Dibekulu A Theisis January 2024 Edit

WOLLO UNIVERSITY
COLLEGE OF BUSSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT
MBA PROGRAM
FACTORS AFFECTING CUSTOMER LOYALTY TOWARDS

BANKING INDUSTRY, IN CASE OF DASHEN BANK, DESSIE TOWN
BY: DIBEKULU ABEBAW
JANUARY, 2024
DESSIE, ETHIOPIA
I
WOLLO UNIVERSITY
COLLEGE OF BUSSINESS & ECONOMICS
DEPARTMENT OF MANAGEMENT
MBA PROGRAM
FACTORS AFFECTING CUSTOMER LOYALTY TOWARDS

BANKING INDUSTRY, IN CASE OF DASHEN BANK, DESSIE TOWN
A THESIS SUBMITTED TO WOLLO UNIVERSITY COLLEGE OF

BUSINESS AND ECONOMICS DEPARTMENT OF MANAGEMENT IN
PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF MASTER OF BUSINESS ADMINISTRATION (MBA)
BY:
DIBEKULU ABEBAW
ID: SGSE/0029/14
UNDER THE GUIDANCEOF:
MENGISTU GULITI (PH.D.)
JANUARY, 2024
DESSIE, ETHIOPIA
I
DECLARATION
First, I declare that this thesis is my work and that all sources of materials used for this thesis
have been duly acknowledged. This thesis has been submitted in partial fulfillments of the
requirements for an MBA degree in Wollo University. I solemnly declare that this thesis is
not submitted to any other institution for the award of any academic degree, diploma, or
certificate. Brief quotations from this thesis are allowable without special permission,
provided that accurate acknowledgement of the source is made.
Requests for permission for extended quotation from or reproduction of this manuscript in
whole or in part may be granted by the head of the major department or the dean of the Post
Graduate Studies. In all other instance, however, permission must be obtained from the
author.
Name: Dibekulu Abebaw Signature: ………………...
Place: Wollo University, Dessie
Department of Management
Program: MBA
Date of Submission: January, 2024
II
APPROVAL SHEET
As members of the Board of Examiners of the Master thesis open Defense Examination, we
certify that we have read, evaluated the Thesis prepared by Dibekulu Abebaw, entitled
“Factors Affecting Customer Loyalty Towards Banking Industry, In Case of Dashen
Bank, Dessie Town” and recommend that it be accepted as fulfilling the thesis requirement
for the Degree of Masters of Business Administration (MBA) in Wollo University, College of
Busines and Economics, complies with the regulations of the university and meets the
accepted standards considering originality and quality.
Name of chairman Signature Date
_____________ ________________ ____________

Name of Major Advisor Signature Date
Dr. Mengistu G. ________________ ____________
Name of Internal Examiner Signature Date
____________________ ________________ ___________

Name of External Examiner Signature Date
____________________ ________________ ______________
Final approval and acceptance of the thesis is contingent upon the submission of the final
copy of the thesis to the council of graduate studies (CGS) through the departmental graduate
committee (DGC) of the candidate’s major department.
I hereby certify that I have read this thesis prepared under my direction and recommend that
it be accepted as fulfilling the thesis requirement.
_________________ ________________ _______________
Postgraduate Directorate Date Signature
III
CERTIFICATION
This is to certify that this thesis entitled entitled “Factors Affecting Customer Loyalty
Towards Banking Industry, In Case of Dashen Bank, Dessie Town” submitted in the
partial fulfillment to the requirement for the award of Degree of Masters of Business
Administration (MBA), to the college of Business and Economics, Wollo University through
the department of Management, done by Dibekulu Abebaw, ID.NO. SGSE/0029/14 is an
authentic work carried by him under my guidance. The matter embodied in this thesis has not
been submitted earlier for award of any degree or diploma to the best of our knowledge and
belief.
Principal Advisor
Mengistu Guliti (Ph.D.)
Signature___________
Date_____________
IV
ACKNOWLEDGEMENTS
First and foremost, I would like to express my gratitude to Almighty God for helping me in
every moment, and without him I will never think of doing and accomplishing my course
and this research successfully. Also, I would like to express my deepest gratitude to my
advisor Mengistu Guliti (Ph.D.) for his constructive and valuable comments throughout in
the preparation of this thesis otherwise it may be difficult to hold this shape. This paper
would never have been accomplished without the cooperation of respondents therefore, I am
deeply grateful for all of them. Additionally, I would like to appreciate my beloved family
and friends who have constantly been encouraging and supporting me throughout my
academic development.
V
TABLE OF CONTENTS
DECLARATION....................................................................................................................................II
APPROVAL SHEET.............................................................................................................................III
CERTIFICATION.................................................................................................................................IV
ACKNOWLEDGEMENTS....................................................................................................................V
LIST OF TABLES..............................................................................................................................VIII
LIST OF FIGURES...............................................................................................................................IX
LIST OF ABBREVATIONS AND ACRONOMYS..............................................................................X
ABSTRACT..........................................................................................................................................XI
CHAPTER ONE......................................................................................................................................1
1. INTRODUCTION...............................................................................................................................1
1.1 Background of the study................................................................................................................1
1.2 Background of the Organization....................................................................................................3
1.3 Statement of the Problem...............................................................................................................3
1.4 Research Questions........................................................................................................................5
1.5 Objectives......................................................................................................................................5
1.5.1 General objective....................................................................................................................5
1.5.2 Specific objectives..................................................................................................................5
1.6 Research Hypothesis......................................................................................................................6
1.7 Significance of the study................................................................................................................6
1.8 Scope of the study..........................................................................................................................6
1.9 Limitation of the study...................................................................................................................7
1.10 Definition of terms and concepts.................................................................................................7
1.11 Organization of the paper............................................................................................................7
CHAPTER TWO.....................................................................................................................................7
2. LITERATURE REVIEW....................................................................................................................7
2.1 Theoretical Literature....................................................................................................................7
2.1.1 Customers’ loyalty..................................................................................................................7
2.1.2 Benefits of Customer Loyalty.................................................................................................8
2.1.3 Factors influences customer loyalty.......................................................................................9
2.1.4 Relation between customer satisfaction and loyalty.............................................................10
2.2 Empirical review on factors affecting customer loyalty in financial institution..........................11
2.3 Conceptual frame work................................................................................................................13
CHAPTER THREE...............................................................................................................................13
3. RESEARCH METHODOLOGY......................................................................................................13
3.1. Research design........................................................................................................................13
3.2. Research Approach...................................................................................................................14
VI
3.3. Target Population......................................................................................................................14
3.4. Sample Size and Sampling Techniques....................................................................................14
3.5. Data Types and Sources............................................................................................................15
3.6. Instruments of Data Collections................................................................................................15
3.7. Data Analysis and Interpretation..............................................................................................16
3.8. Validity and Reliability Test.....................................................................................................16
3.8.1 Validity.................................................................................................................................16
3.8.2 Reliability..............................................................................................................................16
CHAPTER FOUR..................................................................................................................................17
4. RESULTS AND DISCUSSION....................................................................................................17
4.1 Response rate............................................................................................................................17
4.2 Results of Reliability and Validity Test....................................................................................18
4.3 Results of descriptive analysis..................................................................................................18
4.3.1 Demographic characteristics of the respondent customers...................................................19
4.3.2 Respondents’ perception on factors affecting customer loyalty in the Bank.......................20
4.3.3 Measurement of customer loyalty.........................................................................................27
4.4 Results on Pearson Correlation Analysis..................................................................................28
4.5 Results on Multiple Linear Regression Analysis......................................................................29
4.5.1 Multicollinearity Test Results...............................................................................................29
4.5.2 Normality Test Result...........................................................................................................30
4.5.3 Homoscedasticity Test..........................................................................................................31
4.5.4 Independence of Errors (Autocorrelation) Test Result.........................................................32
4.5.5 Linearity test.........................................................................................................................32
4.5.6 Regression Model Fitting Summary and Coefficients..........................................................33
4.6 Hypotheses testing results.........................................................................................................35
CHAPTER FIVE...................................................................................................................................38
5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS.....................................................38
5.1 Summary of Findings...................................................................................................................38
5.2 Conclusion................................................................................................................................39
5.3 Recommendations.....................................................................................................................39
REFERENCES......................................................................................................................................40
APPENDIX 1: QUESTIONNAIRE USED FOR THE STUDY...........................................................45
VII
LIST OF TABLES
Table 3. 1: Sample size determination.....................................................................................15
Table 4.1: Response rate 18
Table 4.2: Validity and Reliability Analysis............................................................................19

Table 4.3: Descriptive results of demographic characteristics of the respondent customers...20
Table 4.4: Service Quality (SQ) items that affect customer loyalty........................................21
Table 4.5: Satisfaction related items that affect customer loyalty...........................................22
Table 4.6: Switching cost items that affect customer loyalty..................................................23
Table 4.7: Complaint handling of use items that affect customer loyalty...............................24
Table 4.8: Commitment items that affect customer loyalty.....................................................25
Table 4.9: Trust quality items that affect customer loyalty.....................................................26
Table 4.10: Bank image items that affect customer loyalty.....................................................27
Table 4.11: Customer loyalty measuring items........................................................................28
Table 4.12: Results Pearson Correlations................................................................................29
Table 4.13: Checking Multicollinearity in the Regression Model...........................................30
Table 4.14: Multiple Regression Analysis Model Summary Result........................................33
Table 4.15: ANOVAa Table of Regression Analysis Result....................................................34
Table 4.16: Regression coefficient of the fitted model............................................................34
Table 4.17: Summary of hypothesis testing.............................................................................37
VIII
LIST OF FIGURES
Figure 2.1-: Conceptual frame work of the study....................................................................13
Figure 4.1: Histogram of standardized residuals for normality test.........................................31
Figure 4.2: Scatter plots of standardized residuals for homoscedasticity test..........................32
Figure 4.3: P-P plot of residuals to test linearity......................................................................33
IX
LIST OF ABBREVATIONS AND ACRONOMYS
ATM = Automatic Teller Machine

