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IJBM
24,7 Correlates of customer loyalty to
their bank: a case study in Nigeria
Benjamin Osayawe Ehigie
494 Department of Psychology, University of Ibadan, Ibadan, Nigeria

Received February 2004

Revised December 2005, Abstract
May 2006 Purpose – This paper seeks to examine how customer expectations, perceived service quality and
Accepted July 2006 satisfaction predict loyalty among bank customers in Nigeria.
Design/methodology/approach – A survey research was conducted that included qualitative
technique to explore customers’ expectations from bank services on the basis of which measurement
scales were developed to measure the variables of the study. Respondents for the qualitative research
include 18 participants for focus group discussions and 24 for in-depth interview; they were operators
of savings, current, and electronic bank accounts. The quantitative research had 247 bank customers
who responded to questionnaire items that measured the research variables.
Findings – A hierarchical regression analysis carried out revealed that perception of service quality
and satisfaction are significant predictors of customer loyalty, with customer satisfaction contributing
more.
Research limitations/implications – It is implied that management of banks in Nigeria should
intermittently conduct market survey to identify the desires of their customers and attempt at
satisfying their customers.
Practical implications – Management of Nigerian banks could design appropriate marketing
strategies towards achieving customer satisfaction and this would culminate in enhanced customer
loyalty.
Originality/value – The paper improves the external validity of similar findings in the West and
demonstrates the generalizability of service quality perception and customer satisfaction as predictors
of customer loyalty.
Keywords Customer loyalty, Customer satisfaction, Customer services quality, Perception,
Relationship marketing, Banks, Nigeria
Paper type Research paper

International Journal of Bank
Marketing
Vol. 24 No. 7, 2006
pp. 494-508
q Emerald Group Publishing Limited
0265-2323
DOI 10.1108/02652320610712102
Introduction
Customer loyalty is critical to the conduct of business in today’s competitive
marketplace, and banks are no exception. Commercial banks have, thus, embarked on
different management strategies as ways to promote customer loyalty (Bahia and
Nantel, 2000; Jamal and Naser, 2002). However, contemporary researchers in bank
marketing (e.g. Day, 2000; Gilbert and Choi, 2003; Hennig-Thurau et al., 2002) have
advocated relationship marketing (RM) as a better option for gaining customer loyalty.
In fact, many firms have established RM programmes to foster loyalty (Schiffman and
Kanuk, 2004).
RM is an attempt to develop an ongoing, expanding exchange relationship with a
firm’s customers and it is based on the premise that it makes economic sense to satisfy
and retain customers (Day, 2000). It is centered on understanding and satisfying
consumer needs (Jones and Farquhar, 2003). Customer care programmes constitutes
one of the practices of RM that nearly every major player in the retail financial services
institutions has adopted (Ryan and Ployhart, 2003). Contemporary studies on financial
institutions have, thus, focused on relationship marketing; a concept introduced by Customer loyalty
Berry (1983). The idea is based on the realisation that building long-term relationships
with customers leads to reducing defection rates, reducing costs and increasing
revenues (Harrison, 2003a).
Literature abounds on the importance of relationship marketing in fostering
customer loyalty (see Day, 2000; Hennig-Thurau et al., 2002; Jones and Farquhar, 2003).
Nonetheless, researchers such as Gilbert and Choi (2003) argue that in Hong Kong, for 495
instance, RM is not being implemented carefully in the banking sector, probably
because a closer look at customers’ needs, expectations, perception of service received,
satisfaction, and loyalty have not formed the basis for implementation. It is in this vein
that the issue of relationship marketing is being examined in the Nigerian banking
sector.
The banking industry in Nigeria has been characterized of many problems that
have badly affected the loyalty of customers (see Ebhodaghe, 1996; Okoduwa, 1995;
Uche and Ehikwe, 2001). The advent of structural adjustment programme (SAP)
opened the floodgate of banking licenses so between 1985 and 1993 licensed banks
operating in Nigeria rose from 41 to 120 (Central Bank of Nigeria, 1995). Most of these
banks were not customer-focused but more of currency exchange centres and they
survived simply by buying and selling foreign exchange (Uche, 1996).). The banks later
intensified the marketing of services only when the government removed most
distortions in the foreign exchange market which made currency trading difficult.
Presently there is high competition among banking firms in Nigeria for customer
patronage that relationship marketing becomes imperative for gaining customer
loyalty. It is in view of this that the present paper reviews relevant literature on the
subject, presents an empirical study that relates customer expectations, perception of
service quality and customer satisfaction with loyalty. The findings from statistical
analysis are reported and the results discussed along with existing literature. Finally,
implications of the findings are presented as well as the limitations of the study.

