Customer Loyalty Banking

Published:

6.1. Chapter Overview

This chapter discusses the research results in relation to the five objectives of the study. Before concluding, this chapter discusses the limitation of the research and makes recommendation for future research.

6.2. Discussion of Results

The discussion on the research's results will be focused mainly on achieving the four mains objectives of the study which are reminded below:

  • 1. To identify the demographic profile of commercial bank customers in the South of Thailand.
  • 2. To examine the cause and effect relationships between the selected predictors of customer loyalty in banking sector (satisfaction, trust, commitment and service quality) towards customer loyalty.
  • 3. To examine the direct cause and effect relationships between the selected predictors of commitment in banking sector (customer satisfaction, trust and perceived service quality) and perceived service quality and satisfaction.
  • 4. To examine mediating effects of commitment, satisfaction and trust on loyalty.
  • 5. To investigate the appropriateness of the competing model (Oliver Loyalty Model, 1997) in verifying customer loyalty model in banking.

6.3. Identification of the Demographic Profile

Lady using a tablet
Lady using a tablet

Professional

Essay Writers

Lady Using Tablet

Get your grade
or your money back

using our Essay Writing Service!

Essay Writing Service

The first objective of this study is to identify the demographic profile of commercial bank customers in the South of Thailand. The following discussion is based on the bank customers' gender, education, employment, income and tenure with banks.

  • 6.3.1 For this study, nearly 400 actual bank customers were directly involved in responding to the predetermined demographic questions. The results tend to imply that the majority of bank customers are male (56%) compared to female. This is in-line with the proportion of employment according to gender for the whole of Thailand or in South Thailand which shows that male employment is slightly more than female (see discussion in chapter 2, p. ).
  • 6.3.2 According to the result, about 74% of bank customers are in the higher education bracket i.e. most of them achieved bachelor's degree or above. This finding supports the opinion that most bank customers are the educated working segment of the population (% & ref ). The area of research has been banks at universities, thus conforming to the high education level of the respondents.
  • 6.3.3 The majority of the respondents are government employees (64.4%) which is according to the percentage of government sector employment. The government sector has a close relationship or agreement with the banks for issuing the monthly salary of their employees through the local banks.
  • 6.3.4 The average income of the majority of the bank respondents (61.5%) is between Baht 15000 to 20000 (USD430-USD573). This is in tandem with per capita income of South Thailand (see chapter 2, p.22).
  • 6.3.5 Most of the respondents have been using the bank services for more than three years (63.4%). Three years length of time can be considered as loyal customers of the banks (Oliver,1999)
  • In summary, the demographic profiles of the bank customers in the South of Thailand are male, highly educated sector (completed tertiary level education) of the population, working with the government sector, earning monthly income between 15,000-20,000 Baht and have been with the banks for three years or more. For this research it usefully for define market segmentation strategy in banking.

    6.4. Examination of the direct antecedents of loyalty

    The second objective of this study is to examine the direct cause and effect relationships between the selected predictors of customer loyalty in banking sector. The direct antecedents that have been specified in the hypothesized model are customer satisfaction, trust, commitment and perceived service quality. The discussion is based on the generated model since the goodness of fit of this model is achieved (x2=178.29; df=161; normed x2= 1.107; GFI=.956; RMSEA=.017; p-value=0.167). The discussion of these findings is as follows.

    • H1: Perceived service quality is related significantly and positively to customer satisfaction.
    • H2a: Customer satisfaction is related significantly and positively to commitment
    • H2b: customer satisfaction is related significantly and positively to customer loyalty.
    • H3a: Trust is related significantly and positively to commitment.
    • H3b: Trust is related significantly and positively to customer loyalty.
    • H4: Commitment is related significantly and positively to customer loyalty.
    • H5a: Commitment is mediation between Customer satisfaction and customer loyalty
    • H5b: Commitment is mediation between trust and customer loyalty.
    • H5c: Commitment is mediation between Perceived service quality and customer Loyalty.
    • H6a: Perceived service quality is related significantly and positively to customer Loyalty.
    • H6b: Perceived service quality is related significantly and positively to commitment.
    • H7: Customer satisfaction is mediation between Perceived service quality and Commitment.
    • H8: Customer satisfaction is mediation between Perceived service quality and Customer loyalty.

