The Differentiation of Bank Services to Small Firms

Increased competitive pressure in the market for loanable funds has encouraged the banks to place greater emphasis on the marketing of their services to both corporate and personal customers. The small business sector of the corporate market covers the majority of corporate accounts and for a substantial volume of bank lending. However, the proliferation of product differentiation in relation to small business customers in order to improve banks′ competitive position appears to have been less than successful. The small business sector is heterogeneous; customer needs vary but there is little evidence to suggest that banks differentiate their products sufficiently to appeal to distinct market segments. On the contrary, despite competitive pressures and new marketing strategies, small business customers generally perceive the services provided by the different banks as indistinguishable.