Multi-Channel Distribution Strategies in the Financial Services Industry
D I S S E R T A T I O N
der Universität St. Gallen,
Hochschule für Wirtschafts-,
Rechts- und Sozialwissenschaften (HSG)
zur Erlangung der Würde eines
Doktors der Wirtschaftswissenschaften
vorgelegt von
Patrick Dahmen
aus
Deutschland
Genehmigt auf Antrag der Herren
Prof. Dr. Walter Ackermann
und
Prof. Dr. Christian Beiz
Dissertation Nr. 2926
Contents XI
Contents
Foreword VII Preface IX Contents XI Overview of Figures XIII List of abbreviations XVII
I. Academic and Empirical Relevance of the Research Subject 1
1. Research Objectives, Approach, Methods and Structure 1 1.1 The Relevance of Multi-Channel Distribution and Definition of
the Research Questions 1 1.2 Definition of Research Approach, Methods andProcess 5 1.3 Structure of the Dissertation 12 1.4 Conclusion 13 2. Changes in the Distribution of Retail Financial Services 15 2.1 Challenges in the Distribution of Retail Financial Services 15 2.2 Changes in the Supply Side 18 2.3 Changes in Consumer Behaviour 30 2.4 Technological Changes: Impact of the Internet on Distribution 35 2.5 Conclusion 39
II. Framework for the Design of Multi-Channel Distribution Systems 41
3. Major Analytical Dimensions of Distribution Systems 41 3.1 Nature, Objectives and Tasks of Distribution 42 3.1.1 Nature and Objectives of Distribution 42 3.1.2 Distribution Tasks 44 3.2 Theoretical Basis for the Analysis of Exchange Processes 46 3.2.1 Economic Theories: Transaction Cost Analysis 46 3.2.2 Behaviour-oriented Theories 48 3.3 Political Economy Paradigm 51 3.3.1 The Internal Economy and Polity of the Distribution System 51 3.3.2 The Task Environments of the Distribution System 54 3.4 Conclusion 57 4. Particularities in the Distribution of Retail Financial Services 59 4.1 The Constituent Elements of Services 59 4.2 The Specific Properties of Retail Financial Services 65 4.3 Service Management: Distribution of Retail Financial Services 69 4.4 Conclusion 75
XII Contents 5. Impact of the Corporate Positioning on the Distribution Strategy 78 5.1 The Nature and Positioning of Distribution Management 78 5.2 Objectives of Distribution Management 80 5.2.1 Overall Corporate Orientation and Financial Objectives 80 5.2.2 Strategie Objectives 83 5.2.3 Marketing Objectives: Relationship vs. Transaction Marketing 88 5.3 Conclusion 94 6. Classification of Multi-Channel Distribution Systems 96 6.1 Nature, Characteristics and Objectives of
Multi-Channel Distribution Systems 96 6.2 Focussed Multi-Channel Distribution Systems 100 6.3 Co-ordinated Multi-Channel Distribution Systems 105 6.4 Conclusion 112
III. Operational Implementation of Multi-Channel Distribution Strategies 115
7. External Fit of the Distribution System 115 7.1 Branding and Communication 115 7.2 Customer Segmentation and Customer Management 126 7.3 Product Offering and Product Positioning 136 7.4 Cross-Cannel Pricing of Products 142 7.5 Change Management - Transformation of Customer Behaviour 149 7.6 Conclusion 153 8. Intemal Fit of the Distribution System 155 8.1 Internal Structure and Processes of Distribution Systems 155 8.2 Customer Ownership and Remuneration of Distribution Channels 160 8.3 Change Management: Transformation of the Behaviour
of Intemal Customers 166 8.4 Conclusion 170 9. Financial Steering of the Distribution System 172 9.1 Management of Distribution Systems as Profit Centres 172 9.2 Efficiency and Effectiveness of the Distribution System 177 9.3 Conclusion 182
IV. Conclusion 183
Overview of Figures XIII
Overview of Figures
Figurel: The Research Process 7 Figure 2: The Different Phases of the Benchmarking Study 10 Figure 3: Process in the Benchmarking Study
on Multi-Channel Marketing 11
Figure 4: Structure of the Dissertation and Interplay
of the different Chapters 13
Figure 5: Distribution Landscape for Retail Financial Services 19 Figure 6: Consolidation Efforts of the Deutsche Bank 22 Figure 7: Evolution of Channel Mix in the German Insurance Market 28 Figure 8: Comparison of Commission Costs for Life Insurance