    6.4.1 Customer satisfaction and customer loyalty

    Lady using a tablet
    Lady using a tablet

    Comprehensive

    Writing Services

    Lady Using Tablet

    Plagiarism-free
    Always on Time

    Marked to Standard

    Order Now

    The direct relationship between customer satisfaction and customer loyalty was found to be positive and significant (B=0.173, CR=3.426, p .001). Thus, hypothesis H2b is supported. Past studies in banking have shown support to this finding (Ball et al., 2004; Beerli et al., 2004; Caruana, 2002; Ehigie, 2006; Liang et al., 2009). The result of the current study tends to imply that the higher the customer satisfaction, the higher the customer loyalty. Customer satisfaction seems to be a key predictor of customer loyalty because the more satisfied the bank customers with the bank services provided for example the deposit interest rates offered, or pleasing overall experience with bank, this will cause a higher loyalty in terms of personal attachment, positive emotional relationship, intention to patronize, recommendation and continuation with the bank.

    6.4.2 Trust and customer loyalty

    The direct relationship between trust and customer loyalty was found to be positive and significant (B=0.289, CR=7.338, p.001). Thus, hypothesis H3b of this study is supported. Past studies have shown similar support to this relationship (Liang et al., 2009; Ndubisi et al., 2007; Eisingerich & Bell, 2007; Ndubisi, 2005). Trust is important to loyalty because customers who have complete trust on the banks may develop the natural willingness to recommend the bank to relatives or friend. Customer's trust can be developed by banks when there is honesty, trustworthiness, confidentiality of bank accounts or transactions. Consequently, customers that have trust on bank providers' honesty and credibility may keep a long withstanding relationship with the bank providers. Hence, trust is an important ingredient in the bank customer relationships and ultimately in the development of loyalty towards banks in South Thailand. Therefore, banks should strive to win customers' trust.

    6.4.3 Commitment and customer loyalty

    • H4: Commitment is related significantly and positively to customer loyalty.

    The direct relationship between commitment and customer loyalty was found to be positive and significant (B=0.187, CR=2.659, p=008). Thus, hypothesis H4 is supported. Past studies in banking and finance have shown support to this finding (Liang et al., 2009; Ndubisi, 2005). This result indicate that the higher the customer commitment the higher the customer loyalty. It also implies that the bank customers are not easily wavered by situational circumstances or special offers by other competing banks such as higher fixed deposit rates or lower loan interest rates.

    In other words, banks need to always be alert at all times for competing aggressive promotional offers by other banks and fast to react to such aggression. Marketing intelligence by banks is necessary to combat any customers snatching or customer switching. It is obvious that commitment is needed by both parties in order to maintain loyal customers.

    6.4.4 Perceived service quality and customer loyalty.

    • H6b: Perceived service quality is related significantly and positively to customer loyalty.

    The direct relationship between perceived service quality and customer loyalty was found to be positive and significant (B=0.359, CR=6.550, p< 0.001). Thus, hypothesis H6b is supported. Past banking studies have shown support to this finding (Ehigie, 2006; Caruana, 2002). This study shows that banks that offer a wide variety of products, their employees know very well the bank's products and willing to discuss with customers, insists on error-free records as well as giving personal attention will definitely maintain loyal customers. This notion of customer relationship quality or customer relationship management (CRM) is supported by Wong & Sohal (2006) who stressed the importance of relationship quality of employees to ensure customer loyalty and commitment.

