Financial service elimination: Problem situations leading to the elimination of products and services

The bulk of the literature focusing on the issues that this paper attempts to tackle, reports theoretical propositions and empirical findings from physical goods settings. A major assumption of the early theoretical contributions (ie 1952-1976) is that a physical good becomes an elimination candidate either if it fails to meet a set of predefined financially related corporate objectives, such as sales, profits, market share and contribution to the coverage of overhead expenses, or if it reaches the decline stage of its life cycle. Subsequent empirical research challenged the above assumption and discovered other circumstances in which a product becomes a candidate for elimination. Specifically, it was found that not all weak products in terms of sales, profits and market share, automatically become candidates for elimination, nor are these candidates only those products that have reached the decline stage of their life. Seventeen problem situations were identified and classified under eight clusters which are illustrated in Table 1. It was also found that not only might there be an overlap between the problem situations that lead to the elimination of a product, but also that more than one problem situation at a time may evoke a product’s elimination.

Table 1 Problem situations making physical goods elimination candidates
Coercion of external forces
Variety reduction policy
Elimination of a slow-moving product
Elimination to release resources
Elimination of an unsuccessful product
Early replacement of a problematic product
Replacement of a ‘bread and butter product’
Change in exchange rates

The empirical research into the problem situations that can turn a financial service into a candidate for elimination is in its early infancy. The limited empirical evidence emanates from the British financial services sector and suggests four broad factors that create the need for financial services elimination (Table 2), namely externally led, strategically led, operationally led and customer-led deletion. The evidence suggests that there are both similarities and differences between the elimination problem situations for physical goods and the ones for financial services, although at this stage it is not clear how these differences are manifested. The most important similarity is that financial services, like physical goods, can be considered candidates for elimination for reasons other than financial considerations, such as social changes, demographic changes and compliance with legislation. However, unlike the physical goods settings, problem situations related to raw materials and stockpiles are not important in financial service settings, which can be attributed to the characteristics of intangibility and perishability.

Table 2 Elimination-led clusters with associated triggers

Externally led

Strategically led

Operationally led

Salesforce-led

Customer-led

triggers

triggers

triggers

triggers

deletion

Changes in

Customer retention

Product

Too many products

Response to

interest rates

management

systems

constraints

demographic changes

Compliance with

Resegmentation

Cost reduction

Product complexity

Retention policies

legislation

Economic factors

New business activities

New product development

Best advice

Social changes

Distribution issues Strategic objectives

Changes in risk

profiles Quality of management information Increase effectiveness of
sale function

Sales force remuneration

One of the gaps in the literature on physical goods and service elimination, therefore, is the lack of a clear distinction between what is an elimination objective and what is a problem situation that can result in a product/service becoming a candidate for elimination. This paper attempts to address these issues, using qualitative empirical evidence from the British financial services sector.

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