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Independent Study

The marketing strategies of Bank Rakyat Klang in promoting personal loans

OOI ENG CHEONG

University of Derby

Independent Study Commencement Date:


20th April 2013
Independent Study Completion Due Date:
31st July 2013

The marketing strategies of Bank Rakyat Klang in promoting personal loans

OOI ENG CHEONG

Dissertation submitted in part fulfillment of the


requirements of the University of Derby for the degree
of
Master of Business in
Administration

DR. CHANTHENEY VELU

Word Count: 16491

Abstract
This research aims to identify the factors that influence the marketing strategies of Bank
Rakyat Klang in promoting personal loan. The objective of this research is to identify
the factors that influence the customers choice of a bank in obtaining a personal loan.
Another objective is to determine the relationships between the factors that influence the
customers choice of a bank and the marketing strategies of Bank Rakyat Klang in
promoting personal loans. The third objective is to analyze how the customers decision
making factors can be used to improve the marketing strategies of Bank Rakyat Klang in
promoting personal loans. The writer chose quantitative research method in the form of a
questionnaire to help him to achieve the objectives of this research. Quantitative
research method was chosen as it is a statistically reliable method. In addition, it enables
a large amount of data from a large numbers of participants to be analysed and
summarised. It is easier to analysed statistical data in comparison to the data collected
through qualitative research. Quantitative research method enables the writer to compare
the statistical data with the past researches as well. The questionnaires were distributed
to 50 customers of Bank Rakyat Klang. First of all, the writer identified the customers
who have obtained loans from

Bank Rakyat Klang. Then, the writer chose

50

participants randomly according to race and age group. Later, the results were analysed
by using SPSS 21.0. One of the limitations of this research is that there are 114 Bank
Rakyat in Malaysia with 3 located in Klang, but this research only covers Bank Rakyat
Klang. Next, the total populations in Malaysia are 28.9 million with 879867 Malaysians
in Klang but this research only involved 50 customers in Klang. Through this research, it
can be concluded that the location of the bank, interest rate of the loan, terms and
conditions of the loan, the application of technology, longer loan repayment period and
customer loyalty influence the customers choice for a bank in obtaining a personal loan.

Acknowledgement
I would like to express my deepest gratitude to my mother Madam Lee for her
valuable guidance and blessings.
I am very grateful to the management groups of Bank Rakyat Klang for
providing me with an environment to complete my research successfully.
I would also like to thank my supervisor Dr. Chantheney for her unwavering
support during the entire course of this research work.
I am deeply indebted to my Head of department Mr. Chan, who modeled me both
technically and morally for achieving greater success in life.
I would like to express my sincere thanks to Lecturer Dr. Chantheney for her
constant encouragement and support throughout the course, especially for the useful
suggestions given during the course of the research period.
I am very grateful to my internal guide, Ms. Jenny for being instrumental in the
completion of my research.
Lastly, I would like to take this opportunity to extend my deepest appreciation to
my family and friends who gave me moral support throughout the research period.

Table of Content
ii

Abstract

Acknowledgement

ii

Table of content

iii

List of Tables

List of Figures

xii

List of Appendix

xii

Chapter 1: Introduction
1.1

Background of the study

1.2

Background of the organization

1.3

Research problem

1.4

Research objectives

1.5

Significance of the study

1.5.1 To the researcher

1.5.2 To the Bank Rakyat Klang

1.5.3 To the respondents

1.5.4 To the banking industry

Rationale of the study

1.6

iii

1.7

Research questions

1.8

Conceptual framework

1.9

Hypotheses

1.10

The scope of the study

1.11

Definition of terms

8
9
9

1.11.1 Marketing strategy


1.11.2 Elements of the marketing strategy

10

1.11.3 Theories in the marketing strategy

10

1.12

Organization of the study

12

1.13

Summary of the chapter

13

Chapter 2: Literature Review


2.0

Introduction

2.1

Marketing mix (4Ps)

2.2

History of the research

14
14
15

2.2.1 The study of factors which influence the consumers choice 15


criteria in retail bank selection
2.2.2 The study of the factors that affect customers decision for 18
taking out bank loans

iv

2.2.3 The study of the marketing strategies

18

2.2.3.1 Place strategy

18

2.2.3.2 Price strategy

19

2.2.3.3 Promotion strategy

20

2.2.3.4 Product strategy

21

2.3

Review of the key studies

22

2.4

Gaps in the literature

27

2.5

Conclusion of the chapter

27

Chapter 3: Research Methodology


3.0

Introduction

28

3.1

Type of research

28

3.2

Research approach

29

3.3

Research population and sampling

30

3.3.1 Research population

30

3.3.2 Sampling

30

Data collection

31

3.4.1 Data collection instrument

32

3.4.2 Development of the questionnaire

32

3.4.3 Structure of the questionnaire

33

3.4.4 Reliability of the research instrument

34

3.4.5 Validity of the research instrument

36

3.5

Data analysis

36

3.6

Conclusion of Chapter

36

3.4

Chapter 4: Data presentation, analysis and findings


4.1

Introduction

37

4.2

Descriptive analyses

37

4.2.1 Characteristics of the respondents

37

4.2.2 Frequency analysis of the sample

40

4.2.2.1 Location of the bank

40

4.2.2.2 Customer service

41
vi

4.3

4.4

4.2.2.3 Interest rate

42

4.2.2.4 Terms and conditions

43

4.2.2.5 Advertisement

44

4.2.2.6 Application of technology

45

4.2.2.7 Longer repayment period

46

4.2.2.8 Customer loyalty

47

Inferential analysis

48

4.3.1 Hypotheses testing

49

4.3.1.1 Hypothesis 1

50

4.3.1.2 Hypothesis 2

50

4.3.1.3 Hypothesis 3

51

4.3.1.4 Hypothesis 4

51

4.3.1.5 Hypothesis 5

52

4.3.1.6 Hypothesis 6

53

4.3.1.7 Hypothesis 7

53

4.3.1.8 Hypothesis 8

54

Conclusion of the chapter

54

Chapter 5: Conclusion and Recommendations


vii

5.1

Introduction

55

5.2

Conclusion of the study

55

5.2.1 Research Question 1

56

5.2.2 Research Question 2

56

5.2.2.1 Location of bank

57

5.2.2.2 Customer service

57

5.2.2.3 Interest rate

57

5.2.2.4 Terms and conditions

58

5.2.2.5 Advertisement

58

5.2.2.6 Application of technology

59

5.2.2.7 Longer repayment period

59

5.2.2.8 Customer loyalty

60

5.2.3 Research question 3

61

5.2.3.1 Location of the bank

61

5.2.3.2 Customer service

61

5.2.3.3 Interest rate

62

5.2.3.4 Terms and conditions

62

5.2.3.5 Advertisement

62
viii

5.3

5.2.3.6 Application of technology

62

5.2.3.7 Longer repayment period

62

5.2.3.8 Customer loyalty

63

Implications of the research

63

5.3.1 Academic implications

63

5.3.2 Practical implications

63

5.3.2.1 To Bank Rakyat Klang

63

5.3.2.2 To the bank industry

64

5.4

Limitations of the research

64

5.5

Suggestions for further research

64

5.6

Summary of the chapter

64

References

66

Bibliography

75

Appendix

76

List of tables
Table 2.1

Review of key studies

26

Table 3.1

Stratified random sampling

31
ix

Table 3.2

5-point Likert-type scales

32

Table 3.3:

Reliability test after pilot test and actual test

35

Table 4.1

Total numbers of questionnaires distributed and collected

37

Table 4.2

Characteristic of respondents

38

Table 4.3

Central tendency of demographic data

39

Table 4.4

Frequency, mean and standard deviation of respondent


for variable 1-bank location

40

Table 4.5

Frequency, mean and standard deviation of respondent


for variable 2 - customer service

41

Table 4.6

Frequency, mean and standard deviation of respondent for variable


3 interest rate

42

Table 4.7

Frequency, mean and standard deviation of respondent


for variable 4 terms and conditions

43

Table 4.8

Frequency, mean and standard deviation of respondent


for variable 5 advertisements

44

Table 4.9

Frequency, mean and standard deviation of respondent


for variable 6 -Application of technology

45

Table 4.10

Frequency, mean and standard deviation of respondent


for variable 7 - Longer repayment period

46

Table 4.11

Frequency, mean and standard deviation of respondent


for variable 8 customer loyalty

47

Table 4.12

Interpretation of correlation value (r)

49

Table 4.13

Pearson product-moment correlation coefficient

50

List of figures
Figure 1.1

Conceptual framework of the research

List of Appendix
Appendix 1

Number of banks in Klang area

76

Appendix 2

Questionnaires for the customers

77

xi

Appendix 2

Kotlers Model of Buyer Behavior

xii

81

Chapter 1: Introduction
1.1 Background of the study
The demands of the present generation are far greater than their age. As a result, a steady
source of income is not sufficient to meet these demands and luxuries. According to
Mourmouras et al. (2012), the demand for personal loans in Malaysia are growing at a
rapid rate. The findings by Narain et al. (2013) also supported Mourmouras et al. (2012)
report. It was found that households loan accounted for 55% of the personal loans.
In Klang, Malaysia, there are 13 commercial banks with 74 branches, 7 investment
banks with 8 branches, 11 Islamic banks with 23 branches and 1 international bank with
1 branch. Appendix 1 gives detailed information about the banks in Klang. These
commercial, Islamic and international banks offer various types of loan including
personal loan. Personal loan is a consumer loan granted for personal, family or
household use (Fitch, 2006). In Malaysia, personal loans are available from as little as
RM1000 to RM150000 or more (iMoneyMy, 2013). The amount that a consumer can
borrow depends on his or her financial strength or ability to repay as well as the
conditions offered by the lender. The borrower signs a loan agreement that states the
amount borrowed, the interest rate and the total monthly payment that he needs to pay
when he takes out a personal loan with a bank. In addition, the loan agreement specify
the details of the loan repayment terms. In Malaysia, the maximum loan term ranges
from 4 years up to 20 years depending on the bank (Endut & Hua, 2009).
In Malaysia, two types of personal loans are available namely:a) secured personal loan
A personal loan is secured when the borrowers offer their assets like a house or car as
forms of security for their loan (Davidoff, 2012).
b) unsecured personal loans
A personal loan is unsecured when the borrowers need not offer any form of assets as
security for their loan (Garman & Forgue, 2007). However, unsecured loan is difficult to
obtain compared to a secured loan as the borrowers need to convince the lenders of their
financial strength. In general, the personal loan taken out by the majority of the
Malaysian is unsecured loan.

The interest rates for a personal loan can be classified into:a) fixed
A fixed interest rate refers to an interest rate that remains the same throughout the full
loan term despite fluctuations in the market (Knowles & Castillo, 2012). Although the
fixed interest rate protects a borrower from interest rate movements, the borrower has to
repay the amount as agreed in the loan agreement until the loan is paid in full. If the
borrower wishes to make extra payments, he has to incur an additional fee. In Malaysia,
the personal loans are usually of the fixed interest rate type. The interest rate for a
personal loan in Malaysia ranges from as low as 3.25% till 24% or more per annum.
b) variable interest rate.
A variable interest rate refers to the interest rate which changes from time to time
according to fluctuations in the market (Henry, 2007)). The advantage of the variable
interest rate is that the borrower could benefit when the market rates are low. On the
other hand, if the market rates are higher, the borrower would have to pay more interest.
The interest rate is often the key factor that determines a good personal loan deal.
Besides obtaining a personal loan from the banks, the consumers can also obtain a
personal loan from the licensed money lenders. There are 4 licensed money lenders in
Klang namely Liger Capital Sdn. Bhd., BGH Credit & Leasing Sdn. Bhd., RM Ace
Consultants and a licensed Chettiar moneylender by the name of Ganesan Nagappan
(Yellow Pages, 2013). The interest rate for licensed money lenders is fixed at 12% per
annum for secured loans and 18% per annum for unsecured loans. The amount of
personal loan that a person can obtain ranges from RM 1000 up to RM 100,000. The
loan term ranges from a month to a year (Murugappan, 2009).

