Retail Banking Strategies of RBS and BNP Paribas

Subject: Economics
Pages: 28
Words: 7564
Reading time:
30 min
Study level: Master


Factors like cross-border consolidation and expansion, introduction of new service distribution channels, and pressures from the stockholders have significant impact on the dynamic of the retail-banking sector across the globe. The increasing competition with high intensity and dwindling profit margins have forced banking institutions to look beyond their existing business models so that they would be able to identify profitable opportunities. This report provides a comprehensive overview of the retail banking strategies adopted by European banks in general. By engaging a quantitative survey among 60 retail-banking customers this study identifies successful retail banking strategies for Royal Bank of Scotland (RBS) and BNP Paribas (BNP) from the perspectives of the customers of retail banking. This study concludes that among other things, increased use of technology, frequent customer surveys, and professionalism demonstrated by the banks in serving customers increase customer satisfaction. The study also evidences that loyal customers receive higher quality services from the banks.


Although the financial system of any nation consists of financial institutions, financial markets, and other infrastructure arrangements such as clearing and settlement systems, banks occupy a prominent position in the financial system. Banks serve the society and economy by rendering various financial services to business organizations and retail customers, by undertaking among other things providing a means of holding and exchanging financial assets and intermediating savings to productive resources through supplying credit to the industrial and business houses and consumers. Banks provide significant service in risk sharing of businesses. The empirical literature on economic growth has extensively dealt with the fundamental importance of banks to the growth of an organized and efficient financial system (King & Levine, 1993; Levine 2001).

Therefore, effective performance of banks is an important factor for the economic development of any nation. The performance of banks is related closely with the satisfaction level of the customers of the banks, especially at the retail banking level. Studies have focused on the customer satisfaction in the retail banking industry (Ahmad, 2002). Along with the study of customer satisfaction, customer profitability management has been integrated to optimize the customer satisfaction and at the same time to improve the performance of the banks (James, 2004). The high cost involved in the acquisition of new customers has made the banks to shift their focus to building and maintaining long-term customer relationships to improve upon their performance (Ennew & Binks, 1996). In this context, banks adopt various strategies to attract new customers and retain existing customers. This study examines the different retail banking strategies adopted by Royal Bank of Scotland and Bank BNP Paribas and suggest suitable strategies to the banks to follow.

Retail Banking – an Overview

Retail banking is a modern form of banking where by banks carry out transaction without having to use other intermediaries such as corporations and other banks (Pond, 2007). The elimination of such intermediaries is considered a strategy that will minimize on the general costs and enhance the relationships that the bank has with its clients. According to Stern, (2006), some of the services that can be provided through this type of services include mortgages, savings, credit cards, checking accounts, debit cards, and personal loans. Most banks have adapted this banking system considering the positive responses from the earlier banks that have achieved great results. Even though it has had trouble over the past three years, the Royal Bank of Scotland is one of the best performing banks in the world, which has continued to attract clients. It is credited for new strategies that it is always employing to ensure that it is at par with the changes in banking technology (Chizek, 1991). The BNP is also another bank that has recently succeeded in its retail banking business.

Retail Banking Strategies

The Royal Bank of Scotland and the BNP Paribas have discovered strategies that have enhanced their business in retail banking. They seem to understand the needs of their customers and therefore provide them with the services that they require. Retail banking may not always work unless the management employs certain kind of strategies that have been tested for practicability (Payne, 1988, P.78). This may be done by first identifying how the strategies will be of benefit to the bank and its customers. It will be meaningless for a bank to employ a retail banking strategy that will benefit the consumers but fail to uplift the status of a company and vice versa. A bank is usually a profit-making organization that needs to ensure that there is a reward for the services provided by them. This should however not be done at the expense of its clients. What is required is for the bank to strike a balance between the two. This is what the Royal Bank of Scotland and the BNP Paribas are striving to do O’Reilly, (1992, p.90). They have identified retail-banking strategies that are both profitable to the organization and their clients.