Literature review
A key relationship marketing outcome is customer loyalty (Hennig-Thurau et al., 2002).
In the RM literature, factors that could be associated with customer loyalty include
customer expectations, service quality perception (see Gerrard and Cunningham, 2001)
and satisfaction (Parasuraman et al., 1985; Ryan and Ployhart, 2003). In relating
marketing outcomes with predictor variables, the univariate approach focuses on a
single predictor variable at a time (Anderson, 1998; Zeithaml et al., 1996), while the
multivariate approach advocates for a plurality of constructs (Fournier and Mick, 1999;
Hennig-Thurau et al., 2002). The main objective of the present study is to examine the
relationship marketing theory by adopting the multivariate approach of examining
correlates of customer loyalty in the Nigerian banking industry. The strength of the
multivariate approach is that it allows for consideration of joint influence of predictor
variables on customer loyalty, as opposed to the univariate approach that allows for
the influence of one predictor variable at a time. It is believed that outcomes of the
present study will have implications for bank customer loyalty in Nigeria.
The marketing of banking services in Nigeria has greatly been affected by different
economic, social and political factors (Uche and Ehikwe, 2001). The banking service
system in Nigeria has been epitomized with failures which have led to the industry
IJBM witnessing collapse of banking firms in the country, thereby threatening the fate of
24,7 customers on its services. With inflation in the country, bank depositors could only
receive negative returns in their deposits, thus discouraging bank deposits and making
the less regulated finance companies more attractive to the market (Standard Trust
Bank, 1999). Okoduwa (1995) reported that out of 120 commercial and merchant banks
in Nigeria, 50 became liquidated. But in 1998 alone 26 banks were liquidated (Uche,
496 1996). Bank financial reports show that in 1993 a total asset of N55.1 billion was lost to
bank liquidation; in 1994 it was N73.1 billion assets lost; in 1995, N95.6 billion assets
were lost (Ebhodaghe, 1996). Bank customers started loosing fate in bank services in
Nigeria and started patronizing capital market. Presently the introduction of
recapitalization in the banking sector has led to merger and acquisition and customers’
loyalty is threatened.
This makes research on customer loyalty significant in the Nigerian banking
industry; to identify factors that could enhance customer loyalty. Customer loyalty is a
feeling of commitment on the part of the consumer to a product, brand, marketer, or
services above and beyond that for the competitors in the market-place, which results
in repeat purchase (Szymigin and Carrigan, 2001). A loyal customer to a bank is, thus,
one that will stay with the same service provider, is likely to take out new products
with the bank and is likely to recommend the bank’s services (Fisher, 2001).
Evidence abounds (e.g. Duncan and Elliot, 2002; Kish, 2000) showing links between
customer loyalty and organization profitability, implying that any organization with
loyal customers has considerable competitive advantage. This makes studies on
customer loyalty essential for bank management. Customers are more likely to be loyal
if there is a customer-oriented climate (Clark, 1997). Such climate is established when
organizations try to identify genuine customers’ needs and design products to meet
those needs (Bridgewater, 2001). Valued customers require truly personalized services,
which Szymigin and Carrigan (2001) explain as knowing what customers want and do
