Predictors of equity in relationships between nancial services providers and retail customers

James G. Barnes Professor of Marketing, Memorial University of Newfoundland, St Johns, Newfoundland, Canada Darrin M. Howlett Research Associate, Omnifacts Research Limited, St Johns, Newfoundland, Canada
Relationship marketing has been embraced in a wide range of industries, including nancial services. Despite considerable study and widespread application, it appears that many services marketers have accepted the concept of relationship marketing with little examination of the basis for genuine, quality relationships. Based on a review of the social psychology and relationship marketing literature, the authors offer a consumer-focused approach to dening the principles of relationship marketing, and examine the conditions under which services marketers can expect to form relationships with their customers. Also presented are empirical ndings on the predictors of the level of equity which resides in relationships between nancial services providers and their retail customers. The research reveals that the affective dimensions of the service encounter best predict quality relationships. The implications for nancial services marketers are discussed.

Introduction
In the past decade, interest in relationship marketing has grown exponentially, driven primarily by retention economics: the fact that strengthening relationships with present customers will lead to greater protability than will equivalent efforts to attract new customers (Reichheld, 1996; Reichheld and Sasser, 1990; Rust and Zahorik, 1993). On initial examination, the idea of a services provider building relationships with customers appears quite sound. However, the relationship marketing literature reveals little consistency in how researchers dene relationship marketing, and even less in how practitioners apply the concept. There is little doubt that a relationship is a complex, multidimensional construct, which would appear to explain, at least in part, the fact that academics put forward quite different denitions of relationship marketing. However, what does appear to be consistent is that most academics and practitioners have only begun to examine what constitutes a true relationship from the customers perspective. The fact that the customers viewpoint has not been wholly taken into account is evidenced by assumptions that appear to have been made concerning relationship marketing. For example, it seems to be widely assumed by scholars and practitioners that a relationship can be formed with any customer, in any situation. Such an assumption is dangerous in that it may lead companies to attempt to form relationships in situations where a genuine relationship cannot be formed because customers do not want one, or because the circumstances surrounding interaction with customers are not conducive. Another assumption, which many scholars and practitioners have made, concerns the factors which contribute to strong, close customer relationships. As evidenced by the prevalence of loyalty programmes and other such behaviour-based initiatives, it appears that many view the process of relationship formation as something akin to a stimulusresponse function. Of all the industries where acceptance of relationship marketing is growing, none appears more interested in the establishment

of customer relationships than the nancial services industry . This is evidenced by a growing literature on relationships between nancial services providers and customers (Axson, 1992; Ennew and Binks, 1995; Palmer and Bejou, 1995; Reichheld, 1996; Rust and Zahorik, 1993; Stewart and Butler, 1994; Storbacka, 1994; Strandvik and Liljander, 1994; Turnbull and Gibbs, 1987), and by relationship marketing efforts being implemented by nancial services providers in markets around the world (Keltner, 1995; Winnett, 1995).

Present views of relationship marketing

Marketing scholars have paid particular attention to studying the value of relationships, and the merit of forming relationships has been generally accepted (Barnes, 1994; Grant and Schlesinger, 1995; Grnroos, 1993; Heskett et al., 1994; Reichheld, 1993; Reichheld and Kenny, 1990; Rust and Zahorik, 1993). However, what has been missing from the literature is an examination of the fundamentals of relationships. Without this critical examination, it is likely that relationship marketing efforts will be off-target. As a result, many of the initiatives which service providers are presently touting as relationship marketing are anything but. The authors contend that many relationship marketing programmes are not customer-focused, as they are based on: 1 raising the switching costs for a customer; or 2 relying on database-driven information to market at a customer one who may or may not be interested in a relationship. The approach of raising switching costs can be seen in the number of loyalty programmes which exist. Such programmes are behaviourally driven and not characteristic of a genuine relationship between company and customer. In addition, like core product attributes, these tactics can be easily copied by competitors. The result of raising switching costs is that consumers may feel locked-in to dealing with a company because

