Relationship Banking in Practice: Perspectives from Retired and Serving Retail Branch Managers

• Author: Roisin Kerr,Mark Durkin
• DOI: http://doi.org/10.1002/jsc.2045
• Published date: 01 January 2016
• Date: 01 January 2016

RESEARCH ARTICLE

Strat. Change 25: 27–43 (2016)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.2045

Copyright © 2016 John Wiley & Sons, Ltd.

Strategic Change: Briengs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.2045

Relationship Banking in Practice: Perspectives from

Retired and Serving Retail Branch Managers1

Mark Durkin

School of Marketing, Ulster University, UK

Roisin Kerr

School of Marketing, Ulster University, UK

As the banking industry continues to go through dramatic change, this study

explores the views and perspectives of retired and serving managers in a case

bank with respect to how relationship management in retail branch banking has

changed over the last 50 years.

In 2000, the UK’s inuential Cruickshank Report accused UK banks of operating

within a series of complex anti-competitive monopolies that continue to push

rms toward bank borrowing rather than equity nance (Ibbotson and Moran,

2003). is accusation triggered an investigation (Competition Commission

Report, 2002) into the provision of bank services to small rm owners and entre-

preneurs seeking to establish and grow their enterprises, and prompted various

government actions to try to help stimulate supply-side support (House of

Commons Treasury Committee, 2011; Project Merlin, 2010) in terms of loan

funding availability and personal nance products (e.g., mortgages). As a conse-

quence of the current economic crisis, retail banks are experiencing enormous

challenges with regard to managing the full spectrum of customer relationships

and are under constant criticism for not doing enough to support relationships

in both the personal and business segments (Tyler, 2011). As reviews into banking

practices continue apace, and with even the UK Labour opposition committing

to still further regulation if elected, it is easy to understand why the development

of demonstrably more positive relationships between customers and banks is so

important.

On the demand side of the business model, but less reported than the supply-

side issues of small rm access to nance, are personal retail banking customer

relationships. It is recognized that competition between banks on personal current

accounts is muted by diculties of switching between providers and by a lack of

transparency relating to the banking services on oer. In short, personal customers

1 JEL classication codes: M15, M30.

Technological advances in retail

banking have led to improved

knowledge about customers and

search–buy behaviors can now be

tracked in more sophisticated and

predictive ways.

The challenge appears to be how

to leverage this new knowledge in

ways that deliver value to

customers and the bank when

customers are interacting less

frequently with staff members

in-branch.

While it would never be feasible

to return to the highly

personalized and intimate

relationships between bank

branch managers and their

customers in former generations,

something of the personal appears

to have been lost in the

increasingly automated banking

environment.

28 Mark Durkin and Roisin Kerr

Copyright © 2016 John Wiley & Sons, Ltd. Strategic Change

DOI: 10.1002/jsc

are often not well placed to make informed choices

between eectively competing suppliers of banking ser-

vices, and more needs to be done to improve the potential

for customer mobility (Vickers, 2011). According to

Ernst& Young (2011), in comparison with other devel-

oped economies, customer condence in banking within

the UK has fallen dramatically, with 63% of customers

stating that they have lost trust in the banking sector.

In light of such toxic publicity, those within the

banking sector are under pressure from government as

well as public opinion to take steps to review their rela-

tionship approach and to seek to rebuild trusting relation-

ships with customers. Indeed, throughout recent years

there have been calls for a return to what some regard as

the ‘halcyon days’ of banking – when harmonious rela-

tionships were perceived to have existed and branch man-

agers were seen as accessible and supportive, had delegated

decision-making authority, knew the customers of their

locale well, could risk-assess quickly and accurately from

personal knowledge, oered good judgment and wide

industry experience, and when technology took a distant

second place to the priority of excellence in personal

service (Aiken, 2012; Rohrer, 2008).

However, one wonders how accurate that picture

really is of relationship banking in the past, and to what

extent it may be the case that as the sector undergoes a

particularly dicult period of transition now, one is

inclined to overstate the often half-remembered positives

of the past. As banks go through this current period of

unprecedented change in terms of banking regulation,

right-sizing strategies, and changing operational deliv-

ery processes, it seems timely to revisit the ways in

which customer relationships were managed in the past

and explore how this might inform how things are chang-

ing today.

Accordingly, in the hope of illuminating the general

area of relationship banking practice, the aim of this study

is to establish the perspectives of both retired and current

bank branch managers with a view to understanding their

respective models for eective relationship banking

practice and to identify the enablers and barriers impact-

ing such eectiveness.

erefore, adopting a qualitative methodology, retired

and current bank executives from the case bank were

interviewed separately and issues of relationship manage-

ment, service excellence, and the role of technology in

marketing orientation were openly explored.

Marketing orientation and relationship

management

In the current economic climate it is important to focus

on the extent to which a marketing orientation exists in

banking services, how such a marketing orientation (MO)

is manifest (Howcroft et al., 2007), and to what extent

the prevailing orientation diers from that embraced in

previous years from a relational perspective. e work of

Ames (1970) is instructive in this regard, presenting cri-

teria through which an organization’s apparent marketing

orientation can be assessed in a robust fashion, and indeed

this model has been used within a nancial services

context in the past (Baker, 1983).

Ames’ (1970) work in this area dierentiates between

what is argued to represent the ‘trappings’ of marketing

in an organization and the ‘substance.’ Trappings are pro-

posed to be:

• declarations of support for marketing from top

management;

• creation of a marketing organization;

• adoption of new administrative mechanisms in support

of marketing;

• increased spend on marketing.

But, as Ames observes, ‘these moves … by themselves are no

guarantee of marketing success’ (p. 94). e kind of change

that is needed is a fundamental shift in thinking and

attitude throughout the company, so that everyone in

every function area places paramount importance on

being responsive to market needs. e relevance of this