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IMPACT OF RELATIONSHIP MARKETING ON CUSTOMER LOYALTY IN THE

BANKING SECTOR

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IMPACT OF RELATIONSHIP MARKETING ON CUSTOMER

LOYALTY IN THE BANKING SECTOR

Mukhiddin Jumaev
Research Scholar, Othman Yeop Graduate School of Business
University Utara Malaysia
Email: termiziy@yahoo.com

Prof. Dr. Dileep Kumar. M.

Othman Yeop Graduate School of Business,
University Utara Malaysia
E-mail: dileep@uum.edu.my

Jalal R. M. Hanaysha
Research Scholar, Othman Yeop Graduate School of Business,
University Utara Malaysia
E-mail: jalal_marketting@yahoo.com

ABSTRACT
The purpose of this study is to discuss the impact of customer loyalty in banking sector. The
customer loyalty in banking has seen a major concern to practitioners due to severe
competition and higher customer expectations. Further to that, one way to enhance customer
loyalty in banking is by focusing on offering excellent services and meeting the needs of
customer. Banks need to have a good understanding of their customer behaviour so that
appropriate marketing strategies directed towards relationship building and customer
retention can be developed. The objective of this study is to examine the causal relationships
of several antecedents of customer loyalty in the context of retail banking in Northern
Malaysia. Thus, it will review the marketing literature on the experience of customer loyalty
ie., customer satisfaction, commitment, trust, perceived service quality and perceived value.
Next, we present the research framework, methods, measures and findings and conclusion.
Finally, the results were discussed in terms of its contribution to the upgrading of banking
services and recommendations for future research.

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

perceived conflict handling, perceived value, trust.
Paper Type: Research Paper

INTRODUCTION

Oliver (1999) has described loyalty as a deeply held commitment to rebuy or repatronize a
preferred product/service consistently in the future, thereby causing repetitive same-brand or
same brand-set purchasing, despite situational influences and marketing efforts having the
potential to cause switching behaviour. And “fervently desires to re-buy a product or service
and will have no other – pursuing this quest against all odds and at all costs”.

Customer loyalty expresses an intended behavior related to the service or the company. This
includes the likelihood of future renewal of service contracts, how likely it is that the
customer changes patronage, how likely the customer is to provide positive word-of-mouth,
or the likelihood of customers providing voice. If real alternatives exist or switching barriers
are low management discovers the organization's inability to satisfy its customers via two
feedback mechanisms: exit and voice (Hirschman 1970).Research related to consumer

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

behavior in the field of service marketing has progressed steadily over the years. Measured
by the impact and amount of work done within customer satisfaction research, it is fair to say
that the dominant theories are disconfirmation of expectations (Swan 1983); (Oliver and
DeSarbo 1988); (Oliver 1980); (Churchill and Suprenant 1982) and cognitive psychology
(Weiner 1980; Weiner 1985; Weiner 1985); (Folkes 1988).

Customer loyalty in banking has been a major concern to practitioners due to severe
competition and higher customer expectations. Customer loyalty is considered a vital link and
aspiration to organizational success, profit and business performance (Oliver, 1997;
Reichheld, 1993; Sheth and Parvatiyar, 1995). The consumers that show the greatest levels
of loyalty toward the product, or service activity, tend to repurchase more often, and spend
more money. Thus, loyal customers do not only increase the value of the business, but also
enable business to maintain costs lower than those associated with attracting new customers
(Barroso and Martin, 1999). Moreover, loyalty rather than satisfaction is becoming the
number one strategic goal in today’s competitive business environment (Oliver, 1999). One
of the ways to enhance customer loyalty in banking is by focusing on offering excellent
services and meeting the needs of customer.

Banks need to have a good understanding of their customer behaviour so that appropriate
marketing strategies directed towards relationship building and customer retention can be
developed. As a result, a great deal of research attention has focused on the identification of
effective methods of actively enhancing loyalty, including loyalty programs such as point
reward schemes. Loyalty programs “create a reluctance to defect” by rewarding the customer
for repurchasing from the organization (Duffy, 1998). Hitherto, in recent years, customer
loyalty in banking has received increasing attention from academic researchers worldwide
(Ball, Coelho & Machas, 2004; Beerli, Martin and Quintana, 2004).

