There are obvious advantages to the banking institution to be derived from a successful implementation of the relationship banking concept. Stability of the client base is enhanced. Profitability is improved through client base stability, because the extension of additional services to existing clients is a more cost effective process than the acquisition of new customers. Further, profitability is improved by concentrating operations in the most profitable marketing segments.

Relationship banking is an attempt to avoid a misidentification of the line of business in banking. It may not be the right answer, but it is being considered for the right reasons.

Based upon the findings of this study, the answer to the research question investigated is a resounding yes--in the short-run. In the long-run, however, the answer is somewhat more difficult to formulate. While relationship pricing may be effective as a means of promoting relationship banking, and while it may prove to be legal in the short-run, long-run difficulties may result. In the long-run, it is possible that relationship

The best way of explaining relationship banking is to compare it to the more traditional approach to banking. This more traditional approach is variously called order-taking banking (Donnelly, Berry & Thompson, 1985, p. 112), and transaction banking (Moriarty, Kimball & Gay, 1983, p. 4). There are a number of points of comparison, of which the most significant are as follows:

Berry, L.L. (1989, August 31). Bank marketing, some lessons learned. American Banker, 4, 9.

g. Marketing factors, such as price and price deals, product quality, and service.

Cyrnak, A.W. (1986, April 11). Recent bank failures. FRBSF Weekly Letter, 1-3.

Profits do not occur, until all costs have been recovered. Some pricing policies are based on full cost recovery in all instances. The use of marginal cost-based pricing policies, however, often allows a firm to be more competitive in pricing, while still retaining a basis for the full recovery of costs over a specified level of output. Alternatively, marginal cost pricing can permit management to make effective decisions related to the use of excess production capacity. The danger to the firm in using marginal cost pricing in decisions involving the use of excess capacity is that illegal price discrimination may result. Such a risk is associated with relationship pricing. Thus, while the use of marginal cost pricing policies may be a valuable tool for management, care must be exercised in practice.