not want and then ensuring that they get what they want.. Customers can and do
change their bank if their expectations are not met by their existing service provider
(Szymigin and Carrigan, 2001). The problem is that customers rarely tell the bank
manager in advance what they have decided to do, especially when they decide to leave
their existing bank for a competitor (Kish, 2000). In aiding bank management to
overcome the problem of customer defection, it becomes imperative for researchers to
identify what is in the minds of customers of bank services when they compare what
should be offered and provided, and what is actually offered and provided (Stafford,
1994).
Although several factors have been reported as relevant for gaining customer
loyalty, nonetheless, customer satisfaction is highly recognized for its fundamental role
(Jamal and Naser, 2002). Satisfied customers are more likely to concentrate their
business with one bank (Reichheld, 1993), provide recommendations for the bank and
invariably reduce a bank’s cost of providing services because there are fewer
complaints to deal with. Customer satisfaction is, thus, not only linked to loyalty, but is
also linked to bank revenue generation (Federal Express, 1992; Winstanley, 1997).
However, it has been shown that the relationship between satisfaction and loyalty is
neither linear nor simple (Jones and Sasser, 1995). High levels of measured satisfaction
sometimes go hand in hand with a continuous increase in customer defection and
within a banking context the reasons are not so clear (Bloemer et al., 2002). The
interactions between customer satisfaction and loyalty have, therefore, been hard to Customer loyalty
define (Oliver, 1999).
The impact of satisfaction on customer loyalty is rather complex. Fisher (2001)
believes that customer satisfaction accounts for only part of why people change
product or service providers. Other studies have shown that customer satisfaction is a
leading factor in determining loyalty (e.g. Anderson and Fornell, 1994; Rust and
Zahorik, 1993). Thus, there are conflicting reports on the relationship between 497
customer satisfaction and loyalty, making it imperative for more empirical studies to
address this relationship issue. The present study, however predicts that customer
satisfaction will correlate positively with bank customer loyalty.
Customer satisfaction is believed to be influenced by some other variables, which
include service quality perceptions and expectations (Patterson et al., 1997; Szymanski
and Henard, 2001). This is exemplified in the disconfirmation paradigm, which
explains that when perceived product performance is equal to expectation the
consumer is satisfied but when it exceeds a customer’s expectations (a positive
disconfirmation) the customer feels “delighted”. But if the perceived performance falls
short of a customer’s expectations (a negative disconfirmation), then the customer feels
dissatisfied (see Schiffman and Kanuk, 2004). Researchers acknowledge the
importance of customer satisfaction and service quality perceptions as predictors of
customer loyalty (e.g. Bloemer et al., 2002; Szymanski and Henard, 2001; Lassar et al.,
2000). However, Newman (2001) believes that the true value of customer satisfaction
and service quality in contributing to genuine attitudinal loyalty remains open to some
debate (Newman, 2001). Such conflicting opinions make provisions for further studies
(Jamal and Naser, 2002). It is predicted, therefore that customer satisfaction and service
quality perception would jointly predict customer loyalty.
Though the role of customer expectations in predicting loyalty has been implied in
