customer s level of acceptance towards loyalty of the ... · commercial banks: canara bank, state...

Customer’s Level of Acceptance towards Loyalty of

the Select Commercial Banks At Kolar District-An

Empirical Study 1Khatijatul Kubra and 2S.M. Chockalingam,

1Karpagam Academy of Higher Education,

Coimbatore, Tamil Nadu.

2Department of Commerce,

Karpagam Academy of Higher Education,

Coimbatore.

Abstract The emergence of new generation banks and the establishment of the

branches of foreign banks have created a competitive environment for

Indian Banks due to their systematic, clear crystal and credible

organization. The banking industry is confronting a briskly modified

market, ultra-modern technologies, cutthroat competition and more

clamorous customers and the changing climate have presented anomalous

set of threats. Banking is a customer centred industry, therefore, the

customer is the locus and customer service is the demarcating factor. The

reason behind this change is the dynamic consumer desires and surmise.

With the emergence of economic transformation in the world, in general

and in India in particular, today’s banks have whip up with the prime

priority on technical and customer centred issues. Exemplary customer

service can augment the bank's competence to attract the plenteous

prospects, uphold the bank's profitability, lower bank operation costs, and

create greater customer loyalty. In this regard, the researcher has made an

endeavour to examine the service quality gap in the select commercial

banks in Kolar District. The study is confined only to the five public sector

commercial banks: Canara Bank, State Bank of Mysore, Vijaya Bank,

Corporation Bank and State Bank of India; and one new generation bank

i.e. Kotak Mahindra Bank. By adopting multi-stage sampling, 750

customers were selected. As an essential part of the study, the primary data

are collected from the 750 customers. Taking into consideration, the

objectives of the study, a questionnaire was prepared after exploration of

the available literature. The results of the study shows that there is a

significant difference in the acceptance level of the customers towards the

International Journal of Pure and Applied MathematicsVolume 117 No. 7 2017, 303-315ISSN: 1311-8080 (printed version); ISSN: 1314-3395 (on-line version)url: http://www.ijpam.euSpecial Issue ijpam.eu

303

loyalty of the Commercial Banks. It implies that there exists disagreement

among the customers regarding the loyalty statements. The study will

provoke the concerned authority to take the necessary decisive measures to

meliorate the service quality of the select commercial banks in Kolar

District.

Keywords: Banking services, service quality, service loyalty, service

performance.

International Journal of Pure and Applied Mathematics Special Issue

304

1. Introduction

The Banking Industry is confronting a novelty market like any other financial

services. Barbarious competition, more stringent consumers and the dynamic

climate have presented an exceptional set of threats. To meet the competition,

creating satisfied customer has become the main aim of each Bank. At the same

time, various banks are available with new offers, schemes, and services with

wide range of products. As a result, a customer has the range of choices where

the proper information can be gathered at cheap cost, and can take the

advantage of such competitiveness. Customer satisfaction is an abstruse concept

and the actual expression of the level of satisfaction changes among persons and

services. A satisfied customer is the best person to generate positive word of

mouth. Hence, the customer satisfaction can be treated as the essential attribute

for the success of business in today’s competitive business world to foster the

customer’s faith, captivate new consumers, increase business with the present

consumers, decrease the dissatisfied consumers with minimum mistakes,

augment the company’s profits and increase consumer satisfaction.

Banking is a customer centred industry, therefore, the customer is the locus and

customer service is the demarcating factor. The reason behind this change is the

dynamic consumer desires and surmise. With the emergence of economic

transformation in the world, in general and in India in particular, today’s banks

have whip up with the prime priority on technical and customer centred issues

2. Concept of Service Quality

A service is an intangible activity which takes place between the service

provider and consumer. The concept of service quality has gained attention in

the sports and recreational literature over the last two decades. Nowadays, with

the increased competition, service quality has been considered as an important

concept in maintaining the competitive advantage and retaining a good

relationship with the customers. Service quality is the difference between the

customers expectations of service consummation antecedent to the service

encounter and their perception of the service acquired. Service quality has an

absolute impact on the bottom line pursuance of the bank and thereby gain

competitive advantage through improved quality of services offered so that the

perceived service exceeds the service levels preferred by the customers.

3. Statement of the Problem

The challenge before the Banking sector today is to build up competitiveness

through improved service quality, thereby making the banks more market

focused. In India, lack of resources, absence of appropriate attitude, vision and

planning, strong resistance from the trade unions and indifferent attitude of

employees have made the banks slow in adapting the new techniques and

technologies for service quality management. Any bank floundering on this


305

ground is likely to croak before hand. In the present competitive scenario of the

Indian Banking industry, a customer have to make a choice among various

service organisations by making a cost benefit analysis, due to which the

expectations of the consumers increase and they become more conscious about

the service quality. Distinctive customer service can augment the banks capacity

to attract affluent prospects, hike up the bank’s profitability, reduce the bank’s

cost of operation and build up ample consumer loyalty. In this context, the

researcher has made an attempt to examine the customer’s level of acceptance

towards the loyalty of the select commercial banks in Kolar District.

4. Objectives of the Study

The study has the following secondary objectives:

1. To examine the loyalty of the customers with their Commercial Banks in

Kolar District.

2. To offer suitable recommendations to enhance the quality of service

provided by the select Commercial Banks, based on the findings of the

study.

5. Hypothesis

The following null hypothesis has been formulated and tested.

H0: There is no significant relationship among the acceptance levels of the

respondents belonging to the different demographic profiles towards the loyalty

with the select commercial banks.