1.2 Background of the organization

Bank Rakyat was founded in September 1954 after an expansion of the cooperative
movement in Peninsular Malaysia (BankRakyatA, 2013). It was formed under
the Cooperative Ordinance 1948. The cooperatives formed their respective
union banks in order to provide financial needs to their members. 11 union
banks merged and form Bank Agong in 1954 (Islam, 2012). Later, in 1967,
Bank Agong was replaced by Bank Kerjasama Malaysia Berhad with its
membership opened to cooperatives and individuals. The name was changed to
Bank Kerjasama Rakyat Malaysia Berhad in 1973. It is better known as Bank
Rakyat.
Bank Rakyat is governed by Bank Kerjasama Rakyat Malaysia Berhad Act 1978 which
allows it to provide financing to non-members (Muhamat, Rosly & Jaafar, 2011). Later,
Bank Rakyat was placed under the Ministry of Finance and the Ministry of Land and
Co-operative Development in 1989. In 1993, the Cooperative Act was revised and it
allows the Bank to operate in Sarawak and Sabah. Bank Rakyat took a huge step in 1993
by introducing Islamic banking products. In 2002, it became a full-fledged Islamic
cooperative bank. In the same year, Bank Rakyat together with 6 other financial
institutions were placed under the supervision of Bank Negara Malaysia. In 2004, Bank
Rakyat was under the supervision of the Ministry of Entrepreneur and Cooperative
Development. As of 2013, Bank Rakyat has 141 branches in Malaysia (BankRakyatA,
2013).

1.3 Research Problem


As of 2013, there are 24 commercial banks, 17 Islamic banks and 4 International Islamic
banks in Malaysia (NBC, 2013). There are 36 financial services including Bank Rakyat
in Klang area (Economic Planning Unit, 2013). When it comes to personal loans, the
customers have a great variety of choices in Klang. Customer is the key to success when
it comes to business. The same goes for Bank Rakyat Klang. Thus, Bank Rakyat Klang
is facing a lot of challenges and competitions in the banking industry.

All the banks in Klang offer various kinds of loan and have their own specialties. Thus,
to survive in this competitive world, Bank Rakyat Klang has to have a good marketing
strategy to obtain a competitive advantage over the other banks. Besides, that Bank
Rakyat Malaysia also face competition from license money lenders. Marketing strategy
is the key to all types of businesses including the banks. Therefore, in this study the
writer wishes to find out the factors that influence the customers choice of a bank in
obtaining personal loans. By indentifying the factors that influence the customers
behaviour the marketing strategies that are apt for Bank Rakyat Klan can be identified.
1.4 Research Objectives
1. To identify the factors that influence the customers choice of a bank in obtaining a
personal loan.
2. To determine the relationships between the factors that influence the customers
choice of a bank and the marketing strategies of Bank Rakyat Klang in promoting
personal loans.
3. To analyze how the customers decision making factors can be used to improve the
marketing strategies of Bank Rakyat Klang in promoting personal loans.

1.5 Significance of the study


The significances of the study are as follows:1.5.1 To the researcher
This study can help the researcher to gain a better understanding regarding the factors
that influence the marketing strategies of Bank Rakyat Klang. In addition, the researcher
will be able to find out what are the effective marketing strategies to promote personal
loans.

1.5.2 To Bank Rakyat Klang


This study helps Bank Rakyat Klang to evaluate the effectiveness of its current
marketing strategies in promoting personal loans. Upon completion of this study, Bank
Rakyat Klang can further improve its marketing strategies in promoting personal loans
by overcoming its weaknesses and strengthening its strengths.
1.5.3 To the respondents
Through this study, the respondents are able to gain a better insight of Bank Rakyat
Klang. In addition, this study can help to create awareness among the respondents
regarding the products that are available at Bank Rakyat Klang.
1.5.4 To the banking industry
This study can serve as a reference to other banks on how they can improve their
marketing strategies in promoting personal loans.
1.6 Rationale of the study
All the banks in Klang offer personal loans and have their own marketing strategies. As
such, it is proven that Bank Rakyat Klang is facing a lot of challenges and competitions
in the banking industry. In order to survive in this competitive world, Bank Rakyat
Klang has to have a good marketing strategy to obtain a competitive advantage over the
other banks (West, Ford, & Ibrahim, 2010)
Based upon the previous studies, this research will analyze the marketing strategies used
by Bank Rakyat Klang in promoting personal loans. This research will identify the
factors that attract customers to obtain a personal loan from this bank. In addition, this
research will also find out whether these banks use the conventional marketing strategies
or new marketing strategies in promoting personal loans. Consensus will be built about
the success or failure of the marketing strategies of Bank Rakyat Klang in promoting
personal loans. It will also observe how bankers improve their marketing strategies to
promote personal loans. Furthermore, based on the findings the researcher can identify

the weaknesses in the strategies used that might be one of the causes why there are still a
number of Malaysians who resort to borrow money from the loan sharks.

1.7 Research questions


This paper seeks the answers for the following questions.
Research Question 1:
What are the factors that influence the customers choice of a bank in obtaining a
personal loan?
Research Question 2:
What is the relationship between the factors that influence the customers choice of a
bank and the marketing strategies of Bank Rakyat Klang in promoting personal loans?
Research Question 3:
How can the marketing strategies of Bank Rakyat Klang in promoting personal loans be
improved?

1.8 Conceptual framework


The conceptual framework serves as the foundation for the entire research project.
Figure 1.1 is a detailed representation of the relationship between factors that influence
the marketing strategies of Bank Rakyat Klang in promoting personal loans and the
customers choice of bank in obtaining personal loans. The independent variables are
location of the bank, customer service, interest rate, terms and conditions set by the
bank, advertisement, application of technology, longer repayment period and customer
loyalty. The dependent variable is the customers choice of a bank to obtain personal
loans.

Independent variables

Dependent variable

Figure 1.1: Conceptual framework of the research

1.9 Hypotheses
Eight hypotheses have been designed for this research. They are as follows:H1 - Location of the bank influences the customers' choice of bank in obtaining
personal loans.
H2 - Customer service influences the customers' choice of bank in obtaining personal
loans.
H3 - Interest rate influences the customers' choice of bank in obtaining personal loans.
H4 - Terms and conditions set by the bank influence the customers' choice of bank in
obtaining personal loans
H5 - Advertisement influences the customers' choice of bank in obtaining personal loans
H6 - Application of technology influences the customers' choice of bank in obtaining
personal loans.
H7 - Longer repayment time influences the customers' choice of bank in obtaining
personal loans.
H8 - Customer loyalty influences their choice of bank in obtaining personal loans.

1.10 The scope of the study


This study is conducted to examine the marketing strategies used by Bank Rakyat
Klang. The writer chose to conduct research in Klang as no similar research has been
carried out in Klang before. Furthermore, the writer lives in Klang and is convenient to
carry out the research. The writer is not able to conduct research in all the cities in
Malaysia as it is time and energy consuming. Therefore, this research involves 50
customers of Bank Rakyat Klang only.

1.11 Definition of terms


a. Personal loan refers to a small amount of credit that is paid back in instalments and is
used for personal consumption purposes (Jentzsch, 2006).
b. Marketing strategy is a process that allows an organization to focus its resources on
the maximum opportunities with the objectives of increasing sales as well as to
maintain a sustainable competitive advantage (BkStrategic, 2013).
c. Customer service is defined as an activity, performance levels as well as a process to
be managed and the resulting goal is to complete the prescribed actions (Singh, et al.,
1998).
d. Interest rate is the percentage of the amount borrowed that must be paid to the lender
in addition to the repayment of the principal amount (Gwartney, et al., 2009).
e. Technology refers to the systematic application of scientific or other organized
knowledge to practical tasks (Lipsitz, 1993).
f. Repayment period refers to the period of time where the borrowers pay back their
loans (Kincaid, 2003).
g. Customer loyalty refers to a behaviour, built on positive values and experiences
(Kincaid, 2003).
h. Independent variable refers to the variable that will have some impacts on dependent
variable (Jex, 2008).
i. Dependent variable refers to the variable that is affected during a research (Harland,
2011).

1.11.1 Marketing strategy


Marketing strategy is a long term plan designed to achieve marketing goals. Establishing
a marketing strategy involves developing clear objectives and goals around which the
structure for a policy is created (Jain, 2000). The establishment of the strategy enables
the organization to work out its tools and techniques to achieve the goals. Hence,
marketing strategy is a process of developing and carrying out the strategy.

1.11.2 Elements of the marketing strategy


There are 3 main elements of marketing strategy in an organization. They are strategy
content, strategy formulation process and strategy implementations.
Strategy content means the specific offerings, timing, relationships and pattern of
resource deployment organized by an organization in its quest for competitive advantage.
For example, pull versus push strategy and differentiation versus generic strategy of cost
leadership. Strategy formulation process refers to the activities that an organization is
involved in for determining the strategy content. For instance, competitor analysis,
market opportunity analysis and decision making styles. Strategy implementation means
how the strategy is conducted. It refers to the actions taken by the organization and the
relationships between the organization and the external constituencies to accomplish the
strategy for instance, coordination mechanisms, control systems and organization
structure (Varadarajan & Jayachandran, 1999).

1.11.3 Basic theories related to marketing strategy


There are 8 theories in marketing strategy. They are institutional theory, game theory,
signalling, innovation, product quality, market share, market pioneering as well as
market orientation.
The institutional theory stated that the actions of the organizations and the consequences
of these actions are influenced by the beliefs, rules and knowledge systems that
characterize the context of the organization (Sheth & Sisodia, 2006).
According to the game theory , the organizations rational maximise their utility. This
theory stated that the organizations will strive to achieve the most preferred outcomes
and their competitors will also behave in the same way (Hult, 2011).

10

The signalling theory stated that competitive signals are regarded as announcements to
convey information or to obtain information from the rivals (Varadarajan &
Jayachandran, 1999).
The innovation theory brings long term profitability of the organization. It refers to a
process of creative destruction. It regards profits in an inherently dynamic environment
as an outcome of discovery as well as innovation which can provide the organization
with a differential advantage over its rivals (Jacobson, 1992).
The product quality theory stated that quality is any factor other than price has an impact
on the demand curve of a product. According to this theory, if an organization offers a
high price for a high quality product targeted at a small market niche, the organization
will exclude it from the contest for market share dominance in the broader market
automatically (Onkvisit & Shaw, 2008). Besides, this theory also stated that when
consumers are not certain of the quality of a product, they tend to use price as an
indicator of quality.
The market share theory stated that there is a strong relationship between the market
share and profitability. In markets with imperfect information regarding the performance
of products, the high market share of a brand represents superior quality to the
consumers (Donelly & Linton, 2012). In these markets, the customers tend to have more
confidence in high market share brands.
The market pioneering theory stated that the organization which is the first to introduce a
new product into the market or employ a new process has a competitive advantage
related to being the first to enter a market. Lastly, the market orientation theory stated
that in order to be successful, the organization needs to determine the needs and wants
of the customers and satisfy them more effectively than their rivals do (Pride & Ferrell,
2012).

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1.12

Organization of the study

The study conducted on the marketing strategies of Bank Rakyat Klang in promoting
personal loans is divided into 5 chapters stated below along with other basic components
of dissertation such as abstract, acknowledgement, table of content, list of figures and
tables, reference list, and appendices:
Chapter 1
This chapter introduces the financial institutions that are available in Klang, the
definition of personal loan, types of personal loans and types of interest rates. In
addition, this chapter also includes the maximum personal loan amount, the range of
interest rate for personal loan, the average personal loan repayment period, research
problem, research objectives, significances of this research, rationale of the study, scope
of the study, definition of terms, the introduction to marketing strategy and its theories as
well as the background of Bank Rakyat.
Chapter 2
This chapter aims to provide a comprehensive insight on the term marketing mix.
Besides, this chapter will include factors that influence the consumers choice criteria in
retail bank selection and the factors that affect customers decision for taking bank loans.
In addition, the marketing strategies of Bank Rakyat and gaps of the literature are also
included in this chapter.
Chapter 3
The third chapter is the methodology part of the paper that encompass the research
purpose, conceptual framework, research approach, research strategy, data analysis, data
quality (reliability and validity), ethical consideration applied during the collection of
data as well as research plan.
Chapter 4
The fourth chapter will conclude the results drawn from data analysis and discuss on
these results.
12

Chapter 5
Chapter 5 reflects the research objectives. This chapter also includes recommendations
for Bank Rakyat Klang on how it can further improve its marketing strategies to
promote personal loans, limitations of research and suggestions for further research.

