Academic journal article International Journal of Marketing Studies

Factors Influencing the Retention of Customers of Ghana Commercial Bank within the Agona Swedru Municipality

Academic journal article International Journal of Marketing Studies

Factors Influencing the Retention of Customers of Ghana Commercial Bank within the Agona Swedru Municipality

Article excerpt

Abstract

Customer retention is an important element of any banking strategy in today's increasingly competitive environment. This study examined the impact of retention factors that influence consumers' decisions to stay with Ghana Commercial Bank within the Agona Swedru Municipal area. The descriptive survey design was used for the research. Simple random sampling and self administered questionnaires were utilised to obtained data from 480 customers of the bank. Correlation and regression techniques were used to examine the relationships between customer satisfaction, service quality, customer trust, customer commitment, switching barrier factors and customer retention. The results revealed that on the whole, switching barrier emerged as the most significant factor influencing customer retention. This was followed by customer commitment and customer trust. The study recommends that management of the bank should pay attention to customer commitment by investing more into customer relationship marketing strategies that can increase customers' dependency and inhibit switching.

Keywords: relationship marketing, customer commitment, customer retention, switching cost, customer trust

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1. Background to the Study

One of the ways by which every firm can survive is through effective relationship marketing strategies. The traditional marketing approach advocates the marketing mix principles and the quest for market share dominance through mass marketing techniques and a focus on new customer acquisition. This approach has guided managers for decades in planning and implementing their strategies. However, several authors have drawn attention to the inadequacies of the traditional marketing approach, which led to the birth of relationship marketing. According to Kotier (2001), relationship marketing has the aim of building long-term mutually satisfying relations with key parties; customers, suppliers, distributors, etc., in order to earn and retain their long-term preference and business.

Customer retention has been well emphasised in theories such as Richard's (1996) conversion model, Sharma and Patterson's (2000) relationship model, Ranaweera and Neely's (2003) holistic approach. All these theories seem to be making some statements, that customer retention brings benefits such as employee retention and satisfaction, better service, lower cost, lower price sensitivity, positive word-of-mouth, higher market share, higher efficiency and higher productivity.

Studies have shown that it is far more expensive to attract new customers than to retain existing ones. Fornell and Wernerfelt (1987) for example, emphasised that, marketing resources may be better spent on keeping existing customers than acquiring new ones. Also there have been several studies emphasising the significance of customer retention in the banking industry (Dawkins & Reichheld, 1990; Reichheld & Kenny, 1990; Marple & Zimmerman, 1999). In addition, Cohen, Gan and Choong (2006) posit that retained customers bring a lot of benefits to banks.

The banking industry has grown from few institutions primarily involved in deposit acceptance and trade finance into a complex multi-player markets where large number of banks are operating with various technology, products and services activities. This has created a competitive environment which is geared towards working more at increasing market share in terms of retaining customers. However, Ghana Commercial Bank (GCB) can only survive, compete effectively and protect its market share in the midst of the current competition in the banking industry, if it will take all necessary steps to invest and retain its customers.

Various studies have been carried out in the developed countries regarding customer retention. However, only few studies have been carried out regarding customer retention in the developing world, especially in the banking sector and in Ghana (Appiah-Adu, 1999). …

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