The authors wish to acknowledge the nancial support provided to this study of customer relationships by The Royal Bank of Canada and by Stentor, the alliance of Canadas telecommunications companies.
International Journal of Bank Marketing 16/1 [1998] 1523 MCB University Press [ISSN 0265-2323]

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James G. Barnes and Darrin M. Howlett Predictors of equity in relationships between nancial services providers and retail customers International Journal of Bank Marketing 16/1 [1998] 1523

they do not wish to forfeit accumulated rewards. One of the practices increasingly applied in consumer marketing is the maintenance of customer databases. As technology has become more widely available, the use of databases has become commonplace. This has created a situation where some practitioners and authors have drawn a close link between relationship marketing and database marketing (Jutkins, 1995; Petrison and Wang, 1993; Shermach, 1995; Silverman, 1995). This view of relationship marketing is, however, onesided. The establishment and maintenance of databases does not constitute an effort to forge true relationships. Databases can be used to target customers, with the customer having little or no knowledge of the company in question or the existence of the database. In addition, databases are limited in the extent to which they can help manage genuine relationships. It is clear that many companies have implemented loyalty programmes and begun to create and manage databases in efforts to build closer relationships with customers. While each of these tactics may form a component of an integrated relationship marketing programme, neither represents a strategic approach to relationship formation. They will do little to bolster the relationships a company can have with its customers if the company does not examine: 1 the manner in which the customer denes a relationship; 2 whether the conditions under which the company interacts with customers are conducive to relationship formation; and 3 the factors which contribute most to quality relationships.

ture, the authors identied two characteristics which should be present for an exchange situation to be characterised as a relationship. First, for a relationship to exist, it has to be mutually perceived to exist; that is, acknowledged by both partners. Social psychologists have long recognised this necessity . Hinde (1979) commented on the mutuality of relationships, suggesting that the behaviour of one party must take into account the behaviour of the other. Second, a relationship goes beyond occasional contact to some special status, suggesting that a relationship is difficult to dene, but the partners will know when one exists (Czepiel, 1990a, 1990b; Duck, 1990, 1995). Obviously, relationships involve more than these characteristics, but in their absence it cannot be said that a true relationship exists. As evidenced by the parallel many scholars and practitioners draw between loyalty programmes, database marketing, and relationship marketing it appears that these characteristics of relationships have yet to be fully recognised.

The dimensions of relationships

How, then, can such constructs as mutuality and special status be operationalised? Berry (1995) observed that there has been a lack of research on the factors that increase or decrease the quality of relationships. A review of the social psychology literature was undertaken with the principal objective of focusing on those attitudinal and psychological dimensions of relationships that have been identied by other researchers.

Closeness in relationships
Many social psychologists have studied the phenomenon of close interpersonal relationships. The construct closeness has considerable value in relationship marketing as it may be presumed that relationships which are deemed to be close are those which are likely to endure. Social psychologists have acknowledged that some relationships are closer than others and that different groups may be more or less prone to the establishment of close relationships (Berscheid et al., 1989a). Clark and Reis (1988) observed that closeness is a concept that underlies many aspects of relationships. Consequently, other authors have developed approaches to the measurement of closeness that are appropriately applied to the measurement of consumers relationships with companies. Berscheid et al. (1989b) developed a Relationship Closeness Inventory which approaches the measurement of closeness from three perspectives: 1 the respondents self-assessment of the closeness of the relationship;

The core of relationships

Although the customer-oriented literature on relationships has been growing (Adelman et al., 1994; Goodwin and Gremler, 1996; Sheaves and Barnes, 1996; Sheth and Parvatiyar, 1995; Weitz and Jap, 1995), the consumers view of relationships remains largely unexplored. Examination of the foundations of interpersonal relationships, as documented in the social psychology literature, provides marketers with insight into factors that can add value in marketing relationships. The importance of taking the customers viewpoint is vital, for in most cases it is the customer who is courted and who usually decides that a relationship is over. How should relationships be dened in order to convey the customers perspective? From a review of the social psychology and relationship marketing litera-

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James G. Barnes and Darrin M. Howlett Predictors of equity in relationships between nancial services providers and retail customers International Journal of Bank Marketing 16/1 [1998] 1523

2 a measure of the emotional tone of the relationship; and 3 a measure of the respondents satisfaction with the relationship.

