Gravity model analysis of client-facing choice (in terms of probability evaluation of clients’ visits to banks)

Abstract

The crisis of the banking sector caused a massive outflow of bank customers. Due to unfavorable situation in the currency and credit markets – exchange rate, undermining the stability of the course of the national currency, outflow of deposit funds, mass closing of accounts in banks – financial institutions went bust. Public confidence in the banking sector has decreased, and as a result – the banks have begun to lose customers in large numbers. In order to keep up, to survive in conditions of uncertainty, risk, and increased competition, most banks choose development strategies which are aimed at improving customer service, since customer choice and confidence in the bank are the key of successful banking business. That is why all aspects of the bank’s activities should be aimed at creating a client base of the bank, sufficient to ensure profit as a result of its activities, to maintain the stability of the client base in the development of the bank. In this regard, the development and implementation of a strategic direction for managing the customer base of the bank deserves more attention than not disposable customer selection. The client base and client selection should be considered as ordinary management objects that require planning and forecasting using pro-technology and modern mathematical tools. Before the management of the bank there is a problem: how to stay in the market and not give up their positions to competitors and attract new clients’ attention to the bank. A solution to this problem can be found by using gravity models.