In Malaysia, retail banking has undergone a major restructuring starting in 2001 whereby,
from an initial 54 individual retail banks, it has been reduced and merged into 22 commercial
banks only (9 domestic and 13 foreign banks) by 2009 (Bank Negara Malaysia, 2009). With
this merger and acquisition exercise, commercial banks will need to increase their bank
outlook and image to attract more loyal customers. For banks to adequately monitor their
customer loyalty programs, bank management need to be knowledgeable of the drivers of
customer loyalty in retail banking industry. This is the main impetus of doing this research.
Thus, the objective of this study is to examine the causal relationships of several antecedents
of customer loyalty in the context of retail banking in Northern Malaysia. This paper is
structured as follows. First, we review the marketing literature on the antecedents of
customer loyalty: customer satisfaction, commitment, trust, perceived service quality and
perceived value. Next, we present the research framework, methods, measures and findings.
Finally, the results were discussed in terms of its contribution to the upgrading of banking
services and recommendations for future research.

THEORETICAL UNDERPINNING OF STUDY

Much of the original work on customer loyalty defines loyalty from behavioural terms
(repurchase or purchase frequency), and then later admitted an attitudinal component. Ganesh
et al. (2000) found two factors in their loyalty items, active loyalty (word – of mouth and
intention to use) and passive loyalty (not switching even under less positive conditions).
Other authors have considered loyalty as a process rather than an outcome. Oliver (1997a),

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for example, distinguishes among four stages of loyalty ie., cognitive, affective, conative, and
action loyalty. Clearly, loyalty is a rich concept with many possible definitions.
A common approach to distinguish customer loyalty is consumer’s attitudinal loyalty and
behavioural loyalty (Dick and Basu, 1994; Zeithaml, 2000; Chaudhuri and Holbrook, 2001).
Behavioural loyalty is repeated transactions (or percentage of total transactions in the
category, or total expenditures in the category) and can sometimes be measured quite simply
with observational techniques. Attitudinal loyalty is sometime defined equivalently with
relationship commitment (Morgan and Hunt, 1994).

Behavioural loyalty is highly prized, because it means sales. Attitudinal loyalty is also highly
prized, because as Oliver, (1997a and 1999) argues, behavioural and attitudinal loyalty are
highly intertwined, repeated purchases lead to positive affect which leads to cognitive loyalty,
high levels of involvement and intention to continue repurchase. We may consider both
affective and cognitive loyalty to be kinds of attitudinal loyalty. Strong attitudinal loyalty
makes customers more resistant to attempts by other marketers to steal them away (Gundlach
et al., 1995) and more resistant to counter – persuasion and search for alternatives (Dick &
Basu, 1994).

Oliver’s (1997) perspective proposes that loyal customers go through four stages. First is a
cognitive sense (belief). For example, sales promotion or high quality products of a firm for
first- IME purchase consideration attracts a customer. To be loyal, the customer must
consistently confirm that his or her expectations about the goods or services are met. Second
is the affective sense (favoured attitude) in which consumers are repeatedly satisfied from
purchasing decisions. Third is the conative stage that consumers have a behavioural intention
– committed deeply to buy. The intention leads to the fourth stage of action. Customers have
the desire to overcome obstacles, e.g., attraction of competitors or price increase by a firm, to
achieve the actual purchase behaviour (Oliver, 1997).

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

Cognitive loyalty Affective loyalty Conative loyalty Action loyalty

1. Perceived Customer 1. Commitment Customer Loyalty

Service Quality satisfaction 2. Trust
2. Perceived Value

Cognitive loyalty

Cognitive loyalty is the information based on whether consumers look for costs, benefits, and
quality during their purchasing decision process. Consumer may shift to other stores, which
can offer better process and benefits. For this study, cost and benefits are translated into
perceived value while quality is based on perceived service quality. Affective loyalty –
Affective loyalty involves both liking and experience satisfaction. The issue of satisfaction
and dissatisfaction has a direct influence on attitude and attitude change. At this stage,
consumer loyalty is determined by information relating to the offering, such as price, quality,
and so forth. It is the weakest type of loyalty, since it is directed at costs and benefits of an
offering and not at the brand itself. Therefore, consumers are likely to switch once they
perceive alternative offerings as being superior with respect to the cost-benefit ratio

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(Kalyanaram and Little 1994; Sivakumar and Raj 1997). Cognitive loyalty is influenced
largely by the consumer’s evaluative response to an experience, in particular to the perceived
performance of an offering relative to price (= value).

Conative loyalty

Conative loyalty - It is a loyalty state containing commitment to buy. One of the important
dimensions is word of mouth, where the consumer not only would re-visit certain store or
bank, but would also encourage relatives, friends and colleagues to patronize certain favored
banks. At conative stage, customers will not only commit to buying but also come to trust
the favoured stores. Action loyalty - It is the habit and routinized response behaviour. This
loyalty category is particularly protected to competitor’s marketing activities and would not
spend time and effort in engaging information search and evaluation. Conative loyalty
implies that attitudinal loyalty must be accompanied a particular brand. It is stronger than
affective loyalty, but has vulnerabilities as well. Repeated delivery failures are a particularly
strong factor in diminishing co native loyalty. Consumers are more likely to try alternative
offerings if they experience frequent service failures. Even though the consumer is conatively
loyal, he has not developed the resolve to avoid considering alternative offerings (Oliver
1999).