BI = Bank Image
CCH = Customer Complaint Handling
CL = Customer loyalty
C = Commitment
CSQ = Customer Service Quality
E = error
MLR = Multiple Linear Regression
S.D. = Standard Deviation
SA = Satisfaction
SC = Switching Cost
SPSS = Statistical Package for social Sciences
X
ABSTRACT
Customer loyalty is very necessary for the competitive business environment and industry. In
increasingly competitive markets, being able to build customer loyalty is seen as the key
factor in winning market share and developing a sustainable competitive advantage. This
study was conducted to examine the effect of different determinants on customer loyalty of
the Dashen Bank at Dessie City five distinct branches. This paper tried to assess the basic
factors influencing customer loyalty in the Dashen Bank at Dessie City five distinct branches.
From the total population of 52,137customers in the targeted five branches of the Dashen
Bank at Dessie City, 397 customers were taken as sample size and 392 respondents correctly
filled and returned the structured questionnaire. The researcher used a cross-sectional
quantitative research approach to analyze the data. The data was collected from customers
of the bank. Self-administered structured questionnaire was used to collect data from the
respondent customers and employees. Descriptive and inferential statistics were used to
analyze and interpretation was made on the results. The findings of quantitative data
gathered from the customers’ of Dashen Bank have very young employees and elder
customers. All the seven determinant factors that expected to affect customer loyalty have
positive correlations with customer loyalty. It was also found all the seven (7) factors of
customer loyalty (service quality (SQ), Satisfaction (S), switching cost (SC), Commitment
(C), Trust and Bank image (BI) had a significant positive effect on customer loyalty and
positively correlated with customer loyalty of the company. These factors have a significant
positive effect on customer loyalty of the Dashen Bank. It can be concluding that the six
factors (service quality (SQ), Satisfaction (S), switching cost (SC), Commitment (C), Trust
and Bank image (BI)) had a significant positive effect on customer loyalty of the bank. The
findings can prove useful to bank managers, human resource policy decision makers, as well
as government and academic institutions. It is recommended to investigate how to maintain
switching cost. The bank is advised to work on switching cost, commitment, and trust and
customer satisfaction, especially on satisfaction and switching cost because their effect on
customer loyalty is larger. Therefore, managements in Dashen Bank industry should focus on
switching cost, customer satisfaction and trust.
Keywords: Customer Loyalty, Satisfaction, Commitment, Trust, Service quality, Bank image
XI
CHAPTER ONE
1. INTRODUCTION
1.1 Background of the study
The financial sector plays an important role in economic growth and development of country.
Customer loyalty is not a new concept but recent years have demonstrated a developing
interest to fabricate customer loyalty because of customer-oriented techniques or strategies.
In recent years, those financial institutions like banks are moving into a more competitive
financial atmosphere with a wide variety of financial products and services ( Samraz Hafeez &
Bakhtiar Muhammad, 2012). In response to this volatile market environment, credit institutions
have shown a keen interest in marketing their products and services to their customers more
effectively. Doing efficient product and service delivery effort, therefore, credit institutions
can increase their customers base and attract new customers and mainly by retaining the
existing customers for long.
Some previous researches like Golrou (2008) and Bilal, et’al., (2010), investigated the
determinants of customer loyalty for banking industry of Iran and Agyei &Kilika (2013)
assessed quality, satisfaction, switching cost, trust, complaint handling and commitment and
analyzed the direct and indirect influences of satisfaction, perceived service quality,
switching cost, brand image, trust, complaints handling and commitment on customer loyalty
differently.
Every business organizations success depends on the satisfaction of the customers. Whenever
a business is about to start customers always come “first” and then the profit follows. Those
companies that are succeeding to satisfy the customers fully will remain in the top position in
a market. Today’s business company has known that customer satisfaction is the key
component for the success of the business and at the same time, it plays a vital role to expand
the market value. In fact, many organizations agree to the fact that high customer satisfaction
will lead to greater customer loyalty (Yonathan and Gebre (2010) which, in turn, leads to
future revenue.
In general, customers are those people who buy goods and services from the market or
business that meet their needs and wants. Customers purchase products to meet their
expectations in terms of money. Therefore, companies should determine their pricing with the
quality of the product that attracts the customer and maintains the long-term affiliation. The
organization should make sure that they are providing full service, equivalent to their
monetary value. This could increase the number of customers and holds the long-term
relationship between the customer and the organization (Maysam, et’al., 2013). And the
existing customer will help to attract the new customers by providing or sharing the
information about the products and services of the companies. Satisfaction means to feel
content after what the person desired or wanted. It is difficult to know whether the customers
are satisfied with the availability of the product or services. Therefore, giving satisfaction to
the customers is not an easy task, for this different factor is needed to be taken into
consideration. Nowadays, competition can be noticed between the business organizations and
marketplaces everywhere and has been one of the challenging tasks for the competitors.
Though it seems to be tough in the growing market, competitors are developing their
marketing channels effectively. One of the important aspects to ensure the attention of the
customers is to provide the best and the most favorable products at this competing market. If
a customer’s satisfaction is earned, then it is sure that customer loyalty will also come along
with it. Moreover, in the absence of the customer, a business organization would not exist. In
order to increase the number of the customers, development of customer’s satisfaction is very
important. In terms of achieving business goals, these two terms are very important. Hence,
the relation of customers and the business organization or market is, therefore, the most
important one “The competition in today’s market is the competition of service, which is
based on the competition of customer satisfaction” (Chen and Wang 2009). Customer
satisfaction is regarded as an invisible asset. It is not only an improvement for the financial
institution but also can be used in predicting for the operation quality and development of
enterprises.
The relationship between customer service quality and customer loyalty is a vital one. In a
competitive market place, understanding customer needs become crucial, therefore financial
institutions, have moved from product-centric to customer-centric positions. Any
organization that has satisfied customers is bound to increase customer base and hence
profitability. Satisfied customers may sell your organization either consciously or
unconsciously. It is therefore important that financial instructions should provide quality
service to customers to satisfy them, make them loyal and retain them at the end (Agyei, P.
M., & Kilika, J. M., 2013).
Developing and maintaining customer loyalty is important particularly in the service sectors
because loyalty results in increase profit through repeat patronage, less price sensitivity and
positive word-of-mouth. This makes it an important determinant of market share and
2
profitability (Teemu, 2007). According to Lam, Shun, and Sanker (2004), customer loyalty
has a powerful impact on firm’s performance and is considered by many companies as an
important source of competitive advantage. Consistently high level of customer loyalty not
only creates tremendous competitive advantage but also enhance employee morale and
productivity. Further, the benefit of customer loyalty to provider of either service or products
include lower customer price sensitivity, reduced expenditure on attracting new customers,
improved organizational profitability.
1.2 Background of the Organization
Eleven visionary shareholders and veteran bankers with initial capital of Birr 14.9 million
founded Dashen Bank in September 1995. Upon securing license from the National Bank of
Ethiopia, Dashen opened its doors for service on the 1st of January 1996 with eleven fully-
fledged branches. Dashen Bank coined its name from the highest peak in Ethiopia, mount
Dashen, and aspires to be ‘‘Best in class Bank in Africa’’. The Bank holds and aimed to be
among the leading banks in Africa and it will extend its reach across Africa both for
competitive benchmarking and business. Ras Dashen is Part of the Simien Mountains
National Park, an exotic setting with unique wildlife and breath-taking views on a landscape
shaped by nature and traditional agriculture. Dashen is the most reputable brand in the
domestic banking market; a reputation earned Ethiopia. It operates through a network of more
than 800 plus Branches, nine dedicated Forex Bureaus, 400 plus ATMs and 1,300 plus Point-
of-Sale (POS) terminals spread across the length and breadth of the nation. Dashen Bank is
the first bank in Ethiopia to provide a full-fledged payment card service as a principal plus
member of AMEX, VISA, MasterCard and Union Pay (as the first African Bank to sign such
agreement). The Bank issues AMEX branded debit cards that give clients the added
convenience of round-the-clock banking through Automated Teller Machines (ATMs) and
conduct purchases at a growing number of merchant locations via point of sale terminals
(POS). Dashen is exclusively acquires and issues American Express cards in Ethiopia.
Dashen Bank offer services for customers it can enable customers can transact in their
convenience, easily, safely and affordably, regardless of where they are at any-time using
Amole digital platform, without necessarily being physically present at the transaction point,
all done without leaving the comfort of their homes, office or moments of relaxation.
Customers can access Dashen Bank’s services and make payments on the
gohttps://dashenbanksc.com.
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Therefore, the aim of this research is to examine determinants of customer loyalty by
defining conceptual framework within which to analyze the factors that influences customer
loyalty of Dashen Bank, Dessie City Branches.
1.3 Statement of the Problem
In globalization, thousands of brands are trying to gain new customers and tend to recollect
them. In this competitive environment where customers have wide range and varieties of
choices and availability of huge amount of information related to product which make them
excessive aware of the goods and services and their functionalities and its uses so it is
difficult for the managers to stop them switching to other bank and to make them Customer
loyalty (Samraz Hafeez & Bakhtiar Muhammad, 2012).. In financial instructions, globally, the
subject of service quality remains a critical one as businesses strive to maintain a comparative
advantage in the marketplace. Since financial services, particularly Micro finance intuitions
compete in the marketplace with generally undifferentiated products, service quality becomes
a primary competitive weapon. Currently, technological advancements are causing banks to
rethink their strategies for services offered to both commercial and individual customers
(Maysam et’al., 2013).
In bank creating customers a strong relationship with the customer’s loyalty; which can be
consequently followed by their loyalty, is considered to be a key factor for increasing the
market share and building a sustainable competitive advantage. As customer loyalty is
considered a vital objective for a firm’s survival and growth, major marketing goal, but it is
also an important basis for developing a sustainable competitive markets. It is imperative that
service companies’ measure and monitor service quality and satisfaction with a view of
influencing the behavioral intentions of their customers (Saha and Theingi, 2009). Satisfying
customers is the first major mission and purpose of any business organization.
However, there are a number of problems hindering the smooth delivery of the banking
services. There is customer’s dissatisfaction over the service offered and the available
services do not match the expectation of the customer (Mesay, 2012). Research suggests that
customer dissatisfaction is still the major reason of bank customers’ switch to other banks
(Manrai, 2007). This dissatisfaction could be because of a variety of reasons. The causes of
dissatisfaction are not well known empirically however from rational point of view; the
probable factors may include network problem and temporary failures in the electronic
banking services. Ha and Jang (2009) argued that service failure occurs when customer
perceptions do not meet customer expectations. The problem with service failure is that it
4
may lead to a destroyed relationship between the customer and the organization. Thus, the
importance of customer satisfaction and loyalty in today’s dynamic corporate environment is
obvious as it greatly influences customer’s repurchase intensions whereas dissatisfaction has
been seen as a primary reason for customer’s intentions to switch. Several studies have been
conducted on satisfaction of bank customers (Potluri and Mangnale, 2011; Samraz Hafeez &
Bakhtiar Muhammad (2012).
During the past decade, the financial service industry has undergone drastic change and
intense competition in Ethiopia. It is imperative to apply the modern innovative marketing
strategy called customer loyalty to the banking industry of Ethiopia. However, the researcher
found only one study conducted on customer loyalty by Mesay (2012). The research by
Mesay (2012) shows that commitment, satisfaction and trust have a significant positive
influence on customer loyalty. In addition, commitment is the most essential factor in
affecting customer loyally followed by satisfaction and trust. As the researcher tried to review
many researchers conduct their studies on the issue, but still there is a gap between service
quality and customer’s loyalty. So the research will try to fill this gap by considering other
additional variables like perceived quality, satisfaction, switching cost, trust and commitment
which can affect the loyalty status of customers at Dashen Bank, Dessie Town.
However, far as services provided by Dashen Bank and its effort to increase customer base
and their loyalty it is not adequately studied in Amhara Region in general and Dessie city in
particular. Therefore, the researcher has decided to investigate customer loyalty in order to
fill this research gap by undertaking preliminary investigation in some branches of the
Dashen Bank hat has been done about loyalty in Dessie city.
1.4 Research Questions
Based on the statement of the problem and review of related literatures, this study has tried to
give answer for the following questions:
 How does service quality influence the loyalty of customer?
 How does satisfaction influence the loyalty of customer?
 How does switching cost influence the loyalty of customer?
 To what extent complaint handling affects customer loyalty?
 To what extent trust influences the loyalty of customer?
 How does Bank Image (Reputation) affects loyalty of customer in Dashen Bank?
 To what extent commitment influence the loyalty of customer?
5
1.5 Objectives
1.5.1 General objective
The main objective of the study is to identify the determinants of customer loyalty in Dashen
Bank, South Wollo Zone, Dessie City Branches.
1.5.2 Specific objectives
 To examine the effect of service quality influence on customer loyalty
 To determine the influence of satisfaction on customer loyalty
 To identify the effect of switching cost on customer loyalty
 To assess the effect of complaint handling on customer loyalty
 To examine the influence of trust on customer loyalty
 To assess the effect of Bank Image (Reputation) on customer loyalty
 To evaluate the commitment influence of customer loyalty
1.6 Research Hypothesis
In this study, the researcher tried to test the following hypotheses as alternative and null:
H a 1 : Service Quality (SQ) has positive relation and significant effect on customer loyalty
H 01 : Service Quality (SQ) has no positive relation and significant effect on customer loyalty
H a 2 : Satisfaction has positive correlation and significant effect on customer loyalty
H 02 : Satisfaction has no positive correlation and significant effect on customer loyalty
H a 3 : Switching cost (SC) has positive correlation and significant effect on customer loyalty
H 03 : Switching cost (SC) has no positive correlation and significant effect on customer loyalty
H a 4 :Complaint handling has positive relation and significant effect on customer loyalty
H 04 :Complaint handling has no positive relation and significant effect on customer loyalty
H a 5 : Trust has positive correlation and significant effect on customer loyalty
H 05 : Trust has no positive correlation and significant effect on customer loyalty
H a 6 : Bank Image (BI) has positive relation and significant effect on customer loyalty
H 06 : Bank Image (BI) has no positive relation and significant effect on customer loyalty
H a 7 : Commitment has positive relation and significant effect on customer loyalty
H 07 : Commitment has no positive relation and significant effect on customer loyalty
1.7 Significance of the study

