Drivers of customer equity in the South African retail banking industry.
Date
2014-07-28
Authors
Mabhunu, Mind
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Abstract
ABSTRACT
The South African retail banking industry is facing new competitive challenges. The
Competition Commission and the Treasurer are currently investigating ways increasing
competition in the South African banking industry. It is expected that recommendations
will be made resulting in changes to some of the operational and pricing aspects of the
industry to make it more competitive. Another challenge is that customers increasingly
expect banks to offer value that is comparable to the high cost of banking. This
research report investigates the drivers of Customer Equity in the South African retail
banking industry, and ranks these in order of importance. The research focuses on the
four big banks: Standard Bank, ABSA, First National Bank and Nedbank.
A review of the literature on Customer Equity highlighted three key drivers, which are:
value equity, brand equity and retention equity. The focus groups validated these
drivers as well as identified 19 sub-drivers. 192 Respondents were asked to rate the
importance of the sub-drivers on a scale of 1-5 and then rate the performance of their
banks on these drivers. A Principal Components Analysis was used to analyse the
results of the quantitative survey and determined the relative importance of each of the
sub-drivers as well as the performance of South Africa’s Big Four banks.
Value Equity was found to be disproportionately more important compared to Brand
and Retention Equity. The most important sub-driver was Reliability of banking
systems, which is a sub-driver of Value Equity. Recommendations are made on how
South African Retail banks can improve their marketing strategies to maximize
Customers Equity. These recommendations are based on the relative importance of
the identified sub-drivers as well as the performance of the banks.
Description
MBA 2012
Keywords
Customer relations, Banks and banking , Marketing -- Management .