the impact of relationship marketing on customer...

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IMPACT OF RELATIONSHIP MARKETING ON CUSTOMER

LOYALTY IN THE BANKING SECTOR

Mukhiddin Jumaev

Research Scholar, Othman Yeop Graduate School of Business

University Utara Malaysia

Email: [email protected]

Prof. Dr. Dileep Kumar. M.

Othman Yeop Graduate School of Business,


E-mail: [email protected]

Jalal R. M. Hanaysha

Research Scholar, Othman Yeop Graduate School of Business,


E-mail: [email protected]

ABSTRACT

The purpose of this study is to discuss the impact of customer loyalty in banking sector. The

customer loyalty in banking has seen a major concern to practitioners due to severe

competition and higher customer expectations. Further to that, one way to enhance customer

loyalty in banking is by focusing on offering excellent services and meeting the needs of

customer. Banks need to have a good understanding of their customer behaviour so that

appropriate marketing strategies directed towards relationship building and customer

retention can be developed. The objective of this study is to examine the causal relationships

of several antecedents of customer loyalty in the context of retail banking in Northern

Malaysia. Thus, it will review the marketing literature on the experience of customer loyalty

ie., customer satisfaction, commitment, trust, perceived service quality and perceived value.

Next, we present the research framework, methods, measures and findings and conclusion.

Finally, the results were discussed in terms of its contribution to the upgrading of banking

services and recommendations for future research.

Keywords: Customer satisfaction, customer commitment, customer loyalty, empathy,

perceived conflict handling, perceived value, trust.

Paper Type: Research Paper

INTRODUCTION

Oliver (1999) has described loyalty as a deeply held commitment to rebuy or repatronize a

preferred product/service consistently in the future, thereby causing repetitive same-brand or

same brand-set purchasing, despite situational influences and marketing efforts having the

potential to cause switching behaviour. And “fervently desires to re-buy a product or service

and will have no other – pursuing this quest against all odds and at all costs”.

Customer loyalty expresses an intended behavior related to the service or the company. This

includes the likelihood of future renewal of service contracts, how likely it is that the

customer changes patronage, how likely the customer is to provide positive word-of-mouth,

or the likelihood of customers providing voice. If real alternatives exist or switching barriers

are low management discovers the organization's inability to satisfy its customers via two

feedback mechanisms: exit and voice (Hirschman 1970).Research related to consumer

mailto:[email protected]

mailto:[email protected]

Far East Journal of Psychology and Business Vol. 6 No. 3 March 2012

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behavior in the field of service marketing has progressed steadily over the years. Measured

by the impact and amount of work done within customer satisfaction research, it is fair to say

that the dominant theories are disconfirmation of expectations (Swan 1983); (Oliver and

DeSarbo 1988); (Oliver 1980); (Churchill and Suprenant 1982) and cognitive psychology

(Weiner 1980; Weiner 1985; Weiner 1985); (Folkes 1988).

Customer loyalty in banking has been a major concern to practitioners due to severe

competition and higher customer expectations. Customer loyalty is considered a vital link and

aspiration to organizational success, profit and business performance (Oliver, 1997;

Reichheld, 1993; Sheth and Parvatiyar, 1995). The consumers that show the greatest levels

of loyalty toward the product, or service activity, tend to repurchase more often, and spend

more money. Thus, loyal customers do not only increase the value of the business, but also

enable business to maintain costs lower than those associated with attracting new customers

(Barroso and Martin, 1999). Moreover, loyalty rather than satisfaction is becoming the

number one strategic goal in today’s competitive business environment (Oliver, 1999). One

of the ways to enhance customer loyalty in banking is by focusing on offering excellent

services and meeting the needs of customer.

Banks need to have a good understanding of their customer behaviour so that appropriate

marketing strategies directed towards relationship building and customer retention can be

developed. As a result, a great deal of research attention has focused on the identification of

effective methods of actively enhancing loyalty, including loyalty programs such as point

reward schemes. Loyalty programs “create a reluctance to defect” by rewarding the customer

for repurchasing from the organization (Duffy, 1998). Hitherto, in recent years, customer

loyalty in banking has received increasing attention from academic researchers worldwide

(Ball, Coelho & Machas, 2004; Beerli, Martin and Quintana, 2004).

In Malaysia, retail banking has undergone a major restructuring starting in 2001 whereby,

from an initial 54 individual retail banks, it has been reduced and merged into 22 commercial

banks only (9 domestic and 13 foreign banks) by 2009 (Bank Negara Malaysia, 2009). With

this merger and acquisition exercise, commercial banks will need to increase their bank

outlook and image to attract more loyal customers. For banks to adequately monitor their

customer loyalty programs, bank management need to be knowledgeable of the drivers of

customer loyalty in retail banking industry. This is the main impetus of doing this research.