the disconfirmation paradigm, but its measurement has been challenged. For instance,
Teas (1993) questions the interpretation and operationalisation of expectations.
Avkiran (1999) notes a tendency to set expectations higher than perceptions thus
making a gap between perceptions and expectations inevitable. These contradictory
reports make it essential for contemporary studies to measure customer expectations,
perceived service quality, and satisfaction separately and examine how they are
associated with loyalty.
The disconfirmation paradigm is ingrained in the SERVQUAL model
(Parasuraman et al., 1985) that gave birth to the SERVQUAL multiple-item survey
instrument (Parasuraman et al., 1988). The scale relies in the use of gap between
expectation and perceived performance as a measure for service quality. Although
literature abound showing that SERVQUAL had been used to measure service quality
in a broad range of service settings (Buttle, 1996), in a banking context Lam (1995)
reports that there were problems with the dimensions of SERVQUAL. Confirmatory
factor analyses revealed that the measurement scale lacked validity with sample from
different culture (Cui et al., 2003). The BANKSERV scale was consequently developed
to circumvent this difficulty in generalization of the SERVQUAL scale (Avkiran, 1999).
BANKSERV is a single scale measure of service quality designed to allow customers to
reflect on their perceptions and expectations in a single statement. The Banking
Service Quality (BSQ) was also developed (Bahia and Nantel, 2000) to measure service
quality in banking, as an adaptation of SERVQUAL. However, Hofstede (1980)
IJBM recognizes the vital impact of cultural differences on all aspects in business, thus,
24,7 pre-empting the need to develop specific measuring instrument to measure service
quality in a different cultural environment. Hence, new scales are developed to measure
the variables for the present study conducted in Nigeria. Based on the criticisms
leveled against gap scores, and as follow-up to the BANKSERV scale that utilizes a
single scale measure, the present study utilizes the same scale items to measure
498 customer expectations, service quality perception, and satisfaction with difference only
in the response pattern to reflect the specific variable measured.
Though satisfaction is modeled as the only immediate antecedent of loyalty, other
key drivers of loyalty include service quality (Hennig-Thurau et al., 2002) and customer
expectations. Studies show that service quality has measurable impact on customer
retention (e.g. Payne and Rickard, 1993) Both satisfaction and service quality are
opined as predictors of customer behaviours like purchase intentions and word of
mouth advertising (Dabholkar, 1995; Reichheld and Sasser, 1990) which are measures
of loyalty. Literatures suggest that expectations for service quality are likely to be
based on perceptions of excellence (e.g. Rust and Oliver, 1994; Taylor and Baker, 1994).
Other empirical researches support the notion that satisfaction is caused by
expectations (Cadotte et al., 1987).. Although many service firms, including retail
banks, have been measuring customer satisfaction and service quality to determine
how well they meet customer needs and requirements (Dabholkar, 1995),
understanding the nature of relationship with customer loyalty is of significant
value to bank managers. It is desirable, therefore, to conduct a holistic study that
relates customer expectations, service quality and satisfaction with customer loyalty. It
is, thus, hypothesized that customer expectations, service quality perception and
satisfaction will jointly predict customer loyalty.

