Impact of Switching Cost on Customer Satisfaction and Customer Retention for Internet Banking Services

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IMPACT OF SWITCHING COST ON CUSTOMER SATISFACTION
AND CUSTOMER RETENTION FOR INTERNET BANKING
SERVICES:
A STUDY BASED ON SRI LANKAN COMMERCIAL BANKS.

BY

N. M. GOONETILLEKE
(2009/MISM/10)
Submitted in accordance with the requirements for the degree of

MASTERS IN INFORMATION SYSTEMS MANAGEMENT
AT THE
UNIVERSITY OF COLOMBO

SUPERVISOR: DR. ANURA KARUNANAYAKE
SEPTEMBER 2011

TABLE OF CONTENTS

Page No

Declaration

ii

Acknowledgment

iii

Abstract

iv

Table of Contents

v

List of Tables

viii

List of Figures

ix

List of Abbrevations

x

i

DECLARATION
I do hereby, certify that this Dissertation does not incorporate without acknowledgement any material previously submitted for the Degree or Diploma in any University, and to the best of my knowledge and belief it does not contain any material previously published or written by another person except where due reference is made in the text

The undersigned, has supervised the dissertation entitled ‘Impact of Switching Cost on Customer Satisfaction and Customer Retention for Internet Banking Services: A study based on Sri Lankan Commercial Banks.’ Presented by N M Goonetilleke, a candidate for the degree of Masters in Information Systems Management, and I do hereby, certify that, in my opinion, it is worthy of submission for examination.

ii

ACKNOWLEDGMENT
I would like to acknowledge the following individuals and banks that have rendered help in this research:
The first person I would like to thank is my supervisor, Dr. Anura Karunanayake; without his great support, I would not have finished this research on time. He has provided me very good guidance and statistical knowledge in completing this study successfully. I feel a deep sense of gratitude to my course coordinator, Dr. Chaminda Jayasundara; for coordinating the Masters in Information Systems Management program. He helped me a lot on finalizing my research topic and to get the senate approval. I sincerely thank the entire academic and non academic staff of the University of Colombo who provided cooperation and assistance regarding university matters in conducting this research successfully.

My appreciation goes to all the respondents who were involved in the pilot study of the survey as they spent their precious and valuable time in responding to the questionnaires which provided me with vital information that I needed for this research. I would like to express my sincere thanks to all the IT Managers and staff of the two state banks and the nine private commercial banks who provided co-operation and assistance regarding getting statistical figures on new Internet banking registrations for the year 2010. Last but not least, my greatest gratitude goes to my wife – Indika, my daughter – Vinuri, my mother – Ranjini, my father – Mervin and my mother-in-law – Sumana, for their encouragement and spiritual support. I dedicate this thesis to them.

iii

ABSTRACT
The emerging technology has made an exponential growth of the Internet which has changed the pattern of organizations performing their business with customers. The banking industry is no exception. In order to gain competitiveness, banks have been introducing more Internet Banking Services.

Managing effective Customer Retention strategies are increasingly important in the banking industry. Since the length in years of customer relationships are one of the most important factors that contribute to the profitability. As a result Customer Satisfaction may be one important driver of Customer Retention. The Switching Costs are also likely to influence Customer Retention independently. The presence of Switching Costs can mean that customers who are already retained are actually dissatisfied but do not defect because of high Switching Costs. Therefore the researcher has set up five objectives to achieve the key factors that affect the Switching Cost which has a reasonable effect on the relationship...
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