The results of this study would have significant in various directions. The first on the
researcher was evidently put up the glaring gaps in specific reference to customer loyalty of
Dashen Bank. This study will help the practical aspect to the stakeholders of Micro finance
institutions in Ethiopia by identifies determinants that influencing customer loyalty. It will
6
help management bodies to make sound decision on customer loyalty to improve the
financing competitive position. Additionally, this study will help other practitioners or
researcher use as reference and provided important input for further studies.
1.8 Scope of the study
This study focused on assessing loyalty of customers of Dashen Bank in five branches at
Dessie City. Though customer satisfaction, motivation and loyalty are issues that deserve the
involvement of both the service providers and customers, the scope of the study was limited
to the customers’ loyalty only. And, the research sample was selected from saving and
current account holders of the Dashen Bank in Dessie City branches in 2023.
1.9 Limitation of the study
All researches have their own limitation and this study is no exception. One is, the survey
was only conducted in five centers of Dashen Bank at Dessie City branches and in strict
sense, and the results pertain only to the quantitative data from the respondents.
1.10 Definition of terms and concepts
Customer loyalty: states that even if companies make minor errors or mistakes, customers
are still willing to do business with them or keep relations
Customer satisfaction: customers’ expectation of the company‘s products or services and
their perceptions of the products or services performance
Service quality: is an indication of the organization's ability to meet customers' desires and
demands.
Trust: is willingness to rely on an exchange partner in whom one has confidence.
Switching cost: is the technical, financial or psychological factors which make it difficult or
expensive for a customer to change brand (Shergill & Bing, 2006).
Commitment: is typically expressed as a desire to continue a relationship.
Bank Image (Reputation): is the customers’ perception about the services in the bank.
1.11 Organization of the paper
The paper consist five chapters. The first chapter contains introductions of the study, which
includes background of the study, definitions of term and concepts, statement of the problem,
research question, and objective of the study, significance of the study, scope of the study and
organization of the paper. The second chapter is to review of the related literature. The third
chapter focuses on the research design and methodology while the fourth chapter provides
analysis of data collected and report findings. The fifth chapter, which is the last one focus on
providing conclusions and recommendations, based on the findings.
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CHAPTER TWO
2. LITERATURE REVIEW
2.1 Theoretical Literature
2.1.1 Customers’ loyalty
A bundle of works has accompanied the increasing importance of relational marketing in
recent years, particularly in the service industries, such as banks, on customer loyalty. Several
authors emphasize the positive relationship existing between customer loyalty and business
performance. Loyal customers not only increase the value of the business, but also enable it
to maintain costs lower than those associated with attracting new customers (Beerli et al.,
2004).
Mohsan (2011) defines loyalty as "a deeply held commitment to rebuild and re-patronize a
preferred product or service in the future despite situational influences and marketing efforts
having the potential to cause switching behaviors. “Customer loyalty is viewed as the
strength of the relationship between an individual’s relative attitude and re-patronage.
Although customer satisfaction is a crucial part of a business, satisfaction alone cannot take a
business to a top level. Customer satisfaction produces a positive financial result, especially
in regular purchases. Today’s unforgiving market where creating and maintaining customer
loyalty is more complex than it used to be in the past years. This is because of technological
breakthrough and widespread of the internet uses. Loyalty building requires the company to
focus the value of its product and services and to show that it is interested to fulfill the desire
or build the relationship with customers (Griffin, 2002).
Mohsan (2011) emphasize, “Loyalty is more profitable.” The expenses to gain a new
customer is much more than retaining existing one. Loyal customers will encourage others to
buy from you and think more than twice before changing their mind to buy other services.
Customer loyalty is not gained by an accident; they are constructed through the sourcing and
design decisions. Designing for customer loyalty requires customer-centered approaches that
recognize the want and interest of service receiver. Customer loyalty is built over time across
multiple transactions.
A relationship with a customer is equally important in customer loyalty and this requires that
company work in a broader context that extends beyond itself, as no company can be world
class at everything (McDonlad& Keen 2000). Mesay (2012) divided customer loyalty into
three different categories that include behavior loyalty, intentional loyalty, and emotional
loyalty.
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2.1.2 Benefits of Customer Loyalty
Customer loyalty is critical to the conduct of business in today’s competitive market. Today
marketers are seeing information on how to build customer loyalty. The increased profits
from loyalty come from reducing marketing costs, increase sales and reduced operational
costs. Further, loyal customers provide strong word-of-mouth create business. Due to the
popularity and benefits derived from customer loyalty programs, many corporations have
adapted these schemes. Customer loyalty programs can do build customer loyalty and
corporations now realize how important loyalty is for their profitability. One of the main
reasons of creating loyalty programs is to increase revenues, which can be done by either
increasing purchase and usage levels and by increasing the range of products bought.
However, there are other reasons for creating loyalty programs including: to generate
information, to reward loyal customers, to manipulate consumer behavior and as a defensive
measure toward competitors (Mohsin, 2012)
2.1.3 Factors influences customer loyalty
Customer loyalty is another important factor in customer satisfaction. The impact of the
satisfaction in loyalty has been the most popular subject in study of the marketing theory.
Therefore, several studies have proved that satisfaction and loyalty have the direct connection
between one another. As satisfied customers are loyal and dissatisfied, customers are a
vendor (Heskett 2011.)
Magasi (2016) considered perceived quality, customer satisfaction, switching cost, customer
trust and, customer commitment are determinants of customer loyalty in banking industry.
However, perceived quality (100%), customer satisfaction (91.7%) and trust (50%) have a
significant critical positive influence on customer loyalty. Finding the loyal customer is not
accessible, even the customers seem to be satisfied with the products and the services. In fact,
the behavior and attitude of the customers towards the particular goods and services matters
the most. If the behavior of the customers is positive to the service holder, then those
customers are said as a loyal customer (Abdullah 2012.)
There are two types of customer loyalty based on behavioral and emotional loyalty on the
goods and services. Behavioral loyalty refers to frequent shopping in a particular retailer and
emotional loyalty refers to the customers' concern towards certain retailer based on past
buying experience and attitude. In this both behavioral and emotional loyalty model,
increased satisfaction should increase customer loyalty. When customers are not satisfied,
customers have the option to express the complaints going to the competitor. But, the study
9
has shown that 60-80% of the customers are satisfied and very satisfied on the survey just
prior to the defection. Therefore, there should also be other factors besides satisfaction that
have a certain impact on customer loyalty (Reichheld & Schefter, 2000).
Perceived Service Quality: Service quality has been found to have a profound input to
customer loyalty as a whole and is defined as the result of the comparison that customers
make between their expectations about a service and their perception of the way the service
has been performed (Parasuraman and Grewal, 2000).
Customer Satisfaction: Customer satisfaction is another antecedent of customer loyalty. In
the highly competitive business world of today, customer satisfaction can be seen as the
substantial of success, as customer satisfaction can lead to customer retention and therefore to
profitability for organization Jemal and Kamal (2004).
Switching Cost: Switching cost is a factor that makes it difficult or costly for customer to
change providers. Another brand loyalty determinant is known as switching cost, which can
be defined as the technical, financial or psychological factors, which make it difficult or
expensive for a customer to change brand Shergill, and Bing (2006).
According to Morgan and Hunt (2004) trust has been defined as the willingness of customers
to rely on an exchange partners in who one has confidence or confidence in an exchange
partners reliability and integrity. Several authors in their literature reinforced the importance
of the relationship between trust and loyalty. Ball, Coelho and Maclas (2004) as describe two
components of trust: credibility trust is one’s perceived reliability of his business party and
benevolence trust is established when one is genuinely concerned about the welfare of his
business party and does not reflect an opportunistic behavior.
2.1.4 Relation between customer satisfaction and loyalty
Based on Aminu and Hartini (2008), there are two critical thresholds affecting the link
between customer satisfaction and customer loyalty. On the high side, when satisfaction
reaches a certain level, loyalty increases dramatically, at the same time satisfaction declined
to a certain point, loyalty dropped equally dramatically. The customer is link to a business
success. Customer satisfaction and loyalty should be incorporated into the long-term goal of a
business. Customer satisfaction is a key element for every organization wishing to increase
customer loyalty and create a better business achievement. The role of satisfaction in loyalty
largely indicates that the former is a key determinant of the latter. “Satisfaction” is an
attitude, whereas loyalty is described as a behavior. Chen and Wang (2009) suggest a view of
customer satisfaction as a kind of consistency evaluation between prior expectations and
10
perceived service performance. Accordingly, the positive evaluation of the product or service
that the customer acquires is a major reason to continue a relationship with a company’s
service or products, and an important pillar that upholds loyalty. Satisfied customers are thus
more likely to repurchase, lower their price sensitivity, engage in positive word-of-mouth
recommendation, and become loyal customers.
Customer satisfaction and loyalty represent a top priority of the company's success and profit.
Satisfaction does not automatically lead to loyalty it needs a step-by-step process. Steps are
described as customers going through different phases such as awareness, exploration,
expansion, commitment, and dissolution (Arantola, 2000). Customer loyalty can be
considered a byproduct of customer satisfaction. The satisfaction of business customer leads
to customer loyalty. Customer loyalty will increase significantly when satisfaction
accomplishes at a certain level and at the same time customer loyalty will decline
automatically if the satisfaction level drops to a certain point (Aydin and Ozer, 2005).
Moreover, highly satisfied customers are tending to be more loyal than the customers who are
merely satisfied. Overall, it is clear that there is a significant positive relationship between
customer satisfaction and customer loyalty. Customer loyalty leads to an increase in both
sales and profitability (Chi, 2005)
2.2 Empirical review on factors affecting customer loyalty in financial institution
The importance of customer satisfaction both practically and theoretically for firms’
continuous survival cannot be over emphasized (Zalatar, 2012). The idea of Customer’s
satisfaction refers to fulfillment of customer’s expectation (Vesel and Zabkar, 2009). This is a
perception a customer has after using a particular product or service, which antecedents may
stem from either emotion or cognition
Customer loyalty is a program that awards different kinds of benefits to a customer in

