Research Paper Details

Research Paper 1
Title: The Impact of customer satisfaction on customer loyalty and intentions to switch in
the banking sector in Malaysia.
Author: Anantha Raj A. Arokiasamy
Source: The Journal of Commerce, Vol. 5, No. 1 ISSN: 2218-8118, 2220-6043 Hailey
College of Commerce, University of the Punjab, PAKISTAN

Abstract:

In today’s volatile dynamic environment, top performing financial institutions are looking
into the demands of their customers avidly in order to survive and compete successfully.
Researchers all over the world have relentlessly emphasized on the utmost importance of
customer satisfaction, customer loyalty and retention as part of survival in the financial
world. This study attempts to find out the impact of customer satisfaction on customer
loyalty and their intentions to switch banks. Data were collected over a period of two weeks
using survey questionnaire from 165 walk-in customers who had accounts with the banks
serving in Ipoh, Perak, Malaysia. The data collected were then analyzed using SPSS.
Pearson correlation and multiple regression analysis were used to examine the correlation
between independent variables and dependent variable. The results of the study indicated
that there is a positive correlation between customer satisfaction and customer loyalty but
showed negative correlation with customer intentions to switch. Conclusions and
implications of the study are also discussed based on the analysis.
Introduction:
Banks are competing intensely in a highly competitive environment to offer quality
oriented services according to customers’ expectations. Researchers are studying various
key segments of banking sector like operations, service quality, employee satisfaction,
customer satisfaction, financing products, efficiency, financial performance to better
understand and serve the community at large. Numerous studies have highlighted the key
concept of quality services/products offered by the banks.
Customers became a centre for all banking activities due to increased competition for
greater market share. Focusing on customer satisfaction has been the key to increasing
service quality according to customers’ expectations in the banking sector (Zairi, 2000).
Hanson (2000) suggested that service quality shows the organization's ability to meet
customers' desires and needs. So organization must improve their services to meet the
customers' wants and requirements. It is found that customers' perception of service quality
is very important for managers to compete in the market (Hoffman and Bateson, 2002).
Since Malaysia’s independence in 1957, its financial landscape has gone through
tremendous changes. The first step in the revolutionary process was the gradual
deregulation of the financial sector (Bank Negara Malaysia), as at 31 August, 2007, there
were 10 domestic commercial banks and 16 foreign owned commercial banks operating in
Malaysia. Bank mergers, deregulation and increased competitive pressures have also
created dramatic changes in the Malaysian banking industry. Currently, Malaysian banks
face the challenges of greater market satisfaction in order to cultivate customer loyalty
(Lam & Bojei, 2007).
Importance of customer satisfaction in today’s dynamic corporate environment is obvious
as it greatly influences customers’ repurchase intentions whereas dissatisfaction has been
seen as a primary reason for customers’ intentions to switch. Satisfied customers are most
likely to share their experiences with other four or six people around them. Equally well,
dissatisfied customers are more likely to tell another ten people their unfortunate
experiences with a particular organization. In order to achieve customer satisfaction,
organizations must be able to build and maintain long lasting relationships with customers
through satisfying various customer needs and demands which resultantly motivates them
to continue to do The impact of customers’ satisfaction on loyalty and intentions to switch
business with the organization on on-going basis (La Barbera & Mazursky, 1983).
According to Portela & Thanassolis, (2006), not only empirically studies of the relationship
between service quality and customer loyalty in banking system are limited, but also the
existing studies on bank branches efficiency in general do not account for the changing
role of bank branches. Excellence in service quality is a key to achieve customer loyalty
which is the primary goal of business organizations, due to the advantages of customer
retention (Ehigie, 2006). Today, the increasing awareness among bank customers of their
rights, changing demands and high competition requires constant progress in service
quality from the bank for their customers to stay loyal. The purpose of this study is to
examine the impact of customer satisfaction on customer loyalty and intentions to switch
in the banking sector in Ipoh, Perak, Malaysia.
Conclusion:
This study attempted to find the impact of customer satisfaction on customer loyalty and
intentions to switch to other financial service providers. Customer satisfaction does have a
positive effect on an organization’s profitability. According to Hoyer and MacInnis (2001),
satisfied customers form the foundation of any successful business as customer satisfaction
leads to repeat purchase, brand loyalty, and positive word of mouth. However, Bowen and
Chen (2001) said that having satisfied customers is not enough, there has to be extremely
satisfied customers. This is because customer satisfaction must lead to customer loyalty.
Bansal and Gupta (2001): “Building customer loyalty is not a choice any longer with
businesses: it’s the only way of building sustainable competitive advantage. Building
loyalty with key customers has become a core marketing objective shared by key players
in all industries catering to business customers.
Loyalty is vulnerable because even if the customers are satisfied with the services rendered
by the financial institutions, there is always an element of defect if they think they can get
better value for money in other institutions. Satisfaction is essential but not enough to gauge
loyalty among customers. In other words, we can have customer satisfaction without
loyalty but it is difficult to comprehend having loyalty without satisfaction. Therefore, all
organizations should try and satisfy their customers and to ensure their loyalty. Customer
satisfaction and loyalty is perhaps the most talk about topic in the 21st century.
Research paper 2
Title: Switching barriers in business-to-business services: a qualitative study
Author: Venkata K. Yanamandram
Source: International Journal of Service Industry Management, 2006, 17 (2), 158-92.

