Essays on strategic price bundling in retail banking

Sammanfattning: The empirical motivation of this dissertation is the retail banks need to become more conscious about the profitability and pricing of their activities in a successively harder competitive environment. One of the largest threats for the retail banks has become the changed customer behaviour resulting in an increased split-banking and bank switching. In this dissertation we focus on examining how price bundling, which is a selling approach of two or more services at a special price, would counteract the enhanced customer disloyalty and improve the strategic customer relationship management against any competitive forces. The theoretical motivation in this dissertation refers, at this time, to incomplete knowledge about long-term pricing issues with specific concern to price bundling. The main aim in this dissertation is to develop principles for effective price bundling strategies, and to empirically examine the way in which price bundling is already utilised by the retail banks. This main aim is divided into four sub-aims that are consecutively dealt with, in five essays, in an attempt to obtain a comprehensive understanding of the research issue. Essay 1 presents two principal frameworks in order to analyse the applicability of price bundling strategies in retail banking. In Essay 2 Guiltinans (1987) normative framework for price bundling is used to develop price bundling principles for a customer retention strategy. Essay 3 presents the results from an empirical study of price bundling strategies in Southern, Central and Northern Europe. Essay 4 investigates the Swedish retail banks application of price bundling in order to attract new customers students. In Essay 5 the issue of customer retention is studied again with respect to the student market in Sweden. The main conclusion and contribution in this dissertation is a set of three principles for strategic price bundlingthat is presented in the concluding discussion. Strategic price bundling principles aim to develop customer loyalty by considering the totality of the seller-customer relationship, and by sharing the mutual benefits when a customer's business is concentrated.