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How Relationship Marketing contributes to gaining
customer loyalty to securities brokerage firms in
The Stock Exchange of Thailand (SET)?
Kanate Wangpaichitr, DBANewcastle Business School
Northumbria University
28 April 2010
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� Literature Review
� Research Question & Objectives
� Research Methodology
� Findings & Conclusion
� Research Contributions
� Discussion
Presentation Structure
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Literature Review
Review of three constructs
underlying the research
RM in Financial
Services Context
Thailand’s
Capital Market
RM in Thailand’ s
Financial Services
RM in Thailand’s
Securities Brokerage
Review of RM in financial services
3
Relationship Marketing
(RM)
LoyaltyRM and its Impact
on Loyalty
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RM in Various Perspectives
� RM involves the use of database in which information is
compiled, analysed and reformulated to meet individual
needs of customers (Nowesnick, 1993).
� Ongoing, interactive use of customer databases leads to
mutually beneficial relationships
(Gilbert & Choi, 2003).
� The transformation of customer information systems from
basic data depositories into customer-driven marketing
information is the key to long-term competitiveness
(Lacey & Morgan, 2009).
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RM in Various Perspectives (Cont.)
� RM requires formal and informal exchanging and sharing of
meaningful and timely information (Camarero, 2007).
� RM means providing information that is trustworthy, deals
with quality and fulfils promises (Ndubisi & Wah, 2005).
� RM requires strong personal relations, interaction and
social exchange in order to succeed
(Zineldin & Philipson, 2007).
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RM in Various Perspectives (Cont.)
� RM requires traditional external marketing tools, activities
and process to support it, e.g. the 4Ps, advertising, direct
mail, marketing communication and relationship building
(Gronroos, 2000).
� The organisations must undertake RM activities at an
appropriate level to remain competitive
(Ward & Dagger, 2007).
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� RM is relatively morestrategic
� RM focuses on building relationship with all stakeholders
� RM concentrates on customer emotions and behaviours
e.g. bonding, empathy and trust.
� CRM is more tactical
� CRM focuses on building
relationship with customers
� CRM focuses on how
management can maintain and enhance relationship
Differences of CRM and RM
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Shift of TM’ to ‘RM’
Mutual
interdependence
Independence and choice
Mutual
cooperation
Competition
and
conflict
Transaction
Marketing (TM)
Relationship
Marketing (RM)
Source: Sheth and Parvatiyar (2000) 8
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RM involves a process of attracting, maintaining and
enhancing relationship with customers and stakeholders …
(and, when necessary, terminating them) at a profit, so that the
objectives of the parties involved are achieved through mutual
exchange and fulfilment of promises.
(Das, 2009, Zineldin and Philipson, 2007)
So, What is RM?
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“There is no universally agreed definition of customer loyalty,
but it can be seen as a commitment to continue to do business
with particular firm on an on-going basis” (Zineldin, 2006)
Customer Loyalty
10
Loyalty has two dimensions – behavioural loyalty and
attitudinal loyalty (Lam & Burton, 2006).
� Behavioural loyalty measures by frequency of purchase or
word of mouth.
� Attitudinal loyalty is the feeling of attachment, psychological
bonding, linkage to one provider.
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RM and its Impact on Customer Loyalty
� RM is considered an effective strategy, not only for
promoting loyalty, but it also crucial in moving target
customers up the ladder of loyalty (Payne et al., 1995).
� The ultimate goal of RM is to bolster already strong
relationships and convert indifferent customers into loyal
ones (Ndubisi, 2007).
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Suspect
Prospect
Customer
Honeymooner / Client
Supporter
Advocate
Partner
ActivePassive
The RM Ladder of Customer Loyalty
Source: Adapted from Payne et al. (1995)12
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RM in the Financial Context
� The banking sector has advocated RM as a key option in
gaining customer loyalty (Gilbert & Choi, 2003).
� In the high-level financial services, the relationship is a
major factor in satisfaction and customer loyalty
(Leverin & Lijandar, 2006).
