja, kun tarkasteltiin kaikkia patoryhmiä yhdessä. Eri patoryhmien esiintyvyyttä tarkasteltaessa EHEC-patoryhmää ei esiintynyt ollenkaan kanassa ja ero oli tilastollisesti merkitsevä muihin lihoihin verrattuna. Lihoista eristetyt 20 EHEC-kantaa kuuluivat 14 eri serotyyppiin, joista osa on aikaisemmin eristetty suolistoinfektioihin ja HUSoireyhtymään sairastuneilta ihmisiltä. Kaikki kannat olivat stx1-positiivisia ja puolella oli lisäksi stx2-geeni, jota pidetään shigatoksiinin virulentimpana muotona. Kahdelta EHEC-kannalta löytyi myös ETECpatoryhmän lämpöstabiilin enterotoksiini Ia:n geeni eli kannat olivat kahden patoryhmän välimuotoa ja osoitus geenien siirtymisestä eri patoryhmien välillä. Vaikka nuorimmat näytteen antaneet lapsipotilaat tuskin söivät lihaa, sen voidaan ajatella silti olevan edustava näyte lasten elinympäristöstä, sillä lasten ruoka valmistetaan usein samoissa oloissa, joissa raakaa lihaa käsitellään. Saastunut liha voi siten olla pikkulasten ripulikoli-infektioiden aiheuttaja.