The management of customer relationships as assets in the retail banking sector

Abstract

The profitable management of customer relationships is currently a rapidly expanding research area. However, there is a lack of empirical studies examining the current practices of firms specifically with regard to the management of customer relationships as assets. This study contributes to bridging this research gap by exploring the extent to which retail banks in the Nordic region are currently implementing key aspects related to what has been termed customer asset/equity management in the literature. Based on the findings, obstacles to the successful implementation of a customer asset management approach are identified and discussed.

Keywords:

• customer asset management
• customer equity
• customer lifetime value
• customer portfolios
• retail banking

Acknowledgements

The author gratefully acknowledges the financial support provided by the Finnish Center for Service and Relationship Management (FCSRM) and Liikesivistysrahasto – Foundation for Economic Education. The author also extends his thanks to Professor Lynette Ryals of Cranfield School of Management, Dr Maria Sääksjärvi of Delft University of Technology, and Professor Christian Grönroos, Henrich Nyman, Dr Jonas Holmqvist and other colleagues at Hanken School of Economics for useful comments on earlier versions of this paper.

Notes

1. The abbreviation CRP (customer relationship profit) was originally proposed by Storbacka (1994), who defined it as relationship revenue (RR) minus relationship costs (RC).

2. In response to the recent financial crisis, the Basel Committee on Banking Supervision (BCBS) proposed new capital stability rules in a December 2009 paper, which is already being widely referred to as Basel III.