This study is going to look at the strategies employed by banks and examine how they are beneficial to both the bank and its clients. The first consideration that the banks have put in place is to establish a strong organic revenue growth. The banks ensure that all their activities revolve around improving the revenue of both their clients and the organization. They are mainly to ensure that as they grow, their clients are also growing with them. This is usually done by not only offering them loan facilities but also ensuring that they provide them with financial advice on how to use the loan. According to Lange, (2007, p.133), whenever a client comes to them for loan, they seek to find out why they really need it, for the purpose of giving them the necessary advice which has always enabled them to keep coming back for more services and hence promoting their growth. Another strategy that is employed by these banks is to improve the loyalty of their customers. There are various strategies, which are employed to attract and maintain the customers that are received by the banks. The other strategies employed include growing the share that they have in the banking market as well as their personal share in the general market and finally to improve on their productivity.

Purpose of the Study

The present study seeks to examine the strategies of retail banks for improving customer satisfaction in general and specifically the strategies adopted by RBS and BNP. The main purpose of the paper is to study the linkage between the retail-banking strategies and customer satisfaction variables in the context of RBS and BNP and develop a conceptual framework of satisfaction in the context of these two banks under study. In order to develop the framework, a customer survey of these two banks was conducted. This research focuses on building a theoretical construct of service expectation from the perspective of the customers. This theoretical construct will take into account the parameters for various services, which the banks provide within the context of retail banking.

Research Objectives

The study attempts to undertake an empirical examination of the following objectives:

  • To identify the variables influencing customer satisfaction in retail banking
  • To link the customer satisfaction with the strategies and performance of banks
  • To suggest effective retail-banking strategies from the customer perspective that will enhance customer satisfaction.

Research Method

The research approach extends first to the review of the relevant past literature. The purpose of the review is to choose the parameters pertaining to the quality levels of service delivery and satisfaction in respect retail banking customers. This research also used quantitative survey method to collect primary data on the retail banking strategies from the customer perspective. The data were collected from the customers of RBS and BNP using a questionnaire as the survey instrument. The research process consisted of a method of random sampling to choose the respondents for the survey and other methods of data collection that will suit the current research.

Organization of the Dissertation

For a comprehensive presentation, this study is organized to have different chapters.

  • Chapter 1presents an introduction on the topic of study and this chapter also lay down the objectives the study will try to accomplish along with the purpose of the study.
  • Chapter 2 contains a detailed review of the relevant literature on retail-banking strategies from the customer perspective and their relationship with the bank performance.
  • Chapter 3 briefly describes the research method, construction of the research instrument, and the process of conducting the research.
  • Chapter 4 presents the findings of the research, analysis of the findings from the survey
  • Chapter 5 summarizes the findings as concluding remarks and recommendations for further research in the field.

Literature Review

In general, it is difficult for the banks to offer product differentiation in the services offered by them, as all the banks are offering similar types of products and services (Lim & Tang, 2000). Therefore, it becomes easier for the banks to match the innovations of their competitor. However, the present-day customers are well informed on the banking products and services, thanks to the development of information and communication technology. They are able to perceive the differences in the quality of service offered by different banks. This development has made the banks to focus on improving the quality of service as a way to enhance customer satisfaction and loyalty. This chapter presents a review of the past literature on strategies adopted by different banks.

Need for Improvement in Service Quality

By formulating and introducing new strategies, the banks are able to improve their core competencies and business performance levels (Kunst & Lenmink, 2000; Stafford, 1996). This realization arises from the belief of the banks that improvement in service quality is a sustainable competitive advantage difficult to be replicated by the competitors (Reichheld & Sasser, 1990). Service quality can be defined to indicate the overall impression of the customers on the service level of a specific organization in terms of the relative quality level of the service (Johnston, 1995). It is imperative that the banks not only meet the customers’ expectations but also exceed wherever possible. In order to be effective and competitive, the service quality should include a continuous improvement process (Lloyd-Walker & Cheung, 1998). Customers make evaluation of the service quality level of the banks mainly based on the personal contact and interaction of the banks with the customers (Gronroos, 1990). Customers make judgments on the service quality level of the banks based on a comparison of their expectations with the actual service quality (Bloemer & Kasper, 1995).

Bank Performance and Service Quality

To ensure that the performance and profit targets are met, the banks realize that they have to be engaged in certain activities that will facilitate their best performances. Some of these activities are to improve the infrastructure (Essvale Corporation Limited, 2007). It also calls for the banks to ensure that the transport and communication network to and from their business premises are in good standards. The banks also hold onto their culture of performance by ensuring that their activities are not hindered by improper performance of their employees. They engage in motivational activities that will ensure that their employees perform according to the requirements of the company. Banks usually undertake sales promotion activities.

