Magazine article Journal of Services Research

Primary Bank as a Measure of Brand Loyalty: An Empirical Study in Indian Retail Banking Context

Magazine article Journal of Services Research

Primary Bank as a Measure of Brand Loyalty: An Empirical Study in Indian Retail Banking Context

Article excerpt


At a time of intensive competition, rising profit pressures and evolving customer demands, banks are striving to achieve customer loyalty. Lots of importance is placed by commercial banks to increase loyalty. Banks are realizing that increased customer retention rates can enhance profits (Levesque and Mcdougall, 1996). The famous study by Reichald and Saser (1990) indicated that an increase in bank's retention rate by 5 percent could lead to an 85 percent increase in its profits. However, marketers consider attaining customer loyalty as the most challenging task. Therefore, building brand loyalty for their customers is the ultimate objective for marketer. It is, therefore, felt that drivers of loyalty will be of great relevance to marketers. Against this backdrop, the current study attempts to address fundamental questions related to customer loyalty.

Brand loyalty for banks has been viewed differently. It is considered as a feeling of commitment on the part of consumer to a product, brand and marketer. Various advantages are derived from a loyal customer. A loyal consumer is one that will stay with the service provider; is likely to purchase new products and is likely to recommend the bank's products (Fisher, 2001). In short, he/she is an excellent candidate for up selling and cross selling. While some view loyalty as an attribute ranging from repeat behavior to a life-long relationships; others relate with regard to cognitive and behavioral aspects. Cognitive loyalty refers to the future intention of repeat behavior and behavioral loyalty is the actually repeated behavior exhibited by customers.

Our study focuses on primary bank considering the advantages it offers to banks. The measure of Primary Bank was captured during customer interactions. Survey of bank customers in three bank branches in India served as the setting of the current study. Our study attempts to capture various factors that drive customer loyalty.


Traditionally, customer loyalty has been viewed as a multi-faceted behavioral construct that includes word of mouth, and cross buying (Liu and Wu, 2007). Enhancing customer loyalty offers several advantages in terms of increased revenue, higher profitability, low cost to serve, higher advocacy of the company by using positive word of mouth, less sensitive to competitive offers and further contributing to higher consumption (Reichheld and Sasser, 1990; Van del Poel and Larriviere, 2004; Colgate, Stewart and Kinsella, 1996; Dawes and Swailes 1999; Kamakura Kamakura, Ramaswami, and Srivastava, 1991). The study by Rust and Zahorik (1993) indicates that financial implications of attracting new customers may be five times as costly as keeping existing customers. The study by Capgemini (2012) indicates that despite having high satisfaction, 40 percent of customers are not sure whether they will remain with primary bank. So, there is a realization that focusing only on higher satisfaction is not sufficient.

Most previous studies increasingly focused on customer retention (Colgate, et al., 1996; Reichheld and Sasser, 1990; Storbacka, et al. 1994). Customer retention can be considered as a measure of relationship continuation and cross- buying. Primary bank is a relevant metrics for measuring customer loyalty in banking context. With the increased competition, it is observed that customers have the option of maintaining more than one bank account. Out of available banks accounts, customer treat primary bank as the major bank and generally keeps higher balance and conduct major transactions. Primary Bank is also referred to as main bank in research reports.

The research report on "Retail Banking in Asia: Pursuing Customer Loyalty" (2011) by Ernst and Young has underscored the importance of main banks. Advantages are derived by customers treating their banks as primary bank. The findings suggest that 80 percent of customers hold two products with a main bank and 26 percent of customers hold more than 4 products. …

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