The Impact of Global Financial Crisis on Loyalty Programs of HSBC - Case Study Example

 The Impact of Global Financial Crisis on Loyalty Programs of HSBC Table of Content Page Abstract …………………………………………………………………..2 Introduction ……………………………………………………………….3 Objectives of the study…………………………………………………….3 Hypotheses ………………………………………………………………..4 Theoretical application …………………………………………………….4 Data analyses and interpretation …………………………………………..6 Test of research hypotheses ………………………………………………..15 Summary, conclusion and recommendations ………………………………23 Bibliography ………………………………………………………………….25 Appendix: Survey Questionnaire Abstract This study took an analytical look on how HSBC bank’s loyalty program has fared amid the recent global financial crisis. Many banks went under during the financial meltdown. Much of this is attributed to the low level of loyalty the banks customers have with their banks. As some turned away when this banks were in serious financial difficulty. The study used the ABCD customer relationship marketing theory to give the study a background. Through the use of questionnaires, administered to 50 respondents the primary data for the study was derived. Three hypotheses were tested using the Analysis of variance (ANOVA) statistical tool, while other questions were analyzed using the simple percentage tabulation style. Among the findings of the study is that many customers are attracted and compelled to transact more business with HSBC as it implement its loyalty reward programs. The study among its recommendation stated that to avoid the dissolution stage of customer relationship marketing HSBC should regards its customers as partners, where mutual benefits is expected to be derived. Hence, it would be wrong to see them as a means of generating profits for the bank. INTRODUCTION Most banks including HSBC were affected by the recent financial crisis especially in their financial base. And thus, the need for them to maintain customers loyalty and continues patronage the consistency and effectively managed loyalty programs was germane. The impact from the financial crunch led some big banks to crumble and others sought government bailouts for them to survive. With their financial statements in red many banks were not able to continue with some loyalty programs, hence devised means to cut them down. Hence, the financial meltdown came as a test to see how strong bank loyalty program has been in truly building and retaining a genuine class of loyal customers. Many customers enjoyed these loyalty programs were they able to stick to bank when it stopped or reduced this loyalty programs and what impact these had on the customers? This is another question the study will answer. Thus, this research study would determine how the global financial crisis has impacted on HSBC operations especially in the administration of its loyalty programs. OBJECTIVES OF THE STUDY Those specific objectives this study wants to achieve include: 1. To determine the level of impact the financial crisis has on the loyalty programs of HSBC. 2. To compare how HSBC loyalty programs fared with those of other banks during the global financial crisis. 3. To determine the numbers of loyalty program HSBC operated and whether they have contributed in weakening or strengthening the financial standing of the institution prior to the financial crisis 4. To recommend ways on which HSBC can effectively manage a strong package of loyalty programs that would boost its financial position and build up genuine loyal customers. HYPOTHESES The following hypotheses are tested in this report: H0: HSBC loyalty programs have good values to provide satisfactions to customers. H0: Global financial crisis has greatly affected the level of satisfaction HSBC customers derive from its loyalty programs. H0: HSBC loyalty programs provide more values to customers than other banks do in the industry THEORETICAL APPLICATION ABCD customer relationship as applied to HSBC loyalty program The ABCD customer relationship analysis is used in this research work as theoretical base for analyzing the relationship between the variables in this study. The model consists of four stages- Acquaintances, Buildup, Continuation, and Dissolution- that display cyclical progression. This model relationship cycle, is a replicate