Thus, the objective of this study is to examine the causal relationships of several antecedents

of customer loyalty in the context of retail banking in Northern Malaysia. This paper is

structured as follows. First, we review the marketing literature on the antecedents of

customer loyalty: customer satisfaction, commitment, trust, perceived service quality and

perceived value. Next, we present the research framework, methods, measures and findings.

Finally, the results were discussed in terms of its contribution to the upgrading of banking

services and recommendations for future research.

THEORETICAL UNDERPINNING OF STUDY

Much of the original work on customer loyalty defines loyalty from behavioural terms

(repurchase or purchase frequency), and then later admitted an attitudinal component. Ganesh

et al. (2000) found two factors in their loyalty items, active loyalty (word – of mouth and

intention to use) and passive loyalty (not switching even under less positive conditions).

Other authors have considered loyalty as a process rather than an outcome. Oliver (1997a),


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for example, distinguishes among four stages of loyalty ie., cognitive, affective, conative, and

action loyalty. Clearly, loyalty is a rich concept with many possible definitions.

A common approach to distinguish customer loyalty is consumer’s attitudinal loyalty and

behavioural loyalty (Dick and Basu, 1994; Zeithaml, 2000; Chaudhuri and Holbrook, 2001).

Behavioural loyalty is repeated transactions (or percentage of total transactions in the

category, or total expenditures in the category) and can sometimes be measured quite simply

with observational techniques. Attitudinal loyalty is sometime defined equivalently with

relationship commitment (Morgan and Hunt, 1994).

Behavioural loyalty is highly prized, because it means sales. Attitudinal loyalty is also highly

prized, because as Oliver, (1997a and 1999) argues, behavioural and attitudinal loyalty are

highly intertwined, repeated purchases lead to positive affect which leads to cognitive loyalty,

high levels of involvement and intention to continue repurchase. We may consider both

affective and cognitive loyalty to be kinds of attitudinal loyalty. Strong attitudinal loyalty

makes customers more resistant to attempts by other marketers to steal them away (Gundlach

et al., 1995) and more resistant to counter – persuasion and search for alternatives (Dick &

Basu, 1994).

Oliver’s (1997) perspective proposes that loyal customers go through four stages. First is a

cognitive sense (belief). For example, sales promotion or high quality products of a firm for

first- IME purchase consideration attracts a customer. To be loyal, the customer must

consistently confirm that his or her expectations about the goods or services are met. Second

is the affective sense (favoured attitude) in which consumers are repeatedly satisfied from

purchasing decisions. Third is the conative stage that consumers have a behavioural intention

– committed deeply to buy. The intention leads to the fourth stage of action. Customers have

the desire to overcome obstacles, e.g., attraction of competitors or price increase by a firm, to

achieve the actual purchase behaviour (Oliver, 1997).

Figure 1 - Four-Stage Loyalty Model (Oliver, 1997)

Cognitive loyalty

Cognitive loyalty is the information based on whether consumers look for costs, benefits, and

quality during their purchasing decision process. Consumer may shift to other stores, which

can offer better process and benefits. For this study, cost and benefits are translated into

perceived value while quality is based on perceived service quality. Affective loyalty –

Affective loyalty involves both liking and experience satisfaction. The issue of satisfaction

and dissatisfaction has a direct influence on attitude and attitude change. At this stage,

consumer loyalty is determined by information relating to the offering, such as price, quality,

and so forth. It is the weakest type of loyalty, since it is directed at costs and benefits of an

offering and not at the brand itself. Therefore, consumers are likely to switch once they

perceive alternative offerings as being superior with respect to the cost-benefit ratio

Affective loyalty

Customer

satisfaction

Conative loyalty

1. Commitment

2. Trust

Action loyalty

Customer Loyalty

Cognitive loyalty

1. Perceived

Service Quality

2. Perceived Value


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(Kalyanaram and Little 1994; Sivakumar and Raj 1997). Cognitive loyalty is influenced

largely by the consumer’s evaluative response to an experience, in particular to the perceived

performance of an offering relative to price (= value).

