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

Author

Listed:
  • Lorin M. Hitt

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

  • Frances X. Frei

    () (Harvard Business School, Cambridge, Massachusetts)

Abstract

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.

Suggested Citation

  • Lorin M. Hitt & Frances X. Frei, 2002. "Do Better Customers Utilize Electronic Distribution Channels? The Case of PC Banking," Management Science, INFORMS, vol. 48(6), pages 732-748, June.
  • Handle: RePEc:inm:ormnsc:v:48:y:2002:i:6:p:732-748
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    File URL: http://dx.doi.org/10.1287/mnsc.48.6.732.188
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alon Eizenberg, 2016. "Estimating the impact of interacting with sales representatives on customer-specific revenue and churn behavior," Quantitative Marketing and Economics (QME), Springer, vol. 14(4), pages 325-351, December.
    2. Paredes - Araya, Dusan, 2009. "A Methodology to Compute Regional Housing Index Price using Matching Estimator Methods," MPRA Paper 15016, University Library of Munich, Germany, revised 04 May 2009.
    3. Anja Lambrecht & Katja Seim, 2006. "Adoption and Usage of Online Services in the Presence of Complementary Offline Services: Retail Banking," Working Papers 06-27, NET Institute, revised Oct 2006.
    4. Hu, Yu Jeffrey & Tang, Zhulei, 2014. "The impact of sales tax on internet and catalog sales: Evidence from a natural experiment," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 84-90.
    5. Anja Lambrecht & Katja Seim & Catherine Tucker, 2007. "Stuck in the Adoption Funnel: The Effect of Delays in the Adoption Process on Ultimate Adoption," Working Papers 07-40, NET Institute, revised Oct 2007.
    6. Van den Poel, Dirk & Lariviere, Bart, 2004. "Customer attrition analysis for financial services using proportional hazard models," European Journal of Operational Research, Elsevier, vol. 157(1), pages 196-217, August.
    7. Malay Biswas, 2017. "Are They Efficient in the Middle? Using Propensity Score Estimation for Modeling Middlemen in Indian Corporate Corruption," Journal of Business Ethics, Springer, vol. 141(3), pages 563-586, March.
    8. Dennis Campbell & Frances Frei, 2010. "Cost Structure, Customer Profitability, and Retention Implications of Self-Service Distribution Channels: Evidence from Customer Behavior in an Online Banking Channel," Management Science, INFORMS, vol. 56(1), pages 4-24, January.
    9. repec:eee:ijrema:v:29:y:2012:i:2:p:192-201 is not listed on IDEAS
    10. Aravind Chandrasekaran & Claire Senot & Kenneth K. Boyer, 2012. "Process Management Impact on Clinical and Experiential Quality: Managing Tensions Between Safe and Patient-Centered Healthcare," Manufacturing & Service Operations Management, INFORMS, vol. 14(4), pages 548-566, October.
    11. Prabuddha De & Yu (Jeffrey) Hu & Mohammad S. Rahman, 2010. "Technology Usage and Online Sales: An Empirical Study," Management Science, INFORMS, vol. 56(11), pages 1930-1945, November.
    12. Abdul Wadud, 2013. "Impact of Microcredit on Agricultural Farm Performance and Food Security in Bangladesh," Working Papers 14, Institute of Microfinance (InM).
    13. Gensler, Sonja & Leeflang, Peter & Skiera, Bernd, 2013. "Comparing methods to separate treatment from self-selection effects in an online banking setting," Journal of Business Research, Elsevier, vol. 66(9), pages 1272-1278.
    14. Rajiv D. Banker & Robert J. Kauffman, 2004. "50th Anniversary Article: The Evolution of Research on Information Systems: A Fiftieth-Year Survey of the Literature in Management Science," Management Science, INFORMS, vol. 50(3), pages 281-298, March.
    15. Schroeter, Christiane & Anders, Sven M., 2013. "Nutrition Label Usage, Diet Health Behavior, and Information Uncertainty," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151214, Agricultural and Applied Economics Association.
    16. Mei Xue & Lorin M. Hitt & Patrick T. Harker, 2007. "Customer Efficiency, Channel Usage, and Firm Performance in Retail Banking," Manufacturing & Service Operations Management, INFORMS, vol. 9(4), pages 535-558, April.
    17. Anja Lambrecht & Katja Seim & Catherine Tucker, 2011. "Stuck in the Adoption Funnel: The Effect of Interruptions in the Adoption Process on Usage," Marketing Science, INFORMS, vol. 30(2), pages 355-367, 03-04.
    18. Piyush Sinha & Srikant Gokhale & Saurabh Rawal, 2015. "Online Retailing Paired with Kirana—A Formidable Combination for Emerging Markets," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 2(4), pages 317-324, December.
    19. Tolga Bilgicer & Kamel Jedidi & Donald Lehmann & Scott Neslin, 2015. "The Long-Term Effect of Multichannel Usage on Sales," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 2(1), pages 41-56, March.
    20. Teerling, Marije L., 2004. "How about integration: the impact of online activities on store satisfaction and loyalty," Research Report 04F08, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    21. Oz Shy, 2013. "Window shopping," Working Papers 13-4, Federal Reserve Bank of Boston.
    22. repec:kap:sbusec:v:49:y:2017:i:2:d:10.1007_s11187-017-9846-x is not listed on IDEAS
    23. Mei Xue & Lorin M. Hitt & Pei-yu Chen, 2011. "Determinants and Outcomes of Internet Banking Adoption," Management Science, INFORMS, vol. 57(2), pages 291-307, February.
    24. repec:dgr:rugsom:04f08 is not listed on IDEAS
    25. repec:pal:jmarka:v:5:y:2017:i:3:d:10.1057_s41270-017-0023-5 is not listed on IDEAS

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