of others in marketing such as the product life cycle (inanimate object); the family life cycle (social units), and the exchange relationship cycle (institutional or business-to-business consumers) (Dwyer, Schurr, and Oh 1987). The ‘ABCD Model of the Relationship Cycle’ as related to HSBC loyalty programs is segmented into four phases of life in regards to the institution’s relationship marketing. In the acquaintance stage, this is when customers’ attention is attracted to the bank’s loyalty program. The first impression really matters. For HSBC bank, the impression display is that of great concern and the desire to meet the customer’s needs, putting into consideration the customers’ status, taste, and financial capability and appealing for the consistence in its loyalty through the management of effective programs would attract customers at this stage of the loyalty programs administration. In other instance, HSBC can develop its customers’ loyalty through direct personal interactions to find out what are those things that are making them dissatisfied and obstructing smooth banking service delivery and seeking their reaction regarding the loyalty programs the bank operates. When this is achieved, customers would have sense of belonging and the acquaintance and relationship they form with the bank will have a strong bond, hence, the last financial crisis melt down would not be an avenue to displace this strong bond between the customers and the bank. The second stage, which is the Buildup stage, is a transition from the acquaintance stage. In this stage, partners are drawn into sampling an interaction to test the outcome. It involves a high consumer’s level of tension for the outcome is uncertain and may not mash with expectations (Stern, 1997). The Buildup stage in HSBC loyalty program used as relationship marketing has to do with its ability to win the trust of its customers through the diverse loyalty programs it introduces and make available to its customers. Moreover, through direct personal interactions the relationship has been tightened and built up into a stage where the bank’s customers are committed and trust the organization’s services. The Continuation stage is a transition from the Buildup stage to where there is deepened commitment to the relationship. In this stage, there is the existence of familiarity, predictability, and the reduction of cognitive and emotional tension (Perlman & Fehr 1987:32,). Through an historical commitment to quality services, building a good relationship with customers via good regime of loyalty programs management, and meeting the demands of customers, HSBC would succeed in winning its customers commitment, making them to continue doing business with the organization. In addition, this has resulted in making the organization a foremost financial institution. Presently, it would not be wrong to say in the relationship marketing of HSBC has assumed this stage of Continuation; where its customers are familiar, committed, and emotionally tied to the organization’s services and products. For this stage “advertising strategy aims at keeping the customer satisfied, and one tactic is to highlight a firm’s record of dedication to the customer” (Stern, 1997). The last stage in the relationship cycle is the Dissolution stage. In this stage, the relationship is broken apart, and there are experienced changes in pairing dynamics, personal characteristics, and needs of a partner, and situational stresses (Levinger 1983, cited in Stern 1997). The dissolution stage is one where the relationship between the customer and the bank is terminated. For HSBC, it has not yet assumed this stage in its relationship marketing through loyalty program. Though, the last global financial crisis threatened the financial capacity of the bank to continue the maintenance of these programs but it has not reached a state of dissolution. DATA ANALYSES AND INTERPRETATION Out of the 50 questionnaires, distributed all 50 were retrieved. Table 1.1 Respondents By Sex SEX FREQUENCY PERCENTAGE Male 27 54.