Customer Efficiency, Channel Usage, and Firm Performance in Retail Banking

Innovations in technology and service design have increasingly enabled firms to incorporate self-service technology to augment or substitute for " traditional " employee-provided service channels. Although it is clear that self-service can reduce cost, less is known about how customers utilize self-service channels in a multi-channel service delivery system and the resulting impact on firm performance. An important aspect of service operations is that customers are co-producers of the service. Thus, the performance of the delivery system and customers' use of service channels can be affected by customers' own efficiency or productivity in service co-production (customer efficiency). In this paper we utilize prior theoretical frameworks in service operations and economics to hypothesize relationships among customer characteristics (especially co-production efficiency), channel utilization, and firm performance. We then test these hypotheses using panel data from a large retail bank. Overall, we find that higher customer efficiency in self-service channels is associated with greater profitability and has a complex relationship with customer retention and product utilization.