� RM can, but need not, to be directed towards all customers
of an institution. It is often directed only at the most
profitable areas (Abratt & Russell, 1999).
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RM in the Financial Context (Cont.)
� Ineffective relationship management appeared to be a key
contributor to service switching (Lam & Burton, 2006).
� In RM, financial institutions are advised to focus on the
emotional tone of their interactions with customer and to
understand of their customers’ behaviours
(Lam & Burton, 2006).
� Two-thirds of information and knowledge derive from
informal face-to-face interaction; the remaining comes from
documentation (Davenport, 1994).
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The Owner and Financier Relationship
Types of Owners
1. Private business run by
core owner
2. Long-term investors
3. Short-term investors
4. Cooperative Partnerships
5. Government ownership
Other Types of Financiers
1. Banks
2. Suppliers
3. Customers
4. Subsidies
Other influencers
1. Financial analysts
2. Investment brokers
3. The stock exchange
4. Government
5. Media
Board of directors
Top management
Various functions
The
Marketing
Function
Source: Gummesson (1999)
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RM in Thai Financial Services
� Thailand is a high-context culture, therefore, strong
relationship being a cornerstone of this society
(Holmes & Tangtongtave, 1997).
� Among Thai cultural characteristics, communication and
personal interaction is very important
(Petison & Johir. 2008).
� Thai consumer behaviour is distinct, placing a lot of
importance on the ‘personal touch’
(Chaoprasert & Elsey, 2004).
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Gap & Motivation
� In financial services, RM practices are not yet fully
developed and implemented (Gilbert & Choi, 2003).
� There is a significant lack of practical and empirical
research, focusing on the consequences of maintaining
long-term relationship between customers and services
providers (Molina et al., 2007).
� RM research has concentrated more on theory building
than on applications relevant to industry and practitioners
(Ward & Dagger, 2007 and Das, 2009).
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Originality of this Research
RM in Financial
Services Context
Thailand’s
Capital Market
RM in Thailand’ s Financial Services
RM in Thailand’s Securities Brokerage
“Incomplete development and implementation
of RM in financial services”
Originality
of
Research
No research on RM and its impact on customer loyalty in the Thai securities industry.
Relationship Marketing
(RM)
LoyaltyRM and its Impact
on Loyalty
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Research Question
“How does ‘relationship marketing’ contribute to gaining customer loyalty to securities brokerages?”
Research Objectives:
� To investigate RM practices in securities brokerage
firms in Thailand
� To investigate factors that impact customer loyalty to
securities brokerage firms in Thailand
� To explore how these RM practices impact customer
loyalty to securities brokerage firms in Thailand
� To produce academic knowledge that contributes to
understanding how RM impacts customer loyalty to
securities brokerage firmsThe first study of RM and customer loyalty in securities
brokerage firms in Thailand or any other emerging stock
market in South East Asia
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Research
Methodology
Interpretivism
Inductive Approach
11stst & 2& 2ndnd PhasesPhases (Pilot Studies)
Methods1) 16 Semi-structured Interviews
2) 3 Non-participant Observation Cases
AnalysisQualitative Content Analysis
Interview Task
1) Noting & Tape Recording2) Transcribing & Coding
Observation Task1) Noting & Coding
2) Typing & Summarising
33 rdrd PhasePhase (Main Study)
Methods
1) 24 Semi-structured Interviews2) 4 Participant Observation Cases
AnalysisQualitative Content AnalysisInterview Task
1) Noting and & Recording
2) Transcribing & CodingObservation Task1) Noting & Coding
2) Typing & Summarising
Testing & Modification- method & technique
- validity- interview questions
Research Design
Interpretivism
Inductive Approach
11stst & 2& 2ndnd PhasesPhases (Pilot Studies)
Methods1) 16 Semi-structured Interviews
2) 3 Non-participant Observation Cases
AnalysisQualitative Content Analysis
Interview Task
1) Noting & Tape Recording2) Transcribing & Coding
Observation Task1) Noting & Coding
2) Typing & Summarising
33 rdrd PhasePhase (Main Study)
Methods
1) 24 Semi-structured Interviews2) 4 Participant Observation Cases
AnalysisQualitative Content AnalysisInterview Task
1) Noting and & Recording
2) Transcribing & CodingObservation Task1) Noting & Coding
2) Typing & Summarising
Testing & Modification- method & technique
- validity- interview questions
Research Design
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Research Methodology (Main Study)
Multi-method of Data Collection� Semi-structured interviews (24)
- Local and international brokerage firms- Institutional and retail customers