% Female 23 46% Total 50 100% The data for table 1.1 shows that 27 or 54% of the study respondents are made, while 23 or 46% of them are female. This implies that the study respondents comprise of more males than females. Table 1.2 Respondents By Age AGE FREQUENCY PERCENTAGE 20-29 years 4 8% 30-39 years 12 24% 40-49 9 18% 50-59 years 23 46% 60 – 69 years 2 4% 70- above 0 0 Total 50 100% Table 1.2 shows that 4 or 8% of the respondents are between 20-29 years olds , while 12 or 24% of them are between 30-39 years. 9 or 18.8% of the respondents are in the age brackets of 40-49 years, while 23 or 46% of than are between 50-59 years. 2 or 4% are in the age bracket of 60 to 69 years. Nine of the respondents is 70 years and above. The date shows that majority of the respondents are between the age brackets of 50-59 years . Table 1.3 Respondents By Educational Level EDUCATIONAL LEVEL FREQUENCY PERCENTAGE Basic 2 4% Secondary school 11 22% Tertiary qualification 22 44% others 15 30% Total 50 100% Table 1.3 shows that 2 or 4% of the respondents have basic education as their highest educational qualification , 11 0r 22% of than passes secondary school qualifications, 22 or 44% of the respondents have tertiary qualifications as their highest qualification , 15 or 30% of the respondents have other qualifications. The data shows that the research respondents have more of tertiary qualifications as their educational achievement. Table 1.4 Respondents By Occupation OCCUPATION FREQUENCY PERCENTAGE Banker 10 20% Non-bank worker 40 80% Total 50 100% Table 1.4 shows tat 10 or 20% of the respondents are bankers while 40 or 80% of them are non-bankers. Originally, the quota of 40 to 10 ratios is designed for Non- bank workers and bank workers. Thus, the distribution justifies the more numbers of non-bank workers to respondents who are bankers. Table 1.5 If respondents manage people OCCUPATION FREQUENCY PERCENTAGE Yes 16 32% No 34 68% Total 50 100% Table 1.5 shows that 16 or 32% of the respondents manage people, while 34 or 68% of do not manage people. Thus, the distribution shows less percentage of the respondents manage people. Table 1.6 How long have you been part of HSBC loyalty programs? YEARS FREQUENCY PERCENTAGE Less than 1 year 18 36% 1-5 years 12 24% 6-10 years 17 34% 11years-above 3 6% Total 50 100% The data distribution in table 1.6 shows that 17 or 34% of the respondents have been part of HSBC loyalty programs for less than one year, 12 or 24% have experienced between 1 to 5 years, 18 or 36% of them have between 6 to 10 years, 3 or 6% of the respondents have 11 years and above experience with the bank loyalty programs. The data above shows that majority of the respondents have between 6 to 10 years experience of HBSC loyalty program. Table 1.7 Has HSBC loyalty programs fared better than those of other banks during the global financial crisis? OPTIONS FREQUENCY PERCENTAGE Yes 19 38% No 3 6% Not sure 28 56% Total 50 100% The data distribution from table 1.7 shows that 19 or 38% of the respondents believe that HSBC loyalty programs have fared better than those of other banks during the global financial crisis. 3 or 6% disagree with this view, while 28 or 56% of the respondents are not sure. It is seen from the data distribution that most of the respondents are not certain whether HSBC loyalty programs has fared better than those of its rivals during the global financial crisis. Table 1.8 Have past HSBC loyalty programs benefited the customers? OPTIONS FREQUENCY PERCENTAGE Yes 34 68% No 4 8% Uncertain 12 24% Total 50 100% In table 1.8, 34 or 68% of the respondents agree that past HSBC loyalty programs have benefitted the customers, 4 or 8% disagree, while 12 or 24% are uncertain. The data shows that the loyalty programs HSBC manages have benefitted many of its customers. Table 1.9 As a recommendation would you prefer HSBC give monetary gifts, tickets or coupons? OPTIONS FREQUENCY PERCENTAGE Monetary gifts 22 44% Tickets 18 36% Shopping coupons 8 16% Others 2 4% Total 50 100% Data in Table 1.9 shows that 22 or 44% of the respondents prefer monetary gifts for HSBC loyalty programs, 18 or 36% prefer tickets, 8 or 16% prefer shopping coupons, while 2 or 4 % prefer others items. It is deduced from the data above that majority of HSBC customers would prefer monetary gifts for the bank’s loyalty programs. Table 1.10 Have you transacted more business with HSBC than before, since the implementation of its loyalty reward program? OPTIONS FREQUENCY PERCENTAGE Yes 34 68% No 18 36% Uncertain 8 16% Total 50 100% The data in table 1.10 shows that 34 or 68% of the respondents have transacted more business with HSBC since the bank launched its loyalty programs, while 18 or 36% of them have transacted less business with the bank during this period. 