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The development and management of relationships with customers is widely cited as an important method of enhancing the quality of service delivery (Berry, 1995; Christopher, Payne and Ballantyne, 1991). Furthermore, building effective and successful relationships can contribute significantly to customer satisfaction, loyalty and retention and thus to improved performance (Reichheld and Sasser, 1990, Rust and Zahorik, 1993). This relationship is not simply a one way process. An effective relationship (in banking or any other area) requires a positive contribution from both parties. Thus, the ability of a bank to meet customer needs requires that the owner/manager provides the bank with appropriate and timely information and is receptive to suggestions and advice provided by the bank. Only if both parties actively contribute to the development of the relationship can that relationship really yield benefits. This process of contributing to the relationship can alternatively be described as participation.

Participation can be thought of as having three broad dimensions; information sharing, responsible behaviour and personal interaction. Any conceptualisation of participation can usefully begin with the idea of information sharing; service providers need to provide information to the customer as one of their most basic functions. More significantly, customers need to share information with service providers in order to ensure that they receive a service that meets their needs. This information could be divided into two components; information which is required as a precondition to the service being provided (eg business plan required prior to the provision of a fixed term loan) and information which is not formally required but which can lead to a much more appropriate service being provided (eg forecasts for business under different scenarios which results in the offer of a loan with a flexible repayment schedule).

A second dimension to participation concerns what might be described as responsible behaviour. Such a concept recognises that both parties in the relationship have duties and responsibilities; in part, this view is consistent with the idea that customers may be placed in the role of partial employees and may have to behave as such and that employees may be placed in the role of partial customers (Bowen and Schneider, 1988). In addition, the idea of duty or responsibility reflects what Anderson et al (1995) describe as 'consumership' or 'good customers' which in their study refers to the extent to which customers take responsibility for planning their finances and monitoring their expenditure and so on. The third dimension of participation refers to personal interaction. This is necessarily broad and will encompass a range of elements with characterise the atmosphere of the relationship including factors such as trust, reliability, support, co-operation, flexibility and commitment

In order to evaluate the benefits which might accrue to customers and banks from participation it is useful to consider their rationale for involvement in a service relationship. Inseparability suggests that the provision of many services cannot occur without customer involvement. However, the way in which customers participate in service delivery can have important implications for both parties. Participative customers may expect to receive a service which is more appropriate to their needs and better quality because the provider has a clearer understanding of their circumstances. They may also be more aware of the constraints on the service provider in terms of what can and cannot be delivered. Accordingly, their expectations may be rather more realistic and the gaps between expectations and performance may therefore be smaller. Thus benefits might be anticipated in the form of enhanced service quality as a result of the delivery of a service which more closely meets customer needs and the formation of more realistic expectations. This in turn might be expected to influence perceptions of value. More generally, the quality of the interaction between buyer and supplier and the degree of customer participation in the relationship has been identified as a possible antecedent of customer satisfaction (Solomon, Surprenant, Czepiel and Guttman, 1985). This might be expected to translate into stronger customer retention and indeed new customer attraction to the provider.


Prior to any specific analysis of customer participation in service relationships, it is desirable to examine the context in which those relationships develop. The UK banking sector is dominated by a small number of large banks providing retail and corporate services both nationally and internationally. From the perspective of the banks the small business segment is arguably of particular importance because of the profit and revenue opportunities it presents (Bannock and Doran, 1991). The value of developing good working relationships with businesses customers in general and small business customers in particular has been highlighted in a number of studies (Turnbull and Gibbs, 1987; Watson, 1985). However the small business segment has not been an easy one for the main banks to target and a number of studies have highlighted imperfections in service provision and problems regarding service quality (Ennew, Reed and Binks, 1993). Although the range and variety of products available to small businesses has expanded, the management of the banking relationship continues to be problematic. In part this may reflect failures on the part of the banks, , such problems may also arise as a consequence of some customers' reluctance to participate in the banking relationship.

Theoretically, active participation in the banking relationship should result in benefits to the customer and the bank. These are considered with reference to the following three propositions:

P1: Customers will benefit from participative relationships through improved financing terms and conditions and through improved levels of service quality.

P2: Banks will benefit from participative relationships in the form of higher levels of satisfaction, customer perceived value and retention.
P3: The benefits to customers outlined in proposition one should be reflected in improved levels of business performance.

In the following section, empirical evidence will be presented to provide a preliminary evaluation of these three propositions.

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