across Distribution Channels 29
Figure 9: Break-down of Retail Mutual Fund Assets
by Distribution Channels 30
Figure 10: Shirts in the Use of Distribution Channels in Retail Banking 34
Figure 11: Use of the Internet in Germany for Insurance-Related Issues
(in millions, Forecast 2001) 37
Figure 12: Reasons against the online Purchase of Insurance Products 38 Figure 13: Dichotomy between Discrete Transactions
and Relational Exchanges 48
Figure 14: Discrete vs. Relational Exchanges and Clan- vs. Bureaucracy-like
Decision-Making Processes 53
Figure 15: The Analytical Dimensions of Distribution Systems 58
Figure 16: Reconciliation of the Different Views on Services with the three
Phases of Services Delivery 61
Figure 17: Framework for the Analysis of the Different Dimensions
of Services 64
Figure 18: The Augmented Service Offering 67
Figure 19: Different Dimensions of Service Management 70
Figure 20: Description of rwo Generic Service Strategies 72 Figure 21: Sales Approach for Different Customer Segments at Deutsche Bank 74 Figure 22: Comprehensive Framework for the Analysis
of Distribution Systems 76 Figure 23: Management Context for Distribution Management 80
Figure 24: Implications of Different Financial Targets
for the Distribution Strategy 82
XIV Overview of Figures
Figure 26: Task-oriented Management Approach
by Tomczak and Reinecke 86
Figure 27: Phases for Defining the Strategie Positioning
of a Company 87
Figure 28: Management and Monitoring of the Sales Cycle
at the Deutsche Bank 90
Figure 29: Comparison of Relationship and Transaction Marketing 93 Figure 30: Impact of the Financial, Strategie and Marketing Targets
on the Distribution System 94
Figure 31: Analytical Grid for the Analysis of Multi-Channel Distribution Systems 99 Figure 32: Distribution System of Allstate Inc. (USA) 103 Figure 33: Split of Profit and Service Time in German Retail Banking 107 Figure 34: Major Value Drivers for
Focussed and Co-ordinated Multi-Channel Systems 113
Figure 35: Customer Segmentation Approach of Nordea 128 Figure 36: Value-based Marketing and
*• Customer Segmentation at Credit Suisse 129
Figure 37: Customer Segmentation Approach of MLP 131 Figure 38: Customer Segmentation Approach of Deutsche Bank 133 Figure 39: Two-Dimensional Customer Segmentation Approach
for Financial Services (McKinsey) 135
Figure 40: Product Positioning
in a Co-ordinated Multi-Channel Environment 138
Figure 41: House Of Quality - Basis for the Definition of the Channel Mix
to Enhance Product Positioning 140
Figure 42: Relative Distribution Costs (Survey among 33 Life Insurers in Europe) 145 Figure 43: Concept for a Consistent Cross-Channel
Management ofPricing 146
Figure 44: Explicit Pricing System for Brokerage Services
at Citibank Germany 148
Figure 45: Nordea - Gradual Introduction of New Distribution Devices
and Channels 150
Figure 46: Citibank - Evolution of Money Transfers
via Different Distribution Channels 152
Figure 47: Organisational Structures for Multi-Channel Distribution Systems 157 Figure 48: AXA Germany: Interfaces between the Product Manufacturer
and the Distributor 158
Overview of Figures XV
Figure 50: Citibank Germany: Channel Strategy - Simultaneous
Reduction of Costs and Increase in Income 169
Figure 51: Customer Touch Points Matrix 175 Figure 52: Use of Target Costing for Defining the Relevant Dimensions for
a Distribution Concept based on the Customer's Requirements 177
Figure 53: Deutsche Bank - Elements of Monitoring Sales Performance 180 Figure 54: Comprehensive Framework
for the Analysis of Distribution Systems 186
Figure 55: Specification of the Major Dimensions of
Focussed vs. Co-ordinated Distribution Systems 189
Figure 56: Description of the Major Dimensions of the Extemal Fit
of Distribution Systems 191
Figure 57: Description of the Major Dimensions of the Intemal Fit