Research method
The study was conducted at Ibadan and Lagos where most commercial banks in
Nigeria located their head offices. The administrative operations of the head offices are
the same as their individual branches across the country. The study was conducted
both as qualitative and quantitative research. This follows Waterhouse and Morgan’s
(1994) approach of using qualitative (in-depth interviews and group discussions) as
well as quantitative research methods (telephone and mail surveys) to tackle the issue
of customer retention among customers of Lloyds Bank (UK). Due to difficulties with
telephone and mailing services in Nigeria, participants for the present study were
contacted physically for in-depth interview, group discussions, and surveys.
Participants were mainly those that owned savings, current, and electronic
accounts. For the qualitative study, 38 bank customers who were volunteer students of
professional postgraduate degree programs at the University of Ibadan, Nigeria served
as participants; 20 were engaged in in-depth interview while 18 participated in the
focus group discussions (FGDs). Students were used as a convenient sample, to avert
the difficulty with getting participants for such qualitative study. For the survey
research, 247 respondents were systematically selected from six randomly selected
banks in Lagos. These were composed of 146 males and 101 females who have
operated a bank account in not less than one year. Their average age was 33.31 years
(s:d ¼ 5:12).
 Interviews were conducted with 20 participants by four trained research assistants; Customer loyalty
each interviewing five participants. Before an interview date was fixed, prospective
participants, who were postgraduate students of studying business related subjects
were screen to check that they had bank accounts. The interview which was both
structured and unstructured was conducted face-to-face and recorded. Interviewees
were requested to discuss specific issues that form their expectations from banking
services in Nigeria, and what behaviors bank customers can indulge to demonstrate 499
loyalty or disloyalty to a bank. Independent content analysis of the interviews was
made by each interviewer, who drew out themes and constructs related to
“expectations of bank customers” in Nigeria as well as “bank customer loyalty”. The
four interviewees subsequently met to harmonize their data, and came up with 21
constructs for the bank customers’ expectations and 20 for customer loyalty. The
selected constructs were those that received at least 75 per cent support by the
interviewers who also acted also as content analyst.
Three focus groups were constituted among 18 postgraduate students who
volunteered to participate. Each of the three groups was composed of six participants,
who were holders of current, savings, and electronic account respectively. The focus
groups were moderated by a trained personnel and a note-taker, supplemented with
tape-recording of discussions. Each group was encouraged to discuss issues related to
what they expect as essential services from their banks in the course of transacting
business. They also discussed issues related to behaviors that demonstrate loyalty to
their banks. Data obtained were content analyzed by three experts who teach courses
related to marketing in the university. Separate themes and constructs were
subsequently drawn for customer expectations and loyalty and those that were
consistently reported by at least two of the analyst were accepted, giving rise to 25
constructs respectively for customer expectations and customer loyalty. These were
harmonized with those from the in-depth interview and constructs that consistently
appeared were retained. Thus, 16 constructs were retained for bank customer
expectations while 13 constructs were retained for customer loyalty.
The 16 constructs for customer expectations and 13 for customer loyalty were used
to develop the research equipments for the quantitative research, which are
respectively labeled as Customer Expectancy Scale (see Table I) and Customer Loyalty
Scale (see Table II). The scales were prepared in check list form and administered to a
sample of 60 bank customers drawn from five banks in Lagos, and their responses
were used to establish face validity of the scales. The items on customer loyalty scale
were also administered to ten senior bank staff for check, as expert judgment for
content validity. All respondents were requested to respond with a “Yes” or “No”
response, as agreement or disagreement to each item measuring what the scale is
believed to measure. Responses were converted to percentage for each item, as
presented in Tables I and II for customer expectations and customer loyalty
respectively. Each item on the two scales received above 80 per cent support by
assessors and was thus retained as valid (see Ehigie, 1999; Morah, 1995).
The 16 items on customer expectations were also used as items to measure customer
perception of bank services quality and customer satisfaction with bank services, with
modifications made on the response alternatives provided for each of the scales. These
three scales and the emergent customer loyalty scale were again administered on 150
bank customers holding current, savings or electronic accounts, drawn from another
IJBM
Measures Acceptance (%)
24,7
1. Bank workers’ possession of required skill 87
2. Bank workers possession of knowledge and experience 88
3. Continuity of service to customer in future years 93
4. Understand customer’s needs 84
500 5. Offering of fast and efficient service 100
6. Providing physical safety to customer 97
7. Confidentiality of transactions 80
8. Positive attitude of staff to customer services 92
9. Trustworthiness of bank 88
10. Bank’s good reputation 84
11. Staff friendliness 80
12. Keeping people informed 89
Table I. 13. Listening to customers 99
Measures of bank 14. Introduction of Saturday banking 100
customers’ expectations 15. Extended banking closing hours 98
in Nigeria 16. Insurance cover for customers 82