Emotional content of relationships

Berscheid et al. (1989a, 1989b) state that a relationship cannot exist without emotional content, and observe that close relationships are characterised by positive affective ties. Consequently, they focus on the emotional tone of the relationship to assess its closeness and, therefore, its likelihood of lasting. In its original form, an emotional tone index constructed by Berscheid et al. (1989b) consisted of 27 emotions.

Strength of relationships
Scholars have employed several terms to identify that aspect of a relationship that implies the likelihood of its continuing. Lehtinen et al. (1994) addressed the measurement of the intensity of relationships in marketing. Berscheid et al. (1989b) incorporated a measure of relationship strength in their Relationship Closeness Inventory. The implications of the use of such terms is that strong, intense relationships are less vulnerable and more likely to endure.

ever, it would appear that nancial services providers do have an opportunity to form genuine relationships. Ennew and Binks (1995) correctly state that the quality of banking relationships will be dependent on the willingness of customers to participate. Customer involvement in the delivery of services varies across industries, but it is accepted that involvement is higher with services which are either relatively complex or longterm in nature: both characteristics of nancial services. Other situations where consumers will likely wish to form relationships are where the service is high in perceived risk, or when customers are heavily dependent on credence qualities in service evaluation (Zeithaml, 1981). Again, these characteristics are present in the case of nancial services. On the basis of the aforementioned criteria, it appears the efforts of nancial services providers to form customer relationships are justied, as many consumers appear willing to engage in relational behaviour.

Ability to form and manage relationships

In comparison to other industries, nancial services providers do have relationship marketing advantages by virtue of the fact that many consumers will wish to form relationships. However, it is questionable whether nancial services providers are yet equipped to capitalise on these opportunities. There are numerous external and internal environmental factors which impede the ability of a nancial services provider to form and manage customer relationships. Establishing relationships with customers is complicated in many countries, owing to multi-branch banks, increased complexity of nancial markets, and saturated markets characterised by intense competition (Axson, 1992; Ennew and Binks, 1995; Keltner, 1995; Palmer and Bejou, 1995; Winnett, 1995). The formation of customer relationships is further confounded by dramatic growth in the use of technology in the delivery of nancial services (Barczak et al., 1997; Filotto et al., 1997; Rugimbana and Iversen, 1994). The growth of technologybased service delivery reduces the personal contact between nancial services providers and their customers, thereby altering relationships which may have previously existed, and relationships yet to be formed. There is growing evidence that some customers are rejecting this approach to banking in favour of a more traditional and personal form of relationship with their banks (Prendergast and Marr, 1994).

Relationship marketing in retail nancial services

Examining the foundations of interpersonal relationships can provide marketers with insight into how they might forge relationships with their customers, and the characteristics that will be present once a true relationship has been formed. Marketers must, however, extend their customer orientation by examining other factors which affect relationship formation. In order for relationship marketing to be successfully applied, consumers must be willing to enter into relationships with services providers, and services providers must fully understand the process of relationship formation and management. These authors posit that, for the most part, consumers are willing to engage in relational behaviour with nancial services providers, but it is questionable whether some of those providers are yet prepared for the task.

