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					 International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
 Volume 4, Issue 5, September - October (2013)

ISSN 0976-6502 (Print)
ISSN 0976-6510 (Online)                                                          IJM
Volume 4, Issue 5, September - October (2013), pp. 92-97
© IAEME: www.iaeme.com/ijm.asp                                             ©IAEME
Journal Impact Factor (2013): 6.9071 (Calculated by GISI)


                              K. Giridhar1, Dr. J Clement Sudhahar2
          Ph. D Scholar, School of Business Leadership and Management, Karunya University,
                                    Coimbatore, Tamil Nadu, India.
         Professor in Marketing Area, School of Business Leadership and Management, Karunya
                              University, Coimbatore, Tamil Nadu, India


        Customer is always the key to any successful long term business model. In today’s highly
 competitive environment, loyalty of the customer towards the service provider is considered as a key
 element and all concerted efforts needs to be undertaken in this direction. This paper attempts to
 throw light on the dimension of client retention that stock brokers in India need to undertake in
 managing customer loyalty and how the expectations of customers have evolved over a period of
 hundred years in this industry.

 Key words: Customer, Loyalty, Relationship, Retention, Stock broker


         Stock Broking in India is more than 135 years old with the earliest known Stock Exchange
 being the Bombay Stock Exchange currently known as BSE Ltd. which was the first ever stock
 Exchange to be established in Asia in 1875. For any customer to execute a transaction on a stock
 Exchange, an intermediary popularly known as Stock Broker (in recent times aka Trading Member)
 is required. Till about mid 1990’s stock broking was a broker driven market wherein clients did not
 have much say in execution of trades or price discovery and were left to the mercy of the Stock
 Broker. But with the advent of screen based automated trading launched first by the National Stock
 Exchange of India Ltd (NSE) it has completely turned the manner in which brokers operate and it
 can be said beyond doubt that today’s customer has an unparallel advantage than before in choosing
 the broker and the rate (price) at which transactions can be executed. Thus, under the changed
 circumstances, it has become highly imperative for the Stock broker to retain customer and ensure
 their loyalty.

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 4, Issue 5, September - October (2013)


         Customer satisfaction and loyalty provide a foundation for high levels of customer lifetime
value, they support a range of customer behaviors with widely varying values, characterized by mere
loyalty (repeat purchase), commitment (willingness to refer others to a product or service), apostle-
like behavior (willingness to convince others to use a product or service), and ownership (willingness
to recommend product or service improvements) (James L Heskett, 2002). In stock broking, word of
mouth is one the primary mode of client acquisition and this can happen only based on existing
customer being loyal to the broker and upon satisfaction of the service level, they would continue/
refer the services to others. Research provides ample evidence regarding the impact of word-of-
mouth (WOM) communication on recipients. Service providers increasingly attempt to harness this
power of WOM by introducing referral reward programs and other marketing instruments that aim to
stimulate positive WOM. It is demonstrated that providing a recommendation influences the senders’
attitudinal and behavioral loyalty. The effect is found to be stronger for customers with low expertise
in the service category and little experience with the provider. This means that encouraging
customers in the early stages of their customer life cycle to give recommendations is specifically
effective in increasing loyalty to the provider (Ina Garnefeld, Sabrina Helm & Andreas Eggert,
2011). Word of mouth is a very important avenue in stock broking. It can be measured whether this
word of mouth advertisement for a stock broker is coming more from a customer in the initial stage
of this relationship or does it continue even at a later stage.
         Customer loyalty is viewed as the strength of the relationship between an individual's relative
attitude and repeat patronage. The relationship is seen as mediated by social norms and situational
factors. Cognitive, affective, and conative antecedents of relative attitude are identified as
contributing to loyalty, along with motivational, perceptual, and behavioral consequences.
Implications for research and for the management of loyalty are derived (Alan S. Dick & Kunal
Basu,1994). How the customers are going to have patronage with the stock broker is purely based on
the individual customer’s relative attitude. Another interesting facet to loyalty can be to find out if
customers are loyal to the service provider or to the markets itself (Bob Mckercher & Bazak Denizci
Guillet,2011). In stock broking this would be an interesting area to be explored since it would be
interesting to find if customers are more loyal to stock brokers or whether they are more loyal to the
secondary markets itself by re-investing in this rather than any other asset class.
         Brand specific-repeat purchase drivers value for money, brand trust and brand affect have
positive and significant effect on probability of repeat purchase made by consumers. In case of
consumer demographics age, income, education and occupation significantly affect the repeat
purchase probability (Bikran Jit Singh & Rashmi, 2010). It would be interesting to note whether the
stock broker as a brand would make a customer loyal to him by doing repetitive business & whether
the stock broker’s brand would make an impact.
         Another aspect to the loyalty factor would be the switching costs between brokers. As
customer-organization relationships deepen, consumers increase their expertise in the firm’s product
line and industry and develop increased switching costs (Simon J. Bell, Seigyoung Auh & Karen
Smalley, 2005). Once the relationship between customer and stock broker deepens, the customer gets
used to the delivery style of the broker and also contributes to the industry. Whether this would tend
to increase the switching costs for a customer among stock brokers needs to be identified.
         Research also suggests that consumers may vary in the degree to which they wish to engage
in a relationship with their service providers. Depending on the service type, either two or three
segments of customers emerge, i.e., ranging from customers who are keen to have a relationship to
those who are indifferent about relationships, down to those who are averse to forming relationships
with service providers. Although there are always customers who are keen to form a relationship
with their service provider, there is no “hard core” group of customers keen on relationships with all

