A New Approach to Analyze the Retail Banking Market and its Development

Projekt Start:01/2017
Forscher:Gabriela Alves Werb, Daniel Blaseg, Elham Maleki, Daniel M. Ringel, Bernd Skiera,
Kategorie: Financial Intermediation
Finanziert von:LOEWE

Topic and Objectives

Market analysis provides insights into the competitive environment in which firms operate, traditionally focusing on products and their producers. Yet, producers are not the only firms active in markets: for example, information providers and comparison platforms engage with consumers and affect their decision-making. Although such non-producing firms can represent both opportunities and threats to producers, they have received limited attention in traditional market analysis. Herein, the project proposes a broader approach. By combining new methods with a new object of analysis, namely, consumer attention, this approach accounts for both producers and non-producing firms. This proposed “proleptic market analysis” applies to the development of the German retail banking market over six quarters. Using organic search results of 902 market-defining keywords and covering over four million individual searches, the project identifies 591 firms that compete for consumer attention across eight identified topics and finds that although 27 percent of these firms produce financial products, they attract only 14 percent of consumer attention.

Key Findings

  • Our proposed proleptic market analysis is the first comprehensive market analysis approach that is applicable to today’s attention economy.
  • It enables decision-makers to understand who competes for consumer attention in a market, against whom, on which topics, and how successful they are.
  • Methodologically, the project advances the extant research stream on market analysis with the proposed proleptic market analysis in four ways:
  • First, we are the first to change the object of market analysis from products to consumer attention, broadening the scope of market analysis beyond producers. This allows for identification and evaluation of  the roles and importance of non-producing firms in a market.
  • Second, we introduce a new data source to market analysis, namely search engine data, and show how it can capture both the demand and supply sides for consumer attention in a market.
  • Third, we develop a new approach that directly applies topic modeling to search engine data to discover market topics (i.e., submarkets) and who competes against whom in each topic.
  • We introduce Topic Mapping to marketing as a superior alternative to the commonly used Latent Dirichlet Allocation (LDA) model.
  • Finally, we propose a new method, VMTM, that visualizes competitive market structure from the output of topic models in a common map.
  • Substantively, the contributions of the research are fourfold:
  • Using the example of the German retail banking market, we empirically show that in today’s Attention Economy, producers face the risk of becoming disconnected from consumers through a plethora of non-producing firms that enter the market and attract disproportionately large amounts of consumer attention.
  • Only 26.73 percent of firms that attract consumer attention in the German retail banking market are producers of financial products. Even worse, these producers attract a mere 13.60 percent of consumer attention.
  • We empirically show that consumers’ definition of a market can reach far beyond its core products. For German retail banking, this means that consumers define the market using nearly six times as many keywords as there are core products.
  • Although analysts generally assume that its incumbents know the key topics of a market, we show that their perspective can be misaligned with consumers’ perceptions of the market. While recovering the six traditional topics of retail banking in our empirical study, we also identify two additional topics to which consumers explicitly devote their attention, namely, mobile payment and innovative credit.
  • We show that firms face different local competitive constellations across topics. Therefore, it is impossible to evaluate the competitive situation any given firm faces at the overall market level.
  • Along similar lines, we find that the variation in local competitive structure among producers and non-producing firms is especially pronounced in the German retail banking market: While producers of financial products dominate the center of the banking topic, they are “pushed” to the peripheries of other topics by non-producing firms, where they attract less consumer attention.

Policy Implications

  • Our findings suggest that proleptic market analysis provides additional actionable insights beyond traditional market analysis. For instance, we find in our empirical study that Facebook has successfully attracted consumer attention in the center of the banking topic (see Figure 4). At the same time, it acquired licenses for e-money and payment services in Europe. The practical implication of this finding for a specific decision-maker or regulator depends on whether they perceive Facebook as a competitive threat or a potential opportunity for cooperation under the given circumstances. However, without the insights generated by proleptic market analysis, decision-makers and regulators would have been unaware of Facebook’s role in consumer decision-making in the retail banking market.
  • Producers (in particular banks and insurance companies) are already disconnected from consumers through a plethora of non-producing firms that enter the market and attract disproportionately large amounts of consumer attention.
  • Firms (in particular banks and insurance companies) face different local competitive constellations across topics, so it is impossible to evaluate the competitive situation at the overall market level.

Zugehörige Working Papers

52Holger Kraft, Thomas Seiferling, Frank Thomas SeifriedOptimal Consumption and Investment with Epstein-Zin Recursive Utility2014 Financial Intermediation consumption-portfolio choice, asset pricing, stochastic differential utility, incomplete markets, fixed point approach, FBSDE