The Non-linear relationship between customer satisfaction and customer loyalty in retail banking - an empirical investigation

Chris Baumann, Suzan Burton, Gregory Elliott

Research output: Contribution to journalConference paperResearchpeer-review

Abstract

The customer loyalty literature has investigated the association between customer satisfaction and a customer’s loyalty and revealed mixed results. While some studies indicate that the relationship is linear, others have found a very low correlation between the two constructs, and in some cases there was a non-linear relationship. While the bank marketing literature is generally extensive, this particular issue has not been empirically tested in retail banking, a gap investigated by this study. A non-linear relationship between customer satisfaction and customer loyalty was found, and a model explaining 57% of a customer’s variation was developed. This study incorporated potential predictors of loyalty beyond the attitudinal dimensions traditionally tested for their association with loyalty measures, and found that market conditions such as switching costs and benefits, as well as the length of the relationship add explanatory power. The model can be used by bankers to profile customers who are likely to defect, and this will allow practitioners to implement pro-active marketing action to prevent customer switching.

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Retail banking
Customer loyalty
Customer satisfaction
Nonlinear relationships
Empirical investigation
Loyalty
Marketing
Bankers
Defects
Costs and benefits
Switching costs
Predictors
Market conditions

Cite this

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title = "The Non-linear relationship between customer satisfaction and customer loyalty in retail banking - an empirical investigation",
abstract = "The customer loyalty literature has investigated the association between customer satisfaction and a customer’s loyalty and revealed mixed results. While some studies indicate that the relationship is linear, others have found a very low correlation between the two constructs, and in some cases there was a non-linear relationship. While the bank marketing literature is generally extensive, this particular issue has not been empirically tested in retail banking, a gap investigated by this study. A non-linear relationship between customer satisfaction and customer loyalty was found, and a model explaining 57{\%} of a customer’s variation was developed. This study incorporated potential predictors of loyalty beyond the attitudinal dimensions traditionally tested for their association with loyalty measures, and found that market conditions such as switching costs and benefits, as well as the length of the relationship add explanatory power. The model can be used by bankers to profile customers who are likely to defect, and this will allow practitioners to implement pro-active marketing action to prevent customer switching.",
author = "Chris Baumann and Suzan Burton and Gregory Elliott",
year = "2008",
language = "English",
pages = "483--485",
journal = "Proceedings of the thirty-seventh annual meeting of the Western Decision Sciences Institute",
issn = "1098-2248",
publisher = "Western Decision Sciences Institute",

}

TY - JOUR

T1 - The Non-linear relationship between customer satisfaction and customer loyalty in retail banking - an empirical investigation

AU - Baumann, Chris

AU - Burton, Suzan

AU - Elliott, Gregory

PY - 2008

Y1 - 2008

N2 - The customer loyalty literature has investigated the association between customer satisfaction and a customer’s loyalty and revealed mixed results. While some studies indicate that the relationship is linear, others have found a very low correlation between the two constructs, and in some cases there was a non-linear relationship. While the bank marketing literature is generally extensive, this particular issue has not been empirically tested in retail banking, a gap investigated by this study. A non-linear relationship between customer satisfaction and customer loyalty was found, and a model explaining 57% of a customer’s variation was developed. This study incorporated potential predictors of loyalty beyond the attitudinal dimensions traditionally tested for their association with loyalty measures, and found that market conditions such as switching costs and benefits, as well as the length of the relationship add explanatory power. The model can be used by bankers to profile customers who are likely to defect, and this will allow practitioners to implement pro-active marketing action to prevent customer switching.

AB - The customer loyalty literature has investigated the association between customer satisfaction and a customer’s loyalty and revealed mixed results. While some studies indicate that the relationship is linear, others have found a very low correlation between the two constructs, and in some cases there was a non-linear relationship. While the bank marketing literature is generally extensive, this particular issue has not been empirically tested in retail banking, a gap investigated by this study. A non-linear relationship between customer satisfaction and customer loyalty was found, and a model explaining 57% of a customer’s variation was developed. This study incorporated potential predictors of loyalty beyond the attitudinal dimensions traditionally tested for their association with loyalty measures, and found that market conditions such as switching costs and benefits, as well as the length of the relationship add explanatory power. The model can be used by bankers to profile customers who are likely to defect, and this will allow practitioners to implement pro-active marketing action to prevent customer switching.

M3 - Conference paper

SP - 483

EP - 485

JO - Proceedings of the thirty-seventh annual meeting of the Western Decision Sciences Institute

T2 - Proceedings of the thirty-seventh annual meeting of the Western Decision Sciences Institute

JF - Proceedings of the thirty-seventh annual meeting of the Western Decision Sciences Institute

SN - 1098-2248

ER -