8 or 16% of them are not sure the level of business they have transacted with the bank after it rolled out its loyalty programs. The above data shows that many customers are attracted and urged to transact more business with HSBC as it implement its loyalty reward programs. Table 1.11 HSBC loyalty programs have good values to provide satisfactions to customers Options Frequency Percentage Strongly agree 12 24% Agree 17 34% Disagree 3 6 % Strongly disagree 2 4% Uncertain 16 32% Total 50 100% Table 1.11 shows that 12 or 24% of the respondents strongly agree that there is HSBC loyalty programs have good values to provide satisfactions to customers. 17 or 34% of them agree to this view, while 3 or 6% disagree; 2 or 4% of the respondents strongly disagree, while 16 or 32% of them are uncertain. The distribution thus, shows there is HSBC loyalty programs have good values to provide satisfactions to customers. Table 1.12 Global financial crisis has greatly affected the level of satisfaction HSBC customers derive from its loyalty programs Options Frequency Percentage Strongly agree 16 32% Agree 22 44% Disagree 2 4% Strongly disagree 4 8% Uncertain 6 12% Total 50 100% The data from table 1.12 shows that 16 or 32% of the respondents strongly agree that Global financial crisis has greatly affected the level of satisfaction HSBC customers derive from its loyalty programs. 22 or 44% of them agree to this statement, while 2 or 4% disagree. 4 or 8% of the respondents strongly disagree, while 6 or 12% of them are uncertain. The distribution thus shows that global financial crisis has greatly affected the level of satisfaction HSBC customers derive from its loyalty programs. Table 1.13 HSBC loyalty programs provide more values to customers than other banks do in the industry Options Frequency Percentage Strongly agree 5 10% Agree 9 18% Disagree 5 10% Strongly disagree 3 6% Uncertain 28 56% Total 50 100% Data in table 1.13 shows that 5 or 10% of the respondents strongly agree that HSBC loyalty programs provide more values to customers than other banks do in the industry. 9 or 18% of them agree, while 5 or 10% disagree. 3 or 6% of the respondents strongly disagree and 28 or 56% of them are uncertain. From the data distribution above it is deduced that there is no certainty on whether HSBC programs provide more values to customers than those from other banks. Table 1.14 HSBC should use more of its resources to improve its loyalty programs to increase customers’ satisfactions Options Frequency Percentage Strongly agree 10 20% Agree 22 44% Disagree 5 10% Strongly disagree 2 4% Uncertain 11 22% Total 50 100% Data from table 1.14 above shows that 10 or 20% of the respondents strongly agree that HSBC should use more of its resources to improve its loyalty programs to increase customers’ satisfactions. 22 or 44% of them agree to this view, while 5 or 10% disagree. 2 or 4% of the respondents strongly disagree, while 11 or 22% of them are uncertain. The data above, thus, implies that HSBC should use more of its resources to improve its loyalty programs to increase customers’ satisfactions. Table 1.15 Adding more numbers of loyalty programs in HSBC would lead to strengthening its financial position for effective customer satisfaction Options Frequency Percentage Strongly agree 20 40% Agree 16 32% Disagree 6 12% Strongly disagree 3 6% Uncertain 5 10% Total 50 100% Data from table 1.15 above shows that 20 or 40% of the respondents strongly agree that adding more numbers of loyalty programs in HSBC would lead to strengthening its financial position for effective customer satisfaction. 16 or 32% of them agree to this view, while 6 or 12% disagree. 