Critical evaluation of the factors in attracting and retaining customer relationship in the local banking industry

Abstract

Financial institutions must expand and maintain powerful relationships with customers in order to reach the eventual aim of customer satisfaction due to the fierce competition in the banking business. Customer relationship management (CRM) has therefore gained prominence in the service industries, particularly in the banking sector. Customer retention has been established to be crucial to the achievement of success for businesses that use relationship marketing. As businesses and customers gain deeper understanding of one another, relationship maintenance expenses decrease. Longer-term clients also make larger purchases and, if they are pleased with the services provided, they may spread the business’ good name by word of mouth. This research is original in its nature, being the first of its kind to investigate the factors related to attracting and retaining customer relationship in the local banking industry in Malta. The aims were accomplished by gathering information from bank customers through online questionnaires, and from bank professionals through online semi-structured interviews. Therefore, to collect primary data, the study used a closed-ended questionnaire which 127 respondents completed by choosing their preferences from a set of options given by the researcher. Meanwhile, four bank professionals - two representatives from BOV, another one from APS and lastly, one from MeDirect - were interviewed. Once the data was collected, it was analysed using a descriptive methodology and the results were presented in bar charts. Findings from the questionnaires and interviews indicated that transaction correctness, service delivery, customer service effectiveness, physical appearance of the bank, and branch locations’ convenience affected customer retention. Findings also revealed that the corporate image of banks, which is built on stability, familiarity, and reliability, affected client retention in banks. The study also found that most of respondents felt that customer satisfaction is determined by service excellence and product uniqueness. A moderately positive association between service quality and customer happiness was demonstrated via correlations. The study recommends that management implement customer satisfaction, customer retention, and anti-customer churn tactics. Another recommendation is that customer retention team be established by banks to track and manage problematic situations that influence client switching and retentio