Affective Loyalty

Affective loyalty relates to a favourable attitude towards a specific brand. Attitude itself is a
function of cognition (e.g. Expectation). Satisfaction is a global affect evaluation or feeling
state which can be predicted from perceived performance as the cognitive component of the
evaluation (Oliver 1993; Phillips and Baumgartner 2002; Westbrook and Oliver 1991).
Expectancy confirmation leads to satisfaction, which in turn effectuates affective loyalty
(Bitner 1990). Oliver (1997) defines satisfaction as “the consumer’s fulfilment response, the
degree to which the level of fulfilment is pleasant or unpleasant.” Affective loyalty is also
subject to deterioration, caused primarily by an increased attractiveness of competitive
offerings (Sambandam and Lord 1995) and an enhanced liking for competitive brands. This
can be, for instance, conveyed through imagery and association used in competitive
communications (Oliver 1999).

Empathy and Loyalty

Relationship Marketing Orientation can be viewed as the ability to share, understand and feel
another person’s feelings in a relational situation. Thus, Sin et al. (2002) described empathy
as dealing with a business relationship that enables two parties to see the situation from the
other’s perspective i.e. seeking to understand somebody else’s desires and goals. In the
banking sector for instance, the front desk bankers must see themselves in the customer’s
shoe and serve them as such in other to keep them satisfied. Earlier studies have shown the
relevance of empathy as a dimension of Relationship Marketing Orientation as shown in the
work of Berry et al (1990) in designing SERVQUAL. Hwang (1987) in Chinese business
relationships where empathy is seen as a sub-component of the Chinese dimension of
guanxi in business and social relationships.

Empathy is the ability to see a situation from another person's perspective (Wang, 2007). It
is defined as seeking to understand somebody else desires and goals. It involves the ability of

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individual parties to view the situation from the other party’s perspective in a truly cognitive
sense (Chattananon & Trimetsoontorn, 2009). Empathy has a number of analogous
meanings – the golden rule, the ethic of care and an “others” orientation. Empathetic
marketers are not insensitive to the needs and concerns of the consumer. Empathy should not
be equated with sympathy; marketers can be empathetic while still driving a hard bargain
with customers (Murphy et al, 2007). In the personal selling literature, the empathetic
abilities of the sales people are a prerequisite for successful selling. In the service marketing
literature, the component of empathy is used in developing the SERVQUAL test instrument
for service quality. In the networking literature, empathy has been considered as an
independent variable in explaining franchisor–franchisee working relationships (Sin et al,
2002).

Commitment and Loyalty

Crosby and Taylor (1983) suggest that the tendency to resist changing preference provides
the principle evidence of commitment. Beatty et al., (1988) define consumer commitment as
the psychological attachment to a service that develops. A customer would be able to
determine that their purchase behaviour was derived from a sense of loyalty. A substantial
research highlights that commitment is an affective nature (Garbarino & Johnson, 1991;
Morgan & Hunt, 1994; Sheth & Parvatiyar, 2002).

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

service provider akin to emotional bonding (Fullerton, 2005), while calculative commitment
is the way that the customer is forced to remain loyal against his or her desire (De Ruyter,
Wetzels & Bloemer, 1998). In calculative commitment, customer can be committed to a
selling organization because they feel that ending the relationship involves an economic to
social sacrifice (Fullerton, 2005). However, although affective and continuance commitments
are distinct components of commitment, there are not necessary mutually exclusive
conditions (Allen & Meyer, 1990).

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

relationship that customer perceives to be of value (Morgan & Hunt, 1994). On the other
hand, continuance commitment is the consumer’s desire to remain in the relationship when
the switching costs are high or when to consumer perceives that other viable alternatives are
scarce.

Luarn and Lin (2003) establish significant relationship between commitment and loyalty.
Various studies in the relationship marketing area have shown that these two factors seem to
be crucial in influencing one another (Anderson and Narus, 1990; Anderson and Weitz, 1992;
Kumar et al., 1995; Morgan and Hunt, 1994; Pritchard, Havitz and Howard 1999; Fullerton,
2003; Evanschitzky et al., 2006). For example, Pritchard, Havitz and Howard (1999) found
commitment to be strongly correlated with customer loyalty. Fullerton (2003) reveals that
when customer commitment is based on shared values and identification, it has a uniformly
positive impact on customer loyalty. Several other studies confirm a significant interaction of
affective commitment and continuance commitment on loyalty (Fullerton, 2003;
Evanschitzky et al., 2006).

