An investigation of the factors affecting customer loyalty in the banking sector in Kenya: a survey of bank customers in Nairobi

Abstract

There has been a myriad of changes in the banking industry over the past years most of which Have resulted in more innovative products and stiffer competition among the various players in The industry. There is need for the banks to grow their business, increase profits and literally survive. The banks can only attain these goals by use of various techniques aimed at attracting new customers and retaining the customers that they serve. This study aimed at identifying the various factors that influence banking customer's loyalty with the hope of suggesting ways in which these factors could be used to the banks' advantage. Specifically, the study aimed at investigating the effects of quality of services and products, the perceived value of services and the customers trust on the customers' loyalty. The data collection tools that were used in this study were questionnaires which were administered by way of personal interviews. The research targeted the banked Kenyans particularly those who live in the city of Nairobi. The sample to be taken comprised of 360 banked people from Nairobi selected using stratified random sampling. The study found that although majority of the customers had accounts in more than one bank, They were particularly using one of the preferred banks for their major banking. The study further found out that most customers have been loyal to their current bank for between two to five years and were transacting on a weekly basis. The majority of customers were unlikely to transfer major banking activity to any other bank accounts. The study also revealed that customer loyalty is greatly affected by service quality, perceived value of service as well as customer trust. Moreover, the study realised that customers would prefer better services at a more reasonable price. The study therefore recommends that Kenyan banks should strive to improve quality of service in order to increase their market share. Trust should be cultivated through integrity and confidentiality of financial and personal information of clients.