1.13 Summary of the chapter


This chapter successfully highlighted the financial institutions that are available in
Klang. In addition, this chapter covers the definition of personal loan, types of personal
loans, types of interest rates, the maximum personal loan amount, the range of interest
rate for personal loan and the average personal loan repayment period in Klang.
Besides, this chapter covers the problem statement of this research and 8 possible
research questions were developed from the problem statement. Research objectives are
highlighted as well. Furthermore, the significances of this research, rationale of the study
and the scope of the study were critically evaluated. This is followed by definition of
terms used in this research. Finally, this chapter discusses the introduction to marketing
strategy and its theories, the background of Bank Rakyat and the organization of the
study.

13

Chapter 2: Literature Review


2.0 Introduction
This chapter aims to provide a comprehensive insight on the term marketing mix.
Besides, this chapter will include factors that influence the consumers choice criteria in
retail bank selection and the factors that affect customers decision for taking out bank
loans. In addition, the marketing strategies of Bank Rakyat Klang and gaps of the
literature are also included in this chapter.

2.1 Marketing mix (4Ps)


In 1960, the term marketing mix was introduced by McCarthy (Barker & Angelopulo,
2007). It comprises of 4Ps. 4Ps includes product, price, promotion and place. This term
was designed to enable mutual satisfying exchanges with a target market (Lamb, et al.,
2010). In order to achieve optimal results in marketing, these 4 elements must be
blended well. This theory has been used in the marketing field for the last four decades.
A marketing mix begins with the product strategy. Without the product, there is nothing
to determine the price, to promote or to determine the place. Product strategy includes
the physical unit itself, its packaging, warranty, brand name, after-sale service, value and
organization image. Products can come in two forms. It can be tangible solid goods like
televisions or services such as banking services (Strader, 2011).
Place strategy is concerned with the location where the products will be made available.
It involves all the business activities associated with storing of the products and serves
as the place where business will take place with the customers (Stolt, 2010). It should be
easily accessible to provide convenience to the customers.
Promotion strategy includes advertising, public relations and personal selling. A good
promotion strategy can help an organization to increase its sales. The aim of a promotion
is to increase awareness of the products or services among the consumers (Oldroyd,
2012; Kotler, 2003). Without promotion, the products or services are not known.

14

However, a good promotion strategy does not guarantee a success. It has a strong
correlation with the other three Ps components.
Nowadays, the consumers often take into considerations the price of the products when
they obtain a product or service. It is the most flexible element among the 4Ps.
Marketers can raise or lower the prices of the products according to the market. Price is
an important factor to obtain a competitive advantage (Stolt, 2010).
The applications of 4Ps are limited. In 1981, Booms and Bitner proposed 7Ps marketing
mix. The 7Ps includes product, price, promotion, place, participants, physical evidence
and process.

2.2 History of the research


2.2.1 The study of factors which influence the consumers choice criteria in retail
bank selection
In this competitive world, many banks found themselves facing aggressive competition
and unlimited opportunities. Increasing levels of competition for financial services have
increased the need of the bank to find and attract new market segments.
Many researches have been conducted to identify the factors that influence the
customers in choosing a bank either for a loan or other purposes. A research was carried
out in Sweden to identify the consumers choice criteria in retail bank selection. This
research was carried out among 558 Swedish bank customers and 53 bank branch
managers. The research showed that the choice was random. Several factors which
influenced the consumers choice criteria in retail bank selection were identified. They
are availability of loans, bank location, influence of parents choices and payment of
salary via a certain bank (Martenson, 1983).
In addition, Kaynak & Kucukemiroglu (1992) carried out a research on 106 Hong Kong
customers of both the domestic and foreign banks. They study showed that strategic

15

location, availability of parking close to a bank and the availability of a wide range of
loans and mortgages were the main factors affecting the customers decisions to select a
bank.
Furthermore, a study was carried out among 209 university students in Maryland, USA
by Khazeh and Decker (1992) to identify the factors that influence the customers
decision to choose a bank. The main findings were quite similar to the aforementioned
reasons. According to research, the main factors are the banks reputation, interest rates
on loans, quick loan approval and customer services.
According to a research which was conducted in Sweden to identify the factors that
influence the consumers choice criteria in

bank selection; price, advertising and

convenience of location were found to play minor roles in bank selection. According to
this research, there is no bank that can offer all products and be the best for all
customers. However, there are a number of leaders in terms of deposit base, in terms of
loans outstanding base, in terms of assets and a niche leader bank (Zineldin, 1983). This
proves that functional quality plays a more essential factor than traditional marketing
activities.
Meanwhile, a research conducted among 1000 students aged between 19-24 with 45%
male and 55% female (Almossawi, 1983) to identify their bank selection criteria. The
factors that determine bank selection are service charges, interest charged on loans,
quick loan approval, availability of parking space near the bank, friendliness of bank
personnel, availability and location of automated teller machines as well as banks
reputation. This research was carried out as the commercial banks need to identify the
criteria on which potential customers determine their bank selection decision in order to
plan an appropriate marketing strategy to attract new customers.
It is worth noticing that pricing is an essential criteria in bank selection according to a
research which was conducted in Singapore. The study was carried out among 500
undergraduates to identify the factors that effect bank selection decisions. According to

16

the research, pricing and product dimensions of bank services were the two main criteria
in bank selection (Ta, 1983). The price dimension includes low service charges, high
interest rates for savings and low interest rates on loans.

Besides, a research was carried out in Sabah, Malaysia to identify the reasons behind the
customers selection of Islamic Mortgage in a bank in Sabah. The sample of the research
included 250 bank customers who were chosen randomly. According to the research, the
customers select the bank for mortgage loan purpose based on three main reasons. They
are customer services, elements of Shariah and Islamic principles and based on pricing
which is the interest rate of the loan (Amin, 2008).

Furthermore, a research was carried out in Athens to identify the bank choice criteria and
the factors that affect customers choice in selecting a bank for mortgage loan. The
research was carried out among 1092 bank customers in Athens. Questionnaire was
distributed to customers. Through this research, four distinct factors were identified as
the main choice criteria that affect consumers bank choice for personal loan. They are
bank service quality, product attributes, communication and access (Lymperopoulos,
1991). According to research, the quality of customer service is the most important
aspect that the customers take into consideration when selecting the bank for personal
loan purpose.

2.2.2 The study of the factors that affect customers decision for taking out bank
loans
Many researches have studied the criteria of bank selection but there are only two that
studied the factors that affect customers decision for taking out bank loans. The first
research was conducted in 2012 among 277 bank customers in Greece (Frangos, 2012).
According to this research, there were four main factors that influenced the customers

17

decision for taking out bank loans namely customer service, shop design, interest rates
and personal marital status.

Nurfahana (2011) did a research on the factors that attract the teachers to obtain 1Aslah
Personal Financing-I loan from Bank Rakyat. The research was carried out among 60
teachers who were teaching in a primary school in Gua Musang, Kelantan. Nur fahana
identifed three main marketing strategies that were employed by the Bank Rakyat Gua
Musang to attract the teachers to obtain 1Aslah personal Financiang-I loan. Nurfahana
had discussed three marketing strategies namely promotion strategy, price strategy and
product strategy in her study.

2.2.3

The study of the marketing strategies

2.2.3.1 Place strategy


A good location is strongly associated with an increase in the potential sale as it could
attract more customers (Weon, et al., 2010). In terms of the location of banks, Weon et
al. found that the branch characteristics and the customer characteristics are the two
important factors. The number of branches of other financial institutions in the region is
an utmost factor with regards to the branch characteristics. GIS analysis based on
database was used when analysing the locations of the bank branches. The regional
economic strength, the regional economic foundation and the demand inductivity were
chosen as the detailed location factors of a bank branch. These formed the basis of the
analysis. Moreover, Weon et al. (2010) had concluded that the location of a bank
influenced the profit. It was found that the profitability of banks branch in a region
increased if the number of branches of other financial institutions in that region
increased.

18

According to Haron & Azmi (2005), all the banks in Malaysia provide services that are
easily accessible by the customers. In order to have easy access to the services
provided by the bank, the bank chose appropriate place that is convenient and
reachable for the customers. The majority of the banks in Malaysia realised that
location of the banks and their branches played an important role in the success of
their businesses.

2.2.3.2 Price strategy


Price is one of the elements of the marketing mix. Among the 4 elements in the
marketing mix, price strategy is the most persuasive element. It has a great impact on the
customers. Rizal & Francis (2010) stated that price is the first factor that a customer
considers when purchasing a product. They found that low price strategy can help to
attract as well as to retain customers and it is a potential marketing strategy.

For the consumers, price represents the quality of a product (Brucks & Naylor, 2000).
Therefore, a product has to be given an appropriate price according to its quality. A
product that is not given a reasonable price may affect the sales and may cause products
failure. Henard & Szymanski (2001) stated that the price has a strong association with
the sales of the product. As such, the price of a product must always be in conformity
with the other 4Ps.
In banking, the pricing strategy is the charge that is imposed on the borrowers.
According to a research, the pricing strategy reduces revenue but can contribute to
customer loyalty (Hallowell, 2011). Customer loyalty is hard to acquire and retain. A
proper pricing is an important key to customer loyalty (Kandampully & Suhartanto,
2000). According to Garvey (2013), the banks should not simply increase the prices of
their products and expect the customers to be loyal. The majority of the leading banks in
the world is employing customer-centric pricing strategies in order to attract, retain
customers as well as to gain more profits in the long run.

19

2.2.3.3 Promotion strategy


Promotion is to inform, convince and influence the customers decision process
(Fransiska, et al., 2012). It plays an important role in introducing a product or service
especially a new product. Advertising, promotion, sales publicity, personal selling and
public relations (PR) are components that would help to communicate and channel
information of products and services to customers (Dore & Crouch, 2003).

A research was carried out by Alvarez & Casielles (2005) to identify the relationship
between promotional strategy and the consumers buying behaviour. The research was
carried out randomly among 100 consumers in Oviedo, Spain. The results of the
research showed that the promotion is an important factor which the consumers take into
considerations when purchasing a product. Promotion is regarded as a tool that can help
the retailers or manufacturers to achieve their objectives (McNeil, 2013). A great price
reduction is the method that has the greatest influence on the consumers buying
behaviour. In addition, the research showed that it is essential for the manufacturers or
retailers to impose promotion in order to gain competitive advantage over their
competitors (Alvarez & Casielles, 2005). Their research showed that promotional
strategy plays a vital role in consumers preferences when purchasing a product.
Promotions based on price is the most effective marketing strategy.
Promotional strategy includes price reduction, advertisement, coupons, trade deals,
rewards programs, rebates, attractive contests and sweepstakes (O'guinn, et al., 2011).
Neslin (2002) stated that promotional strategy can help to increase sales by attracting
more customer to purchase the products. According to Neslin, promotional strategy is an
ubiquitous component of marketing strategy for an organization. Neslin stated that

20

promotional strategy has a great influence on the buying behaviours of the customers.
He had observed the number of purchases made for a product over a 60-week period.
Neslin noticed that more products were purchased during the promotional period
compared to the non-promotional period. His research showed that there was an increase
by 50% in sales via promotional strategy. Thus, it is clear that promotional strategy helps
to attract consumers and indirectly increases the sales.
2.2.3.4 Product strategy
A product is the basis of marketing strategy (Lancaster & Reynolds, 2002). Without a
product, an organization need not have a marketing strategy. An organization needs to
have a product in order to proceed with price and promotion strategy. Donelly (2012)
defined a product as a physical item that meets the needs of a particular type of customer
in terms of quality, appearance, image, convenience and variety.

The introduction of new products is one of the elements of product strategy. New
products are the key to the success of an organization as it helps to attract customers and
thus increases the sales. Cooper & Kleinschmidt (2011) had carried out a research to
evaluate the relationship between the introduction of new products and the success of an
organization. The research showed that 40% of the products which are on sale in the
United States now are products which are not available 5 years ago. The majority of the
organizations are dependent on the new products for their sales. According to Cooper &
Kleinschmidt the introduction of new products does not necessarily succeed. A total of
33% of new products which were introduced in the United States failed at launch.
Cooper & Kleinschmidt also found that 46% of the resources that the organizations
spent on the new products were wasted. They had compared and contrasted 43 pairs of
new products which consists of a mixture of successful and unsuccessful new products.
They concluded that in order to have a successful product strategy, it is necessary to
understand the users needs, pay attention to marketing and launch publicity, employ
outside technology and external scientific communication and the managers ought to be
responsible for their jobs.

21

2.3 Review of key studies


No. Issues studied
Research methods
1
Consumer Choice Qualitative method

Details of the studies


Factors which influence the

Criteria in Retail -This research was

consumers choice criteria in retail

Bank Selection,

carried out among

bank selection are availability of

Martenson(1983)

558 Swedish bank

loans, bank location, influence of

customers and 53

parents choices and payment of

bank branch

salary via a certain bank.