Even though they serve many customers, they have never ceased to engage in activities that promote their products and inform their clients of the services that have been introduced. Sales promotion is also done to enhance the relationships that they have with their clients. Sales promotion encourages customer satisfaction in the case of banks serving retail customers. By meeting them directly in the field, they are able to know their preferences (Robles, 2003). All these activities are centered on improving the productivity of the company and at the same time improving the status of their clients who are representatives of the society.

Berry et al., (1985) and Zeithaml & Bitner, (1996) have identified different dimensions of service quality in the context of banking services. These include:

  1. tangible qualities such as physical appearance of offices and facilities, equipments used by the bank, and attire and appearance of staff;
  2. reliability aspects including the ability to perform the promised service and dependability for accurate service;
  3. responsiveness which encompasses the attitude of the banks to help the customers in times of need;
  4. assurance exhibited by the knowledge and courteous services by the employees; and
  5. empathy is signified by caring and individual attention the banks provide to the customers.

When it comes to the question of qualitative benefits, customer satisfaction and loyalty have been perceived as the major concerns of the banks in the context of their retail-banking services. Zairi (2000) observes that if satisfied customers will share their experience with five customers, dissatisfied customers will advise twice the number about their perceived bad experiences, Naumann, (1995) and Dawes & Swailes, (1999) point out that banks incur five times more expense in attracting new customers than retaining the old customers. Based on past research it is observed, that the service quality improvement in the banking industry started at the front counter (Nazer et al., 1999; Kaynak & Whitely, 1999; Nielson et al., 1998; Zineldin, 1996; Boyd et al., 1994; Haron et al., 1994) and moved on to services using electronic means (Delvin, 1995; Joseph et al., 1999; Jayawardhana & Foley, 2000; Mols, 2000; Daniel, 1999; Sathye, 1999).

“Accordingly, there has been a growing trend to switch from personal banking services to electronic services with a matching improvement in service quality. Financing service quality is considered a winning strategy because it increases customer satisfaction, and maximizes a company’s profits and market share.” (Chaoprasert & Elsey, 2004).

Customer Satisfaction in Retail Banking

The definition of customer satisfaction has been widely debated as organizations increasingly attempt to measure it. According to “The Centre for the Study of Social Policy”, customer satisfaction can be experienced in a variety of situations and connected to both goods and services. It is a highly personal assessment that is greatly affected by customer expectations. Satisfaction also is based on the customer’s experience of both contact with the organization (the “moment of truth” as it is called in business literature) and personal outcomes. Some researchers define a satisfied customer within the private sector as “one who receives significant added value” to his/her bottom line. This definition may apply just as well to public services.

Besides, one of the determinants of success of a firm is how the customers perceived the resulting service quality, as the perceived service quality is the key driver of perceived value (Collart, 2000). It is the perceived value, which determines the customer satisfaction. Many firms including banking industries begin to track their customers ‘satisfaction through measuring their level of service quality perceived by their customers. Spreng & Plshavsky, (1993) stated that customer satisfaction or dissatisfaction is considered the result of a comparison between the pre-use expectations that a customer has about the product or service and the post-use perception of product or service performance. The most widely used model to measure perceived service quality was developed by (Parasuraman et al., 1985, 1988), known as SERVQUAL.

Moreover, customer satisfaction is an issue that cannot be ignored by any organization that aspires to attract and maintain its clients. This is therefore something that the two banks have taken into consideration by improving their services to suit the changing needs of their customers.

To satisfy the needs of their clients adequately, the company has suggestion boxes where they allow their customers to leave their comments on how they look at the services that are being provided to them. They have also extended their banking services on the internet where they can also be connected to their domestic and international clients (Data Monitor, 2004). There is a place on their websites where their clients can post their comments on what the banks can do to improve their services. The comments and suggestions received from their clients have been of great help in ensuring that they provide services that are satisfactory to them.

They are also told to monitor and observe how their customers react to the different services that are provided by the bank (Violano, 1992). This is usually for knowing whether they are on the right track to customer satisfaction. Any negative remark that they may observe from a single client is not taken for granted, the bank will launch investigations into the issue and ensure that it does not recur. There are also a number of customer care units where the customers can seek assistance on various issues. Customers can always make inquiries concerning the different services that are being provided by the bank and those that are applicable to them (McDonald, 2002). Therefore, the researcher is of the view that frequent market research encourages customer satisfaction in the case of retail banking business.

