Academic journal article Academy of Banking Studies Journal

Double Jeopardy in Kuwait Banks: A Focus on Mutual Funds

Academic journal article Academy of Banking Studies Journal

Double Jeopardy in Kuwait Banks: A Focus on Mutual Funds

Article excerpt

INTRODUCTION

A company needs to focus at least a proportion of marketing efforts on the development, maintenance, or enhancement of customer loyalty (Dick and Basu, 1994). This emphasis is important because a company with a large number of brand loyal buyers will be more secure in its markets and should have a higher market share than other firms without this vital customer asset (Raj, 1985; Robinson, 1979; Smith and Basu, 2002). Competitors are at a disadvantage when some firms have a larger number of brand loyal buyers than they have. The many advantages of relatively higher numbers of brand loyal buyers include: a greater response to advertising (Raj, 1982), larger purchase quantities per occasion (Tellis, 1988), and reduced marketing costs (Rosenberg and Czepial, 1983). The advantages garnered from loyalty are especially important since, as markets become more mature, increases in share become more expensive and improvements in the loyalty base might be a viable means of increasing and maintaining share (Gounaris and Stathakopoulos, 2004).

The fact that competitive markets oftentimes exhibit similar market structure characteristics (market share), which in turn was found to be correlated with the number of brand loyal buyers, was first noticed by McPhee (1963). This observance that brands with large market shares usually had the most brand loyal buyers (and vice versa) was termed "doublejeopardy" (DJ) because it seemed unfair for smaller brands to suffer in both ways. Previous research related to DJ suggests its' applicability to a variety of consumer brands and setting. Additionally, other consumer-specific variables exhibit a similar relationship to market share as does consumer loyalty (Ehrenberg et al, 1990).

This study applies the aspects of DJ to the area of mutual fund services in Kuwait. The setting is relevant because few have investigated the DJ phenomenon in Asia (Yang et al, 2005). Plus, only one investigation to this point has studied double jeopardy in the Kuwait market (Pleshko and Al-Wugayan, 2008). Nor have there been many studies in the retail services industries. Most research has focused on brand-level relationships rather than service-level or store-level relationships, as would be necessary in retailing or banking (Meyer-Waarden and Benavent, 2006, Rafiq and Fulford, 2005).

Additionally, the DJ topic is extremely relevant to the banking sector in the Middle East, where markets are opening to global competition as a result of the Arabian Gulf coast country (GCC) members joining the WTO. The presence or absence of the DJ phenomenon in financial services may be critical to companies' decision making, since it would be difficult for small-share firms to grow and show long term success with evidence of a strong DJ effect. Additionally, it may be difficult for foreign or other new firms to enter a geographical market with strong DJ effects. The authors attempt to identify whether the DJ phenomenon is evident through a survey of investors in Kuwait by analyzing the relationship of loyalty to market share as they pertain to mutual funds.

THE DOUBLE JEOPARDY PHENOMENON

A firm's long-term success depends on both its ability to attract customers and its capability to retain these customers (McDowell and Dick, 2001). Jones (1990) points to this fact by stating that manufacturers should regard sales volume and market share as keys to the future, given that both involve sources of repeat business and scale economies. McDowell and Dick (2001) rightfully remind us that a brand's market performance is driven by both the number of individuals buying a particular brand and the frequency of repeat purchases from these customers. The ability to manage these two factors determines the extent to which a firm maintains and sustains its customer base, as well as its market share. Indeed, Robinson (1979) and Raj (1985) state that the larger the number of loyal customers, the more secure will be the brand's market share. …

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