Consumer willingness to enter into nancial services relationships

What factors affect the ability of service providers to form relationships with customers? Barnes (1994) stated that not all companies can expect to form customer relationships, owing to factors such as the nature of the interaction and the customers attitudes toward relationships and the company . How-

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James G. Barnes and Darrin M. Howlett Predictors of equity in relationships between nancial services providers and retail customers International Journal of Bank Marketing 16/1 [1998] 1523

Purposes of the research

Despite the considerable attention that has been paid to relationship marketing, it appears that scholars and services marketers have made only cursory examination of the concept of a relationship as seen through the eyes of a customer. The authors contend that services marketers have yet to fully understand the factors which lead to the development of equity in customer relationships; and that, under these circumstances, relationship marketing efforts are unlikely to lead to increased customer retention and the prots which follow. What does result from a poorlyconstructed denition of relationship marketing, and the resultant misapplication of the concept, is that marketing resources are likely to be misallocated in futile attempts to form relationships with customers, or relationships will be formed with customers who are not as protable as others. The authors assert that the major contributing factor to the somewhat rudimentary understanding of relationship marketing among many marketers is that research in social psychology, which provides valuable insight into human relationships, has received little application in relationship marketing research and practice to date. This situation is exacerbated by the fact that empirical research on relationships between companies and their customers is lacking (Berry, 1995). Presented in this paper are the results of a three-part research study involving a review of the social psychology and relationship marketing literature; content analysis of more than 40 focus groups; and a survey of retail customers of nancial services providers. Applying the results of these components, the authors address several research questions that, based on a review of the literature on relationship marketing, have not yet been adequately addressed. Each of these questions is explored in the context of the nancial services industry: 1 How should the relationship construct be dened for effective implementation of the concept of relationship marketing? 2 Under what conditions can services marketers expect to form relationships with customers? 3 What are the predictors of strong, close, satisfying relationships between services providers and their customers?

Methodology
The authors began with a content analysis of the results of more than 40 proprietary focus group interviews conducted with consumers

in North America and Europe for clients in a variety of industries, including nancial services. A detailed review was also conducted of the social psychology literature dealing with interpersonal relationships and of the growing literature on relationship marketing. The purpose of the reviews was to identify those dimensions of relationships which are generally associated with positive, lasting relationships. In carrying out this review, certain elements of relationships were identied that were corroborated in the content analysis of the focus group discussions. The review of the relationship marketing literature also put into perspective the extent to which marketing scholars are approaching the concept of relationship from the customers perspective. Through these sources, a list of attitudinal and behavioural characteristics of relationships was created that formed the basis of a national telephone survey of 400 retail customers of nancial services providers. Data collection was carried out from a centralised, supervised telephone research facility, and a policy of calling back 10 per cent of respondents for validation purposes was employed. The sampling frame was a current list of all active telephone numbers. Individuals aged 18 and older were included in the sample and were given the option of completing the survey in English or French. To begin, respondents were asked to name the bank, trust company, credit union, or other nancial services provider they use for most of their personal nancial services needs. This was considered to be the respondents main nancial institution, and most of the questions in the interview then pertained to the interaction between the respondent and that company . The questionnaire used was comprehensive in scope, and included questions associated with respondents attitudes toward their relationship with their principal nancial services provider, how they transact business with their nancial institution, how long they have been dealing with the company in question, frequency and form of interaction, list of products held, amount of business given to that company, complaining behaviour, and intention to remain with that company . Questions were also included relating to respondents satisfaction with their dealings with the provider, the extent to which they feel close to the company, their desired level of closeness, feelings of emotion toward the company, and the likelihood of staying with the company and of recommending it to others. From the analysis of the focus group results and the review of the literature on relationships, a list of 54 Likert-scaled state-

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James G. Barnes and Darrin M. Howlett Predictors of equity in relationships between nancial services providers and retail customers International Journal of Bank Marketing 16/1 [1998] 1523

ments was developed, with each statement pertaining to one of the attitudinal dimensions of relationships. The questionnaire included standard demographic and socioeconomic questions.