Conative loyalty

Conative loyalty - It is a loyalty state containing commitment to buy. One of the important

dimensions is word of mouth, where the consumer not only would re-visit certain store or

bank, but would also encourage relatives, friends and colleagues to patronize certain favored

banks. At conative stage, customers will not only commit to buying but also come to trust

the favoured stores. Action loyalty - It is the habit and routinized response behaviour. This

loyalty category is particularly protected to competitor’s marketing activities and would not

spend time and effort in engaging information search and evaluation. Conative loyalty

implies that attitudinal loyalty must be accompanied a particular brand. It is stronger than

affective loyalty, but has vulnerabilities as well. Repeated delivery failures are a particularly

strong factor in diminishing co native loyalty. Consumers are more likely to try alternative

offerings if they experience frequent service failures. Even though the consumer is conatively

loyal, he has not developed the resolve to avoid considering alternative offerings (Oliver

1999).

Affective Loyalty

Affective loyalty relates to a favourable attitude towards a specific brand. Attitude itself is a

function of cognition (e.g. Expectation). Satisfaction is a global affect evaluation or feeling

state which can be predicted from perceived performance as the cognitive component of the

evaluation (Oliver 1993; Phillips and Baumgartner 2002; Westbrook and Oliver 1991).

Expectancy confirmation leads to satisfaction, which in turn effectuates affective loyalty

(Bitner 1990). Oliver (1997) defines satisfaction as “the consumer’s fulfilment response, the

degree to which the level of fulfilment is pleasant or unpleasant.” Affective loyalty is also

subject to deterioration, caused primarily by an increased attractiveness of competitive

offerings (Sambandam and Lord 1995) and an enhanced liking for competitive brands. This

can be, for instance, conveyed through imagery and association used in competitive

communications (Oliver 1999).

Empathy and Loyalty

Relationship Marketing Orientation can be viewed as the ability to share, understand and feel

another person’s feelings in a relational situation. Thus, Sin et al. (2002) described empathy

as dealing with a business relationship that enables two parties to see the situation from the

other’s perspective i.e. seeking to understand somebody else’s desires and goals. In the

banking sector for instance, the front desk bankers must see themselves in the customer’s

shoe and serve them as such in other to keep them satisfied. Earlier studies have shown the

relevance of empathy as a dimension of Relationship Marketing Orientation as shown in the

work of Berry et al (1990) in designing SERVQUAL. Hwang (1987) in Chinese business

relationships where empathy is seen as a sub-component of the Chinese dimension of

guanxi in business and social relationships.

Empathy is the ability to see a situation from another person's perspective (Wang, 2007). It

is defined as seeking to understand somebody else desires and goals. It involves the ability of


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individual parties to view the situation from the other party’s perspective in a truly cognitive

sense (Chattananon & Trimetsoontorn, 2009). Empathy has a number of analogous

meanings – the golden rule, the ethic of care and an “others” orientation. Empathetic

marketers are not insensitive to the needs and concerns of the consumer. Empathy should not

be equated with sympathy; marketers can be empathetic while still driving a hard bargain

with customers (Murphy et al, 2007). In the personal selling literature, the empathetic

abilities of the sales people are a prerequisite for successful selling. In the service marketing

literature, the component of empathy is used in developing the SERVQUAL test instrument

for service quality. In the networking literature, empathy has been considered as an

independent variable in explaining franchisor–franchisee working relationships (Sin et al,

2002).

Commitment and Loyalty

Crosby and Taylor (1983) suggest that the tendency to resist changing preference provides

the principle evidence of commitment. Beatty et al., (1988) define consumer commitment as

the psychological attachment to a service that develops. A customer would be able to

determine that their purchase behaviour was derived from a sense of loyalty. A substantial

research highlights that commitment is an affective nature (Garbarino & Johnson, 1991;

Morgan & Hunt, 1994; Sheth & Parvatiyar, 2002).

Affective commitment reflects a customer’s sense of belonging and involvement with a

service provider akin to emotional bonding (Fullerton, 2005), while calculative commitment

is the way that the customer is forced to remain loyal against his or her desire (De Ruyter,

Wetzels & Bloemer, 1998). In calculative commitment, customer can be committed to a

selling organization because they feel that ending the relationship involves an economic to

social sacrifice (Fullerton, 2005). However, although affective and continuance commitments

are distinct components of commitment, there are not necessary mutually exclusive

conditions (Allen & Meyer, 1990).

From an attitudinal aspect, affective commitment involves the desire to maintain a

relationship that customer perceives to be of value (Morgan & Hunt, 1994). On the other

hand, continuance commitment is the consumer’s desire to remain in the relationship when

the switching costs are high or when to consumer perceives that other viable alternatives are

scarce.

Luarn and Lin (2003) establish significant relationship between commitment and loyalty.