Factors affecting

managers
Qualitative method

Strategic location, parking close to

the customers

-This research was

a bank and the availability of a

decisions to select conducted among 106 wide range of loans and mortgages

a bank in Hong

Hong Kong

were the main factors affecting the

Kong, Kaynak &

customers from both

customers decisions to select a

Kucukemiroglu,

the domestic and

bank.

(1992)
Factors affecting

foreign banks
Qualitative method

The main factors affecting the

the customers

-This research was

customers decisions to select a

decisions to select carried out among

bank are the banks reputation,

a bank in USA,

interest rates on loans, quick loan

209 university

Khazeh & Decker students in

approval and customer services

(1992)
Factors affecting

Maryland,USA.
Qualitative method

Price, advertising and convenience

the customers

-This research was

of location had minor roles on bank

decisions to select conducted among 50

selection. There is no leading bank

a bank in

bank customers in

in all financial areas. Functional

Sweden,

Sweden

quality plays a more essential

22

Zineldin (1983)

factor that traditional marketing


activities.

To identify the

Qualitative method

The factors that determine bank

bank selection

- This research was

selection are service charges,

criteria in

conducted among

interest charged on loans, quick

Bahrain,

1000 students aged

loan approval, availability of

Almossawi

between 19-24 with

parking space near the bank,

(1983)

45% male and 55%

friendliness of bank personnel,

female

availability and location of


automated teller machines as well

To identify the

Qualitative method

as banks reputation
Pricing and product dimensions of

factors that effect

- The study was

bank services were the two main

bank selection

carried out among

criteria in bank selection

decisions in

500 undergraduates

Singapore.

in Singapore.

Ta (1983)
To identify the

Quantitative method

The customers select the bank for

reasons behind

-The study was

mortgage loan purpose based on

the customers

conducted among 250 three main reasons. They are

selection of

customers of a bank

customer services, elements of

Islamic Mortgage

in Sabah

Shariah and Islamic principles and

in a bank in

based on pricing which is interest

Sabah.

rate of the loan

Amin (2008)

23

To identify the

Quantitative method

Bank service quality, product

bank choice

-This research was

attributes, communication and

criteria and the

conducted among

access were identified as the main

factors that affect

1092 bank customers

choice criteria that affect

customers choice

in Athens

consumers bank choice for

in selecting bank

personal loan.

for mortgage loan


in Athens
Lymperopoulos
9

(1991)
The factors that

Quantitative method

Customer service, shop design,

affect customers

-This research was

interest rates and personal marital

decision for

carried out among

status are the main factors that

taking out bank

277 bank customers

influence the customers decision

loans in Greece

in Greece

for taking out bank loans.

The factors that

Quantitative method

The three main marketing

affect customers

-The research was

strategies that are employed by the

decision for

carried out among 60

Bank Rakyat Gua Musang to

taking out

teachers of a primary

attract the teachers to obtain

1Aslah Personal

school in Kelantan

1Aslah Personal Financing-I loan

Frangos (2012)
10

11.

Financing-I

are promotion strategy, price

Nurfahana (2011)

strategy and product strategy.

Factors that

GIS analysis

The important factors that

influence the

influence the feasibility of a

feasibility of a

location are branch function,

location

competition, population, income,

Weon et al.

future development potential and

(2010)

land value.

24

12

The influence of

Quantitative method

A strategic location of an

place strategy and -This research was

organization is essential to

customer

carried out among

maximize profit. The important

attraction

148 bank customers

factors that influence the feasibility

in Korea.

of a location are branch function,

Weon et al.

competition, population, income,

(2010)

future development potential and


land value.

13

14

The relationships

Qualitative method

The pricing strategy reduces

of customer

- A total of 100

revenue but can contribute to

satisfaction,

customers who

customer loyalty. Price remains an

customer

visited the bank were

important factor for the customers

loyalty, and

recruited. They were

when it comes to making a choice

profitability

given questionnaires

for bank.

and short interviews.


Qualitative method

Promotion is an important factor

relationship

-The research was

which the consumers take into

between

carried out randomly

considerations when purchasing a

Hallowell (2011)
To identify the

promotional among 100

product.

strategy and consumers in


the

Oviedo,Spain.

consumers
buying
behaviour,
Alvarez &
Casielles (2005)

25

15

The influence of

The research was

He found that there is consistently

promotional carried out in a

more purchase of the product

strategy on

Ketchup company.

during promotional period

sales,

Neslin (2002)

compared to non-promotional

observed the sales for

period. There was an increase by

60 weeks.

50% in sales via promotional

Neslin (2002)

strategy.
16

To evaluate the
relationshi

Articles and

The factors that influence the

newspapers.

success of product strategy are

p between

recognition of a technical

introductio

opportunity, proficient

n of new

management, market need

products

recognition, sufficient development

and the

resources, well-managed venture

success of

decisions as well as a technical

an

entrepreneur.

organizatio
n.
Cooper &
Kleinschmidt
(2011)
17

To evaluate the

Compared and

In order to have a successful

relationshi

contrasted 43 pairs of

product strategy, it is necessary to

p between

new products which

understand the users needs, pay

introductio

consists of a mixture

attention to marketing and launch

n of new

of successful and

publicity, employ outside

products

unsuccessful new

technology and external scientific

and the

products.

communication and the managers

success of

ought to be responsible for their

an

jobs.
26

organizatio
n.
Cooper &
Kleinschmi
dt (2011)
Table 2.1 Review of key studies
2.4 Gaps in the literature
Many researches have studied the factors that affect customers choice in selecting bank.
However, there are only two researches that studied the factors that affect customers
choice in selecting bank for personal loans and this research was conducted in Greece.
No research has been done on the relationship between location of bank, customer
service, interest rate, terms and conditions, influences from others, application of
technology, longer repayment period and customer loyalty with the customers choice of
obtaining a personal loan from Bank Rakyat Klang.
All the previous studies will serve as a guideline to the writer. It helps the writer to
identify the factors that affect customers choice in selecting a bank to obtain personal
loans. Hence, this research will not only identify the factors that affect customers choice
in selecting bank for personal loans but also the relationships that are not covered in the
past researches.
2.5 Conclusion of the chapter
Based on the literature review it can be concluded that there are various factors that
affect the customers choice criteria in selecting a bank. These factors are availability of
a wide range of loans, bank location, influence of parents choices, payment of salary via
a certain bank, parking close to a bank, banks reputation, interest rates on loans, quick
loan approval and customer services. On the other hand, the factors that affect the
customers decisions to select a bank for personal loans are customer service, shop
design, interest rates and personal marital status. All the banks employ the four

27

marketing strategies namely place strategy, promotion strategy, price strategy and
product strategy in attracting and retaining their customers.

Chapter 3: Research Methodology


3.0

Introduction

This chapter provides details concerning research methodology used to achieve research
objectives. This chapter includes a discussion on the type of research, research approach,
research population and sampling, data collection method, reliability of the research
instrument, validity of the research instrument and data analysis methods. At the end of
the chapter, the overall summary of this chapter is provided.

3.1 Type of research


According to Given (2008), explanatory research refers to a type of research that
intends to explain rather than describe a phenomenon like descriptive research. Given
stated that explanatory research is quantitative in nature. Explanatory research tests prior
hypotheses by determining the relationships between variables for instance, the
relationships between independent and dependent variables. The data collected from
explanatory research can be analysed statistically. According to Johnson & Christensen
(2012), the main objective of descriptive research is to provide an accurate description
regarding a phenomenon or event. It does not focus on the cause-and-effect relationships
but it focuses on describing a situation. It answered the question why, where,
when, what and how.

28

This research aims to identify the factors that influence marketing strategies of Bank
Rakyat Klang in promoting personal loan. Descriptive research plays a role in describing
these factors. In addition, this research also aims to identify the relationship between the
factors that influence marketing strategies of Bank Rakyat Klang in promoting personal
loans and the customers choice for a bank in obtaining personal loans. As such, the
writer has chosen explanatory research to help him to identify the relationships between
the independent and dependent variables. The independent variables are location of the
bank, the interest rate of the personal loan, the terms and conditions of the personal loan,
influences from others, technology, repayment period and customer loyalty. On the other
hand, the dependent variable is the customers choice on a bank in obtaining personal
loan. Thus, both descriptive and explanatory researches are employed in this current
research.

3.2 Research approach


There are three types of research approaches. They are qualitative research, quantitative
research and triangulation (Flick, 2009).
In this research, the writer intends to study the factors that influence marketing strategies
of Bank Rakyat Klang in promoting personal loans. Hence, the writer has chosen
quantitative research in the process of carrying out this research. The writer has chosen
questionnaire as the type of quantitative research method. According to Maijs (2011),
quantitative research is a type of research that explains a phenomenon by collecting
numerical data that are analysed by using mathematical methods. On the other hand,
Nykiel (2007) stated that quantitative research intends to establish facts, make
assumptions and test hypotheses that have been stated. It is the most useful research
method in collecting measurable information.
The writer has chosen quantitative research as it is a statistically reliable method
(Nykiel, 2007). In this research, the collected data is analysed using SPSS 21.0 and

29

presented in the form of tables. Statistically presented data can help to eliminate bias and
thus producing a more accurate results compared to the data collected through
qualitative research.
Furthermore, quantitative research enables a large amount of data from a large numbers
of participants to be analysed and summarised. It is easier to analysed statistical data in
comparison to the data collected through qualitative research (Bellini & Rumrill, 2009).
The writer can compare the statistical data with the past researches as well.
Besides, quantitative research is less expensive and requires lesser time in comparison to
qualitative research which involves interviews and group discussions (Barnes, et al.,
2013). Quantitative research is in the form of close-ended questionnaire and the
participants can answer the questions in a short period of time. On the other hand,
interviews and group discussions may require several hours and the writer have to
transcribe the discussions before they can be analysed. Transcription is not needed for
quantitative research as the data collected from the questionnaire can be key-in to SPSS
21.0 directly.

3.3 Research population and sampling


According to Blankenship (2009), population refers to the group of individuals,
organizations or artifacts which the researcher wants the outcome of the study to apply
to at the conclusion of the research. Blankenship defined sampling as the process of
determining who will participate in the research.

3.3.1 Research population

30

The research population in this study were customers of who had taken personal loans
from banks. The research sample of this study were 50 customers who had
obtained personal loan from Bank Rakyat Klang. The participants for the current
research must be between 18 and 65 years old as only this age group was eligible
to obtain personal loans from Bank Rakyat Klang (www.bankrakyat.com.my).

3.3.2 Sampling
The sampling strategy selected for this study is stratified and random sampling. First of
all, the writer approached the bank customers who were waiting to be attended
by the tellers and explained to them that he wished to conduct a research about
their choice of bank to obtain a personal loan.

However, only chose 50

customers who had taken personal loans from Bank Rakyat Klang were chosen
as samples. The 50 participants were also chosen according to race as in table
3.1 to represent the racial composition of Malaysians. In Malaysia, Malays and
other indigenous make up 61.4%, Chinese 23.7%, Indians 7.1% and others 7.8%
(Soh, 2012). The writer chose the number of participants according to race to
reduce the potential of bias. Besides, this stratified random sample provided a
better representation of the population (Cochran, 2007)

as all the races in

Malaysia took personal loans from Bank Rakyat Klang.

18-65 years old


No of Malay participants

33

No. of Chinese participants

13

No. of Indian participants

Total no of participants

50

Table 3.1: Stratified random sampling

31

3.4 Data Collection


According to Solbakk, et al. (2009), data refers to the information that is collected
during the research. In this research, the writer used questionnaire to obtain information
associated with the objectives and aims of the research. The distribution process did not
involve any online application. The writer distributed the questionnaire in paper form to
50 customers of Bank Rakyat Klang. Each of the participant was given a consent form
and questionnaire. The participants could choose not to participate in the research if they
were not comfortable with it. The writer handed out the questionnaire on the specific
days when he was at Bank Rakyat Klang. When 50 customers had completed the
questionnaire, the data obtained from the questionnaire was analysed by using SPSS
21.0.