Abstract:
Purpose - To investigate the determinants of behavioural brand loyalty amongst dissatisfied
customers in the business-to-business (B2B) services sector.
Design/methodology/approach - A qualitative study was conducted, with 28 personal
interviews undertaken with managers who are involved in the choice of service providers.
The respondents belonged to 24 organisations located in Australia. Template analysis and
eyeballing were techniques used to analyse the data collected. Findings - Assessment of
the reasons why dissatisfied customers stayed with the service providers resulted in six
categories. The categories were found to be, in order of decreasing frequency, impact of
alternative providers, switching costs (18), others (17), inertia (14), investment in
relationships (13), and service recovery (13). The results not only confirmed factors found
in the literature, but also uncovered eleven other factors. Research limitations/implications
– The sample size, whilst appropriate for qualitative research, should be considered
adequate only for exploratory analysis and a further quantitative study is needed to validate
the study. Practical implications - This study is important for those firms who have many
prospective switchers because it is important to understand why these customers stay, and
to what extent such firms can discourage such customers from leaving in both positive and
negative ways. For those service firms that are attempting to attract these prospective
switchers, an understanding of why they do not switch is important, as it will enable them
to develop strategies to overcome these switching barriers and gain market share.
Originality/value - This research is the first study to investigate in a single model a range
of barriers to switching in a B2B services context. The results that confirmed categories
found in the literature also discovered eleven other factors not evident in the extant
literature.
Introduction:
Just as satisfied customers are not necessarily loyal (Rowley and Dawes, 2000), dissatisfied
customers do not always exit (Hirschman, 1970; Day, 1984). Customer dissatisfaction
diminishes an organisation’s customer base, forces the firm to rely on a more volatile
customer mix, and erodes the firm’s reputation (Levesque and McDougall, 1996), and this
is particularly true in service industries, where customer dissatisfaction is a significant
problem (Singh, 1990; Fornell, 1992). Customer responses to dissatisfaction occur along a
continuum of severity (Hirschman, 1970; Levesque and McDougall, 1996; uyter et. al.,
1998; Colgate and Norris, 2001). Although some defections are caused by dissatisfaction
(Keaveney, 1995; Stewart, 1998), consumers may simply remain inactive and take no
action at all when dissatisfied (Day, 1984; Gronhaug and Gilly, 1991).
While a significant amount of research has investigated the reasons that dissatisfied
customers switch service organisations (Crosby and Stephens, 1987; Keaveney, 1995;
Colgate et. al., 1996; Levesque and McDougall, 1996; Stewart, 1998; Colgate and Hedge,
2001) and the importance of switching (Fornell and Wernerfelt, 1987; Reichheld and
Sasser, 1990; Mittal and Lassar, 1998), there has been little research that investigates the
reasons why dissatisfied customers stay with service organisations. Colgate and Lang’s
(2001) research was one of the first studies to empirically investigate a range of factors
why dissatisfied customers do not switch. Their study was undertaken in the consumer
market, with research questions addressing the extent to which various categories of
switching barriers were substantiated across various service industries and the relative
importance of each. Studies that have investigated why customers do not always switch or
defect to competing organisations have been discussed in the context of one or more factors
that reduce customers’ desire to leave an existing service provider (switching barriers). A
body of research examined switching costs and its relationship to repurchase intentions or
loyalty (Gronhaug and Gilly, 1991; Fornell, 1992; Anderson and Sullivan, 1993; Ping,
1993; Nielson, 1996; Jones et. al., 2000, 2002; Burnham et. al., 2003). Only Gronhaug and
Gilly (1991) have researched the effect of switching costs amongst dissatisfied customers
and argue that a dissatisfied customer may remain loyal because of high switching costs.
Other research examined relationships built by either party in the buyer seller dyad as a
barrier to switching (Gwinner et. al., 1998; Colgate and Danaher, 2000),effect of
availability and attractiveness of alternatives (Bendapudi and Berry, 1997), inertia (Bawa,
1990; Bozzo, 2002; Ranaweera and Neely, 2003; White and Yanamandram, 2004) and
service recovery (Spreng et. al., 1995; Bejou and Palmer, 1998; Smith and Bolton, 1998;
Durvasula et. al., 2000). Only the studies on service recovery focussed on the effect of the
barriers to switching amongst dissatisfied customers. The study of customers staying with
a firm as a result of dissatisfaction is valuable, especially in the light of increasing academic
and business attention being given to long term marketing relationships rather than
transactions (Stewart, 1998). Hence, if firms want to promote longer-term customer
relationships, and reduce customer exit as a result of dissatisfaction, it follows that an
understanding of the phenomenon of “why customers stay” is essential. Further, this study
may be important for those firms who have many prospective switchers because it is
important to understand why these customers stay, and to what extent such firms can
discourage such customers from leaving in both positive and negative ways (Colgate and
Lang, 2001). Finally, for those service firms that are attempting to attract these prospective
switchers, an understanding of why they do not switch is important, as it will enable them
to develop strategies to overcome these switching barriers and gain market share (Colgate
and Lang, 2001).

