A study in the International Journal of Economics and Business Research has investigated customer loyalty dynamics in the retail banking sector in Cyprus. The work challenges established assumptions by emphasizing the significance of emotional connections over transactional factors. The investigation highlights affective commitment and attitudinal loyalty as important factors influencing a customer’s decision to stay with their current banking provider.
Maria Georgiou, Sofia Daskou, and Michailina Siakalli of Neapolis University Pafos in Cyprus, and Athanasios Anastasiou of the University of Peloponnese in Tripolis, Greece, have shown that contrary to the received wisdom, behavioural loyalty and continuance commitment have little effect on customer retention in the retail banking area.
This finding suggests that emotional bonds and genuine loyalty hold more sway than other factors like switching costs or habitual purchasing patterns and so can help guide customer retention strategy. Conversely, if customers are shown such evidence about their behaviour then they might usefully find a way to see through such strategies and make a better-informed choice about whether or not to stay with a given bank or find an alternative that better suits their needs.
In parallel with such insights, the research also shows that a strong banking system is important at the national level. The work emphasizes that a well-functioning banking system can ensure financial efficiency but also contribute to economic growth and development. Banks that are facilitating household financial planning and ensuring liquidity across the economy play a vital role in the flow of capital, payments, goods, and services across the nation.
The study’s examination of relational constructs provides insights into the behaviour of Cypriot retail banking customers. Affective commitment and attitudinal loyalty emerge as pivotal motivators for customer retention, the research suggests. It is worth noting that normative commitment is identified as a unique yet negatively correlated contributor to customer loyalty. Normative commitment is an individual’s perceived sense of obligation or moral responsibility to remain committed to, in this case, their bank.
For businesses and policymakers, they must recognise the importance of emotional bonds and genuine loyalty in the banking sector. A better-informed customer might also be made aware of this for the mutual benefit of the broader economy as well as their circumstances.
Georgiou, M., Daskou, S., Siakalli, M. and Anastasiou, A. (2024) ‘An explanatory study of predictive factors of customer retention with Cypriot retail banks’, Int. J. Economics and Business Research, Vol. 27, No. 1, pp.127–150.
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