3.4.1 Data collection instrument


According to Blankenship (2009), data collection instruments are the tools for example
questionnaires that are used in a research study. Hernon & Whitman (2001) defined
questionnaire as a data collection tool that designs the same set of questions for the
participants. The writer chose questionnaire as the data collection instrument in this
research to identify the factors that influenced the marketing strategies of Bank Rakyat
Klang in promoting personal loans.
The writer chose questionnaire for the following reasons:a. it was cheaper in comparison to interviews and group discussions (Barnes, et al.,
2013)
b. it required a short period of time (Barnes, et al., 2013)
c. it would be easier to analyse the data collected from close-ended questionnaire. The

32

data could be presented statistically in comparison to interviews and group


discussions (Jackson, 2012)
d. the identities of the participants could remain anonymous and contributed to
the accuracy of the results (Stangor, 2011).

3.4.2 Development of the questionnaire


The questions in the questionnaire were developed based on the literature review in
Chapter 2. 23 questions in the questionnaire were taken from a research entitled Factors
affecting customers decision for taking out bank loans: A case of Greek customers. All
the questions had been tested among 277 bank customers in Greece (Frangos, 2012).
The writer developed the questionnaire based on 8 factors identified in the above
mentioned research. They are location of the bank, customer service, interest rate, terms
and conditions set by the bank, advertisement, application of technology, longer
repayment period and customer loyalty. The questionnaire was designed with the aim of
identifying the relationships between these independent variable with the customers
choice of bank in obtaining personal loans.
Another 8 questions in the questionnaire which measured the dependent variable
(customers choice of bank to obtain personal loan) are adapted by the writer from the
above mentioned research.

3.4.3 Structure of the questionnaire


The questionnaire in this current research consisted of 2 parts as shown in Appendix 2.
Part 1 was to elicit background information of the respondents. This section would help
the writer to identify the participants and place the respondents in groups. The questions

33

in this section were regarding the participants age, gender, education level, career and
reasons for obtaining personal loan from Bank Rrakyat Klang.
Part 2 of the questionnaire contained 31 questions for the customers of Bank Rakyat
Klang which were used to prove the 8 hypotheses that were stated in Chapter 1. 23
questions were used to measure independent variable location of the bank, customer
service, interest rate, terms and conditions, advertisement, application of technology and
longer repayment period. Another 8 questions were used to measure dependent variable
which was customers choice of bank to obtain personal loan.

All the questions were accessed on a 5-point Likert-type scales (Stangor, 2011) which
ranged from strongly agree to strongly disagree . This was done in order to obtain a
better answer from the respondents. The participants were required to rate each of the
question according to Likert-type scales as shown in table 3.2.
Strongly agree

Agree

Neutral (neither agree nor disagree)

Disagree

Strongly disagree

Table 3.2: 5-point Likert-type scales


3.4.4 Reliability of the research instrument
According to Bell (2005), reliability is the extent in which a test produces a similar
results on all occasions under constant conditions. The instrument used in this study is
said to be reliable as the 8 factors namely location of the bank, customer service, interest
rate, terms and conditions set by the bank, advertisement, application of technology,
longer repayment period and customer loyalty had been studied in the research entitled
Factors affecting customers decision for taking out bank loans: A case of Greek
34

customers. 23 questions in the questionnaire for the current research were obtained
from past research. The other 8 questions in the questionnaire has been adapted by the
writer from the said research. Therefore, the research instrument in this research is
reliable.
Furthermore, a pilot test was carried out among 10 customers at Bank Rakyat Klang
before the actual research was carried out. The results obtained from the pilot test was
tested by using Cronbachs Alpha. The results of the pilot test and actual test are as
shown in the table below:

Variables

Number of
Items

Cronbachs
Alpha
Pilot test

Cronbachs
Alpha
Actual test

Location of the Bank

.89

.86

Customer Service

.7

.68

Interest Rate

.7

.82

Terms and Conditions

. 86

.75

Advertisement

.71

.77

Application of Technology

.72

.86

Longer Repayment Period

.78

.74

Customer Loyalty.

.8

.81

Customers choice of a bank


to obtain personal loans

.8

.97

35

Table 3.3: Reliability test after pilot test and actual test
To interpret alpha value the guidelines given by George and Mallery (2001) are as
follows:> .9
> .8
> .7
> .6
> .5
> .4

Very good reliability


Good
Acceptable
Questionable
Weak
unacceptable

The reliability test for pilot study and actual test was between .68 to .97, which shows
acceptable to high reliability measurement.
3.4.5 Validity of the research instrument
According to Bell (2005), validity refers to the degree in which a research instrument
measures what it is supposed to measure. The participants in this research were selected
based on stratified random sampling method. Thus, this research is valid as all the
customers who had obtained loan from Bank rakyat Klang had equal chance to take part
in the research.
3.5 Data Analysis
The data collected through quantitative research was analysed by using SPSS 21.0.
According to Malhotra (2004) descriptive analysis using frequency distribution, mean
and standard deviation were used to explain the frequency of the respondents profile
and variables in the questionnaire. Inferential analysis using Pearson correlation
coefficient test was used to test the hypotheses (Gravetter & Wallnau, 2004) that were
developed for this study in chapter 1. The relationships between the location of the bank,
customer service, interest rate, terms and conditions set by the bank, advertisement,
application of technology, longer repayment period, customer loyalty and the customers
choice of bank to obtain personal loans were identified based on the statistical results

36

obtained from SPSS 21.0. The effectiveness of the current marketing strategies of Bank
Rakyat Klang was evaluated as well through the statistical data.
3.6 Conclusion of the chapter
It can be concluded that the research methodology created for this research study can
enable the writer to conduct the study by using the most appropriate tools. Using these
effective tools selected in this chapter, the writer can obtain the results and findings of
the study that are presented in the next chapter.

Chapter 4: Data Presentation, Analysis and Findings


4.1 Introduction
In this chapter the findings and results of the study which consist of a descriptive
analyses and inferential analysis will be discussed. The results presented in this chapter
were analysed using SPSS 21.0. The main aim of this chapter is to provide evidences
regarding the achievement of the objectives of the study.
During the research, 50 questionnaires were distributed to the customers who had
obtained loan from Bank Rakyat Klang and all the questionnaires were collected. The
total numbers of distributed and collected questionnaires are shown in Table 4.1.
Name of Bank

Bank Rakyat Klang

Number of

Number of

questionnaires

questionnaires

distributed
50

collected
50

Table 4.1: Total numbers of questionnaires distributed and collected

4.2 Descriptive analyses

37

4.2.1 Characteristics of the respondents


The gender, age, education level and career of the participants are shown in the
following tables:-

Demographic
Factors
Gender

Categories

Frequency

Percentages

Female

20

40.0

Male

30

60.0

Total

50

100.0

Below 30

10.0

30-49

41

82.0

50 and above

8.0

Total

50

100.0

Education Level
SPM

19

38.0

First Degree

22

44.0

Master and Above

18.0

Total

50

100.0

Housewife

14.0

Private Sector

26

52.0

Hawker/businessman/woman

14.0

Age

Career

38

Government Servants

10

20.0

Total

50

100.0

Table 4.2: Characteristic of respondents

Table 4.2 shows that there are 30 male and 20 female participants. 60% of the
participants are male and 40% of the participants are female. The mmajority of the
respondents are 30 to 49 years old. 5 participants (10%) are below 30 years old, 41
participants (82%) are in between 30-49 years old and only 4 participants (8%) are 50
years old and above. The majority of the participants are 1 st degree holders (44%), 19
participants (38%) are SPM leavers and 9 participants (18%) have Master or higher
qualification. The table shows that the majority of the participants (52%) work in
private sectors. 7 participants (14%) are housewives, 7 participants (14%) are hawkers
or doing businesses and 10 participants (20%) are government servants.

Mode

Valid
Age

50

Table 4.3: Central tendency of demographic data


According to Osborn, mode is the most often occurring observation in a frequency
distribution. It is the simplest and the only measure of central tendency that is suitable
for nominal data (Osborn, 2000). It is an important measure for central tendency of
nominal data as mean cannot be taken from data that are placed in categories. The mode
for the age of the participants is 2. It shows that the mode for the sample between 31 to
49 years old.

39

4.2.2 Frequency analysis of the sample


According to Baker (2004), frequency is the number of times that a score appears. The
respondents rated each question in the questionnaire according to 5-point Likert-type
scale. In this research, frequency refers to the number of times the respondents rate 1, 2,
3, 4 or 5. Akaiwa, et al. (2008) stated that mean is the arithmetic average of a set of
values. The frequency, mean and standard deviation for each item is shown in the
following tables:4.2.2.1 Location of the bank
Location of the bank is measured by two items. They are as follows:Location of the bank
Items

Percentage of agreement*
1
2
3
4
5

Convenient location

Mean

Std.
Deviation

2.0

2.0

6.0

22.0

68.0

4.52

.910

2.0

4.0

10.0

30.0

54.0

4.30

.886

attracted you to
choose our bank for
personal loan.

You obtained the


personal loan as the
banks ATM
machine is available
everywhere.

Table 4.4: Frequency, mean and standard deviation of respondent


for variable 1-bank location

Table 4.4 shows that majority of the respondents have chosen Bank Rakyat Klang
because of its convenient location. 68% of the customers strongly agree that convenient
40

location plays an important role in attracting them to obtain personal loan from Bank
Rakyat Klang. The mean for this item is 4.52. Likewise, 54% of the respondents strongly
agree that they obtained the personal loan from Bank Rakyat Klang as the banks ATM
machine is available everywhere. The mean for this item is 4.30. This finding is similar
to the findings by Almossawi (1983) where availability and location of automated teller
machines affect the customers decision for choosing a bank.
4.2.2.2 Customer service
Customer service is measured by 5 items. They are as follows:Items

Percentage of agreement*
1
2
3
4
5

Mean

Std.
Deviation

Our staff was


professional and
knowledgeable.

4.0

20.0

72.0

4.0

3.76

.591

You were courteously


greeted

2.0

2.0

8.0

72.0

16.0

3.98

.714

Your
requests/questions are
promptly answered.

24.0

14.0

54.0

8.0

3.22

.493

The application
process was
thoroughly explained

10.0

68.0

22.0

4.12

.558

You were kept


informed throughout
the application
process

2.0

8.0

78.0

12.0

4.00

.535

Table 4.5: Frequency, mean and standard deviation of respondent


for variable 2 customer service

41

According to Table 4.5 majority of the customers (72%) agree that the bank staffs are
professional and knowledgeable. On the other hand, 72% respondents agree that they
were courteously greeted by the bank staffs during their visit to Bank Rakyat Klang.
Table 4.5 also shows that 54% of the respondents agree that their requests or questions
were promptly answered by the bank staffs. In addition, it was found that 68% of the
respondents agree that the bank staffs thoroughly explained the loan application process
when they applied for personal loan and 78% respondents agree that they were kept
informed throughout the loan application process. The mean for these 5 items fall in
between 3.22 and 4.12 which is in between neutral or agree according to 5-point Likert
scale. This finding is similar to the findings by Frangos (2012), Khazeh & Decker (1992)
and Amin (2008) where customer service influences the marketing strategies of the bank
in attracting customers to the bank.

4.2.2.3 Interest rate


Interest rate is measured by 2 items. They are as follows:Items
1

Percentage of agreement*
2
3
4
5

Mean

Std.
Deviation

Competitive interest
rates for loan
attracted you to
choose our bank

2.0

6.0

38.0

54.0

4.42

.751

You are attracted by


the privileged interest
terms offered in
comparison with
other banks

2.0

10.0

24.0

64.0

4.50

.735

Table 4.6: Frequency, mean and standard deviation of respondent


for variable 3 interest rate

42

Table 4.6 shows that the mean for this item is 4.42. 54% of the respondents strongly
agree that competitive interest rates for loan attracted them to choose Bank Rakyat
Klang. In addition the above table shows that the majority of the customers (64%)
strongly agree that they obtained personal loan from Bank Rakyat Klang as they are
attracted by the privileged interest terms offered in comparison with other banks. The
mean for this item is 4.50. This is similar to the findings by Frangos (2012), Khazeh &
Decker (1992) and Amin (2008) where the interest rate is one of the factors that affect
the customers choice for the bank.
4.2.2.4 Terms and conditions
Terms and conditions is measured by 5 items. They are as follows:Items
You are satisfied with
the loan amount
offered.
You find that the loan
application a simple
procedure and involves
Less bureaucratic
formalities.
You are satisfied with
the terms and
conditions regarding
deferral of
installments.
You are satisfied with
the terms and
conditions set for
guarantors.
You were kept
informed throughout
the application
process.