Various studies in the relationship marketing area have shown that these two factors seem to

be crucial in influencing one another (Anderson and Narus, 1990; Anderson and Weitz, 1992;

Kumar et al., 1995; Morgan and Hunt, 1994; Pritchard, Havitz and Howard 1999; Fullerton,

2003; Evanschitzky et al., 2006). For example, Pritchard, Havitz and Howard (1999) found

commitment to be strongly correlated with customer loyalty. Fullerton (2003) reveals that

when customer commitment is based on shared values and identification, it has a uniformly

positive impact on customer loyalty. Several other studies confirm a significant interaction of

affective commitment and continuance commitment on loyalty (Fullerton, 2003;

Evanschitzky et al., 2006).


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Trust and Loyalty

Liang and Wang (2006 states in this context that trust is “the perceived level of confidence in

transaction partners’ reliability and honesty”. Trust is “the belief that a partner’s word or

promise is reliable and a party will fulfil his/her obligations in the relationship” (Schurr and

Ozanne, 1985). Trust is an important construct in relational exchange because relationships

characterized by trust are so highly valued that parties will desire to commit themselves to

such relationships (Hreinian, 1974). To support this notion, trust has been posited as a major

determinant of relationship commitment (Morgan and Hunt, 1994). Furthermore, Moorman

et al., (1993) found that trust by marketing research users in their research providers

significantly affected user commitment to the research relationship. Creating trust in

customer mind set importance for companies because from the previous studies Trust along

with commitment is an important antecedent of loyalty (Ball et al., 2004). In order to increase

the levels of trust, companies must focus on keeping promises to their customers and

consistently carry their best interest at heart (Hocutt, 1998).

Perceived value and Loyalty

There is a multifaceted meanings of value which vary according to different functional

context –economics (utility and monetary costs), social science (human values) ; industrial

settings (processes and costs), and marketing (consumers’ perspective on tradeoffs between

benefits and sacrifices or costs) (Zeithmal, 1988, Dodds et al., 1991; Roig et al.,2006). Roig

et al (2006) approach perceived value from six multidimensional formative construct

(GLOVAL scale) and test the study on bank customers. Luarn and Lin (2003) define

perceived value from economic perspective which is the customers’ perceived service utility

relative to its monetary and non monetary costs.

Prior studies support the general notion that perceived value contributes to customer

commitment (Luarn and Lin, 2003; Dodds et al., 1991). For example, Luarn and Lin (2003)

have found a significant relationship between perceived value and loyalty as well as

perceived value and commitment.

Conflict Handling and Loyalty

In interpersonal communication, conflict occurs when an individual perceives incompatibility

between his or her personal goals, needs, or desires and those of the other party. In dealing

with conflict, people use different strategies to accomplish their goals. Dwyer et.al (1987)

defined conflict handling as the ability of each supplier to avoid any potential conflict, solve

that particular conflict before they create problems and the ability to discuss the solutions

openly when the problem arises. Conflict handling requires cooperative behaviour from

exchange partners. According to Evans & Beltramini (1987), in a negotiation setting,

cooperative versus competitive intentions have been found to be linked to satisfactory

problem solution. In short, good conflict resolution will result relationship quality positively.

Conflict handling is an important relationship builder. Even though it is difficult to service

industries especially in banking sector to achieve zero service failure banks put in place

effective conflict resolution or problem solving machinery.

A major problem which had been resolved satisfactorily may leave in its wake a happy and

loyal customer, but maybe minor issues if not handled carefully will result in defection. A

more excellent approach, for example proactive in planning and implementation includes,


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identifying potential conflict, solving conflict before they manifest, avoiding potential

conflict and blocking them. Those efforts could bring the better relationship and loyalty to

particular bank or service film (Ndubisi, 2007). Ndubisi & Wah (2005) found a significant

relationship between conflict handling and customer loyalty, indirectly through trust and

perceived relationship quality.

Customer satisfaction

Customer satisfaction is defined as a customer’s overall evaluation of the performance of an

offering to date (Johnson and Fornell 1991). Historically, satisfaction has been used to

explain loyalty as behavioral intentions (e.g., the likelihood of repurchasing and

recommending). The impact of satisfaction on loyalty has been the most popular subject of

studies. Several studies have revealed that there exists a direct connection between

satisfaction and loyalty: satisfied customers become loyal and dissatisfied customers move to

another vendor. (Heskett et al. 1993: 165–167).

Customer satisfaction, meanwhile, is defined as an overall positive or negative feeling about

the net value of services received from a supplier (Woodruff, 1997). Woodruff (1997) argues

that perceived value represents customer cognition of the nature of relational exchanges with

their suppliers, and satisfaction reflects customers’ overall feeling derived from the perceived

value. On the basis of the behavioral model (Fishbein & Ajzen, 1975), affect is significantly

influenced by cognition. There is also empirical evidence that customer-perceived value has a

positive effect on customer satisfaction with a supplier (E.W. Anderson & Mittal, 2000;

Walter, Thilo, & Helfert, 2002).