Measures Acceptance (%)

1. I am very particular about the bank I use 96

2. Though I am used to this bank I can still stop using it 100
3. I use more than one bank 98
4. If I end up using another bank, it will satisfy me like the one I presently use. 84
5. This bank is the best in Nigeria 80
6. This bank’s services are of high quality 82
7. I derive maximum satisfaction from this bank 80
8. I will influence others to use this bank 99
9. I will discourage present users from patronizing this bank 97
10. I will introduce this bank to others 96
Table II. 11. I will continuously use this bank 97
Measures of customers’ 12. I am thinking of closing my account with this bank 84
bank loyalty 13. I will advise all users of this bank to still transact business with it 85

five banks that were not selected for the main study. Their responses to the scale items
were utilized to establish reliability and further validity for the research instruments
used in the main study. Four separate scales were, thus, developed to measure
customers’ expectations, service quality perception, satisfaction, and loyalty.
Customer expectations scale had 16 items and each item had four-point response
alternative, captioned as “extremely important” (4), “important” (3), “slightly
important” (2), and “not important” (1). These were structured to rate bank
customers’ expectations from banks. Respondents were instructed to rate the
importance of each of the bank services listed, based on their expectations from the
bank. The item-total correlation coefficient of all items ranged between 0.41 and 0.84,
alpha co-efficient was 0.91, Spearman Brown co-efficient for internal consistency was
0.94, and all items loaded on one factor in a varimax rotation factor analysis conducted.
The same items were used to measure customers’ perception of service quality and
respondents were instructed to rate their perception of their banks’ services to
customers, using a four-point response pattern ranging from “excellent” (4), “good” (3), Customer loyalty
“fair” (2), to “poor” (1). The item-total correlation of the items ranged between 0.44 and
0.83 with alpha coefficient of 0.92 and internal consistency of 0.93 using Spearman
Brown coefficient. Using the same items, customers’ satisfaction with the services
rendered by their banks was measured with four response alternatives- “highly
satisfied” (4), “satisfied” (3), “dissatisfied” (2) and “highly dissatisfied” (1). Item-total
correlation of the scale ranged between 0.48 and 0.78, with alpha coefficient as 0.93 and 501
Spearman Brown coefficient as 0.96. For each of the scales, total score on all items
represented a respondent’s level on the variable measured. However, responses were
simultaneously made on each item for the three scales, to control for criticisms leveled
against previous studies in which measurements were made successively.
The fourth scale has 13 items designed to measure bank customer loyalty (see
Table II). Responses were made on a four-point alternative, ranging from “strongly
agree” (4), “agree” (3), “disagree” (2) to “strongly disagree” (1), with items 2, 3, 4, 9, 12
reversed. All items had factor weight loading of between 0.40 and 0.75 on a single
dimension, in a varimax factor rotation conducted. Item-total correlation ranged
between 0.50 and 0.77, alpha coefficient obtained was 0.87 and Spearman Brown
coefficient was 0.91. The total score on the items was used for analysis as respondent’s
level of loyalty.

Procedure for the quantitative research

The target sample for the study was 300 participants. Banks purposively selected were
those quoted on the Stock Exchange of Nigeria (NDIC, 2001), had their head offices in
Lagos and operated current, savings, and electronic accounts. Thus, 34 banks were
qualified for the study, from which six banks were randomly selected by ballot.
Customers, basically those holding savings, current or electronic service accounts
participated in the study. A total of 50 questionnaires were assigned to each bank (22
for depositors, 22 for those withdrawing, and six for electronic account operators). The
electronic account was given a smaller weight because of its low patronage at the time
of study. The study was conducted at the end of a month, because it is a peak period for
customers’ visits to banks.
A total of 12 research assistants were trained for the study. The study was
conducted the same day and time, to prevent users of more than one bank from
repeated participation. The questionnaires were deposited with bank clerks on their
respective desks and administered to the customers using the systematic selection
technique, with the support of the research assistants. Every fifth customer that
appeared at the transaction desk (for those withdrawing), or fifth on the waiting queue
(for those depositing) received a copy of the questionnaire. With traffic of customers in
banks at the end of every month, at the point of transactions tallies are often given to
customers who come for withdrawals, after which they sit and wait until they are
called on for their cash. Customers who come to deposit monies also wait on queues to
deposit cash in turns. Only customers that agreed to receive the questionnaires and
who were literates were given. They were encouraged to respond to the questions on
the questionnaire while waiting to be attended to, but could call at the desk after
completion of the questionnaire for an “express attention”. This served as
reinforcement for those that agreed to participate; rather than wasting time waiting.
A customer that ought to be selected but declined participation or is not literate was
IJBM skipped for the next on the row. Two research assistants assigned to each bank
24,7 monitored all who agreed to participate and collected the questionnaires from them on
completion. However, all first six customers that came for electronic banking were
selected as participants because of limitedness in the number of customers at the point
of transactions. Although 265 questionnaires were successfully retrieved from the
respondents but only 247 (82 per cent) were properly filled and therefore used for
502 analysis.

