Using latent commitment profile analysis to segment bank customers

Abstract

Allen and Meyer’s (1990) three component model of organizational commitment is now well accepted in the study of consumer–service provider relationships (Keiningham et al., 2015). Commitment profiling is a “person-centered approach” to commitment (Meyer et al., 2012) which examines groups of individuals who share similar commitment mindsets. The purpose of this paper is to apply commitment profile methodology to the analysis of customer–firm relationships in the context of financial services. This method was applied with customer data collected as part of a nation-wide panel study of consumer financial service relationships in Canada. In total, 428 banking customers participated in this study. This study identified five distinct bank customer commitment profiles (fully committed, affective commitment dominant, continuance commitment dominant, moderately committed and uncommitted) that varied in both size and behaviors and intentions. This is an exploration of commitment profiling as a technique to understand the ways in which consumers differ in terms of their commitment mindsets and behavior. It has application to a wide range of service relationships beyond financial services. This has applications for market segmentation on the basis of customer commitment mindsets in many service sectors, but banking in particular. Since financial institutions have adopted various techniques to measure customer lifetime value (CLV), it would be appropriate to understand how various commitment profiles (segments) are linked to CLV. While commitment profiling is a well-developed approach in understanding the nature of the firm–employee employment relationships, this is an early and exploratory attempt at applying this method in the context of a customer–financial service provider marketing relationship. This is a novel way of understanding bank customer segments in terms of their felt commitment to the financial institution with which they do business.