Customer Value

Customer value is “the fundamental basis for all marketing activity” (Holbrook, 1994, p. 22).

And high value is one primary motivation for customer patronage. In this regard,

Sirdeshmukh, Singh, and Sabol (2002) argue that customer value is a superordinate goal and

customer loyalty is a subordinate goal, as it is a behavioural intention. According to goal and

action identity theories, a superordinate goal is likely to regulate subordinate goals. Thus,

customer value regulates “behavioural intentions of loyalty toward the service provider as

long as such relational exchanges provide superior value” (Sirdeshmukh et al., 2002, p. 21)

This study utilizes the four stages loyalty model first developed by Oliver, (1997). The

objective is to examine the antecedent of customer loyalty amongst consumers. The

theoretical underpinning of the said theory is discussed next. Oliver’s (1997) Four-Stage

Loyalty Model (Figure 1) consists of four evolving stages of cognitive loyalty, affective

loyalty, cognitive loyalty, and action loyalty. The first three stages (cognitive loyalty,

affective loyalty, and conative loyalty) are attitudinal loyalties and action loyalty is

behavioural loyalty.

OBJECTIVES

The objective of this study is to examine the causal relationships of several antecedents of

customer loyalty in the context of retail banking in Northern Malaysia, the criteria to measure

customer loyalty has to establish to provide the outcome measures for the hypotheses.

To analyse relationship between empathy and customer loyalty.

To analyse positive relationship between commitment and customer loyalty.


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To analyse positive relationship between trust and customer loyalty.

To analyse relationship between value and customer loyalty.

To analyse relationship between conflict handling and customer loyalty.

To analyse the influence of relationship marketing on customer loyalty.

HYPOTHESIS

H1: There may have relationship between empathy and customer loyalty.

H2: There may have significant positive relationship between commitment and customer

loyalty.

H3: There may have significant positive relationship between trust and customer loyalty.

H4: There may have significant positive relationship between value and custome loyalty.

H5: There may have significant positive relationship between conflict handling and

customer loyalty.

H6: Relationship marketing may have high influence on customer loyalty

THEORETICAL FRAMEWORK

This research formulates the antecedents of customer loyalty as shown in Figure 2. In the

research framework, it shows that empathy; perceived conflict handling, trust, perceived

value and commitment are direct predictors of customer loyalty.

Figure 2 - Research Framework

RESEARCH DESIGN AND DATA COLLECTION

This particular study concentrates on ‘Impact of relationship marketing on customer loyalty’

in the banking sector and is a form of fact finding research. Hence the study follows

descriptive study design as its plan of action. A total of 100 university lecturers and students

who are patronizing different commercial banks were requested to complete a questionnaire

that contained measures of the constructs of concern. The respondents are staying in the

Penang, Kedah, and Perlis region in Malaysia. Those who are having saving and current

accounts in 5 major banks were considered for the study. Only male members are considered

further for data collection. The study used simple random method as it sampling method, to

arrive at representative sample size.

IV DV

Empathy

Perceived

Conflict

Handling

Trust

Perceived

Value

Commitment

Customer Loyalty


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Tool administration

The tools were distributed to the respondents in their workplace and responses were gathered.

The questionnaire designed for this research was formulated as open ended and closed-ended

questions which were normally structured for respondents to select their choices of statement

from a list of questions presented to them. Study used likert scale by five-point scales

described at either end by “strongly disagree” to “strongly agree” was used. In the first part,

the respondent’s demographic profiles were asked such as gender, age, race, religion and

occupation. The second part consists of 30 items. The entire items were based on the

dimension of the relationship marketing underpinnings. This part was divided in five (5)

dimensions.

The first dimension “trust” consists of six questions which were adopted from Ndubisi

(2005).

The second dimensions which consists of four (4) questions that measure “commitment”

were adopted also from Ndubisi (2005).

The third dimensions that measure “conflict handling” contained five (5) questions which

were adopted Ndubisi (2005) and Naceur & Azaddin (2005).

The fourth dimensions which is “value” questions was contained five (5) questions which

were adopted from Naceur & Azaddin (2005).

The fifth dimensions, “empathy” questions was contained five (5) questions which were

adopted from Husyein et al (2005).

“Customer Loyalty” dimensions” contained five (5) questions which were adopted Ndubisi

(2005) and Naceur & Azaddin (2005) and Beerli et al (2004).