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

Trust and Loyalty

Liang and Wang (2006 states in this context that trust is “the perceived level of confidence in
transaction partners’ reliability and honesty”. Trust is “the belief that a partner’s word or
promise is reliable and a party will fulfil his/her obligations in the relationship” (Schurr and
Ozanne, 1985). Trust is an important construct in relational exchange because relationships
characterized by trust are so highly valued that parties will desire to commit themselves to
such relationships (Hreinian, 1974). To support this notion, trust has been posited as a major
determinant of relationship commitment (Morgan and Hunt, 1994). Furthermore, Moorman
et al., (1993) found that trust by marketing research users in their research providers
significantly affected user commitment to the research relationship. Creating trust in
customer mind set importance for companies because from the previous studies Trust along
with commitment is an important antecedent of loyalty (Ball et al., 2004). In order to increase
the levels of trust, companies must focus on keeping promises to their customers and
consistently carry their best interest at heart (Hocutt, 1998).

Perceived value and Loyalty

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

context –economics (utility and monetary costs), social science (human values) ; industrial
settings (processes and costs), and marketing (consumers’ perspective on tradeoffs between
benefits and sacrifices or costs) (Zeithmal, 1988, Dodds et al., 1991; Roig et al.,2006). Roig
et al (2006) approach perceived value from six multidimensional formative construct
(GLOVAL scale) and test the study on bank customers. Luarn and Lin (2003) define
perceived value from economic perspective which is the customers’ perceived service utility
relative to its monetary and non monetary costs.

Prior studies support the general notion that perceived value contributes to customer
commitment (Luarn and Lin, 2003; Dodds et al., 1991). For example, Luarn and Lin (2003)
have found a significant relationship between perceived value and loyalty as well as
perceived value and commitment.

Conflict Handling and Loyalty

In interpersonal communication, conflict occurs when an individual perceives incompatibility

between his or her personal goals, needs, or desires and those of the other party. In dealing
with conflict, people use different strategies to accomplish their goals. Dwyer et.al (1987)
defined conflict handling as the ability of each supplier to avoid any potential conflict, solve
that particular conflict before they create problems and the ability to discuss the solutions
openly when the problem arises. Conflict handling requires cooperative behaviour from
exchange partners. According to Evans & Beltramini (1987), in a negotiation setting,
cooperative versus competitive intentions have been found to be linked to satisfactory
problem solution. In short, good conflict resolution will result relationship quality positively.
Conflict handling is an important relationship builder. Even though it is difficult to service
industries especially in banking sector to achieve zero service failure banks put in place
effective conflict resolution or problem solving machinery.
A major problem which had been resolved satisfactorily may leave in its wake a happy and
loyal customer, but maybe minor issues if not handled carefully will result in defection. A
more excellent approach, for example proactive in planning and implementation includes,

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identifying potential conflict, solving conflict before they manifest, avoiding potential
conflict and blocking them. Those efforts could bring the better relationship and loyalty to
particular bank or service film (Ndubisi, 2007). Ndubisi & Wah (2005) found a significant
relationship between conflict handling and customer loyalty, indirectly through trust and
perceived relationship quality.

Customer satisfaction

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

offering to date (Johnson and Fornell 1991). Historically, satisfaction has been used to
explain loyalty as behavioral intentions (e.g., the likelihood of repurchasing and
recommending). The impact of satisfaction on loyalty has been the most popular subject of
studies. Several studies have revealed that there exists a direct connection between
satisfaction and loyalty: satisfied customers become loyal and dissatisfied customers move to
another vendor. (Heskett et al. 1993: 165–167).

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

the net value of services received from a supplier (Woodruff, 1997). Woodruff (1997) argues
that perceived value represents customer cognition of the nature of relational exchanges with
their suppliers, and satisfaction reflects customers’ overall feeling derived from the perceived
value. On the basis of the behavioral model (Fishbein & Ajzen, 1975), affect is significantly
influenced by cognition. There is also empirical evidence that customer-perceived value has a
positive effect on customer satisfaction with a supplier (E.W. Anderson & Mittal, 2000;
Walter, Thilo, & Helfert, 2002).