Even though the banks were established some years back, their customers enjoy modern facilities. The banks are always on the lookout for the new technologies that are being invented and subsequently employing them (Singer, 2001).

Investments in the field of technology may prove to be costly at their establishment, yet convenient to the clients. These are some of the sacrifices the Royal Bank of Scotland and the PNB Paribas have had to make. They do not consider the expenses that will be involved in such establishment, but the profits they will earn as many customers utilize to enjoy such services (Roth, 1992). They consider such a development as a risk that is worth taking. This has subsequently made the price of their services soar higher compare to the other banks. They understand the need to personally reach out to their customers and provide them with services that will improve their lives.

The banks are also having twenty-four-hour, seven days open telephone lines where their customers can call in to make inquiries. There are dedicated employees that have been assigned to handle the work in shifts and thus giving the customers the opportunity to talk to them personally. A technical operator who ensures that there is no communications breakdown always manages their phone lines. Therefore, this review indicates that the use of technology and modern facilities enhance customer satisfaction.

Moreover, to ensure that the customers are satisfied with the services that they provide, the banks are usually involved in regular training of their employees (Doscher, 1996). They consider training their staff as crucial because they frequently dissociate with customers and thus giving them, the skills that will enable them improve their services. They are given training on how they can handle the different situations and circumstances they may come across. Therefore, it is the finding from this review that the level of professionalism demonstrated by the banks and their staff increases customer satisfaction.

Also, according to Michael Lowenstein (VP and senior consultant, customer loyalty management, Harris interactive), customer satisfaction and customer loyalty are much related because: “if the gap between expectation, perception and delivery of customer is managed at a high level, the customer will perceive that the relationship is a mutually beneficial one where there is equilibrium of commitment. This, in turn, will encourage repeat custom and give a greater share of the customer, which is the defining factor in customer loyalty”.

Customer Loyalty in Retail Banking

Having loyal customers is one of the best things that can happen to any business organization. The company can rely on when they want to make some changes in the services that they have provided to these customers. Customer loyalty is something that is developed over a period of time, which has to be cultivated through the provision of satisfactory services. More precisely, according to “the Global Loyalty Agency”, customer loyalty is the totality of feelings or attitudes that would incline a customer to consider the re-purchase of a particular product, service, brand, or re-visit a particular company, shop, or website. Effective business performance and improvement in profitability have always been a factor of customer loyalty in banking business.

Therefore, factors like strength of customer relationship, perceived availability of other attractive alternatives and service experiences with the banks determine customer in the case of banks. Loyal customers are probably one of the treasures that the Royal Bank of Scotland and the BNP Paribas enjoy. Existing customers also attract new customers via “word of mouth” (Wonglimpiyarat, 2005). This is because of the good reports existing customers send to their friends and relatives and subsequently encouraging them to be part of the bank. In developing loyalty with their customers, the banks engage in different activities that generally strengthen their relationship. Some of such events are promotions where by their clients participate and win a number of goodies (Essex, 2001). There are also certain kinds of merchandise that the banks may give freely to their customers that have either been in the bank for a considerable number of years and those that increase their bank savings. This is usually done for making their customers feel recognized and appreciated.

Moreover, according to Bowen & Shoemaker, (1998), customer loyalty is difficult to define. For him, there are three distinctive approaches to measure loyalty: behavioral measurements, attitudinal measurement, and composite measurements. More precisely, the behavioral measurements consider consistent, repetitious purchase behaviors as indicator of loyalty. Attitudinal measurements use attitudinal data to reflect the emotional and psychological attachment inherent in loyalty. The attitudinal measurements are concerned with the sense of loyalty, engagement, and allegiance. There are instances when a customer holds a favorable attitude toward a bank. Finally, the third approach combine the first two dimensions and measure loyalty by customers’ product preferences, propensity of brand switching, frequency of purchase, time of purchase, and total amount of purchase (Pitchard & Howard, 1997; Hunter, 1998; Wong et al., 1999). The use of both attitude and behavior in a loyalty definition substantially increases the predictive power of loyalty (Pitchard and Howard, 1997).