3 or 6% of the respondents strongly disagree, while 5 or 10% of them are uncertain. From the distribution above it can be implied that adding more numbers of loyalty programs in HSBC would lead to strengthening its financial position for effective customer satisfaction. TEST OF RESEARCH HYPOTHESES Hypothesis: H0: HSBC loyalty programs have good values to provide satisfactions to customers Table 1.16 Options Responses Strongly agree 12 Agree 17 Uncertain 3 Disagree 2 Strongly disagree 16 ∑ 50 ᵪ 10 Between Deviation = σ2 σ2 = ∑ n (x – μ) 2 K-1 Where: σ2 = Standard deviation, n = size of small sample size μ = mean K= number of sample N= size of enlarge pooled sample μ = 2+7+7+8+6 5 μ = 6 σ2 = 5 [(12-6)2 + (17 – 6)2 + (3-6)2 + (2- 6)2 + (16-6)2] 5-1 σ2 =5 [36+121+9+16+100] 4 σ2 = 5 x 282 4 σ2 = 352.5 Table 1.17 Within deviation = σ2 σ2 = ∑ (x- μ) 2 N-K = 282 5 - 1 = 282 4 = 70.5 The variance ratio F* = Between deviation Within deviation = 352.5 70.5 = 5.0 Degree of freedom is V1 = 4 and V2 = 4. The F table value at 5% level of significance is 6.39 Decision: F* = 5.0 < Fα =0.05 = 6.39 Since F* < F table value we accept the null hypothesis (H0) that HSBC loyalty programs have good values to provide satisfactions to customers. Hypothesis Two: H0: Global financial crisis has greatly affected the level of satisfaction HSBC customers derive from its loyalty programs. Table 1.18 Options responses Strongly agree 16 Agree 22 Uncertain 2 Disagree 4 Strongly disagree 6 ∑ 50 ᵪ 10 Between Deviation = σ2 σ2 = ∑ n (x – μ) 2 K-1 μ = 16+22+2+4+6 5 μ = 10 σ2 = 5 [(16-6)2 + (22-6)2 + (2-6)2 + (4-6)2 + (6-6)2 5-1 = 5 [100+256+16+4+0] 4 = 5 x 376 4 σ2 = 470 Table 1.19 Within deviation = σ2 σ2 = ∑ (x- μ) 2 N-K = 376 5-1 = 376 4 = 94 The variance ratio F* = Between deviation Within deviation = 470 94 = 5.0 Degree of freedom is V1 = 4 and V2 = 4 The F table value at 5% level of significance is 6.39 Decision: F* = 5.0 < Fα =0.05 = 6.39 Since F* < F table value we accept the null hypothesis (H0) that the global financial crisis has greatly affected the level of satisfaction HSBC customers derive from its loyalty programs. Hypothesis Three: H0: HSBC loyalty programs provide more values to customers than other banks do in the industry . Table 1.20 Options Responses Strongly agree 5 Agree 9 Uncertain 5 Disagree 3 Strongly disagree 28 ∑ 50 ᵪ 10 Between Deviation = σ2 σ2 = ∑ n (x – μ) 2 K-1 μ = 5+9+5+3+28 5 μ = 10 σ2 = 5 [(5-10)2 + (9-10)2 + (5-10)2 + (3-10)2 + (28-10)2 5-1 = 5 [25+1+25+49+1+324] 4 = 5 x 425 4 σ2 = 531.25 Within deviation = σ2 σ2 = ∑ (x- μ) 2 N-K σ2 = 425 4 = 106.25 The variance ratio F* = Between deviation Within deviation = 531.25 106.25 = 5.0 Degree of freedom is V1 = 4 and V2 = 4 The F table value at 5% level of significance is 5.0 Decision: F* = 5.0 < Fα =0.05 = 6.39 Since F* < F table value we accept the null hypothesis (H0) that HSBC loyalty programs provide more values to customers than other banks do in the industry Summary, Conclusion, and Recommendations Summary From the research study the following findings were discovered: 1. The loyalty programs HSBC manages have benefitted many of its customers. 2. Majority of HSBC customers would prefer monetary gifts for the bank’s loyalty programs. 3. Many customers are attracted and compelled to transact more business with HSBC as it implement its loyalty reward programs. 4. HSBC should use more of its resources to improve its loyalty programs to increase customers’ satisfactions. 5. Global financial crisis has greatly affected the level of satisfaction HSBC customers derive from its loyalty programs. 6. Adding more numbers of loyalty programs in HSBC would lead to strengthening its financial position for effective customer satisfaction. 7. HSBC loyalty programs have good values to provide satisfactions to customers. Conclusion Loyalty programs are effective ways of attracting and maintaining customers loyalty even during period of excessive competition and industrial turbulence. Just like in the case of the recent financial meltdown, many banks went under because the low level of loyalty their customers have for the bank which was not enough to enable it maintain their trust. Thus, an effective loyalty programs managed by a bank would aid in boosting customers trust and attract more business transactions from them which is more likely to make them stick to the bank during doom moments. Banks also stand to boosts its financial statements when loyalty programs are effectively managed. Recommendations In line with the above mentioned findings for this study it is recommended that HSBC should: 1. Should add more loyalty programs that are effectively managed. When this is done the bank stand to boost its customers trust and hence, boost its financial income through more business transactions from its customers. 