Findings
Relationship dimensions
Principal components analysis was used to reveal the underlying dimensions of the relationships that customers have with their main nancial institution. Analysis of responses to the 54 Likert-scaled statements relating to customer relationships revealed a total of ten factors with an eigenvalue greater than 1. These ten factors explained a total of 60.2 per cent of the variance in the data. The principal variables which loaded on each of the factors are listed in Table I. The factor scores were saved so that the variables representing the factors could be used in subsequent analysis. The rst factors listed in Table I represent those which explained the greatest per centage of the variance. Notably, the rst factor relates to the customers feeling toward the principal nancial institution (Factor 1: reliance and caring), while the second relates to how he or she is made to feel in dealing with the company (Factor 2: how I am made to feel). Other factors reect dimensions that were hypothesised to exist as components of the customers interaction with his or her nancial institution, including feelings that one is trapped (Factor 3), a sense of being very close to employees of the nancial institution (Factor 4), and doubts about the value received (Factor 5).

Research setting
One of the purposes of this research was to provide empirical evidence concerning the factors which predict quality relationships which are likely to lead to customer retention, referrals, and long-term protability . The setting within which the research was conducted was the Canadian nancial services industry which has changed dramatically over the past decade. The relaxation of regulations has allowed Canadian banks to broaden the portfolio of nancial services they offer, making the market more competitive. Canadians are increasingly turning to ABMs, computers, telephones, and other technologies to do their banking. Customers are also more interested in ensuring their own nancial well-being, but appear confused by the myriad choices available to them. As a result, many appear to be willing to form a relationship with a nancial services provider, a relationship in which they can receive nancial guidance. Axson (1992) states that UK consumers have grown to feel confused and increasingly alienated from their banks. In Canada, it also appears consumers increasingly view banks in a negative light, citing increasing prots, excessive service charges, and an unresponsive manner. Partly as a response to changes in the industry, many Canadian nancial institutions are attempting to demonstrate to customers that banks are more than just somewhere to conduct nancial transactions. For much of this decade, many Canadian nancial institutions have been implementing relationship marketing initiatives that are rather tactical loyalty programmes and database marketing being examples. As outlined previously, such efforts can form a component of an integrated relationship marketing programme, but nancial services providers must go beyond this behaviour-based approach to identify the factors which predict quality relationships from the customers viewpoint. Using the data gathered through the survey, the authors have identied factors which contribute to the formation of strong, close, satisfying relationships. Prior to data analysis, a series of variable transformations was performed, the purpose of which was to create a series of variables that are related to customer relationships and how they are carried out. A summary of the variables which were used in subsequent analysis is available from the senior author.

Predictors of relationship quality

Following principal components analysis, multiple regression analysis was conducted to identify variables that are most important in predicting strong, close, satisfying relationships. The independent variables were drawn from three sources: the relationship dimensions produced from the principal components analysis; variables relating to the interaction between the respondent and his or her main nancial services provider; and various demographic and socio-economic characteristics of the respondent. The results are summarised in Table II.

Relationship closeness
Forty-four per cent of the variance in relationship closeness was explained by ve variables. The variable that best explains the closeness that respondents felt toward their main nancial institution is the emotional tone of the relationship. The variables presented in the rst column of Table II provide a good understanding of the nature of close customer relationships. Customers who score high on the closeness scale indicate that they experience positive emotions more often than negative in their interaction with the nancial services

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James G. Barnes and Darrin M. Howlett Predictors of equity in relationships between nancial services providers and retail customers International Journal of Bank Marketing 16/1 [1998] 1523

provider; they rely on the nancial institution and tend to think that the company cares about them; and they are close to individual staff members. They are also distinguished from those customers whose relationships are less close by the fact that they make more personal visits each month, suggesting that face-to-face contact with employees contributes to closeness. They are also less

likely to feel that they are trapped in their relationship.