exchange for being involved with the host organization. Loyalty programs have become
important marketing tools for many organizations. To increase the amount of purchase, many
products oriented and service oriented business organization uses the loyalty program.
Loyalty program helps both to increase the more costumer and marketing. Some of the
loyalty programs can be in the form of customers earning points for every purchase they
make, which they can end up using to redeem valuable goods or services from company
(Peppers & Rogers 2011).
Phong (2017) the objective of the study are customer loyalty construct and the relationship
between customer loyalty and its determinants namely customer satisfaction, switching cost
11
and trust in retail industry in Vietnam. 500 questionnaires were distributed to the customers
of four biggest commercial banks in Vietnam. 390 questionnaires were received from the
respondent and collected data was analyzed using SPSS program. The findings show that
there are strong and positive relationship between customer loyalty and its determinants of
customer satisfaction, switching cost and trust.
Knowing the customers is the very first step to increase the satisfaction level. Once the
organization deals with the customer, it means that the interest and the taste of the customers
are well known which helps to get an idea on how the service provided by the company
actually meet their expectations Furthermore, understanding the customers help to revise the
strategies and decisions respect to the requirements of the customers to deliver the positive
buying experience. It is obvious that the success of the business in mirrored on how the
customers are treated. All the customers want to be treated like an individual and this is why
personalized service leads to the improvement on loyalty.
Magasi (2016) the study intended to investigate the factors affecting customers‟ loyalty in
Sub-Saharan African banking industry. The thoroughly dealt factors were perceived service
quality, customer satisfaction, switching cost, trust and commitment. An intensive literature
review involving fourteen recent from 2009 to 2015 related literature were assessed by
finding out the extent to which each factors determined customer loyalty in Banking industry.
The finding show that perceived service quality, customer satisfaction and trust are the major
determinants of customer loyalty in Sub-Saharan African Banking industry (Cronin, et”al,
2000).
Offering personalized service personally is better rather than ensuring the customer to end up
with the automated machine. In addition, not all the customers are familiarized with the
product and the services. Therefore, providing product training and customer service is
important. Helping the customers to understand the working efficiency of the product will
help to gain the trust of the organization. Meeting the expectations of the customer accurately
helps to build a responsible image of the company (Tweak, 2017). Sometimes adding offers
of service such as discount, surprise gift can attract more attention of customers and
unexpectedly can go a long way in building relationship. Considering these little things can
build a positive image of the service, which helps in increasing customer loyalty extremely
(Heartbeat, 2015).
12
Bilal, et’al., (2010) the objective of this study is to analyze the factors which influences the
customer loyalty in the banking industry of Pakistan and to propose a model for customer
loyalty by analyze of the relationship among different factors. The effect of satisfaction,
switching cost, and commitment on customer loyalty is positive and significant.
Mesay (2012) examined factors affecting customer loyalty within corporate Bank of Oromia.
Questionnaires distributed to 120 customers of corporation bank of Oromia. Data analyzed
using descriptive and inferential statistics. The finding of the study shows that commitment,
satisfaction and trust have significant positive influence on customer loyalty. In Addition,
commitment is most essential factors in affecting customer loyalty followed by satisfaction
and trust. The least important factors in affecting customer loyalty are switching cost ( Oyeniyi
and Abiodun, 2010). The result also indicates the image was not significantly affecting
customer loyalty.
2.3 Conceptual frame work
The conceptual framework is the researcher’s own model and it explains the relationship
between independent and dependent variable. According to Chen (2009), an independent
variable is one that affects the dependent variable in a positive or negative way and the
dependent variable is the variable of primary interest to the researcher. Due to the above
literature review, the researcher tried to identify the influence of service quality, satisfaction,
switching cost, customer complaint handling, trust and commitment on customer loyalty in
Dashen Bank at Dessie City.
Independent variables Dependent variables
Service quality
Customer Satisfaction
Customer loyalty
Customer switching cost
Customer complaint handling
Customer Trust
Customer Commitment
Brand Image (Reputation)
Figure 2.1 -: Conceptual framework of the study

Source: Shanka, M.S (2012); Samraz Hafeez & Bakhtiar Muhammad (2012) with modification
13
CHAPTER THREE
3. RESEARCH METHODOLOGY
In this chapter the researcher, identify research design, methods and approaches in which data
is presented and analyzed. Furthermore, research method, population, sample and sampling
technique, data and data sources, methods of data analysis.
3.1. Research design
Studies that establish causal relationships between variables may be termed explanatory
research design. The emphasis here is explaining the relationships between variables.
Accordingly, this study was used explanatory research design to examine the effect of
independent variables on dependent variable. Explanatory research design, which is
sometimes referred to as analytical research and it is a type of cross- sectional research used
to identify any causal links between the factors or variables that pertain to the research
problem. Having all this, the study describes the influence of customer loyalty. As it is typical
of case based correlation study, the research was conducted with interference, as
questionnaire was administered and the results is analyzed, hence cross-sectional approach of
data collection is used.
3.2. Research Approach
Depending on the nature of the research problem and the research perspective, a research
approach is based on the philosophy of quantitative or qualitative or a combination of these
two approaches (Edmonds and Kennedy, 2013; Creswell, 2003).
Thus, in order to achieve the objectives stated in the preceding section, considering the nature
of research problem and the research perspective, this study followed quantitative research
approach. Explanatory research method as a method, it focuses on collecting, analyzing, and
quantitative data in a single study or series of studies. Its central premise is that the use of
quantitative and qualitative approaches, in combination, provides a better understanding of
research problems than either approach alone. The choice of this method is providing
expanded understanding of research complex problem (Creswell & Plano, 2011). A
quantitative approach was used due to its simplicity in data collection.
3.3. Target Population
The population to be taken for sampling was limited to the geographical location of Dessie
due to time limitation, resource constraints, and convenience. The target populations of this
research were customers of Dashen bank in Dessie branches. According to Branch managers
of the selected branches under study and Dessie District report of September 2023. Total
14
customers of the selected branches are 52,137 who had both loan and saving accounts. The
study considered the five branches such as Piyassa, Buwanbuwuha, Tossa, Dawdo, and Sherfi
tera branches. Therefore, the researcher selected sample respondents from the targeted
population based on simple random sampling methods.
3.4. Sample Size and Sampling Techniques
Appropriate sample size was determined from customer by using the following equation
(Cooper and Schindler, 2014).
N
n= 2
1+ N ( e )
Where, n = sample size; N = size of population and e=5% desire significant level is
considered
Table 3. 1: Sample size determination
Dashen Bank center Total Customer Percentage Sample size in each center
Piasa Main branch 34381 66.5% 262
Tossa branch 4440 8.5% 34
Dawdo branch 7244 13.8% 55
Buanbuawuha branch 3493 6.5% 27
Sherfi tera branch 2579 4.7% 19
Total 52,137 100% 397
Source: Dashen Bank, Dessie City (2023)
Therefore, sample size from the above data based on the formula is as follow:
52137
n= 2
=397
1+52137 ( 0.05 )
Base on the formula, 397 customers calculated. In addition, then probability proportional to
sample size (PPS) sampling technique was employed determine the sample size for costumer
size. Because probability to proportional sampling is one, in which every sampling unit in the
population has an equal and independent chance of being included or selected for the sample.
In addition, it provides an efficient method for selecting a sample that should an adequately
reflect the variation in the population. Finally, a total of 397-sample customer was selected
using simple random sampling as a sampling unit. The five branches (Piyassa Main branch,
Tossa branch, Dawdo branch, Buanbuawuha branch and Shelf tera branch) of Dashen Bank
at Dessie City were selected based on stratified random sampling technique and sampling
units (respondent customers) from each branch were selected using simple random sampling
technique.
15
3.5. Data Types and Sources
In this study, a quantitative data type was collected; in order to generate these data
types, primary data source was used. The primary data sources customers of Dashen Bank
in Dessie branches.
3.6. Instruments of Data Collections
In this study, the researcher applied different data collection methods. Explanatory research
design, which is sometimes referred to as analytical research and it is a type of cross-
sectional research used to identify any causal links between the factors or variables that
pertain to the research problem. Having all this, the study describes the influence of customer
loyalty. As it is typical of case based correlation study, the research was conducted with
interference, as questionnaire was administered and the results are analyzed, hence cross
sectional approach of data collection is used. Therefore, primary data was collected through
self-administered questionnaires. The questionnaires consist of both open and closed ended
questions.
3.7. Data Analysis and Interpretation
After collecting the data, the data was analyzed using descriptive analysis such as percentage,
frequency, mean and standard deviations; reliability test; Pearson correlation and multiple
regression model. The researcher was used Statistical Package for Social Sciences (SPSS)
version 25 software.
3.8. Validity and Reliability Test

In order to ensure the validity and reliability of the research, the researcher distributed some
questioner to the sample of the intended population and subject area experts as a pilot test
before a full-fledged study of the research. In addition, questioners of previous researchers in
the area were used with some modification that helped the respondents to understand easily.
3.8.1 Validity
The issue of validity is the most important concept that researchers are required to deal
critically with. The design of the measuring instrument must be valid so that the collected
data leads to sound conclusions. If research is invalid (because of a poor instrument), then it
is worthless (Cohen et al., 2007:133). Content validity, as defined by Cohen et al. (2007) is a
form of validity that refers to the extent to which the measuring instrument (e.g., test,
questionnaire or inventory) shows that it fairly and comprehensively covers the domain or
items that it purports to cover. Thus, in the context of the present study, content validity was
concerned with the degree to which the designed questionnaire items fairly and accurately
16
represented the main variables discussed in literature reviews. These variables included
service quality, commitment, trust, satisfaction, switching cost, complain handling and brand
image.
3.8.2 Reliability
Reliability, as defined by Cohen, et al. (2007), is the consistency, dependability and reliability
of the measuring instrument over time, and with the same respondents. One means of
increasing the reliability of the instrument is the inclusion of more items in the questionnaire.
In this study, the researcher ensured that there were enough items per construct. In order to
determine the reliability of the questionnaire in the study, Cronbach’s alpha was computed
for each of the 7 (Seven) main independent variables, and for the one dependent variable.
This is a measure of the internal consistency of the questionnaire.
17
CHAPTER FOUR
4. RESULTS AND DISCUSSION
This chapter presented the findings and discussion of the results and the process through
which the results obtained; which included a descriptive analysis, a correlation analysis, and
a regression analysis through SPSS version 25.
4.1 Response rate
Table 4.1 showed that the total number of respondents selected from the bank was 397
customers; hence, questionnaires were distributed after reaching them based on convenience
at five center of Dashen Bank at Dessie city administration. Out of the total 397
questionnaires that were distributed to customers, 392 (98.7%) of them were correctly filled
and returned. Accordingly, the data was analyzed and interpreted here below using the
possible options of descriptive statistics and inferential statistics further.
Table 4.1: Response rate
Items Response/non-response rate
Sample size of customers 397 100%
Collected 392 98.7%
Remain uncollected from customers 5 1.3%
Source: Own Survey Data (2023)
4.2 Results of Reliability and Validity Test
Testing goodness of data is testing the reliability and validity of the measures. Since the
statements have been generated from an extensive review of academic and practitioner’s
literatures, it is assumed that the construct validity was hold. Reliability analysis was
conducted to check whether a scale used in this paper consistently reflects the subset it
measures. For this study, the Cronbach‘s α is used as a measure of internal consistency.
According to Hair (2006), if α is greater than 0.7, it means that it has high reliability and if α
is smaller than 0.3, then it implies that there is low reliability. Therefore, the result shows that
the results extracted from the questionnaire are almost highly reliable.
The Cronbach‘s coefficient alpha was calculated for each field of the questionnaire. As
shown Below in table 4.2, the values of Cronbach‘s Alpha for each field of the questionnaire
and the entire questionnaire. Cronbach's Alpha equals 0.730 for the entire questionnaire
which indicates very good reliability of the entire questionnaire. Reliability scale of the
overall variables is 73.0%. Therefore, based on the test, the results for the items are reliable
and acceptable.
18
Table 4.2: Validity and Reliability Analysis
Variable Cronbach’s alpha Number of Item
Service Quality (SQ) 0.637 5
Satisfaction 0.735 5
Switching cost (SC) 0.707 6
Complaint handling (CH) 0.689 5
Commitment 0.739 5
Trust 0.705 6
Bank image (BI) 0.725 7
Customer Loyalty (CL) 0.805 7
Overall reliability 0.730 46
4.3 Results of descriptive analysis

