Impact of switching cost on customer satisfaction And customer retention for internet banking Services: A study based on sri lankan commercial banks

Abstract

The emerging technology has made an exponential growth of the Internet which has changed the pattern of organizations performing their business with customers. The banking industry is no exception. In order to gain competitiveness, banks have been introducing more Internet Banking Services. Managing effective Customer Retention strategies are increasingly important in the banking industry. Since the length in years of customer relationships are one of the most important factors that contribute to the profitability. As a result Customer Satisfaction may be one important driver of Customer Retention. The Switching Costs are also likely to influence Customer Retention independently. The presence of Switching Costs can mean that customers who are already retained are actually dissatisfied but do not defect because of high Switching Costs. Therefore the researcher has set up five objectives to achieve the key factors that affect the Switching Cost which has a reasonable effect on the relationship between Customer Satisfaction and Customer Retention. Based on the prevous literature, a conceptual framework was developed to determine the impact of Switching Cost on Customer Satisfaction and Customer Retention for Internet Banking Services. The conceptual framework has two main parts featuring the customer attributes and elements of Switching Cost, Customer Satisfaction and Customer Retention process. The part I examines demographic aspects of Customer Satisfaction and Customer Retention while part II examines the specific elements of Switching Cost, Customer Satisfaction and Customer Retention. The research was mainly based on data, collected from Internet banking customers in Sri Lankan commercial banks. The results of the statistical analysis showed that there were specific factors that affect Switching Cost on Customer Satisfaction and Customer Retention, the significant behavioural patterns of customers on Switching Cost were identified and there were evidence on significant differences among the cluster of customers based on their contextual situation. Finally the five objectives setup by the researcher was successfully achieved. Therefore these findings will help the banks to establish a customer oriented strategy to retain their customers in future.