Customer loyalty in the retail banking market of nepal ( A case study of retail baking market of Narayangadh city )

Abstract

Customer loyalty is truly an amorphous concept for many bankers. Most banking strive customer loyalty, and considerable efforts are paid to maintain a loyal customer base. As competition is getting much higher, the importance of customer loyalty and challenge in keeping customers loyalty has increased. It is widely argued that lasting customer relationship is beneficial for the banking sector. The cost of recruiting new customer are said to be higher than cost of retaining old customers. It is found a positive relationship between customer loyalty and the organization’s profitability. Moreover, customer loyalty provides pricing power in the marketplace and better protection from competitive threats. Loyal customer provides a platform for stronger, deeper relationships with customers. Customers that are loyal will return more often, giving higher sales because when customers are loyal to business, business benefits from that customer for very long and that customer will always buy from your business wherever and whenever possible. If your business satisfies loyal customers every time, then hopefully many will become customers for life. This is the effective form of marketing, where your satisfied customers speak to their friends and family, effectively selling your business to them. So, loyal customers will be much more likely to tell their friends about your business/banking. In today’s competitive market, banks and finance companies are emerging very fast in Nepal. The tough competition has been faced by the banks for attracting new customer and retaining old. In this case, maintaining customer loyalty and building customer loyalty program is useful for the bankers. So, the study of customer loyalty would be useful in this situation.

This research has been carried out to find out the customer loyalty. In this context, retail banking has been selected. Retail banking is, however, quite broad in nature. It refers to the dealing of banks with individual customers. In other words, Retail banking refers to the mobilization of deposits by the bank mainly from individuals and lending to small business and in retail loan markets. Retail banking is a relationship business; the institution needs to accept that relationship in two-way street and that a customer will maintain a relationship only if there is value in doing so. Retail banking requires a moderate level of customer relation. In retail banking, each product to be offered to customer needs to be well defined, easily serviceable and profitable so as to build the customer loyalty.The main objective of the study is to find out the level of customer loyalty. It also deals with factors influencing customer loyalty i.e. customer satisfaction, service quality and switching cost. The research also studied the factor affecting level of customer satisfaction, quality factors and factors that made to switch the bank and not to switch the bank.

The study has only focused to various banks of Narayangadh city. The data was collected mainly though questionnaire survey. For the purpose, a structured questionnaire has been designed to collect the required information. These questionnaires were surveyed to the holder of retail loan of the banks. In order to get the information, regarding customer loyalty, the survey was conducted to 80 respondents who were from diverse age group, profession, and different income levels. Secondary sources are also used to analyze the data. The secondary sources include previous research articles, books, publications, previous thesis, various websites etc. The collected data were coded and entered into a statistical software package, SPSS. With the help of SPSS version 10.00 software, the available data were analyzed.

The study has shown that the respondents of Narayangadh area are satisfied with the bank and live up to their general expectation. The study has also stated that most of respondents are associated with LBL followed by HBL and NBL. As the Lumbini bank has its head office in Narayangadh and started its operation earlier, LBL has covered most of the market in Narayangadh. The study has shown that majority of respondents do not have willingness to change the bank and have no willingness to recommend their bank to other. It means they have positive impact on word of mouth.The findings also show that good interest rate and consumer complaint handling are rated most important factor for determining the level of customer satisfaction about retail banking. It is also found in the study that interest rate and easy loan processing are the important quality factor to choose the bank for retail banking. The study also shows that the respondents changed the bank because of loan processing and interest rate. It is also found that loan processing and interest rate are main factors to switch the bank. On other side, risk in choosing another bank might turn out not to satisfy as the main factor which made not to switch the bank.

Finally, the study depicts the customer loyalty regarding retail banking market. In the context of emerging customer loyalty, this study gives some relevant information to other researchers and banks.