Summary measures like frequency, percentage, mean and standard deviations of personal
characteristics and observed perceptional items were reported.
4.3.1 Demographic characteristics of the respondent customers
The demographic data for gender of respondent customers show that out of the 392
respondents who replied for the questionnaire distributed, there were 254 male and only 138
female. Table 4.3 shows that the male respondents formed majority of the target population
with a higher percentage of 64.8%, while female respondents were representing 35.2%. From
the table below gender balance of customers in Dashen Bank was not fairly distributed.
The sample customer respondents is largely dominated by respondents who are at the age of
21 to 34 years, which covers 182 (46.4%) followed by age group of 35-49 that covers 104
(26.5%) of the respondents and age group below 21 years that covers 89 (22.7%) of the
respondent. The result indicates that Dashen Bank has very young and energetic customers.
The majority of the customers at the five (5) centers of Dashen Bank are married which
covers 188 (48.0%) and 172 (43.9%) are single. On the other hand, the majority 202 (51.5%)
of the customers are businessperson, while 71 (18.1%) of the respondents were employees.
It can be seen from Table 4.3 below that the respondents hold a range of educational
qualification from no schooling to holding first degree and above. The majority of the sample
customers group completed high school, which accounted 112 (28.6%). Out of 392 customer
respondents 96 (24.5%) were completed certificate; 83 (21.2%) of customer respondents
completed elementary school; 49 (12.5%) of customer respondents hold bachelor’s degree
19
and 45 (11.5%) of the respondent customers completed diploma. This implies that almost half
of the respondent customers in the Dashen Bank were educated above high school.
The majority of the respondent customers, 142 (36.2%), stayed 11-15 years as a customers of
Dashen Bank. 104 (26.5%) of the respondents stayed 1-5 years, 74(18.9%) of the respondents
stayed above 15 years as customers of Dashen Bank.
Table 4.3: Descriptive results of demographic characteristics of the respondent customers
Demographic Factors Classification/ attributes Frequency Percentage (%)
Gender Male 254 64.8%
Female 138 35.2%
Total 392 100%
Age Below 21 years old 182 46.4%
21 to 34 years old 89 22.7%
35 to 49 years old 104 26.5%
50 to 64 years 13 3.3%
65 and above years 4 1.0%
Total 392 100%
Single 172 43.9%
Marital Status Married 188 48.0%
Widowed 15 3.8%
Divorced 17 4.3%
Businessman 202 51.5%
Employee 71 18.1%
Occupation Student 52 13.3%
Other 67 17.1%
Total 392 100%
Never been to school 7 1.8%
Completed elementary school 83 21.2%
Education level Completed high school 112 28.6%
Completed Certificate 96 24.5%
Completed Diploma 45 11.5%
Obtained a bachelor’s degree 49 12.5%
Total 392 100%
Less than 1 years 36 9.2%
How long as a customer 1-5 years 104 26.5%
of the Bank 6-10 years 36 9.2%
11-15 years 142 36.2%
Above 15 years 74 18.9%
Total 392 100%
20
4.3.2 Respondents’ perception on factors affecting customer loyalty in the Bank
Table 4.4 indicates the perceived service quality related factors that influence customer
loyalty of Dashen Bank at Dessie City. The analysis results were revealed that the majority of
respondents agreed (49.7%) and strongly agreed (26.5%) (Ease of depositing & withdrawing
money from any branch), and they agreed (38.3%) and strongly agreed (12.2%) that
(Continuous and ordered functionality of equipment such as computer and printer etc...),
48.7% agreed and 11.0% strongly agreed that (The staff takes an interest in solving the
problem) and 41.1% of the respondents disagreed on the idea that “The Bank Maintains
error-free records” in Dashen Bank at the five centers/branches of Dessie City. Therefore,
according to the analysis, the high percentage of respondents agreed in many items of service
quality. The highest mean score was observed in the item “Ease of depositing & withdrawing
money from any branch” (mean = 3.79) and the staff takes an interest in solving the problem
in Dashen Bank (mean = 3.31). This finding consistent with previous results of Chen (2009).
Table 4.4: Service Quality (SQ) items that affect customer loyalty
Level of Agreement
1. Service Quality (SQ) Strongly Disagre Neutral Agree Strongly Mean SD
Disagree e Agree
Freq.(%) Freq.(%) Freq.(%) Freq.(%) Freq.(%)
Ease of depositing & withdrawing
money from any branch 18(4.6) 58(14.8) 17(4.3) 195(49.7 104(26.5) 3.79 1.13
Continuous and ordered 41(10.5) 128(32. 25(6.4) 150(38.3 48(12.2) 3.09 1.27
functionality of equipment such as 7) )
computer and printer etc...
The staff takes an interest in
solving the problem 30(7.7) 96(24.5 32(8.2) 191(48.7 43(11.0) 3.31 1.18
The Bank Maintains error-free
records 98(25.0) 161(41. 45(11.5 69(17.6) 19(4.8) 2.36 1.17
1) )
Information provided by bank 26(6.6) 133(33. 44(11.2 161(41.1 28(7.1) 3.08 1.14
employees is clear and 9) ) )
understandable
Table 4.5 indicates satisfaction related items and descriptive analysis of percentage, mean and
standard deviations (SD). The analysis results showed that the majority of respondents agreed
(47.4%) and strongly agreed (20.2%) on the item that Dashen Bank customers are satisfied
with the decision to choose this bank, however, they disagreed (40.6%) and agreed (26.0%)
that this bank leaves me with a pleasant impression, 55.4% agreed and 20.4% strongly agreed
that want to return to this bank in the future, and 40.1% of the respondents agreed on the idea
that I will advise about this bank to my friends. Therefore, according to the analysis, the high
21
percentage of respondents agreed in most of the items of customer satisfaction. The highest
mean score (3.73) was observed in the item I want to return to this bank in the future
followed by the item I am satisfied with the decision to choose this bank in Dashen Bank of
Dessie City centers (mean = 3.57).
Table 4.5: Satisfaction related items that affect customer loyalty

Level of Agreement
2. Satisfaction Strongly Disagree Neutral Agree Stron. Mean SD
Disagree Agree
Freq.(%) Freq.(%) Freq.(% Freq.(% Freq.(%)
I am satisfied with the decision to 11(2.8) 100(25.5 16(4.1) 186(47.4) 79(20.2 3.57 1.15
choose this bank
This bank leaves me with a pleasant 65(16.6) 159(40.6 17(4.3) 102(26.0 49(12.5 2.77 1.34
impression
I want to return to this bank in the 11(2.8) 67(17.1) 17(4.3) 217(55.4 80(20.4 3.73 1.06
future ) )
I will advise about this bank to my
friends 40(10.2) 120(30.6) 36(9.2) 157(40.1) 39(9.9) 3.09 1.23
In comparison to other banks, I

98(25.0) 161(41.1 45(11.5 69(17.6) 19(4.8) 2.36 1.17
consider this bank and its services
) )
successful.
Table 4.6 indicates the descriptive results of items that point towards switching cost. The
analysis result were shown that the majority of respondent customers agreed (41.3%) and
strongly agreed (28.1%) on the item t o change to another bank involves investing time in
searching for information about other banks , 42.1% of the respondent customers agreed on the
idea that to change to another bank involves much effort in deciding which other bank to use , and
58.2% of the respondent customers agreed on the item “ According to my experience, I am
satisfied with the services delivered by this bank”. 38.3% of the respondents agreed on the idea to
change to another bank involves long distance. The highest mean score (3.78) was obtained for
both “To change to another bank involves much effort in deciding which other bank to use ” item and
the item “To change to another bank involves a risk in choosing another bank which might turn out
not to satisfy me “, which show customers high perception on switching cost of the bank.
22
Table 4.6: Switching cost items that affect customer loyalty
Level of Agreement
Strongly Disagre Neutra Agree Strongly
3. Switching cost Mean SD
Disagree e l Agree
Freq.(%) Freq. Freq.(% Freq.(% Freq.(%)
(%)
To change to another bank involves
29(7.4) 81(20.7 10(2.6) 162(41. 110(28.1 3.62 1.29
investing time in searching for ) 3) )
information about other banks
To change to another bank will lose a
11(2.8) 70(17.9 30(7.7) 165(42. 116(29.6 3.78 1.14
lot of personal relationships with ) 1) )
current bank employees &
management
According to my experience, I am
14(3.6) 51(13.0 21(5.4) 228(58. 78(19.9) 3.78 1.03
satisfied with the services delivered ) 2)
by this bank.
To change to another bank involves
much effort in deciding which other 12(3.1) 143(36. 20(5.1) 169(43. 48(12.2) 3.25 1.16
bank to use 5) 1)
To change to another bank involves a 65(16.6) 159(40. 17(4.3) 102(26. 49(12.5 2.77 1.34
risk in choosing another bank which 6 0
might turn out not to satisfy me
To change to another bank involves 41(10.5) 128(32. 25(6.4) 150(38. 48(12.2) 3.09 1.27
long-distance 7) 3)

Table 4.7 indicates the descriptive results of items that point towards Complaint handling. The
analysis result were shown that the majority of respondent customers agreed (37.2%) and
disagree 36.7% on There is a proper complaint handling system, 49.0% of respondent customers
agreed while 29.6% strongly agreed on The bank tries to avoid potential complaints related to
service you used, 54.8% of the respondent customers agreed on The employees listen carefully
whenever you complain, 44.9% of the respondent customers agreed on The bank tries to solve
clear complaints before they create problems, and 43.9% of the respondent customers agreed on The
bank tries to solve clear complaints before they create problems . The highest mean score (3.88)
was obtained on the item “The employees listen carefully whenever you complain ” followed by
“The bank tries to avoid potential complaints related to service you used” with mean of 3.86. Thus,
respondent customers support the importance of complaint handling for customer loyalty.
Table 4.7: Complaint handling of use items that affect customer loyalty
23
Level of Agreement
4. Complaint handling Strongly Disagre Neutral Agree Strongly Mean SD
Disagree e Agree
Freq.(%) Freq.(% Freq.(% Freq.(% Freq.(%)
There is a proper complaint handling 52(13.3) 144(36. 6(1.5) 146(37. 44(11.2) 2.96 1.31
system 7 2)
The bank tries to avoid potential 7(1.8) 73(18.6) 4(1.0) 192(49. 116(29.6 3.86 1.09
complaints related to service you used. 0) )
The employees listen carefully 7(1.8) 49(12.5) 25(6.4) 215(54. 96(24.5) 3.88 0.98
whenever you complain 8)
The bank tries to solve clear 12(3.1) 72(18.4) 30(7.7) 176(44. 102(26.0 3.72 1.13
complaints before they create 9) )
problems
The bank has the ability to openly 16(4.1) 80(20.4) 27(6.9) 172(43. 97(24.7) 3.65 1.18
discuss solutions when problems arise. 9)
Table 4.8 indicates the descriptive results of items that point towards commitment in Dashen
Bank. The analysis result were shown that the majority of respondent customers disagreed
(40.8%) and agree (38.3%) on The bank makes several service adjustments to suit my needs,
39.0% of respondent customers disagreed while 39.5% agreed on The bank offers
personalized services to meet different customer needs differently, 39.5% of the respondent
customers agreed on “The bank is flexible when its services are changed”, 44.1% of the
respondent customers agreed on The bank is flexible in serving my needs, and 51.8% of the
respondent customers agreed on The employees give you special attention. The highest mean
score (3.72) was obtained on the item “The bank is flexible in serving my needs” followed by
the item “The employees give you special attention” show customers’ respond as the bank is
secured to customer loyalty.
24
Table 4.8: Commitment items that affect customer loyalty
Level of Agreement
5. Commitment Strongly Disagree Neutral Agree Strongly Mean SD
Disagree Agree
The bank makes several service 36(9.2) 160(40.8 8(2.0) 150(38. 38(9.7) 2.98 1.25
adjustments to suit my needs ) 3)
The bank offers personalized services 22(5.6) 153(39.0 14(3.6) 155(39. 48(12.2) 3.14 1.22
to meet different customer needs ) 5)
differently
The bank is flexible when its services 35(8.9) 145(37.0 28(7.1) 155(39. 29(7.4) 2.99 1.19
are changed ) 5)
The bank is flexible in serving my 25(6.4) 64(16.3) 18(4.6) 173(44. 112(28.6 3.72 1.22
needs 1) )
The employees give you special 19(4.8) 89(22.7) 48(12.2 203(51. 33(8.4) 3.36 1.07
attention ) 8)
Table 4.9 indicates the descriptive results of items that point towards trust in Dashen Bank.
The analysis result were shown that the majority of respondent customers disagreed (42.1%)
and agree (28.6%) on the bank is very concerned with security for your transactions, 47.7%
of respondent customers disagreed while 28.3% agreed on the item “This bank keeps my
information confidential”, 47.2% of the respondent customers agreed that Dashen Bank is
honest, 44.4% of the respondent customers agreed on Dashen Bank is reliable, 40.3% of the
respondent customers agreed on the bank fulfills its obligations to customers, and 42.6% of
the respondent customers agreed on I have confidence in the bank‘s services. The highest
mean score (3.63) of the item “The bank fulfills its obligations to customers followed by
mean score (3.59) on “Dashen Bank is reliable” show customers’ respond as the bank trust is
important for customer loyalty.
25
Table 4.9: Customer trust items that affect customer loyalty
Level of Agreement
6. Trust Strongly Disagree Neutral Agree Strongly
Disagree Agree Mean SD
Freq(%) Freq(%) Freq(%) Freq(%) Freq(%)
The bank is very concerned with
65(16.6) 165(42.1) 8(2.0) 112(28.6) 42(10.7 2.75 1.32
the security of transactions )
This bank keeps my information 52(13.3) 187(47.7) 17(4.3) 111(28.3) 25(6.4) 2.67 1.20
confidential
This bank is honest 18(4.6) 110(28.1) 34(8.7) 185(47.2) 45(11.5 3.33 1.14
This bank is reliable