Results
In testing the hypotheses of significant joint regression of customer loyalty on
customer expectations, service quality perception, and satisfaction, hierarchical
regression analysis was applied. The hierarchical regression analysis was considered
because some earlier studies have suggested that the effect of evaluative criteria in
forming performance expectations can be moderated by consumer individual
differences such as age, gender, education, and occupation (Bettman and Park, 1980;
Oliver, 1980). Consequently, sex, age, duration of patronage of the account in context,
and number of banks patronized are considered as control variables in the present
study (see Table III).
The initial entry of the control variables (gender, age, years of bank patronage, and
number of banks operated) jointly explained 6 per cent variance in customer loyalty
(change in R square ¼ 0:06). Age was significantly and positively related to customer
loyalty (beta ¼ 0:25), but gender (beta ¼ 20:03), years of patronage (beta ¼ 0:11), and
number of banks operated (beta ¼ 20:05) were unrelated. It is implied that older
customers are more loyal to their banks than younger customers.
The entry of the other variables show that customer expectations, perceived service
quality, and satisfaction jointly accounted for 25 per cent variance in customer loyalty

Model I Model II
Variables Beta SE Beta SE

Step 1: Control variables

1. Sex 2 0.03 0.89 2 0.02 0.80
2. Age 0.25* 0.09 0.23* 0.09
3. Years of patronage 0.11 0.11 0.10 0.06
4. Number of banks operated 2 0.05 0.43 2 0.07 0.52
Step 2 Correlates
5. Customer expectations 2 0.03 0.09
6. Service perception 0.29* 0.15
7. Customer satisfaction 0.34** 0.12
F 2.78* 16.02
R 0.245 0.52
R (square) 0.060 0.29
Change in R (square) 0.060* 0.251**
Adjusted R (square) 0.035 0.234
Table III. Df 4/242 7/239
Hierarchical regression of SE 3.22 2.31
bank loyalty on control
and predictor variables Notes: * p , 0:05 **p , 0:01; n ¼ 247
(change R square ¼ 0:25). However, only the contributions of service perception Customer loyalty
(beta ¼ 0:29) and customer satisfaction (beta ¼ 0:34) were significant in the regression
analysis results but the contribution of customer expectations was not significant.
Customer satisfaction contributed more than service quality perception in the
explained variation in customer loyalty, but both contributed positively. It means that
the more favourable customers perceived bank services and the more satisfied they are,
the more loyal they are to their banks. A summary of the links among the variables 503
studied are presented in Figure 1 in the form of a pictorial model.

Discussions
Through the multivariate model of relationship marketing, it is proposed that customer
loyalty would be jointly predicted by customer expectations, service quality
perception, satisfaction and loyalty. Results from the present study is, thus, based
on multivariate analysis and reveal that perceived service quality and customer
satisfaction are jointly associated with customer loyalty, but not customer expectation.
This is opposed to the opinion of Gerrard and Cunningham (2001) and, Ryan and
Ployhart (2003) that customer expectations, service quality perception, and satisfaction
are important for customer relationship management. The insignificant contribution of
customer expectations in the multiple regression results shows that although
customers have expectations regarding what service providers should do and how they
should behave but it is not sufficient for the realization of loyalty. The present study

Figure 1.
A model showing the links
among customer
expectations, service
quality perception,
satisfaction, and loyalty
IJBM demonstrates that it is more important to satisfy customers so as to secure customer
24,7 loyalty. This finding supports Szymigin and Carrigan’s (2001). This is what
Bridgewater (2001) describes as a customer-oriented climate; when organizations try to
identify genuine customers’ needs and design products to meet those needs.
Among the three predictor variables examined, customer satisfaction accounted for
the largest variation in customer loyalty. This supports other literature showing that
504 customer satisfaction is a leading factor in determining loyalty. For instance,
Hennig-Thurau et al. (2002) argued that customer satisfaction is the only immediate
antecedent of customer loyalty. It implies therefore that the more satisfied a customer
is with the services of a bank the more likely the customer would be loyal. The present
finding thus supports the relationship quality model (Morgan and Hunt, 1994) which
gives credence to customers’ evaluations of service relationship as central to decision to
continue or leave the relationship with service provider. Such evaluations gives rise to
feelings of satisfaction. It is revealed therefore that customer satisfaction is more
important than service quality perception in gaining customer loyalty. Nonetheless, the
significant contribution of service quality perception confirms reports by Fisher (2001)
that customer satisfaction accounts for only part of why people change product or
service providers.

