Factor affecting customer

loyalty in retail banking

Presenter: Wong Yan Yee

Ng Kai Xin
Ho Suk Kuan
Michelle Lim Pei Wen
Loh Su Hui
Tan Kah Hou
 Introduction
Why do your customer leave you?
Death- 1%
Move or relocating-3%
Buy from friend-5%
Sold by competitor-9%
Price-14%
Perceived indifference-68%
(Webb, C. R. ,2009)
 Research Background
• Retail banking refers to banking in which
banking institutions execute transactions
directly with customer, rather than
corporation or other banks.
(“Retail Banking,”2010)
• 4 types- Commercial bank
Community development bank
Private bank
Savings bank
 Problem Statement
• To what extent has the service quality,
relationship banking, online channel,
appropriate technology on customer
loyalty in retail banking
• Sub problem- Rude services
- Ignore customer feedback
 Research Objectives
General objective
•Identify the factor that affecting customer loyalty in retail
banking

2 Specific Objectives

•To determine whether there is a significant positive relationship

between service quality and customer loyalty
•To determine whether there is a significant positive relationship
between relationship banking and customer loyalty
•To determine whether there is a significant positive relationship
between availability of online channel and customer loyalty.
•To determine whether there is a significant positive relationship
between appropriate technology and customer loyalty 
Research Question
Is there any significant relationship between service
quality, relationship banking, online channel,
technology(independent variables) and customer
loyalty(dependent variables)?
Hypothesis of the Study
H1: There is a significant positive relationship between
service quality and customer loyalty
H2: There is a significant positive relationship between
relationship banking and customer loyalty
H3: There is a significant positive relationship between
availability of online channel and customer loyalty.
H4: There is a significant positive relationship between
appropriate technology and customer loyalty
Significance of the
study
• customer loyalty may boost market
share and profitability

Conclusion
 Literature review
• prevents researchers from copying previous
researchers
• answer all research questions
• clarification of problem
• develop understanding
• Improvement
“ Service loyalty refers the degree to
which a customer exhibits repeat
purchasing behavior from a service
provider, possesses a positive attitudinal
disposition toward the provider, and
considers using only this provider when a
need for this service arises ”
Gremler and Brown (1996)
 Review of Literature
• rival in marketing increase gradually and makes
existing loyalty customers difficult (Anderson &
Ponnalovu, 2002)
• online banking is an important distribution channel
(Daniel Singer, 2008)
• customers who receive the relationship banking offer
are more loyalty (Louis Johannes, 2005)
• internet based application plays an important role for
progressing and delivering information (Ram N.
Acharya, 2007)
• design on the technology should be flexible and user-
friendly (Dabholkar ,1994)
 Theoretical Models
Relationship
Online channel
banking H2

H3
Banking
H1 technology
Customer
Service quality
loyalty H4

• How service quality affects the customers loyalty

• How is the relationship banking affects customers loyalty
• How online channel affects customers loyalty
• How banking technology affects customer loyalty
 Conceptual Framework

Service quality

Relationship
banking Customer
loyalty

Online channel

Banking
technology

Independent variables Dependent variables

 Hypothesis Development
• H1: There is a significant positive relationship
between service quality and customer loyalty
• H2: There is a significant positive relationship
between relationship banking and customer loyalty
• H3: There is a significant positive relationship
between availability of online channel and customer
loyalty.
• H4: There is a significant positive relationship
between appropriate technology and customer loyalty
 Research Methodology - Introduction

• Business research is basically the applying

scientific methods to find the answer or
proof of the problems and also hypothesis.
• Firstly, we will specify the type of
research.
• Secondly, we will continue to specify our
data collection methods.
• Explain on the target population, sampling
frame and sampling location, sampling
elements, sampling technique, and also
sample size.
 Research Design

• Qualitative research mostly used in

exploratory research and the researcher going
to observe and interpret their data from what
they observed.
• We choose quantitative method in our study.
• By using quantitative methods, the results are
more objective since we do not involve in
observer.
• This is causal research since we want to find
out the cause-and-effect relationship on
customer loyalty in the retailing bank industry.
 Data Collection Methods

3.2.1 Primary Data

•Primary data is those data that we obtained
“first hand”. This means that we obtained the
data by ourselves.
•Questionnaire
3.2.2 Secondary Data
•Secondary data are gathered and recorded by
someone else; they are already assembled and
usually are historical.
•Databases, text books, reference book, and some
articles .
 Sampling Design

• The process of sampling involves using

a portion of a population to make
conclusions about the whole population.
• Reasons for having sampling :
• Pragmatic reasons- We need to be
efficient in term of money and time
• Accurate and Reliable results- It
might be inaccurate when conducting a
research on large population
 Target Population

• Target population is our concern for

identify the right person for this
research.
• Those always involve in the retailing
bank and understand the procedures
dealing with banking.
• Students , housewives, professional,
working adults, businessmen or business
women.
 Sampling Frame
&
Sampling Location