Reliability Test

Reliability test was conducted on the dependent and independent variables,

internationalisation factors and entrepreneurial orientation. The Cronbach’s alpha values of

the study variables are shown in table. As revealed, the reliability coefficient of the study

variables exceeded the minimum acceptable level of 0.60 (Nunnally, 1978). As a result,

Cronbach’s alpha for the variables ranges from 0.781 to 0.866 and considered for the study.

From Table 1 shown that Cronbach’s Alpha 0.793 hence we can say the reliability of the

questionnaire is at moderately good level.

Table – 1: Reliability Statistics

Cronbach's Alpha

Cronbach Alpha Based on

Standardized Items N of Items

.793 .793 30

Analysis and Results

Appropriate measures were identified based on empirical researchers to test the hypothesized

relationship. Quantitative data obtained and the data gathered were being treated by using the

statistical software program namely Statistical Package for Social Research (SPSS) version

14.0 for analysis and summarization purposes. Several techniques of analysis were used

including ANOVA test, Correlation, and Multiple Regression.


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Correlation analysis

Correlation analysis is used when independent variables are correlated with one another and

with the dependent variable.

Hypotheses 1: There may have significant positive relationship between empathy and

customer loyalty.

Since both variables are interval, Pearson Correlation test was conducted and the results are

shown in Table 2. There is a significant negative correlation between Empathy dimension and

customers’ loyalty with a significant value at 0.000 lower than 0.05. Hence we reject the

Hyphothesis1. In other words empathy dimension and customers’ loyalty are related with a

strong relationship (r = 0.826**).

Table - 2: Correlation between Empathy Dimensions and Customers’ Loyalty

Empathy Loyalty

Empathy

Pearson

Correlation 1 .826(**)

Sig. (2-tailed) .000

N 100 100

Loyalty Pearson

Correlation -.826(**) 1


N 100 100 ** Correlation is significant at the 0.01 level (2-tailed).

Hypotheses 2: There may have significant positive relationship between commitment

and customer loyalty.


shown in Table 2. There is a significant positive correlation between trust dimension and

customers’ loyalty with a significant value of 0.000 lower than 0.05. Hence we accept the

Hyphothesis2. In other words commitment dimension and customers’ loyalty are related with

high relationship (r = 0.650**).

Table 3 - Correlation between Commitment Dimensions and Customers’ Loyalty

Commitment Loyalty

Commitment Pearson



N 100 100

Loyalty Pearson

Correlation .650(**) 1




46

Hypotheses 3: There may have significant positive relationship between trust and

customer loyalty.


shown in Table 3. There is a significant negative correlation between trust dimension and

customers’ loyalty with a significant value of 0.000 lower than 0.05. Hence we reject the

Hyphothesis3. In other words trust dimension and customers’ loyalty are related with

moderate relationship (r = 0.554**).

Table 4 - Correlation between Trust Dimensions and Customers’ Loyalty

** Correlation is significant at the 0.01 level (2-tailed).

Hypotheses 4: There may have significant positive relationship between value and

customer loyalty.


shown in Table 4. There is a significant negative correlation between perceived value

dimension and customers’ loyalty with a significant value of 0.000 lower than 0.05. Hence

we reject the Hyphothesis4. In other words perceived value dimension and customers’ loyalty

are related with strong relationship (r = 0.820**)

Table 5 - Correlation between Perceived Value Dimensions and Customers’ Loyalty

Value Loyalty

Value Pearson



N 100 100

Loyalty Pearson

Correlation

-

.820(**) 1



Hypotheses 5: There may have significant positive relationship between conflict

handling and customer loyalty.

Table 6 - Correlation between Conflict Handling Dimensions and Customers’ Loyalty

Trust Loyalty

Trust Pearson



N 100 100

Loyalty Pearson

Correlation

-

.554(**) 1


N 100 100


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Handling Loyalty

Handling Pearson



N 100 100

Loyalty Pearson

Correlation .661(**) 1




shown in Table 5. There is significant positive correlation between conflict handling

dimension and customers’ loyalty at 0.000 lower than 0.005. Hence we accept the

Hypothesis. In other words conflict handling dimension and customers’ loyalty are related

with moderate relationship (r = 0.661**).

Table 6 - Regression

The major hypothesis stated in this paper was “the relationship marketing may have high

influence on customer loyalty.” Regression analysis (table no. 6) was used for examining

whether each relationship marketing dimension is affected by customer loyalty. Regression

model is significant at the 0.01 level. Thus the finding is in line with the second hypothesis

stated in the paper that the relationship marketing may have high influence on customer

loyalty. Thus the major hypothesis stated is well accepted.

Table 7 - ANOVA Test

One Way ANOVA between Gender, Age, Race, Education, Occupation and Income with

Customers’ Loyalty

Sum of

Squares df

Mean

Square F Sig.

