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

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


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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    • "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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    ABSTRACT: The objective of this paper is to investigate the effects of brand experience and service quality on repurchase intention with the role of brand relationship quality. The study was conducted on 258 respondents and research results are analyzed by using structural equation modeling. As a result of this study, brand experiences, satisfaction, and trust have positively effects on repurchase intention for a brand. The research findings indicate that brand experience appears to be far more salient than brand constructs in shaping and building meaningful and long-lasting relationship with consumers.
    Full-text · Dataset · Nov 2012
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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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    ABSTRACT: The increasing concern of banks about market share and customer equity in the light of unpredictable behaviour of customers has brought to the fore the pre-eminence of customer loyalty. This underscored the analysis of customers' loyalty to banks in Ghana. This study fitted a binary probit model, utilizing cross-sectional data from 130 customers of banks in the Wa Municipality. The results of the regression showed that satisfaction, bank type, distance, ATM facility, time to transact, switch cost, loan commitment, other facilities and auxiliary banking are the significant determinants of customers' loyalty to their main banks. Proximity to customers and infrastructure base of a bank are essential factors influencing customers' loyalty. Banks should consider establishing branches and providing ATM services within and without the municipality, to get banking closer to customers, as a way of reducing customer defection.
    Full-text · Article · Aug 2012
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    • "In today " s technologically advanced world and due to arrival of internet, it " s much more difficult to retain a Customer. Several strategies have been attempted to retain customers (Afsar et al., 2010).Nguyen, (2006) recommended the strategies to develop the capability of relationship marketing in the banking sector especially in the Asian context. 1. Strategy development: It is imperative to develop an overall approach to managing customers. "
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    ABSTRACT: Relationship marketing is emerging as a new phenomenon however; relationship oriented marketing practices date back to the pre – Industrial era. This study expressed that how relationship marketing helps to build the customer loyalty. Relationship marketing has been measured through following indicators such as trust, communication, commitment, and conflict handling. Hundred and fifty questionnaire was administered to customers of banks but hundred and two questionnaire has been taken to evaluation. Relationship marketing contributes significantly to customer loyalty and predicts thirty percent of the variation found. Trust and communication in the relationship marketing contribute significantly to customer loyalty and customer loyalty is not contributed significantly by commitment and conflict handling in the relationship marketing. And also there is a significant mean different in customer loyalty among different age groups. This research focuses on banking services in one particular district of the country; therefore further research in other sectors may be necessary before generalization can be made on the entire service industry Based on the finding of the study, there are a few key points that can be used to conclude this research paper. It is very important that the relationship marketing in the private commercial banks in Jaffna peninsula contributes to the customer loyalty. Mainly trust and communication dimensions in the relationship marketing contribute to the customer loyalty.
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