Relationship strength
Six variables explained 42 per cent of the variance in the measure of relationship strength a composite variable measuring share of wallet, likelihood to refer others and likelihood to remain a customer. As with closeness, emotional tone was the most important predictor. Strong relationships with ones nancial institution are largely characterised by affective dimensions, as reected in the fact that four affective factors entered the regression equation. Those consumers with strong relationships are less likely to be uncertain about the value they are receiving from their main nancial services provider, and experience less of a closeness gap than do those with less strong relationships.

Table I Relationship dimensions 1 Reliance and caring I get the feeling that _____ really cares about me I rely on ____ to give me good nancial advice 2 How I am made to feel I like the way I am treated by the staff at _____ I am treated with respect by _____ 3. Feeling locked in I often feel intimidated when dealing with _____ Sometimes I get the feeling I am trapped in dealing with _____ 4. Individual staff closeness I really am much closer to some of the employees than I am to _____ itself I spend a lot of time talking with staff at _____ 5. Uncertainty about value I could probably get better interest rates at another bank I could probably get better service at another bank 6. Diligence in nancial matters I like to keep a close eye on my bank account I try to keep up to date on changes in interest rates 7. Trust I am honest in my dealings with _____ I feel my accounts are safe with _____ 8. My nancial institution by choice I deal with _____ because I want to, not because I have to 9. Disinclination to switch Moving my business to another bank is just not worth the effort 10. Perceived complexity I nd banking today very complicated and difficult to understand

Satisfaction with the relationship

Congruent with the ndings from the other regression analyses, satisfaction with ones relationship with a nancial institution is also very much inuenced by the emotional tone of the interaction. It is also important to note that ve of the eight independent variables that together explain 66 per cent of the variance in the satisfaction variable are factors representing affective dimensions of the relationship, including reliance and caring, how I am made to feel, and closeness to staff.

Discussion and implications

The ndings presented in this paper represent an analysis of the data from research on customer relationships in the Canadian nancial services industry . In conjunction with the literature reviews and content analysis, the ndings shed light on the customers view of his or her interaction with a nancial services provider and the factors which lead to quality relationships. Obvious from the results is the importance of how customers are made to feel in their dealings with their main nancial services provider. As illustrated by the principal components and regression analyses, the emotional tone of the interaction between the nancial services provider and the customer has the greatest impact on the degree which the customer feels close to and has a strong relationship with the provider, and is satised with that relationship. Harrison (1977) has stated that mere exposure to another can cause an increase in affect, but marketers will do little by simply creating an emotionallycharged service environment: they must ensure they evoke in consumers positive emo-

Table II Predictors of relationship quality Closeness (R2 = 0.44) 1 Emotional tone 2 Reliance and caring 4 Branch visits per month 5 Feeling locked in () 6 7 8 [ 20 ] Strength (R2 = 0.42) Emotional tone Reliance and caring Closeness gap () Feeling locked in () How I am made to feel Satisfaction (R2 = 0.66) Emotional tone Reliance and caring Feeling locked in () Duration of relationship with nancial institution Individual staff closeness Uncertainty about value () closeness gap ()

3 Individual staff closeness Uncertainty about value () How I am made to feel

James G. Barnes and Darrin M. Howlett Predictors of equity in relationships between nancial services providers and retail customers International Journal of Bank Marketing 16/1 [1998] 1523