    6.5. The examination of the direct antecedents of commitment and satisfaction

    The third objective of this study is to examine the direct cause and effect relationships between the selected predictors of commitment in banking sector (customer satisfaction, trust and perceived service quality) and also customer satisfaction (perceived service quality).

    6.5.1 Customer satisfaction and commitment

    The direct effect relationship between customer satisfaction and customer commitment was found to be positive and significant (B=.449, CR=11.621, p< 0.001), Hence, hypothesis H2a is asserted. In the field of finance, only one past study has shown support to this finding (Liang et al., 2009). Customer, who is satisfied with the bank service provided such as a high deposit interest rate or prompt transaction services, will be more committed. Committed bank customers would not willingly change banks and trust the services provided so that they can recommend to their close friends and family members.

    6.5.2 Trust and commitment

    Lady using a tablet
    Lady using a tablet

    This Essay is

    a Student's Work

    Lady Using Tablet

    This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

    Examples of our work

    The direct effect relationship between trust and customer commitment was found to be positive and significant (B=0.177, CR= 4.925, p0.001). Hence, hypothesis H3a is asserted. This finding is supported by Kassim & Ahmed, (2006) who found positive significant relationship between trust and commitment among internet banking consumers. Even though there is only one support in the banking field for this linkage, overall, the result suggests that trust appears to be an important factor in determining commitment due to several reasons. First, the Thailand culture emphasizes relationship based on trust between a company and its customers (Vichit-Vadakhan, 2006). Thus, when trust has been imbedded in the minds of customers, the customers are expected to be more committed in the sense that the customers will give preferences, recommendations for the banks and unwillingness to change bank. Second, trust leads to commitment due to the conative nature of the trust and commitment. It is argued that when customers come to trust a favoured bank, then the customers will have brand commitment (Oliver, 1999), or conative loyalty in the sense that customers tend to spread positive word of mouth, revisit banks and encourage relatives, friends and colleagues to patronize certain banks.

    6.5.3 Perceived service quality and commitment

    The direct effect relationship between perceived service quality and customer commitment was found to be positive and significant (B=0.403, CR= 8.818, p0.001). Hence hypothesis H6b is asserted. Past studies in banking have shown support to this finding (Fullerton, 2004). The higher the bank customers perceived service quality, the higher their commitment. Customers who received responsive service, personal attention from bank staff, and can solve their financial problem are likely to gain commitment from these customers. The customers will constantly revisit banks to expect a known friendly atmosphere at the bank which could be transformed into a long term relationship quality (Caceres and Paparoidamis, 2007).

    6.5.4 Perceived service quality and satisfaction

    The direct effect relationship between perceived service quality and customer satisfaction was found to be positive and significant (B=0.691, CR=16.674, p0.001). Hence, hypothesis H1 is asserted. Past studies in banking have shown support to this finding (Ehigie, 2006; Beerli et al., 2004; Caruana, 2002). If bank's customer perceived service quality as good, they tend to be more satisfied with the bank. Banks which provide product variety, error-free records, experienced staff, accurate transaction, personal attention and act as problem solver are most likely be able to give more satisfaction to their customers.

    6.6. The examination of the mediating effects

    The fourth objective of this study is to examine the mediating effects of commitment, customer satisfaction and trust on several linkages of predictors of loyalty. This examination is made simpler with the utilization of structural equation modeling (SEM) analysis method whereby, the results of the direct and indirect effects are made available. The following discussion is also based on the results of the generated model.

    6.6.1 The mediation of commitment on the linkage between satisfaction and loyalty (Satisfaction & commitment & loyalty)

    • H5a: Commitment mediates the relationship between customer satisfaction and customer loyalty (not supported).

