Financial service elimination: RESEARCH FINDINGS AND DISCUSSION

findings for the research reported here relate specifically to questions asked in order to examine the objectives of financial institutions in making service elimination decisions, and the problem situations which may arise prompting financial institutions to consider a financial service as a candidate for elimination. A number of issues emerged, which are outlined below.

Objectives of service elimination

The in-depth interviews revealed five broad objectives that financial institutions wanted to meet by examining a financial service for possible elimination (Table 4).

Improvement of financially related indicators Seventeen companies reported that by examining a service for possible elimination the objective in mind was to improve indicators of a financial nature. This trend was consistent across the three business type strata and the three size categories of the sample. The terminology used, however, showed some variations. Banks and building societies referred mostly to the improvement of profits and of the dividend paid to shareholders. By contrast, insurance companies (proprietary in their majority) referred to the improvement of ROI and of underwriting profit.

Keep the service range up to date

Seven companies reported that keeping the service range up to date was an objective when examining the future of a financial service. This objective was predominantly cited by the larger companies from the three business type strata. The interviews suggested that the pursuit of this objective required a good market intelligence system, so that companies would be able to monitor the changes and foresee the trends in the marketplace. For example, the marketing manager of a large bank offering corporate services commented accordingly:

‘If we want to eliminate a service because it is not trendy any more, we must have a clear idea of what can replace it. And this idea should be found in what the market wants and not in what we think it wants. And to do that in a successful way we are in close contact with our customers and we are ready to incorporate their requests for our offerings.’

Table 4 Service elimination objectives
To improve financially related indicators
To keep the service range to an up-to-date condition
To concentrate corporate resources on corporate effectiveness
To rationalise the service range in order to minimise customer confusion
To rationalise the service range in order to control cannibalisation

Concentration of the corporate resources on corporate effectiveness

Seven companies reported that they often wanted to eliminate financial services in order to be able to concentrate the finite corporate resources (temporal, monetary and human) on fewer services. This variety reduction objective was cited mainly by small and medium-sized companies from all three business type strata. The marketing manager of a small insurance firm thus commented:

‘Our attempts to compete with the big players can be more effective if we drop services where we are mediocre and focus our resources on the ones where we are very good or best. We cannot be jack of all trades and master of none. It doesn’t help.’

Controlling cannibalisation Four companies mentioned that by eliminating financial services their objective was to minimise, or at least control, the cannibalisation effects between two or more similar services of their portfolio. The interviews suggested that when one financial service was very close to another, the control of possible cannibalisation was not only a choice, but also an action that was strategically and tactically necessary.

Minimise customer confusion The management of three companies realised that by pruning their service range, the likelihood of confusing their customers by the breadth of the offerings was lower. The head of business marketing of a large bank, referring to the retail market, commented:

‘The objective of service elimination is to keep our service range in a clean and rational condition. What is the point of having too many services? It just causes confusion to our customers. Our service range has to be clean so that customers are able to compare the available financial services and identify the most appropriate to them.’

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