ANALYSIS OF FACTORS INFLUENCING BANKS’ CUSTOMER LOYALTY: CASE OF COMMERCIAL BANKS IN NAIROBI CBD, KENYA

Abstract

Customer loyalty has been one of the top tools for a successful business. This study aimed to establish the factors that influence customer loyalty with reference to the case study of commercial banks in Kenya. This study focused on tier 1, tier 2 and tier 3 banks respectively. These banks have grown exponentially over the years and have a huge client base. This study had its underpinning on the theory of Disconfirmation. This theory argued that ‘client loyalty and satisfaction was related to the size and direction of the disconfirmation experience that occurs as a result of comparing service performance against expectations. The study adopted the descriptive survey design. The target population of this study was 1199327 bank customers (retail and corporate) in Tier 1, Tier 2 and Tier 3 bank branches in Nairobi CBD. The study applied stratified and simple random sampling to select a sample of 384 respondents for the study. Data was collected by use of self-administered Semi structured questionnaire. Before the questionnaire was administered, consent was sought from the respondents. On completion, the researcher organized the data received, coded, edited and tabulated to check accuracy, completeness and storing it in appropriate form. Descriptive statistics such as frequencies, percentages, mean score and standard deviation were estimated for all the quantitative variables and information presented in form of tables. The qualitative data from the open-ended questions was analysed using conceptual content analysis and presented in prose. Inferential data analysis was done using regression and correlation analysis. The regression analysis was used to establish the relations between the independent and dependent variables. The Statistical Programme for Social Studies (SPSS) version 25 was used in the running of the statistical data output. The analyzed data was presented in form of narrative, bar graphs, pie charts and frequency tables. The study found that the bank employees are always willing to help and the services provided by the bank are reliable. The study the bank charges competitive interest rates on loans. The study also found that the bank was perceived to be strong and stable. The study further found that the customer is most satisfied with the multitude of products in the bank. The study concluded that product variety had the greatest effect on the customer loyalty on commercial banks in Nairobi, followed by service quality, then price regimes brand perception had the least effect to the customer loyalty on commercial banks in Nairobi. The study recommends that the banks should be focused on the quality of the product in order to sustain the loyalty of their quality seeking customers. The study recommends that the banks should strive to improve its image among the consumer by participating in various CSR projects that will enable them to offer support to people seeking growth opportunities.