10(2.6) 89(22.7) 36(9.2) 174(44.4) 83(21.2 3.59 1.13
The bank fulfills its obligations to
3.63 1.18
customers 14(3.6) 85(21.7) 34(8.7) 158(40.3) 101(25.
8)
I have confidence in the bank‘s
3.30 1.22
services 34(8.7) 92(23.5) 43(11.0 167(42.6) 56(14.3
) )
Table 4.10 indicates Bank service image related items and descriptive analysis of percentage,
mean and standard deviations (SD). The analysis results showed that the majority of
respondents agreed (42.6%) and strongly agreed (22.7%) on the item that The queue waiting
time is attractive, and also they agreed (45.4%) and strongly disagreed (25.0%) that There is a
personalized service for different customers , 37.5% agreed that Convenience of bank equipment is
nice, 44.9% agreed that There is a good humanization of the services, 42.3% agreed that Locations
distribution of the bank‘s services in every branch is fulfilled, 32.7% of the respondent customers
agreed on Bank‘s working hours are convenient and 52.3% of the respondents agreed on Staff
expertise in handling customer service is nice . Therefore, according to the analysis, the high
percentage of respondents agreed in most of the items of bank service image. The highest
mean score was observed in the item Staff expertise in handling customer service is nice (mean =
3.78) followed by There is a personalized service for different customers (mean =3.69) and There is
a good humanization of the services in Dashen Bank of Dessie City centers (mean = 3.57).
26
Table 4.10: Bank image items that affect customer loyalty
Level of Agreement
7. Bank image Strongly Disagree Neutral Agree Strongly
Disagree Agree Mean SD
Freq(%) Freq(%) Freq(%) Freq(%) Freq(%)
The queue waiting time is 29(7.4) 70(17.9) 37(9.4 167(42.6) 89(22.7) 3.55 1.23
attractive
)
There is a personalized service 21(5.4) 63(16.1) 32(8.2 178(45.4) 98(25) 3.69 1.17
for different customers
Convenience of bank
equipment is nice 36(9.2) 87(22.2) 35(8.9 147(37.5) 87(22.2) 3.41 1.29
There is a good humanization
of the services 27(6.9) 67(17.1) 37(9.4 176(44.9) 85(21.7) 3.57 1.19
Locations distribution of the
bank‘s services in every branch 35(8.9) 101(25. 23(5.9 166(42.3) 67(17.1) 3.33 1.27
is fulfilled 8)
Bank‘s working hours are 32(8.2) 121(30. 23(5.9 128(32.7) 88(22.4) 3.30 1.33
convenient
9)
Staff expertise in handling 9(2.3) 44(11.2) 53(13. 205(52.3) 81(20.7) 3.78 .975
customer service is nice 5)
4.3.3 Measurement of customer loyalty

Seven (7) observed items were measure customer loyalty in composite. The descriptive
results of percentages, mean and standard deviation (SD) were showed in Table 4.11. The
analysis result showed that the majority of respondent customers (51.5%) agreed and (23.0%)
strongly agreed on I would always recommend my bank to others , 37.5% of respondent
customers agreed and 27.3% strongly agreed on It would be difficult to change my positive
beliefs about this bank, 57.4% of the respondent customers agreed on “I would always use this
bank‘s service”, 44.9% of the respondent customers agreed on “I am a loyal customer to this
bank”, 43.6% of the respondent customers disagreed on “I do not like to change to another bank
for any reason”, 48.5% of the respondent customers agreed on “My good preference for this bank
will not change” and 33.4% of the respondent customers agreed on Each time I want to make
any financial transaction, this bank is my first choice . The highest mean score (3.77) of the
item “I would always recommend my bank to others ” followed by the item “I would always use
this bank‘s service” with mean of 3.72.
27
Table 4.11: Customer loyalty measuring items
Level of Agreement
Loyalty measurement indictors Strongly Disagre Neutral Agree Strongly Mean SD
Disagree e Agree
I would always recommend my bank
9(2.3) 63(16. 28(7.1 202(51 90(23.0) 3.77 1.05
to others
1) ) .5)
It would be difficult to change my
20(5.1) 98(25) 21(5.4 146(37 107(27. 3.57 1.27
positive beliefs about this bank
) .2) 3)
I would always use this bank‘s
service 12(3.1) 55(14) 32(8.2 225(57 68(17.3) 3.72 1.00
.4)
I am a loyal customer to this bank
15(3.8) 96(24. 26(6.6 176(44 79(20.2) 3.53 1.17
5) ) .9)
I do not like to change to another
50(12.8) 171(43 30(7.7 80(20. 61(15.6) 2.82 1.32
bank for any reason
.6) ) 4)
My good preference for this bank
37(9.4) 68(17. 19(4.8 190(48 78(19.9) 3.52 1.25
will not change
3) ) .5)
Each time I want to make any
33(8.4) 131(33 31(7.9 123(31 74(18.9) 3.19 1.31
financial transaction, this bank is my
.4) ) .4)
first choice
4.4 Results on Pearson Correlation Analysis

In determining the strength of the relationship between two variables, the Pearson correlation
coefficient (−1 ≤r ≤ 1 ¿ can be used. The result of correlation analysis of the table 4.12 below
shows that there is strong and moderate positive and/or negative relationship or correlation
between the determinant factors and customer loyalty. Service Quality (SQ) and customer
loyalty (r = 0.134, p-value < 0.05) has weak positive correlation, Satisfaction (S) and
customer loyalty (r =0.557, P-value < 0.05) has strong positive correlation, Switching cost
(SC) and customer loyalty (r = 0.546, P-value < 0.05) has strong positive correlation,
Complaint handling (CH) and customer loyalty (r = 0.285, P< 0.05) has weak positive
correlation, commitment (C) and customer loyalty (r = 0.557, P<0.05) has strong positive
correlation, Trust and customer loyalty (r = 0.565, P< 0.05) has strong positive correlation,
and Bank image (BI) and customer loyalty (r = 0.565, P-value <0.05) has strong positive
28
correlation. Thus, all considered seven factors had positive relationship with customer
loyalty. A strong positive and equal strength of association was observed between Customer
Loyalty with commitment (C) and Satisfaction (S), and customer loyalty with Trust and bank
image.
Table 4.12: Results Pearson Correlations
Variables/ Measures SQ S SC CH C Trust BI CL
Service Correlation 1
Quality (SQ) p-value
Satisfaction Correlation -0.129* 1 .
(S) p-value 0.010
Switching cost Correlation 0.040 0.351* 1
(SC) p-value 0.425 0.000
Complaint Correlation 0.042 0.181* 0.146* 1
handling (CH) p-value 0.408 0.000 0.004
*
Commitment Correlation -0.065 0.344 0.395* 0.300* 1
(C) p-value 0.196 0.000 0.000 0.000
Trust Correlation -0.010 0.360* 0.420* 0.249* 0.489* 1
p-value 0.844 0.000 0.000 0.000 0.000
Bank image Correlation -0.164* 0.500* 0.292* 0.325* 0.419* 0.445* 1
(BI) p-value 0.001 0.000 0.000 0.000 0.000 0.000
Customer Correlation 0.134* 0.557* 0.546* 0.285* 0.557* 0.565* 0.565* 1
Loyalty (CL) p-value 0.008 0.000 0.000 0.000 0.000 0.000 0.000
N 392 392 392 392 392 392 392 392
*. Correlation is significant at the 0.01 level (2-tailed). Source: Own Survey Data (2023)
4.5 Results on Multiple Linear Regression Analysis

Regression is a technique that can be used to investigate the effect of one or more factors on
an outcome variable. That is, it allows us to make statements about how well one or more
independent variables predict the value of a dependent variable. The variables considered as
factors were entered into regression analysis to determine their relative importance in
contributing to the customer loyalty. Multiple linear regression Analysis is used to ascertain
the extent of potential factors: Service Quality (SQ), Satisfaction (S), switching cost (SC),
Complaint handling (CH), Commitment (C), Trust and Bank image (BI). Thus, a linear
regression model of customer loyalty as a dependent variable and seven (7) dependent
variables was fitted.
29
4.5.1 Multicollinearity Test Results
Multicollinearity exists when there is too highly correlation between two or more predictors
or factors in a regression model. Multicollinearity poses a problem only for multiple
regressions because it involves more than two predictors. Perfect collinearity exists when at
least one predictor is a perfect linear combination of the others.
The best method of checking Multicollinearity is to produce a Collinearity diagnostics with

the use of SPSS, and one of which is the variance inflating factor (VIF). The VIF indicates
whether a predictor has strong linear relationship with the other predictor(s). Although there
are no hard and fast rules about what value of the VIF should be a cause for concern,
(Gujarati, 2004) suggests that value of less than 10 is good value and he suggested that if the
average VIF is greater than 1, there is no Multicollinearity in the regression model.
Table 4.13: Checking Multicollinearity in the Regression Model

Collinearity Statistics
Model variables Tolerance VIF
Service Quality (SQ) 0.945 1.059
Satisfaction 0.688 1.453
Switching cost (SC) 0.739 1.353
Complaint handling (CH) 0.850 1.177
Commitment 0.655 1.527
Trust 0.639 1.564
Bank image (BI) 0.606 1.650
In this study as indicated in Table 4.13, the Variance inflation factors (VIFs) for the seven (7)
potential independent variables included in the regression equation is greater than 1 and less
than 10. For tolerance statistics, values above 0.1 and below 1 are worthy of concern.
Considering the regression models for this study the tolerance statistics values are greater
than 0.1 and below 1, VIF are all less than 10.0 for all predictors as indicated in tables 4.13 as
such no Multicollinearity is observed data to fit the required regression model.
4.5.2 Normality Test Result
Distribution of the data is another issue in this research, whether it is normal or not. Graphical
methods, such as histograms and normality plots, can be conducted to provide a visual
inspection of the normal distribution of a data set prior to further interpretation of the
regression analysis. A useful graph that we can inspect to see if a distribution is normal called
30
a P–P plot (probability–probability-plot). The normal probability plots were used to test the
normality of data. It is comparatively simple graphical device to study the shape of the
probability density function (PDF) of a random variable is the normal probability plot (NPP).
It uses values of the variable of interest on the horizontal axis and the expected value of this
variable on the vertical axis. If the fitted line in the NPP is approximately a straight line, one
can conclude that the variable of interest is normally distributed.
Hence, Figure 4.1 Histograms can provide important information about the shape of a
distribution. If most of the scores are gathered around the middle of the continuum and a
gradual, symmetric decrease of frequency on either side of the center score occurs, it is
considered a normal distribution.
Figure 4.2: Histogram of standardized residuals for normality test
Though no distribution can be considered “perfect”, as most of the scores are gathered around
the middle of the continuum and histogram is a bell-shaped, it is considered a normal
distribution.
4.5.3 Homoscedasticity Test
The assumption of Homostedacity indicates that the variance of errors is equal and constant
across all levels of the variables. Homoscedasticity is related to the assumption of normality
because when the assumption of normality is met, the relationship between the variables is
homoscedastic. Heteroscedasticity occurs when the variance of errors differs at different
values of the independent variables. This assumption requires evenly distribution of residual
31
terms or homogeneity of error terms throughout the data. According to Gujarati (2004) this
assumption can be assured by visual checking of a plot of the standardized residuals by the
regression standardized predicted rate. If the error terms are distributed randomly with no
certain pattern, then the problem is not detrimental for analyses.
Figure 4.3: Scatter plots of standardized residuals for homoscedasticity test