Conclusion:
This research is the first study to investigate in a single model a range of barriers to
switching in a B2B services context. The results that confirmed categories found in the
literature also discovered eleven other factors not evident in the extant literature. By
identifying the reasons that reduce the likelihood of switching, we can gain a better
understanding of when customers are more or less likely to switch service providers.
Organisations that have low levels of customer satisfaction need to reinforce barriers to
switching, and understand the factors that encourage customers to stay and build on them.
Res earcg Paper 3:
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Research Paper 3:

Title: Impact of Customer Satisfaction on Customer Loyalty and Intentions to Switch:

Evidence from Banking Sector of Pakistan
Author: Faizan Mohsan, Muhammad Musarrat Nawaz , M. Sarfraz Khan, Zeeshan
Shaukat, Numan Aslam,
Source: International Journal of Business and Social Science Vol. 2 No. 16; September
2011

Abstract:

Top performing financial institutions always look into the needs and demands of their
customers in order to survive and compete successfully in today’s dynamic corporate
environment. That is the reason why organizational researchers from all around the globe
have continuously emphasized on the importance of customer satisfaction, loyalty and
retention. The current research study attempts to find the impact of customer satisfaction
on customer loyalty and intentions to switch. The data were collected from 120 customers
visiting the banks counters and had an account with banks serving in Pakistan. The
collected data then analyzed using the Microsoft Excel and SPSS 16. The results of the
study revealed that customer satisfaction was positively correlated with customer loyalty
and negatively correlated with customer intentions to switch. Some recommendations for
future research are also made.