Customer Value

Customer value is “the fundamental basis for all marketing activity” (Holbrook, 1994, p. 22).
And high value is one primary motivation for customer patronage. In this regard,
Sirdeshmukh, Singh, and Sabol (2002) argue that customer value is a superordinate goal and
customer loyalty is a subordinate goal, as it is a behavioural intention. According to goal and
action identity theories, a superordinate goal is likely to regulate subordinate goals. Thus,
customer value regulates “behavioural intentions of loyalty toward the service provider as
long as such relational exchanges provide superior value” (Sirdeshmukh et al., 2002, p. 21)
This study utilizes the four stages loyalty model first developed by Oliver, (1997). The
objective is to examine the antecedent of customer loyalty amongst consumers. The
theoretical underpinning of the said theory is discussed next. Oliver’s (1997) Four-Stage
Loyalty Model (Figure 1) consists of four evolving stages of cognitive loyalty, affective
loyalty, cognitive loyalty, and action loyalty. The first three stages (cognitive loyalty,
affective loyalty, and conative loyalty) are attitudinal loyalties and action loyalty is
behavioural loyalty.

OBJECTIVES

The objective of this study is to examine the causal relationships of several antecedents of
customer loyalty in the context of retail banking in Northern Malaysia, the criteria to measure
customer loyalty has to establish to provide the outcome measures for the hypotheses.

To analyse relationship between empathy and customer loyalty.

To analyse positive relationship between commitment and customer loyalty.

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

To analyse positive relationship between trust and customer loyalty.

To analyse relationship between value and customer loyalty.
To analyse relationship between conflict handling and customer loyalty.
To analyse the influence of relationship marketing on customer loyalty.

HYPOTHESIS
H1: There may have relationship between empathy and customer loyalty.
H2: There may have significant positive relationship between commitment and customer
loyalty.
H3: There may have significant positive relationship between trust and customer loyalty.
H4: There may have significant positive relationship between value and custome loyalty.
H5: There may have significant positive relationship between conflict handling and
customer loyalty.
H6: Relationship marketing may have high influence on customer loyalty

THEORETICAL FRAMEWORK

This research formulates the antecedents of customer loyalty as shown in Figure 2. In the
research framework, it shows that empathy; perceived conflict handling, trust, perceived
value and commitment are direct predictors of customer loyalty.
Figure 2 - Research Framework

IV DV
Empathy

Perceived
Customer
Conflict
Loyalty
Handling
Trust

Perceived
Value

Commitment

RESEARCH DESIGN AND DATA COLLECTION

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

in the banking sector and is a form of fact finding research. Hence the study follows
descriptive study design as its plan of action. A total of 100 university lecturers and students
who are patronizing different commercial banks were requested to complete a questionnaire
that contained measures of the constructs of concern. The respondents are staying in the
Penang, Kedah, and Perlis region in Malaysia. Those who are having saving and current
accounts in 5 major banks were considered for the study. Only male members are considered
further for data collection. The study used simple random method as it sampling method, to
arrive at representative sample size.

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Tool administration
The tools were distributed to the respondents in their workplace and responses were gathered.
The questionnaire designed for this research was formulated as open ended and closed-ended
questions which were normally structured for respondents to select their choices of statement
from a list of questions presented to them. Study used likert scale by five-point scales
described at either end by “strongly disagree” to “strongly agree” was used. In the first part,
the respondent’s demographic profiles were asked such as gender, age, race, religion and
occupation. The second part consists of 30 items. The entire items were based on the
dimension of the relationship marketing underpinnings. This part was divided in five (5)
dimensions.
The first dimension “trust” consists of six questions which were adopted from Ndubisi
(2005).
The second dimensions which consists of four (4) questions that measure “commitment”
were adopted also from Ndubisi (2005).
The third dimensions that measure “conflict handling” contained five (5) questions which
were adopted Ndubisi (2005) and Naceur & Azaddin (2005).
The fourth dimensions which is “value” questions was contained five (5) questions which
were adopted from Naceur & Azaddin (2005).
The fifth dimensions, “empathy” questions was contained five (5) questions which were
adopted from Husyein et al (2005).
“Customer Loyalty” dimensions” contained five (5) questions which were adopted Ndubisi
(2005) and Naceur & Azaddin (2005) and Beerli et al (2004).

Reliability Test

Reliability test was conducted on the dependent and independent variables,

internationalisation factors and entrepreneurial orientation. The Cronbach’s alpha values of
the study variables are shown in table. As revealed, the reliability coefficient of the study
variables exceeded the minimum acceptable level of 0.60 (Nunnally, 1978). As a result,
Cronbach’s alpha for the variables ranges from 0.781 to 0.866 and considered for the study.
From Table 1 shown that Cronbach’s Alpha 0.793 hence we can say the reliability of the
questionnaire is at moderately good level.