� Participant observations (4 cases)
� Author’s research diary
� Research documentation
Data Analysis Techniques
Interview Tasks
� Qualitative content analysis
- Noting and recording
- Transcribing and coding
Observation Tasks
� Noting and coding
� Typing and summarising
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Research Findings
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First Objective : RM Practices
Findings confirmed that securities brokerage firms in Thailand
implemented three types of RM activities:
• Information marketing activities
• Relationship-building activities
• Database marketing activities
The research also revealed a number of similarities and
variations between stakeholders in relation to RM practices.
Details are as follows ……
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Three Types of RM Activities
RM PracticesRM Practices
Information-marketing activities:• Provide high quality research papers
• Arrange small group seminars
• Corporate accesses & company visits
• Meeting with government officials & experts
• Telephone
• Informal information updates
Relationship-building activities:• Inviting customers to lunch / dinner
• Leisure activities e.g. day trip, river cruises
• Sporting activities e.g. taking customer to golfing,
tennis tournaments
• Special events e.g. thank you parties
Database-marketing activities:• Customer Relationship Management system (CRM)
• Customer’s needs and behaviours
• Life styles
• Sending cards, emails & SMS
• Direct marketing e.g. customer segmentations
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LocalSecurities Brokerage Firms
LocalLocalSecurities Brokerage Firms
Information-marketing activities
Relationship-building activities
Database-marketing activities
ShortShort--term individualterm individualcustomers
RM Practices for
‘Short-term Individual Customers’
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LocalSecurities Brokerage Firms
LocalLocalSecurities Brokerage Firms
Relationship-building activities
Database-marketing activities
InstitutionalInstitutional and
longlong--term individualterm individualcustomers
Information-marketing activities
RM Practices for
‘Institutional and Long-term Individual Customers’
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InternationalSecurities Brokerage Firms
InternationalInternationalSecurities Brokerage Firms
Information-marketing activities
Relationship-building activities
Database-marketing activities
Foreign institutionalForeign institutionalcustomers
RM Practices for
‘Foreign Institutional Customers’
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Second Objective : Influential Factors
Findings demonstrated three main factors impacting
on customer loyalty:
• Providing high quality research papers
• Having close relationships with customers
• Providing efficient trade execution services
A significant addition to current theory and practice was the finding that various types of participants were influenced
differentially by each of these factors.
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Quality of
RM Practices
Quality ofQuality of
RM PracticesRM Practices
Information services
Understanding customers’
investment behaviours
Providing one-stop services
BehaviouralBehavioural LoyaltyLoyalty
Factors Outcome
Most Influential Factors for
‘Local Securities Brokerages’
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Quality of
RM Practices
Quality ofQuality of
RM PracticesRM Practices
Having good relationships with
customers
High quality summaries of key
information
Providing un-biased and
independent advice
BehaviouralBehavioural LoyaltyLoyalty
Factors Outcome
Most Influential Factors for
‘International Securities Brokerages’
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Quality of
RM Practices
Quality ofQuality of
RM PracticesRM Practices
Superior research papers andrecommendations
High quality executions
Efficient marketing services
BehaviouralBehavioural LoyaltyLoyalty
Factors Outcome
Most Influential Factors for
‘Institutional Customers’
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Quality of
RM Practices
Quality ofQuality of
RM PracticesRM Practices
Human relationships orpersonal touch
High quality recommendations
and research support
BehaviouralBehavioural LoyaltyLoyalty
Factors Outcome
Most Influential Factors for
‘Retail Customers’
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Third Objective : RM Impacts
The study confirmed that,
by implementing RM with
targeted customers,
brokerages not only ‘gained’and ‘strengthened’ - but
effectively ‘maintained’significant customer loyalty
RM Practices
• Information-marketing Activities
• Relationship-building Activities
• Database-marketing Activities
‘Strengthening’
Loyalty
‘Maintaining’
Loyalty
‘Gaining’
Loyalty
Customer
Loyalty
Customer
Loyalty
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Conclusion
This research confirmed that RM had a demonstrable
impact in gaining customer loyalty to securities brokerage
firms in Thailand.
