Modeling the factors that explain customer loyalty in retail banking

  • 645 Views
  • 232 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

Literature suggests that achieving adequate customer loyalty is a significant determinant of growth and profitability. However, in South Africa, there is no evidence of a validated customer-loyalty-in-retail-banking scale. Thus, this study aimed to contribute to the literature by validating customer loyalty in retail banking as a six-factor structure comprising customer loyalty, service quality, customer commitment, trust, switching cost and customer satisfaction, which practitioners can use as a marketing guide to better understand customer loyalty. Data was collected from one sample only once, and the sample size was selected (N = 400). Descriptive and confirmatory factor analyses were undertaken to achieve the study’s objective. Confirmatory factor analysis results validated customer loyalty in retail banking as a six-factor structure that includes customer loyalty, service quality, customer commitment, trust, switching cost and customer satisfaction. The results show no serious multicollinearity between the latent factors and that acceptable internal-consistency reliability was returned for each factor. Moreover, the measurement model returned acceptable composite reliability together with construct, convergent and discriminant validity. Moreover, IFI, TLI, CFI, SRMR and RMSEA model fit index values suggest a good fitting model. Thus, the results concluded that this six-factor model is a reliable and valid instrument of customer loyalty in retail banking and is the first validated customer loyalty scale within the retail-banking context of South Africa. Retail banks are encouraged to use this instrument as a marketing guide in their quest to provide excellent banking services to their market segments, as well as build solid bank-customer relationships.

view full abstract hide full abstract
    • Table 1. Sample
    • Table 2. Descriptive, reliability, correlation and collinearity statistics
    • Table 3. Measurement model estimates
    • Conceptualization
      Marko van Deventer, Ephrem Habtemichael Redda
    • Formal Analysis
      Marko van Deventer, Ephrem Habtemichael Redda
    • Methodology
      Marko van Deventer
    • Writing – original draft
      Marko van Deventer, Ephrem Habtemichael Redda
    • Writing – review & editing
      Marko van Deventer, Ephrem Habtemichael Redda
    • Software
      Marko van Deventer
    • Investigation
      Ephrem Habtemichael Redda