Percentage of agreement*
1
2
3
4
5
0
8.0
10.0 52.0 30.0

Mean

Std
Deviation

4.04

.922

8.0

8.0

20.0

64.0

4.40

1.059

12

6.0

22.0

60.0

4.54

.937

14.0

54.0

30.0

4.10

1.345

2.0

2.0

68.0

24.0

4.06

1.319

Table 4.7: Frequency, mean and standard deviation of respondent


for variable 4 terms and conditions

43

According to Table 4.7, 52% of the customers agree that they are satisfied with the loan
amount offered by Bank Rakyat Klang. The table also shows that 64% of the
respondents strongly agree that the loan application from Bank Rakyat Klang is a simple
procedure and involves less bureaucratic formalities. In addition, 60% of the customers
strongly agree that they are satisfied with the terms and conditions regarding deferral of
installments which is imposed by Bank Rakyat Klang. Besides, Table 4.7 shows that
slightly more than half of the customers (54%) agree that they are satisfied with the
terms and conditions set for guarantors. 68% of the customers agree they were kept
informed throughout the application process. The mean for these 5 items fall in between
4.04 and 4.54 which is agree according to the 5-point Likert scale. Frangos (2012),
Khazeh & Decker (1992) and Hallowell (2011) had done research on influence of term
and condition set by bank but their findings found this variable insignificant.

4.2.2.5 Advertisement
Advertisement is measured by 3 items. They are as follows:Items

Percentage of agreement*
1
2
3
4
5

Mean

Std.
Deviation

You obtained the


personal loan from us
due to recommendation
from others.

30.0

50.0

20.0

3.90

.763

You know about our


personal loan from the
internet.
You know about our
personal loan from the
flyers/brochures.

44.0

52.0

4.0

3.60

.571

26.0

50.0

22.0

3.92

.792

Table 4.8: Frequency, mean and standard deviation of respondent for


variable 5 advertisements

44

Table 4.8 shows 50% of the customers agree that they obtained personal loan from Bank
Rakyat Klang due to recommendation from others. Besides, 52% of the respondents
agree that they know about personal loan offered by Bank Rakyat Klang through the
internet. In addition, the above table shows that half of the customers agree that they
obtained information regarding personal loan offered by Bank Rakyat Klang through the
flyers or brochures. The mean for these 3 items fall in between scale 3 and 4, which is in
between neutral and agree according to the 5-point Likert scale. Nurfahana (2011),
Alvarez & Casielles (2005) and Neslin (2002) found that advertisement which is one of
the promotional strategies, can help to attract customers to obtain a personal loan from a
bank. However, the current research revealed that advertisement does not influence the
customers decision for a bank in obtaining a personal loan.

4.2.2.6 Application of technology


Application of technology is measured by 2 items. They are as follows:Items

Percentage of agreement*
1
2
3
4
5

Mean

Std.
Deviation

You are satisfied with


the short waiting time
due to the
employment of high
technology.

4.0

16.0

28.0

52.0

4.28

.781

The bank processes


your personal loan
application in a short
time due to its high
technology.

4.0

16.0

24.0

56.0

4.32

.814

Table 4.9: Frequency, mean and standard deviation of respondent


for variable 6 Application of technology

45

Table 4.9 shows more than half (52%) of the customers strongly agree that they are
satisfied with the short waiting period due to the employment of high technology by
Bank Rakyat Klang. The mean for this item is 4.28. Besides, Table 4.9 also shows that
the majority of the customers (56%) strongly agree that the bank processes their personal
loan applications in a short time due to the use of high technology. The mean for this
item is 4.32. This finding is similar to the findings by Cooper & Kleinschmidt (2011)
where the application of technology plays an important role in ensuring the success of
product strategy.
4.2.2.7 Longer repayment period
Longer repayment period is measured by 2 items. They are as follows:Items

Percentage of agreement*
1
2
3
4
5

You are attracted to

Mean

Std.
Deviation

2.0

2.0

6.0

36.0

54.0

4.38

.855

4.0

8.0

58.0

30.0

4.14

.729

the personal loan due


to its low installments
and long repayment
period.
You can extend loan
repayment period.
Table 4.10: Frequency, mean and standard deviation of respondent
for variable 7 Longer repayment period
Table 4.10 shows that 54% of the respondents strongly agree that they are attracted to
the personal loan offered by Bank Rakyat Klang due to its low installments and long
repayment period. The mean for this variable is 4.38. Besides, Table 4.10 also shows the
majority of the customers (58%) agree that they chose to obtain personal loan from
Bank Rakyat Klang because they are able to extend their loan repayment period. The
mean is 4.14. Although Frangos (2012) had done research on this variable, he did not
find it important in influencing customers choice of a bank in obtaining personal loan.
46

4.2.2.8 Customer Loyalty


Customer loyalty is measured by 2 items. They are as follows:-

Items

Percentage of agreement*
1
2
3
4
5

You will recommend


your friend or other
family members to
obtain personal loan
from this bank.

4.0

16.0

28.0

52.0

4.28

.870

4.0

8.0

6.0

22.0

60.0

4.26

1.139

You are already a


customer of this
bank/its branches
before applying for
loan

Mean

Std.
Deviation

Table 4.11: Frequency, mean and standard deviation of respondent


for variable 8 customer loyalty
Table 4.11 shows that 52% of the customers strongly agree that they will recommend
their friends or other family members to obtain personal loan from Bank Rakyat Klang.
The mean for this item is 4.28. Besides, Table 4.11 also shows that 60% customers
strongly agree that they were already the customers of Bank Rakyat Klang before they
applied for personal loan from the bank. The mean for this item is 4.26. Based on the
current findings, it can be concluded that customer loyalty influences the customers to
obtain a personal loan from Bank Rakyat Klang. However,
Hallowell (2011) and Frangos (2012) did not find this variable important.
4.3 Inferential analysis

47

Correlation test is carried out to identify whether or not there is significant relationship
between independent and dependent variables. There are two types of correlation test.
They are Spearman Rho and Pearson (Walker & Maddan, 2013).
The Spearmans rank correlation coefficient is a nonparametric measure that describes
statistical relationship between two variables by using monotonic function (Chernick,
2011). On the other hand, Pearson product-moment correlation coefficient measures the
linear relationship between two variables and is denoted by r (Weinberg & Abramowitz,
2008). Pearson product-moment correlation coefficient is chosen to identify the
relationship between independent and dependent variables in this research (Buchanan,
2008). Pearson correlation coefficient is chosen as the data is normally distributed.
The data in this research meet all the requirements for Pearson correlation coefficient.
The requirements are as follows:a. The scale of measurement is in the form of ratio or interval
b. Variables are normally distributed
c. Linear association
d. No outliers in the data (Jackson, 2012)
The correlation value r indicates positive or negative relationship between the variables.
In a positive relationship, if the value of a variable increases, the value of the correlated
variable increases as well and vice versa. In a negative relationship, if the value of a
vaariable increases, the value of the other variable decreases and vice versa.
The interpretation of correlation value r is based on Guilfords rule of thumb (Kelly,
2009) as shown below:-

-0.90 to -1
-0.70 to -0.90
-0.40 to -0.70
-0.20 to -0.40

Very high negative relationship


high negative relationship
moderate negative relationship
weak negative relationship

48

-0.20 to 0.20
no or negligible relationship
0.40 to 0.70
weak positive relationship
0.40 to 0.70
moderate positive relationship
0.70 to 0.90
high positive relationship
0.90 to 1
very high positive relationship
Table 4.12 Interpretation of correlation value r
4.3.1 Hypotheses testing
Hypothesis

Pearson
Correlation

Sig.

Relationship between bank location and the customers


choice of bank in obtaining personal loans

.814

.004

Relationship between bank customer service and the


customers choice of bank in obtaining personal loans

.02

.889

Relationship between interest rate the customers choice


of bank in obtaining personal loans

.901

.010

Relationship between terms and conditions set by the


bank and the customers choice of bank in obtaining
personal loans

.836

.001

Relationship between advertisement and the customers


choice of bank in obtaining personal loans

.140

.331

Relationship between application of technology and the


customers choice of bank in obtaining personal loans.

.719

.010

Relationship between longer repayment time and the


customers choice of bank in obtaining personal loans

.788

.003

Relationship between customer loyalty and their choice


of bank in obtaining personal loans.

.919

.001

Table 4.13: Pearson product-moment correlation coefficient


4.3.1.1 Hypothesis 1
H01: There is no significant relationship between location of the bank and the
customers choice of bank in obtaining personal loans.

49

H1: There is a significant relationship between location of the bank and the
customers choice of bank in obtaining personal loans.
Based on the findings in Table 4.13, it is clear that there is a significant relationship
between location of the bank and the customers' choice of bank in obtaining personal
loans. The r value is 0.814 and p=0.004<0.05. The r value indicates high positive
relationship and it is statistically significant as the p is <0.05. Kaynak & Kucukemiroglu
(1992), Martenson (1983), Zineldin (1983) and Weon, et al. (2010) stated that there is a
positive relationship between location of the bank and the customers decision for
choosing a bank. Almossawi (1983) also found that the availability of ATM machines is
strongly associated with the customers choice of a bank. Hence, it can be concluded that
location of a bank has a positive and significant relationship with the customers choice
of bank in obtaining personal loan. Thus, H01 is rejected and H1 is accepted.

4.3.1.2 Hypothesis 2
H02:

There is no significant relationship between customer service and the

customers choice of bank in obtaining personal loans.


H2:

There is a significant relationship between customer service and the

customers choice of bank in obtaining personal loans.


Based on the findings in Table 4.13, it is clear that there is no significant relationship
between customer service and the customers' choice of bank in obtaining personal loan.
The r value is 0.02 and p=0.889>0.05. The r value indicates

no or negligible

relationship and it is statistically insignificant as the p is >0.05. Thus, H02 is accepted


and H2 is rejected. However, this finding differs from the findings by Frangos (2012),
Khazeh & Decker (1992) and Amin (2008) where customer service was found to have
significant and had positive relationship with the customers choice of bank. The current
findings suggest that the relationship between customer service and the customers
choice of bank in obtaining personal loan is negligible and insignificant.

50

4.3.1.3 Hypothesis 3
H03: There is no significant relationship between interest rate and the customers
choice of bank in obtaining personal loans.
H3: There is a significant relationship between interest rate and the customers
choice of bank in obtaining personal loans.
Based on the findings in Table 4.13, it is clear that there is a significant relationship
between interest rate and the customers' choice of bank in obtaining personal loan. The r
value is 0.901 and p=0.01<0.05. The r value indicates very high positive relationship
and it is statistically significant as the p is <0.05. Thus, H03 is rejected and H3 is
accepted. This finding is similar to the findings by Frangos (2012), Khazeh & Decker
(1992) and Amin (2008) where the interest rate was found to have positive and
significant relationship with the customers choice of bank. Hence, it can be concluded
that the interest rate of loan has a positive and significant relationship with the
customers choice of bank in obtaining personal loan.
4.3.1.4 Hypothesis 4
H04: There is no significant relationship between terms and conditions set by the
bank and the customers choice of bank in obtaining personal loans.
H4: There is a significant relationship between terms and conditions set by the
bank and the customers choice of bank in obtaining personal loans.
Based on the findings in Table 4.13, it is clear that there is a significant relationship
between terms and conditions set by the bank and the customers' choice of bank in
obtaining personal loans. The r value is 0.836 and p=0.001<0.05. The r value indicates
high positive relationship and is statistically significant as the p is <0.05. Thus, H4 is
accepted. However, past research by Frangos (2012), Khazeh & Decker (1992) and

51

Hallowell (2011) did not find any significant relationship between the terms and
conditions and the customers choice of bank in obtaining a personal loan.
4.3.1.5 Hypothesis 5
H05: There is no significant relationship between advertisement and the customers
choice of bank in obtaining personal loan.
H5 There is a significant relationship between advertisement and the customers
choice of bank in obtaining personal loan.
Based on the findings in Table 4.13, it is clear that there is no significant relationship
between advertisement and the customers' choice of bank in obtaining personal loans.
The r value is 0.14 and p=0.331>0.05. The r value indicates no or negligible relationship
and it is statistically insignificant as the p is >0.05. Thus, H05 is accepted and H5
rejected. However, Nurfahana (2011), Alvarez & Casielles (2005) and Neslin (2002)
found that advertisement which is one of the promotional strategies which has a positive
and significant relationship with the customers choice of bank and can help to attract
customers to obtain a personal loan from a bank. Nevertheless, the current findings
suggest that the relationship between advertisement and the customers choice of bank in
obtaining personal loan is negligible and insignificant.