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 4, Issue 5, September - October (2013)

service providers (Peter J. Danaher, Denise M. Conroy & Janet R. McColl-Kennedy, 2008). It is
pertinent to note that in stock broking as well customers may be indifferent to loyalty.
        However, irrespective of all these factors, even during the pre 1990’s, stock brokers were
doing business based on customer loyalty towards them and in the current circumstances as well
their business exists because of customer loyalty.


        Relationship marketing (RM) was conceived as an approach to industrial and service markets
and considered to be inappropriate in other marketing contexts. Recently, however, the domain of
RM has been extended to incorporate innovative applications in mass consumer markets. Much has
changed in recent years. Recent applications of RM in consumer markets have been facilitated by
developments in direct and database marketing within an increasingly competitive and fragmented
marketplace (Ashish Gupta, 2011).
        Relationship marketing-establishing, developing, and maintaining successful relational
exchanges-constitutes a major shift in marketing theory and practice (Morgan and Hunt, 1994).
Successful relationship with customers is possible only if there is commitment and that originates
from trust. There are also been studies that has aimed to explicate why customers stay in service
relationships, while additionally examining how different forms of commitment to these
relationships affect customers' voice, both within and outside of the relationship. Social balance
theory, social influence theory, and escalation of commitment provide important theoretical bases for
why individuals stay. Seven notable links relative to staying reasons and commitment that have been
observed are relational benefits and resistance to change to calculative commitment; subjective
norms and sunk costs to affective commitment; procedural switching costs, avoidance of conflict,
and resistance to change to normative commitment (Sharon E. Beatty, Kristy E. Reynolds & Mary P.
Harrison, 2012). It is important to note as to why does a customer stay in a service relationship with
a stock broker and how does a customer’s voice is heard by the broker and what are the various
reasons for the commitment of the customer to the broker.
        Customer management (CM) research has evolved and has had a significant impact on the
marketing discipline. In an increasingly networked society where customers can interact easily with
other customers and firms through social networks and other new media, customer engagement is an
important new development in CM. Customer engagement is considered as a behavioral
manifestation toward the brand or firm that goes beyond transactions (Peter C. Verhoef, Werner J.
Reinartz & Manfred Krafft, 2010). In Stock broking it would be interesting to note that how does
customer engagement would result in continued relationship in terms of loyalty and commitment to
the stock broker. Part of this would also be successful complaint management which primarily
depends on customers' willingness to voice their complaints and on stock brokers ability to
adequately deal with these complaints. Affectively committed customers display little change in their
post recovery behavior, even after a service failure followed by an unsatisfactory recovery attempt. It
seems that these customers are tolerant and want to help the provider improve their business.
Affective commitment seems to amplify willingness to help the service provider by means of voicing
dissatisfaction despite considerable efforts in doing so. Moreover, affective commitment buffers the
negative effects of service failures on post recovery behavior (Heiner Evanschitzky, Christian Brock
& Markus Blut, 2011). Whether customer complaints in stock broking are affecting the commitment
and what are the various measures taken by stock broker in resolving the same would have a lasting
impact on the relationship between the customer and stock broker.
        Another study has investigated the effects of customer contact frequency and relationship
duration on customer-reported relationship strength (CRRS). It was observed that both contact
frequency and relationship duration have a positive effect on CRRS, and that duration moderates the