According to Evans et al., (2009), another concept is the loyalty programs. More precisely, a loyalty program normally aims to build customer loyalty by rewarding customers for their cumulative purchasing over time. In most cases, the aims of loyalty programs are:

  • to retain customers by providing them value and satisfaction;
  • to increase spending by existing customers; and
  • to cross-sell other products that the existing customers might not be aware of.

The review finds validity in the assumption that customer loyalty programs will have the effect of improving the customer retention.

There are also different kinds of accounts that have been introduced in the banks to ensure that every member of the society is represented. For example, parents may be given bonuses if they open accounts for their children in the bank. This is done with the purpose of ensuring that even as the children grow up, they will recognize the bank and probably remain with it for years to come (Shin, 2005). The banks also ensure that their customers are always attracted to the good services that they are always providing. Loyal customers are also provided with certain kind of bonuses for their savings, this is done to encourage the others that have just joined to maintain their loyalty with the customers. Therefore, if the customers are loyal, then the level of services provided to them will be higher in respect of the banks under study.

Whenever the banks want to engage in an activity that involves their clients, they will consult their loyal customers to find out the practical nature of deal (Buckle, 2004). Loyal customers became the trusted contact the banks will reach out to whenever they need to make changes that will directly affect their customers.

Besides, according to Roberts & Dowling, (2002), “the positive perceptions of a firm’s reputation relate positively to customer loyalty”. More precisely, a strong corporate reputation provides a bank signal and encourages reduced transaction costs, as well as other outcomes that benefit the company (Rose & Thomsen, 2004). They also suggest that customers of well-reputed organizations engage in supportive behaviors. Therefore, a good reputation pays off because customers attribute higher levels of competence and quality to the firm and therefore support that firm. Therefore, it is reasonable to state that when the banks increase their reputation, there will be a corresponding improvement in the customer loyalty for the banks considered under this study.

Finally, customer loyalty is very important as it provides benefits to both consumers and to banks. One of the earlier approaches to loyalty included measuring repeat purchasing using panel data and researchers predicted consumer behavior using stochastic models (G.Foxall, 2006).


This chapter presented a review of the available literature on retail banking strategies of banks. The review has highlighted the need for improving the customer service quality and the interaction of the factors of customer satisfaction and customer loyalty in improving the service quality by the banks. The review also discussed the different dimensions of service quality. A theoretical model for service quality by banks was also evolved. The importance of customer loyalty programs and the impact of customer service quality on bank performance were also part of the review.

Research Methodology

The purpose of this chapter is to present a brief description of the quantitative research technique of survey method used by the current research to accomplish the research objectives. According to Denzin and Lincoln (1998), the researcher has the option to adopt any research method, which he finds suitable to conduct the research. However, the researcher has to take into account the nature of the social issue and the resources available for conducting the research. It is imperative that the researcher also takes into account the research questions before deciding which research method he/she wants to make use. In the present research on the retail banking strategies to improve bank performance, it is proposed to use a quantitative research approach.

Characteristics of Quantitative Research

Quantitative research is numerical in nature. The method uses statistical analysis and process to answer the research questions. The collection of empirical data is the basis for conducting the research using quantitative method. Quantitative research uses the research tool of survey through constructed questionnaire or any other feasible method to collect primary data. According to Burns & Grove, (1993), quantitative research is “a formal, objective, systematic process in which numerical data is utilized to obtain information about the research question.” Quantitative research provides the researcher the comfort of objectivity and reliability, which makes this method a preferred one. The quantitative research is expected to provide the same results, even when different researchers conduct the same research. The ability to present the findings based on quantifiable and reliable data is a distinct strength of quantitative research (Trochim, 2001).

Research Strategy

Researchers and academicians have worked on the development of several research tools and techniques forming part of the broad research methodology, which can be used in researches of different social issues (e.g. Galliers, 1991; Alavi & Carlson, 1992). This study has chosen the research philosophy of positivism and the quantitative research method of survey for conducting the research. The following section provides a brief review of the survey method.

