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Do Better Customers Utilize Electronic Distribution Channels? The Case of PC Banking

  • Lorin M. Hitt

    ()

    (University of Pennsylvania, Wharton School, Philadelphia, Pennsylvania 19104)

  • Frances X. Frei

    ()

    (Harvard Business School, Cambridge, Massachusetts)

Registered author(s):

    Many service firms are pursuing electronic distribution strategies to augment existing physical infrastructure for product and service delivery. But little systematic study has been made for whether and how characteristics or behaviors might differ between customers who use electronic delivery systems and those who use traditional channels. We explore these differences by comparing customers who utilize personal-computer-based home banking (PC banking) to other bank customers. Case studies and detailed customer data from four institutions suggest that PC banking customers are apparently more profitable, principally due to unobservable characteristics extant before the adoption of PC banking. Demographic characteristics and changes in customer behavior following adoption of PC banking account for only a small fraction of overall differences. It also appears that retention is marginally higher for customers of the online channel.

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    File URL: http://dx.doi.org/10.1287/mnsc.48.6.732.188
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    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 48 (2002)
    Issue (Month): 6 (June)
    Pages: 732-748

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    Handle: RePEc:inm:ormnsc:v:48:y:2002:i:6:p:732-748
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    1. Allen N. Berger & Loretta J. Mester, 1997. "Inside the black box: what explains differences in the efficiencies of financial institutions?," Finance and Economics Discussion Series 1997-10, Board of Governors of the Federal Reserve System (U.S.).
    2. J. Yannis Bakos, 1997. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, INFORMS, vol. 43(12), pages 1676-1692, December.
    3. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
    4. Eric K. Clemons & Il-Horn Hann & Lorin M. Hitt, 2002. "Price Dispersion and Differentiation in Online Travel: An Empirical Investigation," Management Science, INFORMS, vol. 48(4), pages 534-549, April.
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