    The indirect effect of commitment on the relationship between customer satisfaction and customer loyalty is found to be non-mediating (direct effect=0.173; indirect effect=0.084; total effect=0.257). Since the direct effect is more than the indirect effect thus, commitment does not mediate the linkage between customer satisfaction and customer loyalty. In other words, the indirect relationship between satisfaction and loyalty is not mediated by commitment. Prior studies support this notion (Caceres & Paparoidamis, 2007; Dimitriades, 2007). The probable reason for the non-intervening effect of commitment is because bank customer satisfaction has a stronger direct relationship with loyalty compared to indirect effect. Satisfied customers will directly become loyal customers without the intervention of commitment. Thus, banks could concentrate on maintaining satisfied customers to keep them loyal.

    6.6.2 The mediation of commitment on the linkage between trust and loyalty (Trust & commitment & loyalty)

    • H5b: Commitment mediates the relationship between trust and customer loyalty (not supported)

    The relationship between trust and loyalty is not mediated by commitment (direct effect=0.289; indirect effect=0.033; total effect:=0.322). Past studies have found mixed findings i.e partial mediating effect (Caceres & Paparoidamis, 2007) while the others found no mediating effect, thus supporting the present study (Donio et. al, 2006). Trust and loyalty have strong direct effects rather than being mediated by commitment. As earlier discussed in 6.4.2, trust plays a very important role in Thailand's culture and social background. Both parties have a trust for each other. Once the bank customers have developed trust in a bank, than loyalty follows suit.

    One of the unique services provided by banks is the 'cycle' loan given to bank customers based on the amount of monthly salary deposited with bank. The customers may be given loan 10 times the amount of monthly salary but solely on trust for each other. Additionally, the banks in Thailand are increasing their customer loyalty programs by serving as a shopping mall selling through product catalogues or special shopping fairs, where bank customers can use their bank account card to buy luxury products such as cars, computer laptop, electrical goods, gold and diamond jewelry and etc.

    6.6.3 The mediation of commitment on the linkage between perceived service quality and loyalty (Perceived service quality & commitment & loyalty)

    • H5c: Commitment mediates the relationship between perceived service quality and customer loyalty (partially supported)

    The relationship between perceived service quality and loyalty is partially mediated by commitment (direct effect=0.359; indirect effect=0.253; total effect=0.612). Past studies have shown support to this finding (Hennig-Thurau et al., 2001).

    6.6.4 The mediation of satisfaction on the linkage between perceived service quality and loyalty (Perceived service quality & Satisfaction & commitment)

    • H7: Satisfaction mediates the relationship between perceived service quality and commitment (partially supported)

    The indirect relationship between perceived service quality and commitment is partially mediated by satisfaction (direct effect=0.403; indirect effect=0.311; total effect: =0.713). Past studies have shown support to this finding (Vilares & Coelho, 2003).

    6.6.5 The mediation of Satisfaction on the linkage between perceived service quality and loyalty (Perceived service quality & Satisfaction & loyalty)

    • H8: Satisfaction mediates the relationship between perceived service quality and customer loyalty (partially supported).

    The relationship between perceived service quality and loyalty is partially mediated by satisfaction (direct effect=0.359; indirect effect=0.253; total effect=0.612). Past study has shown full mediating effect of satisfaction (Cristobal, et. al., 2007). The bank providers must provide high quality services and products in order to attract more loyal customers as well concentrating on giving satisfaction.

    6.7. The verification of the appropriateness of Oliver's (1999) competing model

    The final objective of this study is to investigate the appropriateness of the loyalty competing model (Oliver, 1999) in verifying customer loyalty model in banking. The finding seems to imply a reasonably fit competing model based on the absolute goodness of Fit index (GFI= .925; RMSEA=.048; p-value=.056; R2 (SMC)=0.75). This result tend to support the robustness of the original underpinning model suggested by Oliver (1997, 1999) in modeling customer loyalty antecedents in general and in South Thailand in specific.

