Identifying the Determinants of Customer Retention in a Developing Country Context

Abstract

This paper investigates how image, perceived service quality and satisfaction determine customer retention in the retail banking industry in Malaysia. Data was obtained using a self-administered survey involving a convenience sample of 134 retail banking customers in Malaysia. The results show that image is both directly and indirectly related to retention through satisfaction while perceived service quality is indirectly related to retention through satisfaction. The paper concludes that satisfaction is not the sole determinant of retention in retail banking. Some managerial implications of this research find that the interrelationships between the determinants (image, quality and satisfaction) allow bank managers to better understand the dynamics of customer retention formation.

Identifying the Determinants of Customer Retention in a Developing Country Context

“…Hence, we are able to capture a more detailed insight into the relationship between image and quality on one hand and satisfaction on the other hand. Our study also shows that satisfaction has a direct positive effect on retention and is consistent with the previous studies conducted by Kassim (2001) and Rust and Zahorik (1993). This result seems to validate the importance of customer satisfaction in formulating customer retention in other service settings (for example, telecommunications).…”

“…service Quality and satisfaction Kassim (2001) found that both customer satisfaction and customer perceptions of service quality were important predictors of customer retention in telecommunication services. Bloemer et al (1998) have identified similar relationship; both customer satisfaction and customer perceptions of service quality were important predictors of loyalty in retail banking services.…”