Table – 1: Reliability Statistics

Cronbach Alpha Based on

Cronbach's Alpha Standardized Items N of Items
.793 .793 30

Analysis and Results

Appropriate measures were identified based on empirical researchers to test the hypothesized
relationship. Quantitative data obtained and the data gathered were being treated by using the
statistical software program namely Statistical Package for Social Research (SPSS) version
14.0 for analysis and summarization purposes. Several techniques of analysis were used
including ANOVA test, Correlation, and Multiple Regression.

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Correlation analysis

Correlation analysis is used when independent variables are correlated with one another and
with the dependent variable.

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

Since both variables are interval, Pearson Correlation test was conducted and the results are
shown in Table 2. There is a significant negative correlation between Empathy dimension and
customers’ loyalty with a significant value at 0.000 lower than 0.05. Hence we reject the
Hyphothesis1. In other words empathy dimension and customers’ loyalty are related with a
strong relationship (r = 0.826**).

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

Empathy Loyalty
Pearson
1 .826(**)
Empathy Correlation
Sig. (2-tailed) .000
N 100 100
Loyalty Pearson
-.826(**) 1
Correlation
Sig. (2-tailed) .000
N 100 100
** Correlation is significant at the 0.01 level (2-tailed).

Hypotheses 2: There may have significant positive relationship between commitment

and customer loyalty.

Since both variables are interval, Pearson Correlation test was conducted and the results are
shown in Table 2. There is a significant positive correlation between trust dimension and
customers’ loyalty with a significant value of 0.000 lower than 0.05. Hence we accept the
Hyphothesis2. In other words commitment dimension and customers’ loyalty are related with
high relationship (r = 0.650**).

Table 3 - Correlation between Commitment Dimensions and Customers’ Loyalty

Commitment Loyalty
Commitment Pearson
1 .650(**)
Correlation
Sig. (2-tailed) .000
N 100 100
Loyalty Pearson
.650(**) 1
Correlation
Sig. (2-tailed) .000
N 100 100
** Correlation is significant at the 0.01 level (2-tailed).

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Hypotheses 3: There may have significant positive relationship between trust and
customer loyalty.
Since both variables are interval, Pearson Correlation test was conducted and the results are
shown in Table 3. There is a significant negative correlation between trust dimension and
customers’ loyalty with a significant value of 0.000 lower than 0.05. Hence we reject the
Hyphothesis3. In other words trust dimension and customers’ loyalty are related with
moderate relationship (r = 0.554**).

Table 4 - Correlation between Trust Dimensions and Customers’ Loyalty

Trust Loyalty
Trust Pearson
1 .554(**)
Correlation
Sig. (2-tailed) .000
N 100 100
Loyalty Pearson -
1
Correlation .554(**)
Sig. (2-tailed) .000
N 100 100
** Correlation is significant at the 0.01 level (2-tailed).

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

Since both variables are interval, Pearson Correlation test was conducted and the results are
shown in Table 4. There is a significant negative correlation between perceived value
dimension and customers’ loyalty with a significant value of 0.000 lower than 0.05. Hence
we reject the Hyphothesis4. In other words perceived value dimension and customers’ loyalty
are related with strong relationship (r = 0.820**)

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

Value Loyalty
Value Pearson
1 .820(**)
Correlation
Sig. (2-tailed) .000
N 100 100
Loyalty Pearson -
1
Correlation .820(**)
Sig. (2-tailed) .000
N 100 100
** Correlation is significant at the 0.01 level (2-tailed).

Hypotheses 5: There may have significant positive relationship between conflict

handling and customer loyalty.

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

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Handling Loyalty
Handling Pearson
1 .661(**)
Correlation
Sig. (2-tailed) .000
N 100 100
Loyalty Pearson
.661(**) 1
Correlation
Sig. (2-tailed) .000
N 100 100
** Correlation is significant at the 0.01 level (2-tailed).

Since both variables are interval, Pearson Correlation test was conducted and the results are
shown in Table 5. There is significant positive correlation between conflict handling
dimension and customers’ loyalty at 0.000 lower than 0.005. Hence we accept the
Hypothesis. In other words conflict handling dimension and customers’ loyalty are related
with moderate relationship (r = 0.661**).

Table 6 - Regression

Dependent Independent Variable: Green Marketing Adjuste

Variable Customer d R2
Loyalty Empath Commitm Trust Perceived Conflict
y ent V3 Value Handling
V1 V2 V4
Customer Loyalty 0.079* 0.669* 0.07 0.073* 0.070 0.20
(F1) 1*

The major hypothesis stated in this paper was “the relationship marketing may have high
influence on customer loyalty.” Regression analysis (table no. 6) was used for examining
whether each relationship marketing dimension is affected by customer loyalty. Regression
model is significant at the 0.01 level. Thus the finding is in line with the second hypothesis
stated in the paper that the relationship marketing may have high influence on customer
loyalty. Thus the major hypothesis stated is well accepted.