    Previous studies have applied this conceptual underpinning for the development of the research framework only (Pedersen & Nysveen, 2001; Caruana, 2002; Bennett & Thiele, 2004; Aydin & Ozer, 2005; Ehigie, 2006). Furthermore, none of these studies have verified the appropriateness of the model using the data collected for their study. My study tends to fill this void in the attempt to verify its appropriateness to the bank customers' perception data in South Thailand. The result of this first time attempt has given a good impetus and support for Oliver's model. It seems that the model could be applied in other research and culture setting such as Thailand and banking.

    The appropriateness of the underpinning model for bank customers in South Thailand could be attributed to the high reliability and validity of the measurement scale utilized in the research model and also could be due to its simplicity.

    6.8. Managerial implication

    To recapitulate, the findings from this research have a meaningful contribution to commercial bank practitioners, the Thailand government, academicians and the general public of South Thailand.

    Besides emphasizing the uniqueness of this first time empirical research findings for Thailand, this study has somehow produces new findings and increase the body of knowledge in customer loyalty antecedents in South Thailand.

    For the commercial bank practitioners, the significant predictors of loyalty could indicate the way forward to improve and maintain customer loyalty amongst bank customers at all time. The improvement of its service quality and product offers to customers must be a priority agenda for most banks due to stringent competition and economic situational instability locally and globally. Commercial banks are front liners in handling this financial crisis in the best way they could.

    6.9. Limitation of the Study

    This research thesis has been conducted to the best of my ability in accordance to the quantitative research method process. However, several limitations cannot be avoided as numbered below.

    • 1. The study was conducted in South of Thailand only due to money and time constraints. Therefore, the generalizability of the results to a wider population could be limited. The study only used banking sector thus generalizability of the results to other areas and disciplines should be done with caution.
    • 2. This study has attempt to be comprehensive by including most of the common predictors of loyalty, however, the variables used in this research are not exhaustive, whereby some factors are left out such as performance, complaints, communication, conflict handling, segmentation, perceive value, image etc. mainly due to their inappropriateness to the conceptual underpinning used in this study.
    • 3. The Oliver underpinning theory of customer loyalty may not be the only feasible model to be used. .
    • 4. While care has been taken to sample the respondents by systematic random sampling, since we are dealing with actual bank customers, limitations of convenience samples are noted. For example, the denoted fifth customer might not want to cooperate for whatever reason.

    6.10. Recommendation for Future Research

    • 1. This research should be conducted to cover a wider population or country so that the results could be generalized to the whole population of Thailand. Likewise, industry limitation could be remedied by including other service industry settings such as internet banking, hotel, tourism, healthcare, education, retailing etc.
    • 2. Future studies should add value to the present knowledge in this area by adding variables such as image, convenience as direct antecedents of customer loyalty.
    • 3. More empirical studies should be conducted utilizing other conceptual underpinning in future research such as Dick and Basu (1994) loyalty typology
    • 4. More studies should use actual customers in future research in spite of the difficulty in getting cooperation when collecting data. Real situation behavioral perceptions are very much needed in today's research venture. Their invaluable input will give a much more authentic scenario of the current happenings in marketing and consumer research.

    6.11. Conclusion

    This research has achieved its objective by identifying the demographic profiles of bank users in South Thailand and the salient underlying factors that predict customer loyalty in banks. The demographic profiles of the bank customers in the South of Thailand are male, highly educated sector (completed tertiary level education) of the population, working with the government sector, earning monthly income between 15000-20,000 Baht and have been with the banks for three years or more. The direct significant antecedents of customer loyalty are customer satisfaction, trust, commitment and perceived service quality while the direct significant antecedents of commitment are customer satisfaction, trust and perceived service quality. For the mediating effects, commitment is found to be a non mediator for linkages between customer satisfaction and trust with customer loyalty. However, commitment is a partial mediator when tested for linkages between perceived service quality and loyalty. Similarly, satisfaction is a partial mediator for the linkages between perceived service quality and loyalty as well as perceived service quality and commitment. Finally, the adaptation of Oliver's (1999) loyalty underpinning theory has been substantiated empirically.