Introduction:

The importance of customers has been highlighted by lots of researchers and academicians
all around the world. Top performing financial institutions believe that customers are the
purpose of what they do and they very much depend on them; customers are not the source
of a problem and they should never make a wish that customers „should go away‟ because
their future and security will put in jeopardy. That is the main reason why financial
institutions of today are focusing much attention on customer satisfaction, loyalty and
retention (Zairi, 2000). Satisfaction is an overall customer attitude or behavior towards a
service provider, or an emotional reaction towards the difference between what customers
expect and what they receive, regarding the fulfillment of some desire, need or goal
(Hansemark, & Albinsson, 2004; Kotler, 2000; Hoyer, & MacInnis, 2001). Customer
loyalty, on the other hand, is the result of an organization‟s creating a benefit for customers
so that they will maintain and increasingly repeat business with the organization
(Anderson, & Jacobsen, 2000). It is in fact a deeply held commitment of customers to
prefer products or services of a particular organization in future despite situational
constraints or marketing influences to cause the switching behavior. Moreover true
customer loyalty is created when customers become advocate of an organization without
any incentive (Oliver, 1997). Importance of customer satisfaction in today‟s dynamic
corporate environment is obvious as it greatly influences customers‟ repurchase intensions
whereas dissatisfaction has been seen as a primary reason for customers‟ intentions to
switch. Satisfied customers are most likely to share their experiences with other five or six
people around them.
Equally well, dissatisfied customers are more likely to tell another ten people about their
unfortunate experiences with a particular organization. In order to achieve customer
satisfaction, organizations must be able to build and maintain long lasting relationships
with customers through satisfying various customer needs and demands which resultantly
motivates them to continue to do business with the organization on on-going basis (La
Barbera, & Mazursky, 1983). Although, previous research has attempted to examine the
link between (a) customer satisfaction and customer loyalty and (b) customer satisfaction
and customer intensions to switch in various industries but there are still lack of research
in banking sector to investigate this relationship especially in the context of Pakistan.
Therefore, current research study attempts to examine the impact of customer satisfaction
on customer loyalty and intentions to switch in banking sector of Pakistan and to suggest
the researchers and practitioners for implications

Conclusion:

The current research study attempts to find the impact of customer satisfaction on customer
loyalty and intentions to switch. Clarke (2001) examined that customer satisfaction is really
no more than the price of entry to a category. For satisfaction to be effective, it must be
able to create loyalty amongst customers. McIlroy and Barnett (2000) stated that an
important concept to consider when developing a customer loyalty program is customer
satisfaction. Satisfaction is a critical scale of how well a customer‟s needs and demands
are met while customer loyalty is a measure of how likely a customer is to repeat the
purchases and engage in relationship activities. Loyalty is vulnerable because even if
consumers are satisfied with the services they will continue to defect if they think they can
get better value, convenience or quality elsewhere. Therefore, customer satisfaction is not
an accurate indicator of loyalty. Satisfaction is essential but not a sufficient condition of
loyalty. In other words, we can have customer satisfaction without loyalty, but it is too hard
or even impossible to have loyalty without satisfaction. Based on the views and research
done by numerous researchers and academicians, it can be concluded that customer
satisfaction is very important. Thus, though customer satisfaction does not guarantee repeat
purchases on the part of the customers but still it plays a very important part in ensuring
customer loyalty and retention. However his point has been echoed by lots of
organizational critics when they said that customer satisfaction is a direct determining
factor in customer loyalty which in turn prevent them to switch to other financial service
providers. Therefore organizations should always strive to ensure that their customers are
very satisfied. Customer loyalty and retention is potentially one of the most powerful
weapons that financial institutions of 21st century can employ in their fight to gain a
strategic advantage and survive in today‟s ever-increasing competitive environment.