Survey Method

Survey method is one of the most important and prominent measurement tool applied in any social research. A survey would include a short question-answer based on a short questionnaire to a lengthy and elaborate one-to-one interview. Questionnaires and interviews are the two broad survey methods, which are frequently uses for collecting primary data for any research. According to Denscombe, (1998) survey method is preferable “to get a detailed and comprehensive view about the data obtained, which will be used for mapping”. Denscombe (1998) has pointed out the salient features of survey method, which include (i) an extensive coverage, (ii) taken up within a defined timeframe, and (iii) containing empirical data. Since survey through a questionnaire allows the freedom to the respondents to express their opinion and viewpoints freely, surveys method is popular. It also has the ability to provide a quantitative or numeric description by way of asking questions to a fraction of the total population represent by the sample (Creswell, 2003). Despite being a time-consuming process, it is proposed to collect the primary data for this research using the survey method and the survey instrument of questionnaire, in view of reliability and freedom available to the respondents.


This chapter provided a brief description of the research approach and elaborated the salient features of case study as a research method along with the merits and demerits of case study method. The findings of the case study are presented in the next chapter with an analysis of the findings.

Findings and Analysis

This chapter presents a summary of the findings of the survey and a detailed analysis of the findings of the research.

Summary of Findings

This section provides a summary of the findings of the survey conducted to collect the opinions of the customers of RBS and BNP on the strategies adopted by the bank for improving the customer satisfaction and in turn to improve the performance of the banks.

Overview of the Survey

A random sample of 60 customers of RBS and BNP were contacted for completing the questionnaire on the retail-banking strategies of both the banks. The survey instrument in the form of a questionnaire contained an introductory statement explaining the nature and purpose of the questionnaire. The questionnaire (Appendix I) expressly provided, that survey participants should be aged above 18 years. There were two sections where section A contained questions focusing on the topic of study and section B contained demographic questions for analysis of the profile of the samples. The questionnaire contained 18 questions in all.

Background of the Survey

The scope of the survey was determined based on the variables dealt with by past studies and the theoretical model evolved for the study. In particular, the survey was expected to augment the gap in the knowledge pertaining to the problems in providing customer service in the context of retail banking with the focus on different dimensions of service quality. The customers’ perspectives of service quality and the suggestions from the customers for possible improvements in ‘customer service quality levels’ were also within the scope of the study. The actions and strategies evolved and introduced by RBS and BNP and the persistent problems faced by them in improving service quality including the proposed moves of the banks to effect a continuous improvement in service quality are some of the other aspects that were expected to be covered through the customer survey. The perceived issues in customer service on the part of the banks from the perspective of the customers may be categorized to include staff behavior issues, information technology issues leading to delay in services or in providing information, communication and cooperation, work process delays, and other specific issues. Questions have been constructed to elicit as much information on the customer service and satisfaction from the point of view of the customers.

Profile of Respondents

The survey was conducted totally among 60 bank customers, of which 30 respondents bank with RBS and the remaining 30 respondents have their accounts with BNP. Of the 60 samples responded to the survey questions 38 of them were males and 22 were females.


The questions to find the retail-banking strategies that have a strong influence in satisfying the customers of RBS and BNP focused mainly on the initiatives of these two banks in reaching the customers through customer surveys and using information technology tools. The survey has evidence to prove that the customer satisfaction improves with direct marketing techniques of distributing pamphlets and email communications. The survey also proves the positive impact of frequent market researches and customer surveys conducted by the banks on the customer satisfaction. There are differing opinions on the frequency with which these two banks conduct market research or customer surveys to collect the views of the clients for possible corrections in their approach to improve the service quality level. There is a mixed response to the question as to whether the customers are happy with the frequency of such market researches with a majority of 24 people taking a middle approach to answer the question.

There is a positive response on the correlation between the enhanced use of information and technology facilities and customer satisfaction levels. The respondents have appreciated the level of professionalism exhibited by the staff of the banks in dealing with the customers. The majority of the customers are in agreement with a higher level of professionalism exhibited by the bank employees. There is a mixed response to the question on whether the customers responded would be willing to recommend the bank to their family members, friends or colleagues. From the survey, it is proved that both the banks operate customer loyalty programs to retain the existing customers. This study evidences the receipt of higher level of service from the banks to those customers who have stayed with the bank for longer periods. The majority of the respondents have agreed that both the banks command good reputation among them in respect of the service quality level. This study also evidences that the reputation of the bank is an important factor for the customers to remain loyal to the respective banks.


The focus of this research is to examine the impact of strategies employed by RBS and BNP on increasing the customer satisfaction in the retail-banking sector because the competition in this sector is intense and the findings of this study would add to the existing knowledge on the strategies adopted by different banks for attracting and retaining customers. Past literature on banking customer satisfaction and customer loyalty was reviewed and a theoretical framework evolved for the examination of the strategies of these two banks, to ascertain the impact of the strategies on increasing customer satisfaction. A quantitative survey was undertaken using the survey method by distributing the questionnaire constructed based on the knowledge acquired from the review of the relevant literature.