2. Developing loyalty programs should not end with the delivery of tickets or loyalty rewards, follow up should be carried out where the management of the bank should find out if truly the beneficial of the programs are really pleased with what they get from the loyalty programs. 3. To avoid the dissolution stage of customer relationship marketing HSBC should regards its customers as partners, where mutual benefits is expected to be derived. Hence, it would be wrong to see them as a means of generating profits for the bank. 4. HSBC should give more of monetary gifts as rewards for its loyalty programs. This should delight its customers than coupons, and tickets. Bibliography Dwyer, F. Robert, Paul H. Schurr, and Sejo Oh 1987: “Developing Buyer-Seller Relationships” Journal of Marketing. Volume 51. April Fest, G. 2007: Loyalty Programs that Span the Bank. Bank Technology News. Volume 20, Number 4. Ivanauskiene, N. And Auruskeviciene, V. 2009: Loyalty Programs Challenges in Retail Banking Industry. Economics and Management. Volume 14. Meyer-Waarden, L. 2008: The Influence of Loyalty Programme Membership on Customer Purchase Behaviour. European Journal of Marketing. Vol. 42, pp. 87-114. Nunes, J.C., Dreze, X. 2006: Your Loyalty Program is Betraying You. Harvard Business Review. O‘Malley, L. 1998. Can Loyalty Schemes Really Build loyalty? Marketing Intelligence and Planning. Vol. 16. No: 1. pp. 47-55. Petruzzelis, L., Romanazzi, S. And Guirrieri, A.R. Loyalty and Customer Satisfaction in Retail Banking: the Role of Social Network. Unpublished Work: University of Bari, Italy. Perlman, Daniel and Beverly Fehr 1987: “The Development of Intimate Relationships”, in Intimate Relationships: Development, Dynamics, and Deterioration, Daniel Perlman & Steve Duck (eds.). Newbury Park: Sage. Uncles, M.D., Dowling, G. R., & Hammond, K. 2003: Customer Loyalty and Customer Loyalty Programs. Journal of Consumer Marketing. Vol. 20, No. 4, pp. 294-316. Stern, Barbara B. 1997 Advertising Intimacy: Relationship Marketing and the Services Con summer, Vol. 26, No. 4 Appendix SURVEY QUESTIONNAIRE Dear Respondent, I am a student, studying a Masters in Marketing at the University of Technology, Sydney (UTS). I am conducting a research study that explores the impact of global financial crisis on HSBC’s loyalty programs. This questionnaire is design to seek your opinion on raised questions relating to the study. Any information you give would strictly be used for academic purpose only, and would not be divulge to any third party. Thank you in anticipation for your cooperation. Best regards, Hanan Turkistani. Section A Instructions: Please tick one appropriate box against your answer to question. Strongly agree Agree Disagree Strongly disagree Uncertain 1. HSBC loyalty programs have good values to provide satisfactions to customers 2. Global financial crisis has greatly affected the level of satisfaction HSBC customers derive from its loyalty programs 3. HSBC loyalty programs provide more values to customers than other banks do in the industry 4. HSBC should use more of its resources to improve its loyalty programs to increase customers satisfactions 5. Adding more numbers of loyalty programs in HSBC would lead to strengthening its financial position for effective customer satisfaction Section B 1. How long have you been part of HSBC loyalty programs? a. Less than 1 year b. 1-5years b. 6-10years c. 11-above 2. Has HSBC loyalty programs fared better than those of other banks during the global financial crisis? a. Yes b. No c. Not sure 3. Have past HSBC loyalty programs benefited the customers? a. Yes b. No c. Uncertain 4. As a recommendation would you prefer HSBC give monetary gifts, tickets or coupons? a. Monetary gifts b. Tickets c. Shopping coupons d. Others 5. Have you transacted more business with HSBC than before, since the implementation of its loyalty reward program? a. Yes b. No c. Uncertain Section C 1. Are you: a. Male b. Female 2. Age: a. 20-29 b. 30-39 c. 40-49 d. 50-59 e. 60-69 f. 70-above 3. Educational level: a. Basic b. Secondary school c. Tertiary qualification d. Others 4. Are you: a. Bank worker b. Non-bank worker 5. Do you manage people: a. Yes b. No Read More