Figure 4.2 above shows that the standardized residuals in this research are distributed evenly
indicating heteroscedasticity is not a serious problem for this data.
4.5.4 Independence of Errors (Autocorrelation) Test Result
This Linear regression assumption refers to that errors in regression are independent; this
assumption is likely to be met if the Durbin–Watson statistic is close to 2 and between 0 and
4. The Durbin–Watson statistic test for this study found to be 0<1.530<4 (see table 4.14
below) which indicate the assumption of independence of errors is met. Thus, the value of
Durbin Watson is close to 2 indicates there is no violation of Autocorrelation.
4.5.5 Linearity test
Linearity refers to the degree to which the change in the dependent variable is related to the
change in the independent variables.
32
Figure 4.4: P-P plot of residuals to test linearity
From the above figure 4.3 the scatter plot of residuals shows no large difference in the spread
of the residuals as you look from left to right on figure 4.3; This result suggests the
relationship we are trying to predict is linear. Therefore, there is no problem of linearity.
4.5.6 Regression Model Fitting Summary and Coefficients
Table 4.14: Multiple Regression Analysis Model Summary Result
Model Summaryb
Modela R R Square Adj. R Square Std. Error Durbin-Watson
1 0.778a 0.605 0.598 0.45726 1.530
a. Predictors: (Constant), Bank image , Service quality , Switching cost , Complaint
handling , Commitment, Satisfaction, Trust
b. Dependent Variable: Customer Loyalty (CL)
From the table 4.14 above, it has been seen that R value is 0.778. Therefore, R value (77.8%)
for the overall potential seven (7) factors affecting customer loyalty, suggested that there is a
strong effect of independent variables on the customer loyalty (CL). From the Table 4.14
above, it can also observed that the coefficient of determination i.e. the R-square (R 2) value is
0.605, which representing that 60.5% of the total variation of the customer loyalty (CL) is due
to the factors Service Quality (SQ), Satisfaction (S), Switching cost (SC), Complaint handling
(CH), Commitment (C), Trust and Bank image (BI); which in fact, is a strong explanatory
power of regression and the other unexplored variables may explain the variation in
customer loyalty which accounts 39.5% of it. The researcher concludes that about 60.5% of
33
the portion of the dependent variable (customer loyalty: CL) is explained by the seven
determinants that are included in this thesis.
Table 4.15: ANOVAa Table of Regression Analysis Result
Modelb Sum of Squares Df Mean Square F Sig.
1 Regression 123.019 7 17.574 84.052 0.000b
Residual 80.289 384 0.209
Total 203.308 391
a. Dependent Variable: Customer Loyalty (CL); b. Predictors: (Constant), Bank image , Service quality ,
Switching cost , Complaint handling , Commitment, Satisfaction, Trust
The F-test is used to test the impact of overall explanatory power of the whole model, or the
joint effect of all explanatory variables as a group. (i.e. testing the overall performance of the
regression coefficients). It measures the statistical significance of the entire regression
equation rather than each individual coefficient as the beta value is designed to do. The
greater the value of F-statistics indicates that the variables included in the model have
together a significant effect on the dependent variable, and the model has a high explanatory
power. From the ANOVA Table 4.15, it is identified that the value of F-statistics is 84.05 and
is significant as the level of significance is less than 5% (p=0.000<0.05). This indicates that
the overall model was reasonable fit and there was a statistically significant joint effect of the
independent variables (Service Quality (SQ), Satisfaction (S), Switching cost (SC), Complaint
handling (CH), Commitment (C), Trust and Bank image (BI)) on the dependent variable
(customer loyalty: CL).
Table 4.16: Regression coefficient of the fitted model
Unstandardized Standardized
Model Coefficients Coefficients T Sig.
B Std. Error Beta
(Constant) 0.386 0.204 1.889 0.060
Service Quality (SQ) 0.071 0.033 0.072 2.185 0.030*
Satisfaction 0.219 0.038 0.223 5.766 0.000*
Switching cost (SC) 0.242 0.035 0.255 6.834 0.000*
Complaint handling (CH) 0.050 0.039 0.045 1.288 0.198
Commitment 0.169 0.035 0.190 4.716 0.000*
Trust 0.166 0.035 0.189 4.716 0.000*
Bank image (BI) 0.181 0.039 0.189 4.582 0.000*
a. Dependent Variable: Customer Loyalty (CL); * shows that the variables are statistically significant at 5%.
34
The regression coefficients are the slopes which can explain the relative importance of
explanatory variables. These coefficients are obtained from regression analysis after all the
explanatory variables are standardized. As illustrated in table 4.14 above the value of
adjusted R square is 0.598 which indicated about 60.0% of changes in customer loyalty (CL)
can be accounted for by the seven factors but the remaining change in customer loyalty (CL)
may be accounted for variables other than the variables included in this study with different
sample size of respondent customers.
The above table 4.16 also depicts the extent to which each independent variables influence
the dependent variable individually. The relative importance of the seven (7) potential factors
(independent variables) in contributing to the variance of the customer loyalty (CL)
(dependent variable) was explained by the unstandardized Beta coefficient. The beta values
of the independent variables i.e. Service Quality (SQ), Satisfaction (S), Switching cost (SC),
Complaint handling (CH), Commitment (C), Trust and Bank image (BI) showing the effects
on the dependent variable (customer loyalty) are -0.071, 0.219, 0.242, 0.050, 0.169, 0.166
and 0.181, respectively.
The result obtained from the regression analysis showed that Switching cost (SC) followed
by Satisfaction (S) had more significant effect and statistically meaningful when compared
with the other potential factors in terms of enhancing customer loyalty. This can also be
understood as a certain improvement on Switching cost (SC) and Satisfaction (S) of the bank
would boost customer loyalty (CT) by 0.242 and 0.219, respectively. Service quality (SQ) had
a significant positive effect on customer loyalty. Moreover, Satisfaction (S), switching cost
(SC), Commitment (C), Trust and Bank image (BI) had a significant positive effect on
customer loyalty. Thus, of all factors, six determinant factors considered independent
variables were statistically significant effect on customer loyalty. However, Complaint
handling (CH) has no statistical significant relationship with and no effect on customer
loyalty (CT).
4.6 Hypotheses testing results
Hypothesis testing is based on unstandardized coefficients beta and P-value to test whether
the hypotheses are rejected or not. At this point using this multiple regression coefficient
results (Table 4.16), the proposed seven (7) hypotheses for this study were tested as follows:-
35
H a 1 : Customer’s perceived quality of banking services positively related and signficanly
customer loyalty
The result of multiple regression analysis in Table 4.16 above clearly indicates that Service
quality (SQ) has significant effect on customer loyalty, since (p<0.05). Besides, the value of
beta (β = 0.071) shows the small positive effect of Service quality (SQ) on customer loyalty.
The above result is supported by Martin and Quintana, (2004), which Service quality (SQ)
has a positive and significant indirect /direct effect on customer loyalty. Therefore, H a 1 is
accepted
H a 2 : Satisfaction has positive correlation and significant effect on customer loyalty
The result of multiple regression analysis in Table 4.16 above clearly indicates that customer
satisfaction has significant effect on customer loyalty, since (p<0.05). Besides the value of
beta (β=0.219) shows the positive effect of Satisfaction on customer loyalty. This result is
consistent with Bilal, et’al (2010) and Mesay (2013). Therefore, H a 2 is accepted.
H a 3 : Switching cost (SC) has positive correlation and significant effect on customer loyalty
The result of multiple regression analysis in Table 4.16 above clearly indicates that Switching
cost has significant effect on customer loyalty, since (p<0.05). Besides the value of beta
(β=0.242) shows the positive effect of Switching cost on customer loyalty. Phong (2017),
which Switching cost has a positive and significant effect on customer loyalty, supports the
above result. Therefore, H a 3 is accepted.
H a 4 :Complaint handling (CH) has positive relation and significant effect on customer
loyalty in the Dashen Bank at Dessie City branches. The result of multiple regression
analysis in Table 4.16 above clearly indicates that Complaint handling (CH) has no
significant effect on customer loyalty, since (p>0.05). The above result is contradicting the
findings of Golrou (2008), which showed Complaint handling (CH) has a positive and
significant effect on customer loyalty. Therefore, H 04 is accepted
H a 5 : Trust has positive correlation and significant effect on customer loyalty
The result of multiple regression analysis in Table 4.16 above clearly indicates that trust has
significant effect on customer loyalty, since (p<0.05). Besides the value of beta (β = 0.166)
shows the positive effect of trust on customer loyalty. Mesay (2012) and Magasi (2016) that
trust has a positive and significant effect on customer loyalty support the above result.
Therefore, H a 5 is accepted
H a 6 : Bank Image (BI) has positive relation and significant effect on customer loyalty
The result of multiple regression analysis in Table 4.16 above clearly indicates that Bank
36
image has significant effect on customer loyalty, since (p<0.05). Besides the value of beta
(β=0.181) shows the positive effect of bank service image on customer loyalty. The above
result is supported by (Client Heartbeat, 2015) and Tweak Your Biz 2017), that bank service
image has a positive and significant effect on customer loyalty. Therefore, H a 6 is accepted
H a 7 : Commitment has positive relation and significant effect on customer loyalty

The result of multiple regression analysis in Table 4.15 above clearly indicates that
commitment has significant effect on customer loyalty, since (p<0.05). Besides the value of
beta (β=0.169) shows the positive effect of commitment on customer loyalty. Bilal, et’al.,
(2010) stated that commitment has a positive and significant effect on customer loyalty
supports the above result. Therefore, H a 7 is accepted
Table 4.17: Summary of hypothesis testing

Hypothesis Result P-value
H a 1 : Service quality has positive relation and significant effect on CL Accepted 0.030*
H a 2 : Satisfaction has positive correlation and significant effect on CL Accepted 0.000*
H a 3 : Switching cost (SC) has positive correlation & significant effect on CL Accepted 0.000*
H a 4 : Complaint handling has positive relation and significant effect on CL Rejected 0.198
H a 5 : Trust has positive correlation and significant effect on customer loyalty Accepted 0.000*
H a 6 : Bank Image (BI) has positive relation and significant effect on CL Accepted 0.000*
H a 7 : Commitment has positive relation and significant effect on CL Accepted 0.000*