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 4, Issue 5, September - October (2013)

effect of frequency. Specifically, a relationship-maturity effect: for shorter-duration relationships,
contact frequency enhances CRRS, but for longer-duration relationships, contact frequency has no
effect on CRRS. Furthermore, those with longer duration are perceived to be stronger, while those
with greater contact frequency are not (Tracey S. Dagger, Peter J. Danaher & Brian J. Gibbs, 2009).
Whether the contact frequency and relationship duration between customer and stock broker would
have an impact on the relationship strength and during shorter duration of relationship whether
frequent interaction helps and as the relationship becomes longer whether the contact frequency
really matters is something which needs to be monitored to ensure the relationship continues
        Over period of several decades of research it has been proved time and again beyond doubt
that customer relationship is key and there are numerous tools available in the form of database,
software etc. But it is imperative today to move on from analysis to taking feedback on the
experience the customer has had with the service provider which can possibly be a more cohesive
approach. This may help in finding out what the customer finds as an value add in the relationship
than how valuable the customer is to the firm (Chandrashekhar R. Suryawanshi, 2013).


        Customer retention refers to a customer’s slated continuation of a business relationship with
the firm (Timothy et al., 2007). Retaining clients implies keeping them active with you through a
good customer service that is built on’’ a understanding of their needs, preferences and want’’
(Oyenihi and Abiodun, 2008). It is not only a cost effective and profitable strategy (Reichheld,
1996), but is imperative in fostering customer satisfaction, considering the fact that clients are
becoming increasingly aware of their rights and privileges, expecting more values for their money,
better quality services and products, even at a higher cost. The key for the stock broker would be to
ensure that customer trades on regular interval through him.


         Today the stock broker is not any more a mere service provider for buying and selling of
equity products. He is expected to be a one stop shop financial service provider for all customer
needs. Many of the corporate stock brokers have diversified and are providing multiple products to
their clients apart from equities such as Insurance, mutual funds, currencies, commodities, depository
services etc.
There are certain essential parameters that need to be captured and monitored for client retention.
         Periodic measurement of client feedback
         Whether client trade’s with other stock brokers
         Frequency of client transactions
         Stock brokers perceived brand image in the market
         Complaints against the broker, compliance to regulatory norms
         Providing multiple products as offered by competitors in the industry
         Providing all possible technological tools in a cost effective manner
         Offering platform of multiple Exchange’s to trade
         Periodic engagement in terms of product awareness, promotional activities
         Competitive brokerage
         Whether the client engages in brand promotion through word of mouth advertising
         Customer accessibility to the branch in-charge at the place of trade
         Zero default on payment to the customer
         Prompt communication and timely support for any customer queries or problems

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 4, Issue 5, September - October (2013)


        Customer retention in today’s market conditions are really challenging since the cost of
acquiring new client is multi fold and hence stock brokers would take efforts to retain clients through
loyalty by providing all relevant facilities and services that would keep customers satisfied and also
ensure that the customer also values the relationship with the stock broker as much as the stock
broker valuing the customer’s relationship.


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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 4, Issue 5, September - October (2013)

  16. Sharon E. Beatty, Kristy E. Reynolds & Mary P. Harrison, “Understanding the Relationships
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