Implications of findings
The study has confirmed the importance of studying and understanding consumer
behaviour, for the purpose of improving customer services in the banking system in
Nigeria. To gain customer loyalty, bank management ought to satisfy their customers.
This can be best implemented when customers’ needs are known and machineries are
put in place at getting them satisfied. It has been revealed that customer satisfaction is
dependent on the product’s performance (Kotler et al., 2003) and product performance
depends on meeting customers’ needs and expectations. This supports relational
benefits approach of relationship marketing theory which proposes the fulfillment of
relationship-oriented customer benefits for future development of existing relationship
(Gwinner et al., 1998). Increased customer loyalty is the single most important driver of
long-term financial performances of banks and service quality and customer
satisfaction have been demonstrated as essential keys to securing customer loyalty (see
Bloemer et al., 2002; Duncan and Elliot, 2002).
It is imperative for bank management in Nigeria, therefore, to improve customer
services by giving customers what they want, when they want it. Thus, identifying
and satisfying customers’ needs could improve bank customer services because what
is offered can be used to separate own services from competitors’. As a step towards
achieving this, customers who hold accounts with competing banks could be studied
intermittently, so as to identify what aspects of customer services are being enjoyed in
competing banks that are not present in own bank. This design will enable banks that
are sensitive to market research compete favourably with other banks as they will do
better in comparative advantages.
Bank management needs to emphasize service quality. Service quality relates to
customers’ perceptions or judgment of services (Harrison, 2003b). Due to the fact that
banks do not provide tangible products, their service quality is usually assessed by
measures of the service-provider’s relationship with customers. Thus, as obtained in
the quantitative analysis of the present study (see Table I), bank management should
pay attention to bank staff skill possession, knowledge, attention to customers and Customer loyalty
their needs, offering of fast and efficient services and general attitude to customer
services. Other issues for gaining customer loyalty in the Nigerian banking system
include confidentiality in transactions, trustworthiness of bank, introduction of
weekend banking, extension of banking hours, and provision of insurance for
customers. Bank management in the Nigerian market should therefore see to customer
satisfaction based on these measures. 505
Invariably, there is need for the management of banks to intermittently train their
workers on relationship marketing skills. Such training would build a
customer-oriented climate in which contact staff can deliver service efficiently and
effectively, acknowledging that acquiring and retaining customers is the very essence
of marketing. Consequently, customer relations behaviors can serve as the criteria for
bank staff performance evaluations and promotions.

Limitations of study and suggestions for future research

Although there is limited number of constructs that could serve as correlate of
customer loyalty (Hennig-Thurau and Klee, 1997), the variables presented in the
present study are not exhaustive. It is encouraged for future researchers to study other
possible correlates of customer loyalty in the banking industry and device a path
model that could show the relationships among the variables. Findings from the
present study cannot be generalized to other financial services, or banking services in
other cultural environment. Researchers could therefore attempt at replicating the
present study with other financial services or in other cultural environment. Although
the present research focused on general banking services, more specific research could
address each of the services provided in the banking industry, like current, savings,
and electronic accounts, rather than combining all as is the case in the present study.
This is in view of the need for personalized services suggested by Szymigin and
Carrigan (2001).
Due to attempts at limiting the number of items in the scale to gain willingness to
participate, more direct items on the behavioral aspects of customer loyalty were not
introduced, to at least satisfy description of loyalty as behavioral and attitudinal (see.
Hennig-Thurau et al., 2002). These are issues that require closer examination by future
researchers.

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Corresponding author
Benjamin Osayawe Ehigie can be contacted at: benosang@yahoo.com or ehigieb@dickinson.edu

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