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7.4.3 Client Value Generation: Customer Success

So how can the success experienced by customers with their bank relationship in the digital age be measured and controlled? The term “customer value” has been used frequently in the literature (Pechtl 2005; Kotler and Bliemel 2007). It can have two different meanings, as it can be understood from the perspective of the bank or from that of the customer.

From the perspective of the bank, the value of the customer is seen as his contribution to achieving the monetary and non-monetary goals of a bank (Fig. 7.16). The amount of customer value from the viewpoint of the customer indicates whether it is worthwhile for the customer to commence or to maintain a relationship with a bank (Fig. 7.17).

Fig. 7.16 Classic concept of the customer value (Source Own illustration, based on Kotler and Bliemel 2007,p. 58)

The factors that influence customer value are well known. Measuring customer value, or the individual factors, is a controversial topic in the literature.[1] What all treatments of customer value have in common is that they are based on a construct such as the concept of benefit. Benefit is composed of the consumption of the good, the associated service provided, the image of the bank and the available distribution channels. The price expected to be paid and additional possible expenses for consuming the product or service are compared with the benefit from the service. The expenses frequently incurred by the customer in addition to the sales price can be termed additional costs. According to Pechtl (2005, p. 1) they are differentiated in the industrial context as follows:

• Follow-up costs (such as switching, operational, repair and maintenance costs)

• Divergence costs (such as transport costs, time required for transport)

• Transaction costs (such as search, agreement, control and implementation costs)

In the context of financial services, follow-up costs might include switching banks, divergence costs could represent the time spent in visiting a customer advisor in a branch, and transaction costs include, for example, the cost of examining account balances.

The difference between the benefit and the sum of expenses is then known as the customer value. Synonyms include net benefit or value gain. Until now, the main focus has been on how banks can exert influence on the aforementioned aspects of customer value by means of classic marketing channels, and thus maximise their success.

Fig. 7.17 Client value in the digital age (Source Own illustration, based on Kotler and Bliemel 2007, p. 58)

The previous discussion has now shown that new needs arise. Now, customers are no longer being satisfied at all needs levels. Differentiation features exist at the higher needs levels (see Fig. 7.14). The key question is which components influence the “success” derived by the customer from exchange relationships—hereafter referred to as “customer success” or “client value” (Fig. 7.17).

In contrast to customer value, the term “client value” refers to all positive and negative experiences had by the customer when consuming bank services. These include the previous classic factors of customer value. These factors operate at the level of basic physiological or security needs, as they essential comprise the classic bank services for customers. Gradually, the three highest needs levels will become ever more relevant for all customer groups (see Fig. 7.14).

The elements of client value must therefore be supplemented with the following needs to be satisfied:

• Empowerment: Learning about the financial product or the financial market in general in the context of the service relationship.

• Participation: Active involvement in the provision of the service or the development of the product.

• Impact: Satisfaction by procuring services with a positive social influence—such as future-viable investment products.

These factors are not yet being covered by the conventional control mechanisms of banks. Not every component of possible client value is of equal importance to each customer group. The growing proportion of emancipated customers means that the “new” and previously unfulfilled needs—from the classic banking perspective—will become increasingly significant. Therefore, the future-oriented control of client value integrates all of the customer needs presented.

Prior to the digital age the factors of client value were stable over a long period. The new understanding of client value is a sensible initial rough categorisation for the challenges of the digital age. In future, the development of the needs of digital natives must be observed very closely in order to refine or, where necessary to adapt this rough categorisation. In that respect, the graphic shown above is merely a momentary snapshot of possible aspects of client value. Changes to needs will produce not inconsiderable differentiation opportunities, as customer experience the difference between actual offers and their needs as a “pain”. Those who succeed in evaluating these “pain points” can exploit these differentiation opportunities (Osterwalder et al. 2011). The resulting client value can also be interpreted as a standard for the performance capability of banks. Wherever resources are transformed into success from the customer perspective, added value will be created (Mairhofer 2009). It remains unclear, however, for which aspects of client value customers are willing to pay banks in future, and which needs they can cover without the help of banks.

  • [1] For instance, how much a customer is willing to pay for a service is analysed. This transformation from benefit from a service into the price that he is willing to pay is complex; it is also unclear how additional costs should be treated (Adler 2003; Balderjahn 2003).
 
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