tions; the type which enhance relationship quality . As the authors asserted earlier in this paper, relationship marketing is not simply a stimulus-response function. These empirical ndings should indicate to marketers that relationships cannot be built on behavior alone: forcing customers to deal with a rm does not contribute to quality relationships. Much of the literature dealing with service quality and customer relationships has dealt with the manner in which consumers evaluate the service encounter. This literature has stated that consumers satisfaction with service delivery is a function of expectations versus outcomes, most related to imitable core product elements (Cronin and Taylor, 1992; Parasuraman et al., 1993; Parasuraman et al., 1988, 1994). From the ndings of this study, however, it appears that service providers should pay more attention to non-core elements, such as the manner in which customers are made to feel prior to, during, and following service delivery . Several scholars have investigated the role of affect in consumers evaluation of services. For example, Oliver (1993) recognised that the interaction between service provider and customer causes both positive and negative affect, while Alford and Sherrell (1996) and Price et al. (1995) conducted research to determine the inuence of affect on satisfaction levels. However, one of the major contributions of this study is an empirical link between affect and relationship quality . This link points to implications for the way in which nancial services providers target their customers, structure their organisations, and hire, train and empower employees. In order to improve marketing effectiveness, nancial services providers expend considerable effort in segmenting their markets. These authors assert, however, that once a segment has been identied and a product mix tailored, nancial services providers often devote little effort to devising service delivery processes that make consumers feel good in dealing with the company . Under such conditions, it can be argued that the entire purpose of segmentation to improve marketing effectiveness is undermined. Focus group research conducted by the authors suggests that some young customers, for example, feel intimidated by banks. Such a feeling would appear to be a major impediment to the building of relationship equity . Without clearly dened plans to reduce this intimidation among young people, a tailored product mix and marketing communications may do little to help nancial services providers form quality relationships with this target segment. The importance of positive affect in quality relationships also has implications for the

manner in which nancial services providers structure their companies. In an insightful article on relationship marketing in nancial services, Axson (1992) stated that nancial services delivery involves two core processes: transactions management and relationship management. He states, however, that most modern banks are structured to be efficient at transactions management, not relationship management. The nancial services industry has lagged behind others in truly empowering employees. Decision-making power, which aids relationship management, has been gradually removed from the branch, as evidenced by the introduction of computerised creditscoring models, fees for services, regardless of customer status or value, and centralised advances departments (Axson, 1992). It can thus be argued that the structure which has allowed nancial services providers to become adept at transactions management has contributed to consumers perceptions of banks as large, remote, and unfeeling. As in all high-contact service industries, the quality of relationships that a nancial services provider builds with customers is contingent on the quality of its front-line employees. Researchers (Bowen and Lawler, 1992, 1995; Hartline and Ferrell, 1996) have studied the impact of the behavior of employees on customers perceptions of service quality . As shown in this study, it is important to make the customer feel right about the way he or she is being treated, which has signicant implications for the manner in which nancial services providers recruit, train, compensate, motivate, and evaluate their front-line employees. The importance of affect means that nancial services providers must go beyond mere service scripting. Every interpersonal interaction is unique, and front-line nancial services employees must be cognisant that even the most minute nuances of the exchange can have an impact on how customers feel. The importance of employees actions on the emotional content of the relationship has been anecdotally recorded (Axson, 1992; Cumby and Barnes, 1997). The ndings from this study indicate that the quality of the relationships a company has with its customers is very much determined by how employees make customers feel. In conclusion, the fact that the emotional interaction between a company and its customers is critical, as shown herein, and that such exchange is difficult for competitors to imitate, makes understanding the drivers of positive emotion very important. Czepiel (1990b, p. 312) states: Most services are parity offerings and depend on building relationships as a strategy to offset the effects of competition, while Thomas (1978) and Bhide

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James G. Barnes and Darrin M. Howlett Predictors of equity in relationships between nancial services providers and retail customers International Journal of Bank Marketing 16/1 [1998] 1523

(1986) state that most services providers are generally unable to protect most components of their offering from rapid imitation by competitors. Given that many nancial services are parity offerings, it can be stated that a customer is unlikely to be overly impressed by core product attributes when all companies are providing similar offerings. As shown in this study, what will probably provide differentiation is the way the nancial services provider makes the customer feel during service delivery . Different elements of the service encounter will produce emotion for different groups of customers; from the nancial services providers perspective, it is important to identify and maximise the elements that lead to positive emotions. That is, on a segment-by-segment basis, there is a need to determine the causal sequence of service provider behaviours and consumer emotions: this represents a logical extension for future research.

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