However, RM positively impacted individual short-term
investors’ loyalty to particular staff and not to the brokerage.
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Summary of Key Research Findings
35
Brokerage Firms 1st Objective
RM Practices
2nd Objective
Influential Factors
3rd Objective
RM Impacts
Research Outcome
LocalBrokerageLocalLocal
Brokerage
InternationalBrokerage
InternationalInternationalBrokerage
Information-marketing
Activities
Relationship-marketing
Activities
Database-marketing
Activities
Institutional customers
• Research papers &
recommendations
• Dealer executions
• Marketing services
Retail customers
• Relationships &
personal touch
• Good recommendations
& research support
Local brokerages
• Information services
• Understanding customers’
behaviours
• Providing one-stop services
International brokerages
• Good relationships
• Summaries of key info.
• Un-biased and independent
advice
‘Strengthening’
Loyalty
‘Maintaining’
Loyalty
‘Gaining’
Loyalty
RM has an impact in
gaining customer loyaltyto securities brokerage
firms.
RM has an impact in
gaining customer loyaltyto securities brokerage
firms.
Trust
however,
short-term retail
customers’ loyalty toparticular staff,
not to the firm.
however,
short-term retail
customers’ loyalty toparticular staff,
not to the firm.
• Short-term Individual Customers
• Long-term Individual Customers
• Institutional Customers
• Foreign Institutional Customers
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Research Contributions
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Theoretical Contributions
This research adds to current theory by bringing together
three main RM components which had previously been treated
separately in literature:
1. Information-marketing activities
2. Relationship-building activities
3. Database-marketing activities
This is the first study to provide a synthesised
investigation of these activities.
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Professional Practical Contributions
The research findings support and extend the current body of
practice knowledge on RM in the financial services sector.
The securities brokerages have to develop systematised database
marketing to increase customer satisfaction and loyalty.
The research established the three factors that most influenced
customer loyalty and explained the dynamics of how these impacted
on different types of participants.
RM in practice, ‘knowing your customers’.
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Policy Implications
The findings have significant implications for the SET’s current
policies and practices. For example:
� It is crucial to promote RM and its benefits to stakeholders;
� SET and securities brokerage firms must develop a more subtle
understanding of customer needs and behaviours;
� SET/CMDF and related organisations should create or set up a
‘research portal’ for the industry;
� Improving the competence of marketing/sales officers in product
knowledge and RM.
In RM, one size does not fit all.
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� The research found brokerage firms did not utilise customer
databases in a systematic fashion. An in-depth study of customers
database management and implementation will be very useful for
the industry.
� Research is required to develop an in-depth understanding of
investors’ needs, expectations and behaviours and how to move
their loyalty from brokerage staff to brokerage firms.
� The findings indicated an opportunity for a comparative study of
the interaction of culture and RM in developed and emerging stock
markets.
Recommendations for Future Research
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Thank you
41
In this highly competitive environment, we must pay more
attention to gaining and maintaining customer’s loyalty in order to
retain competitive advantage.
Consequently, RM is a keykey strategy to our success.
Kanate Wangpaichitr can be contacted at: [email protected]