Determining the factors that influence customer loyalty in the South African banking sector
According to the Ernst and Young Global Consumer Survey(2012) titled 'The Customer Takes Control' banks across the world are under intense pressure with a reported 40% decrease in customer confidence in the banking industry. The South African banking sector is no different as it also faces challenges to stay competitive in an ever changing business and operating landscape. The South African banking sector consists of local and foreign banks that compete for customers in their respective locations. This complex and very dynamic environment is dominated by the so called 'big four' banks which are Amalgamated Banks of South Africa- ABSA, First National Bank- FNB, Nedbank and Standard Bank. These banks will form the core of this research proposal and the main focus will be retail banking because that is the core service offered by the mentioned banks and it will more cost effective for the researcher to gather information on the retail banking rather than all the services of the aforementioned financial institutions.
The research topic is determining the factors that influence customer loyalty. The operating environment of banks and financial institutions in general is a difficult one especially as public trust is at a historic low following the global recession of 2008-09, the effects of which the populace is only starting to recover from now. There is a need to repair badly damaged relationships between the customer and their bank. Customer loyalty is defined as when a customer consistently purchases a certain product, service or brand over an extended period of time (Lovelock& Wirtz, 2011). It is all about attracting and retaining the right customer.
Within the context of this definition, it is therefore prudent to say customers are becoming increasingly disloyal to their banks. Studies have shown that customer attrition in South Africa increased by almost fifteen percent (15%) in 2012 alone. It is estimated that seventy percent (70%) of bank customers have either switched banks or stopped using banks at all (Clark, 2012). These findings are also reflected in the Ernst and Young Global Consumer Survey 2012. Furthermore, thirteen percent (13%) of customers are planning to switch banks.
This research proposal will seek to determine why customers have become less loyal. In order to do this, the researcher will start with a background study of the problem in which it will be highlighted why this study is necessary. The background study will also include a relevant discussion of the industry and an overview of the big four banks that will form the core of the study. These banks are already mentioned above. The proposal will cite the problem and endeavor to explain why this problem needs to be researched; this will form the problem statement. The problem statement will be followed by the research objectives which will clarify the aim of the study, attempt to identify the primary objective including possible findings. Following the problem statement will be the research method statement which outlines how the researcher will conduct the necessary research in order to compile a strategic report. A literature review will follow in which the researcher will state all the literature used and that have a bearing on the stated topic. In it, the researcher will identify and state other literature on the topic, what other researchers have found on the subject matter, state it briefly and identify particular aspects not covered. The proposal will also include a research design and methodology, research hypothesis, significance of study, key terms, division of study and finally the references.
Background to the Study
1 General Overview of the Banks
Standing for Amalgamated Banks of South Africa, ABSA Bank is a wholly owned subsidiary of the ABSA Group which in turn is a subsidiary of...