Brand positioning in financial services: CUSTOMER DEFECTION

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Brand positioning in financial services: CUSTOMER DEFECTION

One of the key battles for financial services firms is how to reduce the defection rate of its customer base, or in other words, how to retain customers. Customer defection is costly to firms as not only do they have to replace the defecting customer with a new customer, and thus have acquisition costs, but also the new customer is usually more costly to service due to the set-up costs. Thus there has been an increasing focus on retention marketing in the past decade in an effort to reduce customer defection rates. A concept linked to customer defection is customer vulnerability, which is the likelihood of the customer defecting at a future point in time. This is a cognitive construct that provides an initial verbal indicator of likely subsequent buying behaviour.

A key market-based asset for the firm is the current customer base. Current customers are also a primary target market for any mass media marketing activities, whether the marketing manager intends them to be or not, in that current customers are more likely to notice the brand’s marketing communications than are non-customers. Therefore, it would seem to be good marketing practice to ensure that positioning choices are attributes that are linked to lower customer vulnerability. This provides validity to the approach taken in this research which is to use the link between positioning attribute association and customer vulnerability to assess the comparative performance of positioning attributes.

This leads to the key research questions addressed in this research:

—      Which positioning attributes are more strongly associated with customer vulnerability?

—      Do these ‘better’ positions vary across brands?

—      Do ‘better’ positions remain so over time?


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Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

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