Target population 

Sampling frame
Probability or nonprobability sampling method

Plan procedures

Sample size

Select actual sampling units 

Conduct research
Sampling frame (working population)
•Sample may be drawn
•Banking customer-students,
housewives, and academic workers,
working adults, businessmen and also
business women
 Sampling

• Kampar area
• Kuala Lumpur areas
• Different areas (working adults ,
businessmen or business women )
 Sampling Elements
 Student(younger group )
• Deal with bank (0nline)
• Different view (retailing bank industry)
 Academic workers & adult workers
• Knowledge (bank industry )
• Information (royalty in that bank industry)
 Businessmen and businesswomen (Kampar
areas )
• Experiences (dealing with the retailing bank
industry)
 Sampling Technique
 Probability sampling
• Population is known
• Nonzero probability of selection
• Probability sampling
 Nonprobability sampling
• Population is unknown
• Personal judgment or convenience
 Four methods of non-probability sampling

 Convenience sampling
 Judgment sampling
 Snowball sampling
 Quota sampling
Five types of probability sampling
• Simple random
• Systematic sampling
• Stratified sampling
• Cluster sampling
• Multistage sampling

Probability sampling
- Combination method of simple random sampling
and cluster sampling
 Sampling size

30 respondents have been

selected for the pilot
test
 Research Instrument
According to Micuda Ion dan, service
quality can divided into five
dimensions which are :

• Tangible
• Reliability
• Responsiveness
• Assurance
• Empathy
According to Nicolae A.P., philosophy of
relationship marketing relays on gaining
competitive advantages for the company.

Four dimensions of relationship banking

• Management
• Instrumental
• Informational
• organizational
According to GIS & Geospatial
Technology,
they provide seven technology dimensions:

• Utility service based

• Custom application services
• Engineering
• R & D services
• Enterprise application services
• IT infrastructure management
• Business process outsourcing
Harry Gold outline four dimensions in
online channel

• Targeting
• compensation’
• Advertising units
• Metrics
 Construct Measurement
• Measures the variables in this study would affect
the relationship of customer loyalty in retailing
banking
• Operationalization is the process of identifying
scales that correspond to variance in a concept
• Nominal scale - most elementary level of
measurement
• Interval scale - having both nominal and ordinal
properties and also differences in quantities of a
concept
• Ordinal scale - a ranking scales
 Data Processing
• After getting questionnaire fill by
respondents, we will coded, key in, and edit all
data.
• Checking for any blank answers and
inconsistencies
• Editing process include double check the
questionnaires to confirm no missing data and
ensure respondents are understand questions
in our questionnaire
• Enter data into SPSS version 16.0 to help us
analysis data in later stage
 Data Analysis
Descriptive Analysis
• Maximum
• Minimum
• Mean
• Standard deviation
• Variance
Age of Respondents
Age’s frequency distribution
Frequency of Age
Occupation of Respondents
Respondents’ occupation frequency distribution
Frequency of Respondents’ occupation
Gender of Respondents
Respondents’ gender frequency distribution
Frequency of Respondents’ gender
Respondents’ choice of bank
Respondents’ choice of bank frequency distribution
Frequency of Respondents’ choice of bank
Years of Respondents become customer of bank
Years of Respondents become customer of bank frequency
distribution
Frequency of Years of Respondents become customer
of bank
 Scale Measurement

• Reliability consistency & stability

• Low reliability Problem checking

Variable of service quality
Variable of relationship banking
Variable of online channel
Variable of banking technology
 Inferential Analysis
Independent sample t-test between male and
female in retailing banking industry

: There is a significant difference of customer loyalty

between
male and female customers

: There is a significant difference of customer loyalty

between
male and female customers
Conclusion
References:
•Daniel S. , Albert A. & Babu M. (2008). Management innovation and cultural
adaptivity in international online banking. Retrieved March16, 2010, from
http://
www.emeraldinsight.com/Insight/viewPDF.jsp?contentType=Article&Filename=
html/Output/Published/EmeraldFullTextArticle/Pdf/0210310403.pdf
•Mohammad Suhainy Abdul Rahim. (2009). Service Quality, Customer
Satisfaction And Loyalty Towards JKR Malaysia. Retrieved March 22, 2010,
from 
http://dspace.fsktm.um.edu.my/bitstream/1812/550/1/Service%20Quality%2
0Customer%20Satisfaction%20and%20Loyalty%20towards%20JKR%20Malaysi
a%20(Mohammad%20Suhainy%20Abdull%20Rahim%20CGA%20060082).
pdf
•Ram N. Acharya & Albert Kagan (2007). Online banking applications and
community bank performance. Retrieved March16, 2010, from
http://www.emeraldinsight.com/Insight/viewPDF.jsp?contentType=Article&File
name=html/Output/Published/EmeraldFullTextArticle/Pdf/0320260603.pdf
•Retail Banking. (2010,March). Retrieved March 16,2010,from
http://en.wikipedia.org/wiki/Retail_banking
•Webb, C. R. (2009, December 30). Why do our customer leave us? Retrieved
February 6, 2010, from Ezine Article:
http://ezinearticles.com/?Why-Do-Our-Customers-Leave-Us?&id=3493881
Q&A