This study explores the impact of relationship marketing on customer loyalty in banking context. In particular, it will discuss the significance and influence of the underpinnings of the relationship marketing such as trust, commitment, conflict handling, values and empathy on customers’ loyalty in the banking sector. This chapter contains; (1) Background of The Study, (2) Problem Statement, (3) Specific Objectives of This Study, (4) Research Question, (5) Theoretical Framework, (6) Hypothesis, and (7) Significant of the Study.
Part one (1) Background of The Study will describe about the background and theories which related to this research. Part Two (2), Problem Statement discusses the subject related to the topic. Part Three (3), Purpose of The Study highlights the objectives of this research. Part Four (4), discusses what are the questions which needed to be answered in this research, followed by Part Five (5) explains the theoretical framework of
the research. Part Six (6), consists of the hypothesis of the research and the lastly Part seven (7) explains the significant of the research.
1.1 An overview of customer loyalty
Customer loyalty has been well established as a key to profitability and long-term sustainability (Keating et al., 2003, Reichheld, 1996; Reichheld & Aspinal, 1993). Reichheld & Schefter (2000) maintained that, while it is important for a commercial enterprise to attract a large client, a sizeable customer-base by itself does not offer any assurance of long-term profitability unless the firm can earn loyalty from its customers. Consistent with this view, Kandampully (1998) argued that the ability of a service organization to create, maintain and expand a large and loyal customer base over a longtime horizon is critical to achieve and sustain a winning position in the marketplace. This indicates that in any business sector, customer loyalty is a major competitive advantage.
A clearly examination of the literature on customer loyalty revealed several differences in the conceptualization of this construct. For example, Shanker et al. (2003) view loyalty purely as an attitude, whereas Hofmeyr & Rice (2000) consider loyalty to be “the behavioral propensity to buy a brand repeatedly”. On a different note, Heskett (2002) suggest that loyalty exist when a customer dedicates an increasing “share of wallet” to repurchase from a firm. Knox and Walker (2001), however, argued that repurchase
behavior is a behavioral construct that refers to the extent to which consumers repeatedly purchase from a firm, while loyalty is a more complex concept that involves both psychological and behavioral components.
Thus, consumers are generally considered to be loyal when they hold favorable attitudes toward a firm or its products or services, and when they repeatedly purchase from the firm (Amine, 1998; Wong and Sohal, 2003). On the other hand, Jones & Sasser (1995) considered customer loyalty to be “the feelings of attachment to or affection for a company’s people, products or services”. They further suggested that these feelings manifest themselves through many form of consumer behavior that will eventually reflect on the bottom line of business organizations. Hence, customer loyalty is reflected through numerous behavioral outcomes, not only repurchase behavior.
Why focus on customer loyalty? Customer loyalty has been well established as a key to profitability and long-term sustainability (Keating et al. 2003; Reichheld, 1996; Reichheld & Aspinall, 1993). Previous researches suggested that customer loyalty is a key driver of financial performance in service organizations (Ganesh, Arnold, and Reynolds 2000; Jones & Sasser 1995). Customer loyalty may be a more important determinant of profit than market share and position (Heskett et al. 1994). By identifying the antecedents of customer loyalty and understanding the impact of these antecedents on...