Gender 2.678 2 1.339 7.118 .001

Age .892 2 .446 1.610 .000

Race 29.368 2 14.684 16.189 .211

Education 8.501 2 4.251 9.114 .000

Occupation .023 2 .012 .148 .862

Income .465 2 .233 .594 .003

The table (table 7) above clearly indicates that there is significant variation in findings related

to gender, age and education. From the means of gender it is observed that the males are

Dependent

Variable Customer

Loyalty

Independent Variable: Green Marketing Adjuste

d R2 Empath

y

V1

Commitm

ent

V2

Trust

V3

Perceived

Value

V4

Conflict

Handling

Customer Loyalty

(F1)

0.079* 0.669* 0.07

1*

0.073* 0.070 0.20


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having high customer loyalty than females. Among age group, the members in the young

group having high mean score towards customer loyalty compared to other groups. Further

those who are having high education having high customer loyalty mean score compared to

other groups. The findings related to customer loyalty further shows that customers having

varied income significantly different in loyalty in banking sector. Members having high

incomes show high brand loyalty than members with low income. The rest of the dimensions

like, race, and occupation show insignificant finding in this research.

DISCUSSION

This particular study was oriented on the effect of relationship marketing on customer

loyalty. The study well establishes that the relationship marketing is having high influence on

the customer loyalty. Loyalty is a deeply held commitment to re-buy or re-patronize a

preferred product/service consistently in the future and it is influence by many relationship

marketing variables like, empathy, trust, commitment, values and way of conflict negotiation.

The research proves that customer loyalty is an important element of banking success in

today’s increasingly competitive environment. 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.

Banking has traditionally operated in a relatively stable environment for decades. However,

today the industry is facing a dramatically aggressive competition in a new deregulated

environment. More banks are present in the business arena from both public and private

sector. Customers are getting better choice in banking operation with enhanced facilities.

Most important behaviour customers expect in banking transaction is the empathetic attitude.

This indicate, understand the customers problem and making provision of good banking

solutions with less time. Sin et al. (2002) in this context rightly described that empathy as

dealing with a business relationship that enables two parties to see the situation from the

other’s perspective i.e. seeking to understand somebody else’s desires and goals. In the

banking sector for instance, the front desk bankers must see themselves in the customer’s

shoe and serve them as such in other to keep them satisfied. The present finding support

importance of relationship marketing variable empathy in handling customers and enhance

customer loyalty.

In relationship marketing the firm is trying to achieve profitability through the decrease of

customer turnover and the strengthening of customer relationships. Commitment is another

important determinant of the strength of a marketing relationship. The bank officer’s

commitment in making provision of banking facilities considering the varied needs of

customer is one among the major factor which influences the consumer’s attitude towards

banks. This required a higher level of obligation to make a relationship succeed and to make

it mutually satisfying and beneficial to both customers and bank. Various studies in the

relationship marketing area have shown that these two factors seem to be crucial in

influencing one another (Anderson and Narus, 1990; Anderson and Weitz, 1992; Kumar et

al., 1995; Morgan and Hunt, 1994; Pritchard, Havitz and Howard 1999; Fullerton, 2003;

Evanschitzky et al., 2006). The present research finding support the fact that commitment is

a significant factor which influences the customer loyally of the customers of banks. Banks

need to recognise the potency of service commitment in keeping loyal customer.


49

Trust is a psychosocial phenomenon. Liang and Wang (2006) states in this context, that trust

is “the perceived level of confidence in transaction partners’ reliability and honesty”. It

penetrates to such a level in cognition that generates impressions and faith. When customers

interact with an employee, their trust is created by their perceptions of that interaction. How

far the banks in business develop trust among the customer is having high influence on

customer’s preference and loyalty on specific bank. Trust develops more affective loyalty

among customer on firms. The importance of trust in explaining loyalty is supported by

numerous of authors (Morgan and Hunt, 1994; Auh, 2005; Ball, 2004). The sensitive nature

of the financial transactions always invites trust as the major component between two parties.

Customer trust towards the bank is more based on how the bank operates clearly and induces

the element of trust in the sensitive transactions. In order to increase the levels of trust,

companies must focus on keeping promises to their customers and consistently carry their

best interest at heart (Hocutt, 1998). The present research finding is tune with the past

researches and it supports the influence of trust on banking institution in financial

transactions.

