Article

Determinants of customer loyalty in the banking sector: The case of Pakistan

African Journal of Business Management 07/2010; 4:1040-1047.

ABSTRACT The concept of customer loyalty has received much consideration and attention from both academics and practitioners in different industries. In increasingly competitive markets, being able to build consumer loyalty is seen as the key factor in winning market share and developing a sustainable competitive advantage. Banking industry is no exception as it has high interaction with the customers, so managers must understand the factors which influence the loyalty of the customers towards their respective banks. It is always costly to attract new customers, so the managers always try to find ways to retain their current customers and concentrate on different factors which enhances the customer loyalty among the customers of the organizations. This research attempts to find the factors of customer loyalty and their relationships with the banking industry in one of the developing countries, which is Pakistan. Then analyzing the relationship among different factors, a model for the customer loyalty is proposed at the end of the research. In order to do this, a questionnaire is designed and validated, then based on the data which is gained from the 316 respondents' answers to the designed questionnaire, the analysis is done and the results and the relations among the factors are explained. Perceived quality, satisfaction, trust, switching cost and commitment are the factors which influence the loyalty of the customers. Theses factors also influence each other as well. The relationships of different factors with each other are also studied and the SPSS software is used to analyze the data gathered from the respondents. During the past decade, the financial service sector has undergone drastic changes, resulting in a market place which is characterized by intense competition, little growth in primary demand and increased deregulation. Government of Pakistan has privatized quite a number of banks which further increases the competition and com-plexity among the banks. Finding a place in this heating sun becomes vital to the long-range profitability and ultimate survival of the bank. This can be done both by maintenance or having new ones. In this research we tried to find the main determinants of the customer loyalty in banking industry of Pakistan in order to help this key industry to have a wider look for supporting their customers and finally having more loyal ones.

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Available from: Bilal Afsar, Jan 09, 2014
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    • "Both parties will mutually use commitment to continuously show their trustworthiness toward the exchange relationship (Wang, 2009). Commitment is frequently defined as a desire to maintain a relationship (Moorman et al., 1992; Afsar et al., 2010). We use the term "commitment" to refer to consumers' ultimate relationship disposition, encompassing beliefs, attitudes, and behaviors toward the brand and their relationship with that brand. "
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    • "These only attest to the significance of customer loyalty to organizational profitability, growth and development, and yet most studies on the subject focus on customer satisfaction and psychological issues and largely outside the banking sector. In the few cases that the focus is on the banking sector the concern has been on determinants of bankruptcy (see Ahmed, 2005) and the analysis has been very qualitative, failing to bring out any causal-effects relationships (Lind and Mason, 1997) or multiple linear regression has been used (see Afsar, 2010) which is also inadequate since loyalty in most of these studies is measured (and rightly so) as a categorical variable (see Maddala, 1992; Gujarati, 2004). This study diverges from the rest by looking at the determinants of customer loyalty in the banking sector using a non-linear discrete choice model (probit) to assess factors that do not only border on customer satisfaction and psychological issues, but also inculcate locational and infrastructure factors in Ghana. "
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