A comparison of the replies of the respondents indicates that both the banks have adopted similar strategies for improving customer satisfaction. The findings of this research observed marked differences in the service levels of different banks and banks provide service with different quality levels to different customers. The study has evidenced the influence of customer satisfaction on the earnings and profit earning capacity of the banks. This fact can be seen from the findings of Naumann (1995), and Dawes and Swailes (1999) on the additional costs incurred by the banks in attracting new customers.

It is inferred from this research that since the nature of banking services is such that interaction of the external customers with the banks through the behavior and professionalized services of the banks is essential. The satisfactions from these interactions play an important role in developing relationships with the customers. Such relationships enhance the customer loyalty and retention of the customers for a long time with the bank. Both RBS and BNP adopt direct marketing strategies like distributing pamphlets and communicating with the customers through emails about the products and services. The findings prove that these marketing initiatives increase the opportunities for improved customer relationship, though not to a significant level. This strategy is in line with one of the dimensions of service quality identified in works of Berry et al., (1985) and Zeithaml & Bitner, (1996).

It is imperative that the changes in customer needs and expectations are monitored constantly so that the banks can bring about improvements in their service quality level. Although different strategies are adopted by the banks to have the complete information on customer preferences, conducting market research and customer surveys is one of the predominant strategies adopted by the banks. The market research and surveys conducted frequently draw information on the changes in the customer needs and the service quality level of the banks from the customers’ perspective. Through carefully designed questions, the banks are able to capture the service needs of the customers and make amends in their service delivery. The responses to the survey indicate that customer satisfaction level increases with such interactions of the banks with the customers. This finding corroborates the findings of Berry et al (1994) about the dimension of empathy for customer service.

The nature of banking products and services is such that, it is easier for the competitors to copy the strategies of one bank to their advantage. There is one area, where the banks can acquires sustainable competitive advantages (which the competitors cannot replicate) is the provision of services using latest technologies. With the rapid developments in information and communication technology, the banks would be able to develop unique communication tools that will facilitate faster and efficient services to the customers. Although most of the IT tools are common, some of the banks can develop unique IT tools that will provide faster service to the customers, especially in the retail-banking segment. The respondents have indicated a positive association of increased use of electronic services with their satisfaction level. This finding is similar to the research finding of Kunst & Lenmink, (2000) and Stafford, (1996), who has dealt with the association of the improvements in the core competency and business performance. When the banks improve their core competence in the matter of provision of efficient and faster services through electronic means, the banks are sure to experience higher level of customer satisfaction.

One of the important dimensions of customer service in the area of retail banking is the reliability and responsiveness of the banks in dealing with the customer service delivery. Those b banks are professional in their approach and have employed dedicated staff would be able to approach customer issues with professional skill and expertise. Such an approach will go to increase the trust and confidence the customers have on the bank. The professionalism, which the banks exhibit in their service deliveries, will inspire the customer to continue the relationship with the banks by improving customer loyalty. In the case of both RBS and BNP, the customers are appreciative of the professional approach of the respective banks in dealing with customer issues. The customers indicate a positive association of the professionalism and customer satisfaction. Zeithaml & Bitner, (1996) have focused on this dimension in the banking customer service in their earlier work.

Reaching customers through word of mouth is one of the important elements in the development of retail banking services to the customers. For achieving some positive results through this phenomenon, it is highly imperative that the banks keep their customers in a happy and conducive atmosphere for convenient banking. The bad experiences with the banks are spread in greater dimensions than good experiences. When a customer has a high satisfaction level, he/she is sure to recommend the banks service to his/her friends, family members, and other acquaintances, when asked about their opinion on the services of the bank. The respondents to the survey have given a mixed response to the question on whether they are inclined to recommend either RBS or BNP to others. Perhaps the participants would have answered this question without attributing any importance to the implications of the answers, as the survey was conducted on a personal one-to-one basis by meeting the customers while visiting their respective banks. Therefore, in the opinion of the researcher the mixed response of the respondents need not be given any weight. The opinion of the existing customers on the service level of the retail banks is of considerable significance to the banks, as it is the gateway for acquiring new customers without any extra efforts from the bank. The only requirement in this case is that the banks should keep the existing customers happy and satisfied.