Table 7 - ANOVA Test

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

Sum of Mean
Squares df Square F Sig.
Gender 2.678 2 1.339 7.118 .001
Age .892 2 .446 1.610 .000
Race 29.368 2 14.684 16.189 .211
Education 8.501 2 4.251 9.114 .000
Occupation .023 2 .012 .148 .862
Income .465 2 .233 .594 .003

The table (table 7) above clearly indicates that there is significant variation in findings related
to gender, age and education. From the means of gender it is observed that the males are

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having high customer loyalty than females. Among age group, the members in the young
group having high mean score towards customer loyalty compared to other groups. Further
those who are having high education having high customer loyalty mean score compared to
other groups. The findings related to customer loyalty further shows that customers having
varied income significantly different in loyalty in banking sector. Members having high
incomes show high brand loyalty than members with low income. The rest of the dimensions
like, race, and occupation show insignificant finding in this research.

DISCUSSION

This particular study was oriented on the effect of relationship marketing on customer
loyalty. The study well establishes that the relationship marketing is having high influence on
the customer loyalty. Loyalty is a deeply held commitment to re-buy or re-patronize a
preferred product/service consistently in the future and it is influence by many relationship
marketing variables like, empathy, trust, commitment, values and way of conflict negotiation.
The research proves that customer loyalty is an important element of banking success in
today’s increasingly competitive environment. Consumer loyalty is seen as the key factor in
winning market share and developing a sustainable competitive advantage. Banking industry
is no exception as it has high interaction with the customers, so managers must understand
the factors which influence the loyalty of the customers towards their respective banks.

Banking has traditionally operated in a relatively stable environment for decades. However,
today the industry is facing a dramatically aggressive competition in a new deregulated
environment. More banks are present in the business arena from both public and private
sector. Customers are getting better choice in banking operation with enhanced facilities.
Most important behaviour customers expect in banking transaction is the empathetic attitude.
This indicate, understand the customers problem and making provision of good banking
solutions with less time. Sin et al. (2002) in this context rightly described that empathy as
dealing with a business relationship that enables two parties to see the situation from the
other’s perspective i.e. seeking to understand somebody else’s desires and goals. In the
banking sector for instance, the front desk bankers must see themselves in the customer’s
shoe and serve them as such in other to keep them satisfied. The present finding support
importance of relationship marketing variable empathy in handling customers and enhance
customer loyalty.

In relationship marketing the firm is trying to achieve profitability through the decrease of
customer turnover and the strengthening of customer relationships. Commitment is another
important determinant of the strength of a marketing relationship. The bank officer’s
commitment in making provision of banking facilities considering the varied needs of
customer is one among the major factor which influences the consumer’s attitude towards
banks. This required a higher level of obligation to make a relationship succeed and to make
it mutually satisfying and beneficial to both customers and bank. Various studies in the
relationship marketing area have shown that these two factors seem to be crucial in
influencing one another (Anderson and Narus, 1990; Anderson and Weitz, 1992; Kumar et
al., 1995; Morgan and Hunt, 1994; Pritchard, Havitz and Howard 1999; Fullerton, 2003;
Evanschitzky et al., 2006). The present research finding support the fact that commitment is
a significant factor which influences the customer loyally of the customers of banks. Banks
need to recognise the potency of service commitment in keeping loyal customer.

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Trust is a psychosocial phenomenon. Liang and Wang (2006) states in this context, that trust
is “the perceived level of confidence in transaction partners’ reliability and honesty”. It
penetrates to such a level in cognition that generates impressions and faith. When customers
interact with an employee, their trust is created by their perceptions of that interaction. How
far the banks in business develop trust among the customer is having high influence on
customer’s preference and loyalty on specific bank. Trust develops more affective loyalty
among customer on firms. The importance of trust in explaining loyalty is supported by
numerous of authors (Morgan and Hunt, 1994; Auh, 2005; Ball, 2004). The sensitive nature
of the financial transactions always invites trust as the major component between two parties.
Customer trust towards the bank is more based on how the bank operates clearly and induces
the element of trust in the sensitive transactions. In order to increase the levels of trust,
companies must focus on keeping promises to their customers and consistently carry their
best interest at heart (Hocutt, 1998). The present research finding is tune with the past
researches and it supports the influence of trust on banking institution in financial
transactions.

