FACTORS INFLUENCING CUSTOMER LOYALTY IN THE BANKING INDUSTRY FACTORS INFLUENCING CUSTOMER LOYALTY IN THE BANKING INDUSTRY
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Most banks believe they are in the finance industry and not in the service industry and that is why they tend to compete financially (i.e., Pricing) rather than on service quality. Respectfully, I disagree with this approach because it leads to low service quality in our banking industry which leads to low customer satisfaction. A customer is a heartbeat of a bank and it is evident that today customers have increasingly become so enlightened and aware of their importance. Hence, ignoring them in search of a competitive advantage can be suicidal for banks. And that is why I believe that the banking industry is more of a service industry than the financial industry and customers should be the priority.

The main objective of any bank is to maximize profits and to do so they must have a large pool of reliable customers. Due to globalization and advanced technology, most of the potential customers/existing customers are more knowledgeable about what banks offer. To satisfy the customers in today’s banking, banks need to offer more than just financial products. To make them stay, the banks need to satisfy their customers which will lead to customer loyalty and that lead to profitability. It is worth noting that loyalty should not be measured in sales only but in the customer’s engagements and brand advocates within their social circles and loyal customers are less likely to switch banks because of a price. For any bank to be successful, it is vital to maintain a high rate of customer loyalty because the costs of customer acquisition are much more than the costs of retention. The key to generating high customer loyalty is to deliver high customer value.

Currently, banks face challenges in retaining their customers for several reasons such as staff lack of knowledge and skills necessary to meet rapidly changing customer behaviours and stiff competition between them. So, the banks need to come up with unique strategies to attract and retain their customers. How can a bank retain its customers and turn them to be loyal? In this article, I will share three factors that influence customer loyalty in the banking industry:

  1. Quality Of Service — Quality of service plays a crucial role in influencing customer loyalty hence the need for the banks to ensure that customers are treated with respect, and humility all the time. A bank can differentiate itself from others by delivering high-quality service. The banks need to understand their customers and educate them about the products and services they provide and allow them to be heard. Also, the banks need to invest in training their employees in how to render excellent customer service, exhibit positive attitudes, and courteous practices towards the customers to promote high-quality service and enhance customer satisfaction. Moreover, banks should develop effective recruiting and hiring policies to ensure it hires qualified staff that are quality service-oriented. The bank should also have a 24hrs open communication channel (i.e., for example, call centres) with its customers to make sure customers can access relevant information about the products and services at any given time. In addition, the bank should create an effective and efficient customer complaints management system to ensure that customers’ complaints are handled promptly. Once the customer is satisfied with the quality of service, the image of the bank will improve hence the customers will continue to come back to the bank for more services and products.
  2. Brand Image — For a customer, a perceived brand is the evidence of a good quality of products and services so the brand image is extremely important for most customers whether to bank with you or not. Banks should strive to improve their image/brand in the society they operate in through such activities as participating in various Corporate Social Responsibility (CSR) projects. Brand image can impact the decision of the customer to continue to bank with you or not (i.e., be loyal to your organization or not) because customers want to associate themselves with a good brand. The process of creating a brand should be the responsibility of each employee of a bank as each one has a role to play to ensure the image of the bank is as influential as it can be.
  3. Customer Satisfaction — Customer satisfaction is one of the most important issues concerning banks therefore banks must provide diversified products and services that will meet the needs and expectations of different segments of the society they are serving. The bank needs to invest in its employees as they play a crucial role in ensuring customers are satisfied, treated well, and they are happy. As we know, “happy employees equal happy customers”, so to achieve thorough customer satisfaction, a bank must have satisfied employees by offering deserved numerations and benefits who, in return, will work extremely hard to meet the expectations of their customers. Loyal employees are happier and are engaged more in their work which will lead them to render excellent customer services, hence satisfying the customers and turning them into loyal ones.

I will wind up by reiterating that is very important for banks to retain their existing customers as the growth rate is shrinking and fierce competition in the banking industry. Also, we have seen how important it is for banks to deliver quality services to ensure survival in today’s competitive environment. Furthermore, banks should “take care” of their staff to achieve thorough satisfaction of their customers which will turn them loyal.

Written by Kelvin Mkwawa, MBA

Seasoned Banker

Email address: Kelvin.e.mkwawa@gmail.com

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Kelvin Mkwawa
Written by

Kelvin Mkwawa

Seasoned Banker|Business Strategist|Business and Products Development expert|Business Analyst

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