Customers’ Preference Towards Functional Benefits Versus Experiential Benefits from Bank Brands


The Indian banking industry has been a witness and a party to an important transition. Gone are the days when banks were operating in a sellers’ market and could take advantage of it. They could afford being dingy, shabby places ruled by snob officers who took advantage of customers’ weak position and could thrive by merely offering functional benefits. Now, because of the immense competition, players in the banking industry find themselves operating in a customer driven market. Customers now have more choices and banks have to cater to more evolved needs of the customers, like experiential benefits, in order to retain the existing customers and to attract new ones.

Customers derive functional, symbolic and experiential benefits from brands. The value that customers derive out of a service brand comes out of either of these or a combination of all of these, depending on the context in which the service brand operates. This study deals with the question of whether Indian customers have evolved to a level where they also seek experiential benefits from bank brands along with functional benefits, and if they do, how important are either of these benefits for a bank’s customer. It is worth mentioning that symbolic benefits are not considered under this study.

This study takes into consideration both rural and urban customers’ preferences as well as the attitude of existing and potential bank customers. A survey on 240 respondents consisting of the aforementioned categories of bank customers has been conducted to identify whether functional benefits are preferred over experiential benefits or vice versa. An impact of these benefits on customer loyalty has also been examined. The results are expected to help banks in devising strategies to improve overall customer satisfaction.


Contribution of banks is vital for the economic health of any country, and India is no exception. Across the globe, and in India too, banks play a dual role – one, as mobilizer of public savings and two, in directing the flow of funds for constructive purposes. Considering the critical role of banks, from time to time, the Government of India has taken strategic initiatives depending on the role it expects banks to play. Some such initiatives are nationalizing the banks in 1969 and 1980, and then opening the industry for private players in 2013.

The Government of India nationalized a total of 20 banks – 14 in 1969 and 6 in 1980 – by substituting p r i vate o w n e rs h i p w i t h p u b l i c o w n e rs h i p . Nationalization of banks made possible the transformation from class banking to mass banking. Branch expansion programmes under the aegis of Reserve Bank of India tried to make available the necessary banking facilities in all parts of the country especially the untapped rural and semi urban areas. This has been considered as a seminal step towards implementation of projects meant for rural development and upliftment of economically weaker sections. The consequence to this effort is a gradual increase in the usage of banking facilities even in the remotest of areas. On another front, with their credit schemes, banks played a decisive role in improving the health of sick industrial units and thereby prevented unemployment. The ‘priority sectors’ that were neglected initially got a new life with an increased flow of credit. The reform process that started in the 90’s has provided a pool of opportunities to the financial sector. From here on, identification of growth opportunities and formulating strategies to exploit them has been considered as the key to success.

Presently, the Indian banking industry is passing through a phase of transition from being in a powerful sellers’ market to operating in a customer driven market. The customers now have more choices in terms of choosing one bank over another. Competition amongst banks is getting fiercer with every passing day through the addition of unique service offerings to enhance customer satisfaction. For a bank, a customer can be defined as a user or potential user of banking services. It would also include an account holder, a representative, or a person carrying out casual business transactions with a bank, or a person who, on his own initiative, may come within the banking fold (Talwar Committee Report, 1976). The efficiency of a bank can be measured in terms of service delivery to its target customers. For survival, growth, and continuous customer satisfaction, it has become imperative for banks to introduce new and better services in addition to the existing services. The globalization of the Indian economy has truly called for a much more careful approach on the part of the Indian banking sector to improve the overall quality of customer services through, for example, the smart use of technology. Adding new customers and retaining existing ones have become crucial for competing. Excellent service also entails employee engagement with customers. Such behaviours would affect customer satisfaction, which in turn, affects the profitability of banks. Satisfaction is related to the perception a customer holds about a brand and the eventual value provided by it. The value for banking services to a customer can be in the form of perceived functional benefits such as interest rates, number of branches, number of ATMs, etc. and/ or through experiential benefits that include employee behaviour, ambience, infrastructure, etc. The relevance of brand image and its associated value provides an impetus to further explore the field and examine whether customers give preference to functional benefits over experiential benefits or vice versa, whether the preference changes when existing and potential customers are compared, and whether there is any impact of the urban and rural area parameter on such preferences. The present study is an attempt to find an answer to the issues raised.

b. Lognormal – Values are positively skewed, not symmetric like a normal distribution. It is used to represent values that don’t go below zero but have unlimited positive potential. Examples of variables described by lognormal distributions include real estate property values, stock prices, and oil reserves.

c. Uniform – All values have an equal chance of occurring, and the user simply defines the minimum and maximum. Examples of variables that could be uniformly distributed include manufacturing costs or future sales revenues for a new product.

d. Triangular – The user defines the minimum, most likely, and maximum values. Values around the most likely are more likely to occur. Variables that could be described by a triangular distribution include past sales history per unit of time and inventory levels.

e. PERT– The user defines the minimum, most likely, and maximum values, just like the triangular distribution. Values around the most likely are more likely to occur. However, values between the most likely and extremes are more likely to occur than the triangular; that is, the extremes are not as emphasized. An example of the use of a PERT distribution is to describe the duration of a task in a project management model.

f. Discrete – The user defines specific values that may occur and the likelihood of each. An example might be the results of a lawsuit: 20% chance of positive verdict, 30% change of negative verdict, 40% chance of settlement, and 10% chance of mistrial.

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