Slightly different products and distribution channels offered by all banks and easiness of imitation of them make difficult to create differentiation for retail banks in highly competitive banking industry. Therefore, customer loyalty is the main tool left to the banks seeking to create competitive advantage. Because, loyal customers not only increase the value of the business, but they also enable it to maintain costs lower than those associated with attracting new customers. Therefore, the main goal of this article is to define the key factors that influence the extent to which customers are loyal towards their banks.In the first part of the article, authors mention about different definitions of loyalty made by different academicians. Indeed, there is no consensus between most of them. In spite of different approaches, behavioral and psychological dimensions of loyalty are the base lines of the definitions. Consistent purchasing behavior from the same brand may be an indicator of loyalty, but variability of the loyalty (e.g. multi-brand loyalty) invalidates this definition. On the other hand, customer satisfaction together with barriers or the switching costs were the key factors affecting loyalty. Also, customer satisfaction and perceived quality are related with each other; although which one is antecedent is a debate between academicians.
There are many reasons affecting customer satisfaction like quality.In every respect, there are two types of customer loyalty concepts and these are related to consumer’s degree of commitment to the brand: loyalty based on inertia and true brand loyalty.
In the light of literature survey, second part of the article mentioned about empirical research based on structural equation model and carried out by authors at 6 different banks with 576 customers. The aim of the research is to find relationship between customer satisfaction and switching cost, between perceived quality and satisfaction in the retail banking market.
Some conclusion reached after research;
- customer satisfaction and switching cost are loyalty antecedents. But, the former is significantly more influential than the latter.
- customer satisfaction is antecedent of perceived quality in retail banking. That means quality is an evaluated phenomenon depending on customers' experiences. But high level quality does not guarantee satisfastion if the cost of quality is not affordable.