Situation Analysis
Bank customers act as both suppliers and consumers to the banks. The customers supply the bank with money, which is the raw material for financial institutions. On the other hand, customers act as consumers by being the buyers of various products of the financial institutions.
Therefore, it is vital for a bank to have customers who would be able to supply it with large amounts of money and consume huge quantities of the bank’s products (Wright, Watkins and Ennew 65). Big banks prefer to attract corporate customers. The high value of the transactions of corporate customers reaps huge financial benefits to the banks. On the other hand, small retail customers undertake small value transactions.
However, the profit margins of financial transactions of small customers are usually higher than the profit margins of transactions of corporate customers. Increased competition in the retail banking market segment threatens to reduce the profit margin in this market segment (Quiry et al 264) However, big banks have enough financial resource to cope with the stiff competition in the market segment.
Problem Analysis
There is a steady increase in the amount of small retail customers that banks serve. This market segment offers a suitable growth opportunity for banks. The retail banking segment is the most profitable segment. Small retail customers require many banking services.
Some of the services include payroll management and investment products. Therefore, it is vital for banks to formulate strategies that would help in attracting small retail customers. Big banks have generally been unsuccessful in attracting and retaining small retail customers.
One of the major factors that lead to poor retention of small retail customers is the inability to offer high quality services to small retail customers. Big banks do not usually solve the problems of the small retail customers quickly and courteously. In addition, big banks charge high fees, which are prohibitive to small retail customers (Rezaee 88). Big banks do not usually have products that fulfill the needs of the small retail customers.
This is due to the wide variety of products that small retail customers need. In addition, small customers account for a small percentage of the revenue of big banks. Therefore, big banks do not prioritize the interests of the small retail customers. Mismatch of products makes small retail customers look for banking services in other financial institutions. The location of big banks is also one of the major factors that restrict big bank’s ability to attract small retail customers.
Big banks are usually located in upmarket areas, which are far from the location of the business establishments of small retail customers. This makes it difficult for small retail customers to access the services of big banks easily. Therefore, small retail csuromers seek financial services from financial institutions that are in their vicinity.
Solution Analysis
There is no single approach that would enable banks attract and retain small retail customers. For banks that wish to attract small retail customers, it is vital for the banks to understand the dynamics of their relationship with small retail customers.
Banks should understand the major factors that drive the profitability of the small retail customers. In addition, banks should understand the cross-selling opportunities that exist in this market segment. Cross selling would enable banks improve their profitability in this market segment significantly (Wright, Watkins and Ennew 154).
One of the major strategies that banks may use to attract and retain small retail customers is investing in innovative products. The innovative products should be responsive to the needs of the small retail customers. In addition, banks should formulate a strategy that would be responsive to the needs of the small retail customers.
Big banks should not just offer personalized products to customers; they should strive to realize the full value of their relationship with the small retail customers. Therefore, banks should offer services and pricing structures that appreciate the relationship that the bank has with the small retail customers.
Implementation Analysis
Big banks should ensure that they implement a strategy that would help to attract and retain small retail customers. However, the strategy should not contravene the major policies of the bank. Therefore, it is unlikely for big banks to move from their upmarket locations in order to attract small retail customers.
This is because the movement from upmarket locations may alter the image of the bank. This may be detrimental to the bank. However, the big banks can introduce innovative mobile and internet banking solutions that would help in attracting and retaining small retail customers. In addition, big banks should offer a wide variety of products that would fulfill the banking needs of small retail customers.
It is vital for banks to ensure that they introduce the measures that attract small retail customers systematically. Introducing drastic measures would be detrimental to image of the bank. This may trigger the exit of existing corporate customers. Big banks that attract and retain small retail customers while retaining their existing corporate customers guarantee their future financial prosperity.
Works Cited
Quiry, Pascal, Yann Le Fur, Antonio Salvi, Maurizio Dallochio and Pierre Vernimmen. Corporate finance: Theory and practice. Hoboken, NJ: John Wiley & Sons, 2006. Print.
Rezaee, Zabihollah. Financial institutions, valuations, mergers, and acquisitions: The fair value approach. Hoboken, NJ: John Wiley & Sons, 2001. Print.
Wright, Mike, Trevor Watkins and Christine Ennew. Marketing financial services. London: Routledge, 2012. Print.