52

4.3.1.6 Hypothesis 6
H06: There is no significant relationship between application of technology and the
customers choice of bank in obtaining personal loan.
H6: There is a significant relationship between application of technology and the
customers choice of bank in obtaining personal loan.
Based on the findings in Table 4.13, it is clear that there is a significant relationship
between application of technology and the customers' choice of bank in obtaining
personal loan. The r value is 0.719 and p=0.01<0.05. The r value indicates

high

positive relationship and it is statistically significant as the p is <0.05. Thus, H06 is


rejected and H6 is accepted. This finding is similar to the findings by Cooper &
Kleinschmidt (2011) where the application of technology was found to have positive
and significant relationship with the customers choice of bank. Hence, it can be
concluded that application of technology has a positive and significant relationship with
the customers choice of bank in obtaining personal loan.
4.3.1.7 Hypothesis 7
H07: There is no significant relationship between longer repayment period and the
customers choice of bank in obtaining personal loan.
H7: There is a significant relationship between longer repayment period and the
customers choice of bank in obtaining personal loan.
Based on the findings in Table 4.13, it is clear that there is a significant relationship
between longer repayment period and the customers' choice of

bank in obtaining

personal loans. The r value is 0.788 and p=0.003<0.05. The r value indicates

high

positive relationship and it is statistically significant as the p is <0.05. Thus, H7 is


accepted. However, past research done by Frangos (2011) did not find any significant
relationship between the longer repayment period and the customers choice of bank in
obtaining a personal loan.
53

4.3.1.8 Hypothesis 8
H08: There is no significant relationship between customer loyalty and the
customers choice of bank in obtaining personal loan.
H8: There is ao significant relationship between customer loyalty and the
customers choice of bank in obtaining personal loan.
Based on the findings in Table 4.13, it is clear that there is a significant relationship
between customer loyalty and the customers' choice of bank in obtaining personal loans.
The r value is 0.919 and p=0.001<0.05. The r value indicates high positive relationship
and it is statistically significant as the p is <0.05. Thus, H8 is accepted. However past
research done by Hallowell (2011) and Frangos (2012) did not find any significant
relationship between customer loyalty and the customers choice of bank in obtaining a
personal loan.
4.4 Conclusion of the chapter
Based on the current findings location of the bank, interest rate, terms and conditions set
by the bank, application of technology and longer repayment period are found to
influence the customers choice of bank in obtaining personal loan. Customer loyalty is
also a significant factors according to current findings whereas past research by
Hallowell (2011) and Frangos (2012) found it insignificant. On the other hand, customer
service and advertisement do not influence the customers choice of Bank Rakyat Klang
in obtaining a personal loan. These two findings differ from past research whereby
Frangos (2012), Khazeh & Decker (1992) and Amin (2008) found customer service an
important factor that influence customers choice. Alvarez & Casielles (2005) and
Neslin (2002) found that advertisement important. Further discussion about these issues
are dealth with in chapter 5.

54

Chapter 5: Conclusion and Recommendations


5.1 Introduction
This chapter will conclude the findings in Chapter 4 and discuss whether the objectives
of the study have been achieved. The limitations of the study and recommendations for
further studies are also included in this chapter.

5.2 Conclusion of the study


This research aims to identify the factors that influence the marketing strategies of Bank
Rakyat Klang in promoting personal loan. The objective of this research is to identify
the factors that influence the customers choice of a bank in obtaining a personal loan.
Another objective is to determine the relationships between the factors that influence the
customers choice of a bank and the marketing strategies of Bank Rakyat Klang in
promoting personal loans. The third objective is to analyze how the customers decision
making factors can be used to improve the marketing strategies of Bank Rakyat Klang in
promoting personal loans.
Quantitative explanatory and desriptive research design for data collection has been used
in this research to identify factors which influence the customers choice of a bank in
obtaining a personal loan. A quantitative research method in the form of a questionnaire
has been used for data collection. Feedback from 50 customers of Bank Rakyat Klang
who have obtained a loan from that organization have been analysed using SPSS 21.0.
The findings from the questionnaires as stated in chapter 4 revealed that the factors that
influenced the customers choice of bank in obtaining personal loan from Bank Rakyat
Klang differ slightly from the factors that were identified in Literature Review Chapter
2.

55

The three research questions that were posed in Chapter One had been answered in
Chapter Four. The three questions are as follows:5.2.1 Research Question 1
What are the factors that influence the customers choice of a bank in obtaining a
personal loan?
Based on the findings in Chapter 4, location of the bank, interest rate of the loan, terms
and conditions of the loan, application of technology, longer repayment period and
customer loyalty influence the customers decision in choosing a bank for a personal
loan. These findings were supported by the past researches and marketing strategies as
mentioned in chapter 4. However, Frangos (2012), Khazeh & Decker (1992) and Amin
(2008) found that customer service influenced the customers choice of a bank in
obtaining a personal loan. Nevertheless, the current findings showed that customer
service does not influence the customers decision in choosing a bank for a personal
loan. Likewise, Alvarez & Casielles (2005) and Neslin (2002) found that advertisement,
which is one of the promotional strategies, can help to attract customers to obtain a
personal loan from a bank but the current findings showed that advertisement does not
influence the customers choice of a bank in obtaining a personal loan. At the same time,
based on the current findings, customer loyalty is significant whereas past research by
Hallowell (2011) and Frangos (2012) found it insignificant. Therefore, further research
has to be done on advertisement, customer service and customer loyalty to come to a
more conclusive findings.

5.2.2 Research Question 2:


What is the relationship between the factors that influence the customers choice of a
bank and the marketing strategies of Bank Rakyat Klang in promoting personal loans?
Based on the findings in chapter 4, the following are the relationship between the
factors that influence the customers choice of a bank and the marketing strategies of
Bank Rakyat Klang in promoting personal loans

56

5.2.2.1 Location of the bank


The findings of the research showed 68% of the customers strongly agree that they were
influenced by strategic location and another 54% due to the availability of its ATM
machines everywhere. Inferential statistic showed a positive and significant relationship
between the location of the bank and the customers choice for a bank in obtaining a
personal loan. Past research by Kaynak & Kucukemiroglu (1992), Martenson (1983),
Zineldin (1983) and Weon, et al. (2010) had identified the location of the bank or place
strategy as a crucial factor when it comes to attracting customers to the bank. Almossawi
(1983) had identify

easy access to ATM as a factor that influence the marketing

strategies of a bank in promoting personal loan. Therefore, Bank Rakyat Klang should
pay attention to place strategy in promoting personal loans.

5.2.2.2 Customer service


Based on the findings in Chapter 4, the mean for 5 items tested for this variable fall in
between 3.22 and 4.12. The inferential statistic showed that the relationship between the
customer service and the customers choice of bank in obtaining a personal loan is
negligible and insignificant. The findings concluded that customer service does not play
a vital role in determining the customers choice for a bank in obtaining a personal loan.
This is in contrast to previous studies mentioned in Chapter 2. Frangos (2012), Khazeh
& Decker (1992) and Amin (2008) stated that customer service influences the marketing
strategies of the bank in attracting customers to the bank. Customer service is part of
promotion strategy that is a vital marketing mix component (Oldroyd, 2012: Kotler,
2003). Therefore, more research has to be done about customers service as a marketing
stretegy of Bank Rakyat Klang.
5.2.2.3 Interest rate
The findings in chapter 4 showed the mean for the 2 items tested for this variable is 4.42
and 4.5. The inferential statistic also showed a positive and significant relationship
between interest rate and the customers choice of bank in obtaining a personal loan. The

57

current finding is supported by Khazeh & Decker (1992) Frangos (2012) and Amin
(2008) who stated that interest rate is one of the factors that affect the customers choice
for the bank. Hence, the marketing strategy employed by Bank Rakyat Klang through
imposing low interest rate had attracted customers to obtain personal loans from the
bank.

5.2.2.4 Terms and conditions


Based on the findings in Chapter 4, the mean for the 5 items tested for this variable falls
between 4.04 and 4.54. The inferential statistic showed that there is a positive and
significant relationship between terms and conditions set by the bank and the customers
choice of bank in obtaining a personal loan. The customers are satisfied with the rules
and regulations regarding deferral of installments, rules and regulations set for the
guarantors and with the speed of loan approval. Thus, it is clear that the terms and
conditions of the loan affect the customers decision for a bank in obtaining a personal
loan.

However, past research by Frangos (2012), Khazeh & Decker (1992) and

Hallowell (2011) on the influence of term and condition set by banks found this variable
insignificant. Nevertheless, terms and conditions set for taking up a loan is part of price
strategy and is vital marketing strategy Rizal & Francis (2010); Henard & Szymanski
(2001). As such, terms and conditions play important roles in the marketing strategies of
Bank Rakyat Klang in promoting personal loan.
5.2.2.5 Advertisement
The mean for these 3 items tested for this variable is between 3.60 and 3.90 which is
neutral according to the 5-point Likert scale. The inferential statistic showed that the
relationship between the advertisement and the customers choice of bank in obtaining a
personal loan is negligible and insignificant. The findings in Chapter 4 revealed that the
majority of the customers neither agree or disagree that they chose to obtain a personal
loan from Bank Rakyat Klang due to recommendation from friends and information that
they acquired via the internet or flyers. Overall, it can be concluded that the
advertisement does not play a vital role in determining the customers choice for a bank
in obtaining a personal loan. However, according to the literature review in Chapter 2,
58

Nurfahana (2011) had identified that promotional strategy helps to attract customers to
obtain a personal loan from a bank. In addition, Alvarez & Casielles (2005) and Neslin
(2002) found that promotion is an important factor which the consumers take into
considerations when purchasing a product. Neslin (2002) also found that there was an
increase by 50% in sales via promotional strategy. Advertisement is one of the
promotional strategies. According to Oldroyd (2012) advertisement is part of promotion
strategy which is an important item in marketing mix (4Ps). Therefore, further research
need to be done to find a conclusive answer fot this variable in terms of the marketing
strategies of Bank Rakyat Klang.

5.2.2.6 Application of technology


Based on the findings in Chapter 4, it is known that the majority of the customers
obtained personal loan from Bank Rakyat Klang as they need not have to wait for a long
time due to the advancement of technology at the bank as well as fast processing of their
loan applications. The mean for the 2 items tested for this variable is 4.28 and 4.32. The
inferential statistic showed that there is a positive and significant relationship between
application of technology and the customers choice of bank in obtaining a personal
loan. This shows that the customers take into considerations the employment of
technology by the bank when choosing the bank for a personal loan. According to the
literature review in Chapter 2, Cooper & Kleinschmidt (2011) found that the application
of technology is necessary in order to ensure the success of product strategy. Thus, this
current research reinforces Cooper & Kleinschmidt findings. It can be concluded that the
application of technology influences the customers to obtain a personal loan from Bank
Rakyat Klang. As such, application of technology play important roles in the marketing
strategies of Bank Rakyat Klang in promoting personal loan.
5.2.2.7 Longer repayment period
The findings in Chapter 4 indicated that the majority of the customers agree that they
obtained personal loan from Bank Rakyat Klang due to its long repayment period and
low installments. Besides, they are able to extend their loan repayment period. The
59

mean for this variable is 4.38 and 4.14. In addition, the inferential statistic also showed
that there is a positive and significant relationship between longer repayment period and
the customers choice of bank in obtaining a personal loan. Thus, it is clear that longer
repayment period of the loan affects the customers decision for a bank in obtaining a
personal loan. However, based on literature review no past researches had proven that
longer repayment period is one of the factors that influence the customers choice of
bank in obtaining a personal loan. Although Frangos (2012) had done a research on
longer repayment period among bank customers in Greece, his findings did not identify
this factor as a determining item. Thus, this current research has identified longer
repayment period for personal loans as a marketing strategy for Bank Rakyat Klang.
5.2.2.8 Customer loyalty
The findings in Chapter 4 confirmed that the majority of the customers are satisfied with
the personal loan offered by Bank Rakyat Klang and will recommend to others. The
mean for this item is 4.28. Besides, the majority of them were customers of Bank Rakyat
Klang before they applied for a personal loan from the bank. This shows that these
customers chose to obtain a personal loan from Bank Rakyat Klang as they are loyal
customers of the respective bank. The mean for this item is 4.26. In addition, the
inferential statistic showed that there is a positive and significant relationship between
customer loyalty and the customers choice of bank in obtaining a personal loan.
Overall, it can be concluded that customer loyalty influences the customers choice of
bank in obtaining a personal loan. Hallowell (2011) stated that the price strategy can lead
to customer loyalty. However, no past researches had proven that customer loyalty is
one of the factors that influence the customers choice of bank in obtaining a personal
loan. Thus, this current research is able to identify the relationship between customer
loyalty and the customers decision in choosing a bank to obtain a personal loan.
According to Paavola (2006) and Fournier, Susan & Yao (1997), customer loyalty need
to be taken into consideration by marketers. It can be concluded that customer loyalty
influences the customers to obtain a personal loan from Bank Rakyat Klang. As such,
customer loyalty plays important roles in the marketing strategies of Bank Rakyat Klang