The present research also established significant correlation between perceived value

dimensions of customer’s with customer loyalty. Customer perceived value is defined as “the

consumer’s overall assessment of the utility of a product based on perceptions of what is

received and what is given” (Zeithaml, 1988, p. 14). It is observed that now days more and

more banking institutions are focused on firm’s decision on a value proposition – on how it

will create differentiated value for targeted segments and what position it wants to occupy in

those segments. Since a bank consists of customers from different segments the institution

needs to cater the varied requirement of customers with utmost care and value service.

Choice of any customer in this context depends on his/her perceived value on the quality of

services provided. Perceived value on the services in bank thus establishes appropriate

positioning in the minds of the targeted consumers in comparison to competitors. Switching

over from one bank to another is the decision based on the perceived value of the customers

on the services they extended to the customers.

The study also observed clear findings in relation to customer loyalty in relation to conflict

handling situations in banking. The findings indicates that higher the effort a bank extend

towards conflict handling situations banking and making provision of feel good factor

towards the banking customers, higher the loyalty the customers feel towards the concerned

bank. In this contest it is rightly pointed out that a major problem which had been resolved

satisfactorily may leave in its wake a happy and loyal customer, but maybe minor issues if

not handled carefully will result in defection. A more excellent approach, for example

proactive in planning and implementation includes, identifying potential conflict, solving

conflict before they manifest, avoiding potential conflict and blocking them. Those efforts

could bring the better relationship and loyalty to particular bank or service film (Ndubisi,

2007). Those banking firms which provide better affective feeling towards the customers and

very much committed to extend better satisfaction among customers in banking transaction

generate better loyalty among customers.

IMPLICATIONS

The present research provides better understanding on factors influencing customer loyalty in

banking sector. The factors which related to customer loyalty like trust, commitment,

empathy, perceived value and conflict handling have better influence on the customer’s


50

choice as well preferred bank. It is expected that the bank mangers and banking staff should

have such attitude towards customers in order to maintain better customer relations. Loyalty

is the by product of cognitive, conative and affective components of behaviour. Customer’s

intelligence, attitude and behavioural components significantly influence their choice towards

a bank in banking transactions. The banking firms should induce better feelings among

customers to maintain their preference towards the bank. It is suggested in this context that

the banking firms strategically should dedicated to understand the customer’s needs and give

them better feelings through service quality. The banks should think about what can be done

for them might enhance preference over other banks. Customer loyalty becomes paramount

to being competitive in the marketplace.

LIMITATION OF THE RESEARCH

The limitations of the study are mainly two kinds. The first refers to small sample with

focusing only on students and faculty members as young consumers group in particular. The

second limitation is that scales of relational values which were drawn from the past literature

and has not been validated empirically. However, the goal was to stimulate research interest

by confirming the perceived value as multi dimensional in nature rather than only looking at

overall perceived value.

RECOMMENDATION FOR FUTURE RESEARCH

It is recommended to the banks to resolve conflict in a manner that will eliminate

unimportant loss and inconvenience to customers. This will build the customers’ loyalty that

will benefit banks in gaining the competitive advantage in an increasing competition in the

banking sector. Banks need to fulfil highly demanding customers because they will continue

use the bank the services is satisfied. This study recommends that banks need to put more

attention to attract customers in terms of commitment, empathy and value. To be strong

connection between bank and customer is also necessary for bank to maintaining a good

business relationship such as organizing festive celebration, potential customer’s celebration

and others. It is also important for bank to stress in the recruitment policies especially for

those are bringing the front image of bank because they are represented on behalf of bank.

In this study, it also suggested that for future research can go for larger sample and

compare two different samples of young generation and older generation consumers in

evaluating the values of retail banks.

CONCLUSION

This particular research was conducted to analyze the effect of relationship marketing on

customer loyalty. The study clearly indicates the influence of independent variable on

dependent variable. The foregoing statement about what drives loyalty should be understood

with the provision that loyalty is not entirely divorced from satisfaction (Mittal & Lassar,

1998). The disloyalty or loyalty groups contrasted are from a subpopulation that is already

satisfied. In separating disloyal versus loyal customers, therefore, managers have to ask what

drives loyalty beyond satisfaction. In addition to measuring satisfaction, managers must also

measure customer intention to patronize the organization in the future (Mittal & Lassar,

1998). From the tests and findings all predictors including Commitment, Trust, Empathy,

Perceived Conflict Handling, Perceive value have positive correlation to Customer's loyalty

It is important for manager to remember that customers benchmark not just from what similar

service companies are doing, but what the best service providers in general are doing. Loyalty


51

is built through a positive differentiation that is usually achieved by providing superior

customer service. This study is still open to be developed using other predictors such

as gender, ethnicity, services related products offered by banks or using other test tools such

as different test. This study could be generalized with the students and faculty members of

various universities in the Northern part of Malaysia.

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