Not only in retailing of consumer durables but also in retail banking customer loyalty programs are found to be making significant contribution in enhancing customer satisfaction. Both RBS and BNP have taken serious efforts in offering attractive customer loyalty programs in their efforts to retain the customers. The respondents acknowledge the impact of loyalty programs in improving customer satisfaction. The earlier work of Naumann, (1995) on customer loyalty can be referred here in which he has asserted the need for enhancing the customer loyalty for improving customer satisfaction levels. The survey evidences that customer loyalty programs are an effective strategy to improve customer satisfaction.

The respondents to the survey expressed their opinion that both RBS and BPN extend higher quality services to those customers who have stayed with the bank for longer periods. It is obvious that the banks would treat those customers who have continued business relationship with them differently than the new customers who have just started banking with them. The concept of relationship marketing has been developed, based on assessing the impact of continued customer relationship on the profitability of the bank. This concept is different from the traditional transactional nature of marketing strategies. In the present day’s business context, banks have started adopting relationship-based marketing approaches, which recognize the lifetime value of the customers. This has made the banks move away from the traditional transactional-based marketing approach. Relationship marketing has been found to be effective in the areas of investment banking as well as retail banking segments. The current study evidences the positive correlation between the longer association of the customers with the banks and the increase in the “customer service quality level”.

Conclusion and Recommendations

This chapter provides a summary of the key findings of the research and the implications of the findings to the retail-banking institutions. This chapter makes few suggestions for further research and the limitations of the study.


The relationship dimensions, which lead to improved customer satisfaction, are closely associated with the performance of the banks. The findings of this study corroborate the observations of earlier researches conducted in this area of marketing strategies adopted by retail banks. The current study makes a valid contribution to the evaluation of the impact of customer satisfaction on the performance of different banks. The Royal Bank of Scotland and the BNP Paribas are the best example of banks that have succeeded in retail banking. They may be employing similar strategies as the other banks are doing but they have a unique way of implementing them. The banks always employ strategies after they test them for practicability. They are engaged in field research whereby they consider the needs of the people and thus giving them exactly what they desire. The banks consider employees as an important asset that they have and thus doing all in their capability to ensure that their needs are adequately met. The banks perform commendably in bringing latest technology in the service of their customers.

Their services have been expanded to the international world by through not only electronic banking but also establishing physical branches. The banks continually engage in activities that will ensure that they remain at the top in terms of growth and meeting the needs of their clients. The dedicated spirit of hard work and commitment that is employed by those banks can also be adapted by other banks that desire to succeed in retail banking. The key findings of this study indicate that customers are more loyal to banks enjoying higher reputation. The study evidences that banks extend higher level of service to those customers who remain loyal to the bank and use their services continuously for a longer period. The customer loyalty programs and direct marketing through pamphlets and email communications have a significant positive effect on customer satisfaction and thus leads to higher performance level of the banks. The study proves that the professionalism exhibited by the banks and their staff in extending services to customers have a lasting impact on the customers and their perspective on the service level of the banks. Enlarged use of information and communication technology and extending service using the technology has proved to provide greater satisfaction to the customers. The banks enhance the customer service level through frequent customer surveys and market research conducted by them on customer expectations and preferences.


The major limitation of the research was in identifying and selecting the samples for the survey. The researcher tried used the customer database of the banks to get the email ids of the customers. Even after considerable persuasion of the banks about the purpose of the research, as the banks were reluctant in providing the customer details. Therefore, the study was conducted by personally contacting the customers and getting the questionnaire answered. This has consumed substantial time and resources. Second, the number of respondents to the survey is less jeopardizing the generalization of the findings.


The major managerial implication of this study is that the banks are not placed at the same level in providing services to the customers, as they deal in similar products. Therefore, it is not possible to evolve a standardized global strategy affecting performance. It reiterates the need for the banks to develop unique marketing strategies, like relationship marketing strategies in the area of retail banking.

With the recent development of relationship marketing, there are wide options available for doing further research in the area of the impact of relationship marketing on the promotion of retail banking. A comparison of the marketing strategies of banks situated in different geographical locations would throw more light on the differences in the customer expectations and the areas where retail banks can improve their service quality level.


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