60

in promoting personal loan. However, further research need to be done to arrive at a


conclusive answer.
5.2.3 Research Question 3:
How can the marketing strategies of Bank Rakyat Klang in promoting personal
loans be improved?
This research provides valuable insights on the factors that influence the customers
choice of a bank to obtain personal loan. Based on the customers decision making
behavior as stated in Chapter 4, the following are the recommendations for improving
the marketing strategies of Bank Rakyat Klang in promoting personal loan. This also
covers the writers recommendation for this research.
Recommendations:
5.2.3.1 Location of the bank
Bank Rakyat Klang should maintain its location as the majority of customers chose the
bank for a personal loan due to its strategic location. In addition, Bank Rakyat Klang
should place more ATM at various places as it is one of the factors that influence the
customers to choose Bank Rakyat Klang to obtain a personal loan. Kaynak &
Kucukemiroglu (1992), Martenson (1983), Almossawi (1983), Zineldin (1983) and
Weon, et al. (2010) had stressed on the importance of this factor.
5.2.3.2 Customer service
Although customer service was found to have negligible and insignificant relationship
with customers choice of bank in obtaining a personal loan, the staffs of Bank Rakyat
Klang should explain the application thoroughly and keep customers informed
throughout the application process as the majority of the customers has stated that they
are attracted to personal loan offered by Bank Rakyat Klang due to these two reasons.
Furthermore, Frangos (2012), Khazeh & Decker (1992) and Amin (2008) had found this
factor important.

61

5.2.3.3 Interest rate


It is recommended that Bank Rakyat Klang offers competitive interest rate for a personal
loan in order to attract more customers as justified by Frangos (2012), Khazeh & Decker
(1992) and Amin (2008).
5.2.3.4 Terms and conditions
Bank Rakyat Klang should reviews its terms and conditions for a personal loan now and
then to suit the needs of the customers. The terms and conditions ought to be flexible
and offer more benefits to customers in comparison to its competitors as this factor is
related to product strategy which is basic 4Ps (Lamb, et al., 2010, Strader, 2011).
5.2.3.5 Advertisement
Advertisement was found to have negligible and insignificant relationship with
customers choice of bank in obtaining a personal loan. It is recommended that Bank
Rakyat Klang reduces its financial allocation on advertisement and focuses on other
factors such as lowering interest rate (price strategy) that influence the customers choice
of bank in obtaining a personal loan (Stolt, 2010).
5.2.3.6 Application of technology
Bank Rakyat Klang should constantly be equip with the latest technology as the
application of technology plays an important role in attracting customers to obtain a
personal loan from the bank. Cooper & Kleinschmidt (2011) had mentioned that
technology saves time and it convinient for customers.
5.2.3.7 Longer repayment period
It is recommended that Bank Rakyat Klang offers longer loan repayment period in
comparison to its competitors in order to obtain a competitive advantage. Strader ( 2011)
had recommended product strategy to attract customers.

62

5.2.3.8 Customer loyalty


In order to prevent customers from switching to other banks, it is necessary to ensure
that customers are satisfied with the personal loan offered by Bank Rakyat Klang and it
is the responsibility of all the staffs in Bank Rakyat Klang. Uncles, Dowling &
Hammond (2003) had stressed on the importance of loyalty in retaining and attracting
customers.

5.3 Implications of the research


5.3.1 Academic implications
This research has helped the researcher to gain a better understanding regarding the
factors that influence the chustomers choice of a bank for obtaining personal loans. In
addition, the writer also found effective marketing strategies for Bank Rakyat Klang to
promote personal loans. This research has provided a hands on venue for the writer to
apply all the theories that he has learnt throughout this course. Besides, this research can
serve as an academic reference for other researchers in the future as well.
5.3.2 Practical implications
5.3.2.1 To Bank Rakyat Klang
This research helps Bank Rakyat Klang to evaluate the effectiveness of its current
marketing strategies in promoting personal loan. It is found that the location of the bank,
interest rate, terms and conditions, application of technology, longer repayment period
and customer loyalty influence the customers choice for a bank in obtaining a personal
loan. Previous studies done by Frangos (2012), Khazeh & Decker (1992), Cooper &
Kleinschmidt (2011), (Stolt, 2010), Lamb, et al., (2010), Strader (2011), Amin (2008)
and others as discussed in chapter 4 supported this findings. On the other hand,
advertisement and customer service do not influence the customers choice for a bank in
obtaining a personal loan. In addition, this research provides recommendations to Bank

63

Rakyat Klang on how it can further improve its marketing strategies in promoting
personal loan.
5.3.2.2 To the bank industry
This research can be used as a reference to other banks on how they can improve their
marketing strategies in promoting personal loan. The findings of this research which are
supported by previous studies can be used by the banking industry in Malaysia as no
previous study as been done in Malaysia pertaining to personal loans.
5.4

Limitations of the research

This research only covers Bank Rakyat Klang in Klang, Malaysia. There are 141 Bank
Rakyat branches in Malaysia with 3 branches in Klang (Bank Rakyat, 2013). In addition,
the population of Malaysia is 28.9 million (Trading Economics, 2013). There are 879867
Malaysians in Klang (Mongabay, 2013). This research only involves 50 customers in
Klang. The number of respondents in this study is limited and therefore it imposes
difficulty in terms of developing a comprehensive study with significant results.
5.5 Suggestions for further research
The results obtained from this research may not be accurate as it only covers 1 out of
141 Bank Rakyat branches in Malaysia. A more accurate results can be obtained by
conducting a research that covers all the 141 Bank Rakyat branches in Malaysia. In
addition, this research only involves 50 customers in Klang. Future research should
involve more participants in order to improve the results. Further research should be
conducted on factors that influence customers choice of bank based on Kotlers model of
buyer behavior which not only examines the marketing aspect but also marketing and
other stimuli, the buyers black box and buyer responses (Kotler, 2003). Detail of
Kotlers model of buyer behavior is attached in Appendix 3. Further research also has to
be done on advertisement, customer service and customer loyalty to come to a more
conclusive findings since. The findings of current research differs from past research.

64

5.6

Summary of the chapter

The findings based on the questionnaires have helped to prove 6 out of 8 hypotheses
stated in Chapter One. It can be concluded that the location of the bank, interest rate of
the loan, terms and conditions of the loan, the application of technology, longer loan
repayment period and customer loyalty influence the customers choice for a bank in
obtaining a personal loan. In order to further improve its marketing strategies in
promoting personal loan, Bank Rakyat Klang should focus on these 6 factors. On the
other hand, customer service and advertisement do not influence the customers choice
for a bank in obtaining a personal loan.

65

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66

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Bell, J. (2005) Doing your research project: A guide for first-time researchers
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Appendix

68

Appendix 1: Number of banks in Klang area


COMMERCIAL BANKS
Affin Bank Bhd.
Alliance Bank Malaysia Bhd.
Bangkok Bank Bhd.
Bank of China(M) Bhd.
CIMB Bank Bhd.
Citibank Bhd.
Hong Leong Bank Bhd.

4
1
1
1
15
2
10

INVESTMENT BANKS
Affin Investment Bank Bhd
Aminvestment Bank Bhd
Maybank Investment Bank Bhd.
CIMB Investment Bank Bhd.,
OSK Investment Bank Bhd.
Ecm Libra Investment Bank Bhd
ISLAMIC BANKS

2
1
2
1
1
1

HSBC Bank Malaysia Bhd.

CIMB Islamic Bank Bhd

Maybank Bhd.

13 Bank Islam Malaysia Bhd

Public Bank Bhd.


RHB Bank Bhd
Standard
Chartered

13 AmIslamic Bank Bhd.,


2
7 Alliance Islamic Bank Bhd.,
2
Bank 2 Al Rajhi Banking & Investment 1

Malaysia Bhd.

Corporation (M) Bhd.

United Overseas Bank (M) Bhd.


1
INTERNATIONAL BANK
Pt Bank Muamalat Indonesia 1

Affin Islamic Bank Bhd.,


Bank Kerjasama Rakyat Bhd.
Bank Muamalat Malaysia Bhd.

2
3
1

Hong leong Islamic Bank Bhd

RHB Islamic Bank Bhd.

Tbk.

Source: Bank Negara Malaysiahttp [Online] Available at: http//www.bnm.gov.my/


[Accessed: 9 April 2013].

Appendix 2
Questionnaires for the customers
Part 1
1. Age
a. Below 30
b. 30-49
c. 50 and above
2. Gender

69

a. Male
b. Female
3. Educational Level:
a. SPM
b. First degree
c. Masters and above
4. Career:
a. Farmer/fisherman
b. housewife
c. government servants
d. private sector
e. hawker/businessman/woman
5. Reasons for obtaining personal loan
a. business
b. Personal education
c. childrens education
d. medical
e. other emergencies

Part 2:
To measure independent variable 1 (Location of the bank) respondents were asked
to answer following questions
1 Convenient location attracted you to choose our bank for

personal loan.
You obtained the personal loan as the banks ATM

machine is available everywhere.


To measure independent variable 2 (Customer service) respondents were asked to
answer following questions
3
Our staff was professional and knowledgeable.
1 2 3
4 You were courteously greeted.
1 2 3
5 Your requests/questions are promptly answered.
1 2 3
6 The application process was thoroughly explained.
1 2 3
7 You were kept informed throughout the application process 1 2 3
To measure independent variable 3 (Interest rate) respondents were asked to
answer following questions
8 Competitive interest rates for loan attracted you to choose
9

our bank.
You are attracted by the privileged interest terms offered in
70

4
4
4
4
4

5
5
5
5
5

comparison with other banks.

To measure independent variable 4 (Terms and conditions) respondents were


asked to answer following questions
10 You are satisfied with the loan amount offered
11 You find that the loan application a simple procedure with

1
1

2
2

3
3

4
4

5
5

less bureaucratic formalities.


12 You are satisfied with the terms and conditions regarding

deferral of installments
13 You are satisfied with the terms and conditions set for

guarantors.
14 You are satisfied with the speed of approval and immediate

payout.
To measure independent variable 5 (Advertisement) respondents were asked to
answer following questions
15 You obtained the personal loan from us due to

recommendation from others.


16 You know about our personal loan from the internet.
17 You know about our personal loan from the

1
1

2
2

3
3

4
4

5
5

flyers/brochures.
To measure independent variable 6 (Application of technology) respondents were
asked to answer following questions
18 You are satisfied with the short waiting time due to the

employment of high technology.


19 The bank processes your personal loan application in a

71

short time due to its high technology.


To measure independent variable 7 (Longer repayment time) respondents were
asked to answer following questions
20 You are attracted to the personal loan due to its low

installments and long repayment period.


21 You obtained the personal loan from us as you can extend

loan repayment period.


To measure independent variable 8 (Customer loyalty) respondents were asked to
answer following questions
22 You will recommend your friend or other family members

to obtain personal loan from this bank.


23 You are already a customer of this bank/its branches before

applying for loan.


To measure dependent variable (Customers choice of bank to obtain personal
loan) respondents were asked to answer following questions
24 I chose Bank Rakyat Klang to obtain personal loans

because of convenient location.


25 I chose Bank Rakyat Klang to obtain personal loans

because of Customer service


26 I chose Bank Rakyat Klang to obtain personal loans

because of interest rate


27 I chose Bank Rakyat Klang to obtain personal loans

convenient for me.


28 I chose Bank Rakyat Klang to obtain personal loans based

on advertisement.
29 I chose Bank Rakyat Klang to obtain personal loans

because of technology they applied.


30 I chose Bank Rakyat Klang to obtain personal loans

because of its longer repayment period.


31 I chose Bank Rakyat Klang to obtain personal loans

because the terms and conditions set by the bank is

because of customer loyalty.

72

Thank you for your cooperation.

Appendix 3
Kotlers Model of Buyer Behavior

Source: Kotler, P. (2003) Marketing management. 11th edn. India:Prentice-Hall

73