Source: Own Survey Data (2023); * is showing significant effect
The respondent customers stated that improving bank service image and customers’
satisfaction, minimizing cost of services; developing high commitment would boost the
customer loyalty in Dashen Bank.
37
CHAPTER FIVE
5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Summary of Findings
This study has descriptive, correlation and regression analyses findings. Out of the total 397
questionnaires that were distributed to Dashen Bank customers, 392 (98.0%) of them were
correctly filled and returned. The reliability measure, Cronbach‘s Alpha, for each component
of the questionnaire and the entire questionnaire was greater than 0.6. Cronbach's Alpha
equals 0.730 for the entire questionnaire, which indicates very good reliability of the entire
questionnaire. The majority of the customer respondents were 254 (64.8%) male. The
majority of the customer respondents 188 (48.0%) were married. The majority of the
customer respondents 221 (56.4%) were opened saving (deposit) account. The sample
customer respondents are largely dominated by respondents who are at the age below 21
years. The majority of the sample customers were completed high school, which accounted
112 (28.6%). The majority 142 (36.2%) of the sample customers were stayed for 11-15 years
as customers in Dashen Bank.
The correlation analysis indicated that strong/weak and statistically significant positive
correlation was found between all potential factors and customer loyalty. Service Quality
(SQ) and customer loyalty (r = 0.134, p-value < 0.05) has weak positive correlation,
Satisfaction (S) and customer loyalty (r = 0.557, P-value < 0.05) has strong positive
correlation, Switching cost (SC) and customer loyalty (r = 0.546, P-value < 0.05) has strong
positive correlation, Complaint handling (CH) and customer loyalty (r = 0.285, P< 0.05) has
weak positive correlation, commitment (C) and customer loyalty (r = 0.557, P<0.05) has
strong positive correlation, Trust and customer loyalty (r = 0.565, P< 0.05) has strong
positive correlation, and Bank image (BI) and customer loyalty (r = 0.565, P-value <0.05) has
strong positive correlation. Thus, all the seven (7) factors had positive relationship with
customer loyalty.
These means, these seven variables Service Quality (SQ), Satisfaction (S), Switching cost
(SC), Complaint handling (CH), Commitment (C), Trust and Bank image (BI)) are going in a
similar direction; they are positively related with customer loyalty and their correlation
coefficients fall in strongly and moderate degree of association.
In this study there are seven determinants of customer loyalty. These are customer
satisfaction, service quality, switching cost, bank service image, customer complaint
handling, commitment and trust. The regression analysis model summary, R squared was
38
found to be 0.605. This value indicates that 60.5% of the total variation in customer loyalty
can be predicted from the potential seven (7) variables considered. Of all seven determinants,
only six (6) determinant factors are significantly influence customer loyalty. Standardized
beta coefficients showed the magnitude of those six (6) independent variables to predict
customer loyalty of the bank. Meaning, the significance tests of the six explanatory variables
indicate the explanatory variables are significant with p-value (P<0.05) for predicting
customer loyalty measured by observed items.
The six determinants significantly affecting customer loyalty were Service Quality (SQ),
Satisfaction (S), Switching cost (SC), Commitment (C), Trust and Bank image (BI). The
findings showed that switching cost (SC) followed by satisfaction (S) had more significant
effect and statistically meaningful when compared with the other potential factors in terms of
enhancing customer loyalty.
5.2 Conclusion
The objective of this research was to examine the effect of different factors on customer
loyalty at the Dashen Bank at Dessie City administration branches. Questionnaire was used to
gather the required data for the study from customers of the bank. The result indicates that
Dashen Bank has very young and energetic customers. Almost half of the respondent
customers in the Dashen Bank were educated above high school.
Regression analysis and correlation coefficient indicate that there is a statistically significant
relationship between customer loyalty and the seven potential factors affecting customer
loyalty. Especially, Service Quality (SQ), Satisfaction (S), Switching cost (SC), Commitment
(C), Trust and Bank image (BI) have been found to have significant effect on customer
loyalty of the case company. Moreover, Service Quality (SQ) has a significant positive
relationship and effect on customer loyalty at the Dashen Bank. These seven factors of
customer loyalty account for about 61% of the variation of the customer loyalty of the bank
under study.
Thus, six (6) determinants, Service Quality (SQ), Satisfaction (S), Switching cost (SC),
Commitment (C), Trust and Bank image (BI) were affecting customer loyalty at Dashen
Bank in Dessie City five centers.
5.3 Recommendations
The results of the study showed that all the expected seven (7) factors were significantly
correlated with customer loyalty of the Dashen Bank. Thus, based on the finding and the
conclusion reached, the following suggestions are forwarded to the respective body. To be
39
competitive enough and to sustain in a changing market and remain profitable, the Dashen
Bank at Dessie branches would need to re-evaluate their customers’ interest to achieve
customer loyalty. The employees and managers should attempt to enhance and maintain long-
term relationship with their customers. Taking the advantage of maintain a relationship with
existing customers than acquiring new ones. The customers should believe firmly that their
respective banks deliver what they promise in their advertisement and that they were not
opportunistic however, honest. The managers ought to often take the feedback of the
customers and will incorporate the changes desired by the customers in their feedbacks. The
second most essential factor that influences customer loyalty is customer satisfaction.
Therefore, managements in banking industry should focus on customer satisfaction.
Management should ensure service offered by the bank must matches or exceeds customer
expectation. As customers are satisfied with the service the more they tend to become loyal
customer. The study also reveals a significant relationship between service quality,
commitment, and trust and customer satisfaction with loyalty. Therefore, it is highly
recommendable for the bank to work on service quality, commitment, trust and customer
satisfaction, especially, on satisfaction and service quality because their effect on customer
loyalty is larger.
40
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44
APPENDIX 1: QUESTIONNAIRE USED FOR THE STUDY
WOLLO UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT (MBA PROGRAM)
QUESTIONNAIRE USED FOR THE STUDY
Dear respondent, Customer at Dashen Bank!

My Name is Dibekulu Abebaw. I am a postgraduate Student at Wollo University,
conducting research entitled “Factors Affecting Customer Loyalty Towards Banking
Industry, In Case of Dashen Bank, Dessie Town” to partially fulfill the requirements for
the award of a Master’s degree in Business Administration (MBA). To this end, your kind,
honest, and unbiased response will significantly contribute to finding practical and possible
solutions to the problem. Therefore, your honest responsiveness is strongly required to make
the research valuable and reliable. This is purely an academic exercise, so any information
given would not be disclosed to the third party.
Section A: (Put a ‘Tick √’ mark on the space provided)
1). Gender: Male Female
2). Age group:
Below 21 years old 21 to 34 years old
35 o 49 years old 50 to 64 years old
65 years and older
3). Marital Status:
Single (never married) Married
Widowed Divorced
4). Please indicate the highest level of education you have attained
Never been to school Completed elementary school
Completed high school Completed Certificate
Completed Diploma Obtained a bachelor’s degree
Postgraduate degree (master's or doctorate)
5). How long have you been using Dashen Bank's service?
Less than 1 year r 1-5 years 6-10 years 11-15 years Above 15
6). Please, indicate your Occupation
45
Businessman Employee Student Other
Section B: Please, respond by choosing the best-fitted number in the box that indicates your
extent of agreement or disagreement with each statement. The value of each answer will be
weighted as 1 = Strongly disagree (SD), 2 = Disagree (D), 3 = Neutral (N), 4 = Agree (A),
and 5 = Strongly agree (SA). Please, circle or highlight the number of your answer.
S. Variables and Items SD D N A SA
N. CUSTOMER SATISFACTION
1 I am satisfied with the decision to choose this bank 1 2 3 4 5
2 This bank leaves me with a pleasant impression 1 2 3 4 5
3 I want to return to this bank in the future 1 2 3 4 5
4 I will advise about this bank to my friends 1 2 3 4 5
5 In comparison to other banks, I consider this bank and 1 2 3 4 5
its services successful.
SWITCHING COST SD D N A SA
1 To change to another bank involves investing time in 1 2 3 4 5

searching for information about other banks
2 To change to another bank will lose a lot of personal
1 2 3 4 5
relationships with current bank employees & management
3 According to my experience, I am satisfied with the 1 2 3 4 5
services delivered by this bank.
4 To change to another bank involves much effort in 1 2 3 4 5
deciding which other bank to use
5 To change to another bank involves a risk in choosing 1 2 3 4 5
another bank which might turn out not to satisfy me
6 To change to another bank involves long-distance 1 2 3 4 5
SD D N A SA
COMPLAINT HANDLING
1 There is a proper complaint-handling system for the bank 1 2 3 4 5
2 The bank tries to avoid potential complaints related to the

1 2 3 4 5
service you use.
3 The employees listen carefully whenever you complain 1 2 3 4 5
The bank tries to solve clear complaints before they create
1 2 3 4 5
4 problems
5 The bank can openly discuss solutions when problems arise. 1 2 3 4 5
46
SD D N A SA
CUSTOMER COMMITMENT
1 The bank makes several service adjustments to suit my 1 2 3 4 5
needs
The bank offers personalized services to meet different 1 2 3 4 5
2 customer needs differently
3 The bank is flexible when its services are changed 1 2 3 4 5
4 The bank is flexible in serving my needs 1 2 3 4 5
5 The employees give you special attention 1 2 3 4 5
CUSTOMER TRUST SD D N A SA
1 The bank is very concerned with the security of transactions 1 2 3 4 5
2 This bank keeps my information confidential 1 2 3 4 5
3 This bank is honest 1 2 3 4 5
4 This bank is reliable 1 2 3 4 5
5 The bank fulfills its obligations to customers 1 2 3 4 5
6 I have confidence in the bank‘s services 1 2 3 4 5
BANK IMAGE SD D N A SA
1 The queue waiting time is attractive 1 2 3 4 5
2 There is a Personalized service for different customers 1 2 3 4 5
3 The convenience of bank equipment is nice 1 2 3 4 5
4 There is a good Humanization of the services 1 2 3 4 5
5 Locations distribution of the bank‘s services in every 1 2 3 4 5
branch is fulfilled
6 The bank‘s working Hours are convenient 1 2 3 4 5
7 Staff expertise in handling customer service is nice 1 2 3 4 5
SERVICE QUALITY SD D N A SA
1 Ease of depositing & withdrawing money from any branch
1 2 3 4 5
2 Continuous and ordered functionality of equipment 1 2 3 4 5
such as computer and printer etc...
3 The staff takes an interest in solving the problem 1 2 3 4 5
4 The Bank Maintains error-free records 1 2 3 4 5
5 Information provided by bank employees is clear and 1 2 3 4 5
understandable
CUSTOMER LOYALTY SD D N A SA
47
1 I would always recommend my bank to others 1 2 3 4 5
2 It would be difficult to change my positive beliefs 1 2 3 4 5
about this bank
3 I would always use this bank‘s service 1 2 3 4 5
4 I am a loyal customer to this bank 1 2 3 4 5
5 I do not like to change to another bank for any reason 1 2 3 4 5
6 My good preference for this bank will not change 1 2 3 4 5
Each time I want to make any financial transaction, this 1 2 3 4 5
7 bank is my first choice
If you have additional comments on how Dashen Bank could improve its service delivery
and invest in customer loyalty, please, write
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Thank you very much for your cooperation!!
48

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WOLLO UNIVERSITY

COLLEGE OF BUSSINESS AND ECONOMICS

FACTORS AFFECTING CUSTOMER LOYALTY TOWARDS

BY: DIBEKULU ABEBAW

FACTORS AFFECTING CUSTOMER LOYALTY TOWARDS

A THESIS SUBMITTED TO WOLLO UNIVERSITY COLLEGE OF

Name: Dibekulu Abebaw Signature: ………………...

Place: Wollo University, Dessie

Date of Submission: January, 2024

Name of chairman Signature Date

_____________ ________________ ____________

Dr. Mengistu G. ________________ ____________

Name of Internal Examiner Signature Date

____________________ ________________ ___________

____________________ ________________ ______________

_________________ ________________ _______________

Postgraduate Directorate Date Signature

Mengistu Guliti (Ph.D.)

Table 4.1: Response rate 18

Table 4.2: Validity and Reliability Analysis............................................................................19

ATM = Automatic Teller Machine

1.7 Significance of the study

Customer loyalty is a program that awards different kinds of benefits to a customer in

Customer complaint handling

Brand Image (Reputation)

Figure 2.1 -: Conceptual framework of the study

3.8. Validity and Reliability Test

4.3 Results of descriptive analysis

Table 4.5: Satisfaction related items that affect customer loyalty

In comparison to other banks, I

Source: Own Survey Data (2023)

Source: Own Survey Data (2023)

This bank is reliable

4.3.3 Measurement of customer loyalty

4.4 Results on Pearson Correlation Analysis

4.5 Results on Multiple Linear Regression Analysis

The best method of checking Multicollinearity is to produce a Collinearity diagnostics with

Table 4.13: Checking Multicollinearity in the Regression Model

Figure 4.2: Histogram of standardized residuals for normality test

Figure 4.3: Scatter plots of standardized residuals for homoscedasticity test

H a 7 : Commitment has positive relation and significant effect on customer loyalty

Table 4.17: Summary of hypothesis testing

H a 2 : Satisfaction has positive correlation and significant effect on CL Accepted 0.000*

H a 7 : Commitment has positive relation and significant effect on CL Accepted 0.000*

Dear respondent, Customer at Dashen Bank!

1 To change to another bank involves investing time in 1 2 3 4 5

2 The bank tries to avoid potential complaints related to the

and invest in customer loyalty, please, write

Thank you very much for your cooperation!!

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_

Dr. Mengistu G. ____

__________ _

______

___ _