The present research also established significant correlation between perceived value
dimensions of customer’s with customer loyalty. Customer perceived value is defined as “the
consumer’s overall assessment of the utility of a product based on perceptions of what is
received and what is given” (Zeithaml, 1988, p. 14). It is observed that now days more and
more banking institutions are focused on firm’s decision on a value proposition – on how it
will create differentiated value for targeted segments and what position it wants to occupy in
those segments. Since a bank consists of customers from different segments the institution
needs to cater the varied requirement of customers with utmost care and value service.
Choice of any customer in this context depends on his/her perceived value on the quality of
services provided. Perceived value on the services in bank thus establishes appropriate
positioning in the minds of the targeted consumers in comparison to competitors. Switching
over from one bank to another is the decision based on the perceived value of the customers
on the services they extended to the customers.

The study also observed clear findings in relation to customer loyalty in relation to conflict
handling situations in banking. The findings indicates that higher the effort a bank extend
towards conflict handling situations banking and making provision of feel good factor
towards the banking customers, higher the loyalty the customers feel towards the concerned
bank. In this contest it is rightly pointed out that a major problem which had been resolved
satisfactorily may leave in its wake a happy and loyal customer, but maybe minor issues if
not handled carefully will result in defection. A more excellent approach, for example
proactive in planning and implementation includes, identifying potential conflict, solving
conflict before they manifest, avoiding potential conflict and blocking them. Those efforts
could bring the better relationship and loyalty to particular bank or service film (Ndubisi,
2007). Those banking firms which provide better affective feeling towards the customers and
very much committed to extend better satisfaction among customers in banking transaction
generate better loyalty among customers.

IMPLICATIONS

The present research provides better understanding on factors influencing customer loyalty in
banking sector. The factors which related to customer loyalty like trust, commitment,
empathy, perceived value and conflict handling have better influence on the customer’s

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choice as well preferred bank. It is expected that the bank mangers and banking staff should
have such attitude towards customers in order to maintain better customer relations. Loyalty
is the by product of cognitive, conative and affective components of behaviour. Customer’s
intelligence, attitude and behavioural components significantly influence their choice towards
a bank in banking transactions. The banking firms should induce better feelings among
customers to maintain their preference towards the bank. It is suggested in this context that
the banking firms strategically should dedicated to understand the customer’s needs and give
them better feelings through service quality. The banks should think about what can be done
for them might enhance preference over other banks. Customer loyalty becomes paramount
to being competitive in the marketplace.

LIMITATION OF THE RESEARCH

The limitations of the study are mainly two kinds. The first refers to small sample with
focusing only on students and faculty members as young consumers group in particular. The
second limitation is that scales of relational values which were drawn from the past literature
and has not been validated empirically. However, the goal was to stimulate research interest
by confirming the perceived value as multi dimensional in nature rather than only looking at
overall perceived value.

RECOMMENDATION FOR FUTURE RESEARCH

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

unimportant loss and inconvenience to customers. This will build the customers’ loyalty that
will benefit banks in gaining the competitive advantage in an increasing competition in the
banking sector. Banks need to fulfil highly demanding customers because they will continue
use the bank the services is satisfied. This study recommends that banks need to put more
attention to attract customers in terms of commitment, empathy and value. To be strong
connection between bank and customer is also necessary for bank to maintaining a good
business relationship such as organizing festive celebration, potential customer’s celebration
and others. It is also important for bank to stress in the recruitment policies especially for
those are bringing the front image of bank because they are represented on behalf of bank.
In this study, it also suggested that for future research can go for larger sample and
compare two different samples of young generation and older generation consumers in
evaluating the values of retail banks.

CONCLUSION

This particular research was conducted to analyze the effect of relationship marketing on
customer loyalty. The study clearly indicates the influence of independent variable on
dependent variable. The foregoing statement about what drives loyalty should be understood
with the provision that loyalty is not entirely divorced from satisfaction (Mittal & Lassar,
1998). The disloyalty or loyalty groups contrasted are from a subpopulation that is already
satisfied. In separating disloyal versus loyal customers, therefore, managers have to ask what
drives loyalty beyond satisfaction. In addition to measuring satisfaction, managers must also
measure customer intention to patronize the organization in the future (Mittal & Lassar,
1998). From the tests and findings all predictors including Commitment, Trust, Empathy,
Perceived Conflict Handling, Perceive value have positive correlation to Customer's loyalty
It is important for manager to remember that customers benchmark not just from what similar
service companies are doing, but what the best service providers in general are doing. Loyalty

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

customer service. This study is still open to be developed using other predictors such
as gender, ethnicity, services related products offered by banks or using other test tools such
as different test. This study could be generalized with the students and faculty members of
various universities in the Northern part of Malaysia.

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