6. Scope of the Study

The study is confined only to the Savings Banks and Current Account holders who

have an account with the select commercial banks in Kolar District. The most

common 5 dimensions of the service quality namely, assurance, empathy,

reliability, responsiveness and tangibility are considered for the study. The

commonly used loyalty statements were used to measure the acceptance of the

customers towards the loyalty of the banks. The study is restrained only to five

public sector commercial banks: Canara Bank, State Bank of Mysore, Vijaya Bank,

Corporation Bank and State Bank of India; and one new generation bank i.e. Kotak

Mahindra Bank.

7. Sampling Design

There are 19 commercial banks in action in Kolar District as on March 2015. Of

which, 10 are Public Sector Banks and 9 are Private Sector Banks. Multistage

Sampling technique is adopted to collect primary data for the purpose of the

study. At the first stage, 6 commercial banks i.e. 5 public sector commercial

banks and 1 new generation bank which out- number in the branches are

selected out of 19 commercial banks. In the later stage, 40 per cent of the


306

branches i.e. 25 branches are selected out of the 6 selected commercial banks. In

the last stage, 20 savings bank account holders and 10 current account holders

were selected from each branch on intended basis for the study. Therefore, the

sample size consists of 750 customers. The sampling distribution of the current

study is depicted in the following table.

Table 1: Sampling Distribution

Bank No. of Branches Samples

No

. o

f B

ran

ches

No

. o

f S

av

ing

s B

an

k

Acc

ou

nt

Ho

lder

s

No

. o

f C

urr

en

t

Acc

ou

nth

old

ers

Canara Bank 18 7 140 70

State Bank of Mysore 14 6 120 60

Kotak Mahindra Bank 09 4 80 40

Vijaya Bank 08 3 60 30

Corporation Bank 07 3 60 30

State Bank of India 06 2 40 20

Total 58 25 500 250

8. Research Design

The current study is experiential in nature, based on the survey technique. The

primary data was collected from 750 respondents as an essential part of the

study. Likert’s Scaling technique was used to construct the questionnaire. To

assess the appropriateness of the questions, a pre-testing of questionnaire was

done by contacting 30 respondents. Thereafter, necessary changes were

consolidated in the questions and their sequel. Journals, magazines, reports,

books and unpublished dissertations were referred to collect the secondary data.

Collected data have been incorporated in a master table and thereby tabulated to

arrive at appropriate conclusions. In order to study the customer’s level of

acceptance towards the loyalty of the customers towards select commercial

banks, paired ‘t’ test,‘F’ test, Analysis of Co-efficient of Variation and Percentage

Analysis have been employed.

9. Review of Literature

Benjamin Osayawe Ehigie (2006)1attempted to peruse the effect of customer

expectations, perceived service quality and satisfaction on the loyalty of the

customers in Nigerian Banks. A survey was undertaken incorporating the

qualitative technique to analyse the customer’s expectations from the Banking

1Benjamin Osayawe Ehigie, “Correlates of Customer Loyalty to their Banks”, International Journal

of Bank Marketin, Vol. 24, No. 7, Pp .494-508, 2006.


307

services. On the basis of these techniques measurement scales were evolved to

amplitude the variables used for the study. For the qualitative research, the

respondents include 18 participants for focus group discussion and 24 for in-

depth interview. On the other hand the quantitative survey had 247 bank

customers whose response was collected by using questionnaire. The

participants had Savings Bank Account, Current Account and Electronic

Accounts with the banks.

Usha Lenka, Damodar Suar, Pratap K.J. Mohapatra (2009)2 made an attempt to

examine whether service quality of Indian commercial banks augment customer

satisfaction that sustains customer loyalty. The data were collected from 350

consumers of scheduled commercial banks in Orissa. The questionnaire focused

on socio demographic, human, technical and tangible aspects of service quality,

customer satisfaction and loyalty. The results of the study suggest that better

human, technical and tangible aspects of the bank branches boosts customer

satisfaction and loyalty. The impact of human aspects is more than the technical

and tangible aspect on the customer satisfaction which inturn leads to customer

loyalty. It concludes that the advanced service quality of banks can help to

retain the consumers.

Rizwan Ali, Gao Leifu, Ramiz-ur-Rehman (2014)3 attempted to analyse as to

how service quality, confidence and prominence effects customer loyalty in the

Banking industry in Pakistan.A set of hypothesis was developed and a

methodology was outlined for testing them. The response was collected from

645 bank customers. . The findings can note that service quality, confidence,

prominence has a positive influence of consumer loyalty. There is also a strong

positive correlation among the three factors of customer loyalty. Most of the

respondents showed their trust towards private banks in Pakistan. A major part

of respondents also believed that the services of the foreign banks are

outstanding and better than the public and private banks

10. Research Gap

Limited efforts have been made by the researchers in terms of correlating the

service quality, satisfaction and loyalty in the banking sector. The studies

reviewed have not looked into the level of importance of the factors influencing

the customers to prefer a particular bank for transaction, consumer’s satisfaction

towards the services of the commercial banks, customer’s perception towards

the perceived level of service quality, comparison between the expected and

perceived levels of service quality, and loyalty of the customers with their banks

in a single study. Thus, the present study is different from the studies

undertaken so far by filling these gaps.

2Usha Lenka, Damodar Suar, Pratap K.J. Mohapatra, “Service Quality, Customer Satisfaction, and

Customer Loyalty in Indian Commercial Banks”, The Journal of Entrepreneurship Vol. 18, No. 1, 2009.

Rizwan Ali, Gao Leifu, Ramiz-ur-Rehman, “Factors Influencing Customer Loyalty of Banking

Industry: Empirical Evidence from Pakistan”, International Journal of Learning and Development, Vol.

04, No. 2, 2014.


308

11. Customers’ Level of Acceptance towards Loyalty

The concept of customer loyalty has acknowledged much consideration from

both academicians and practitioners in various industries. The existence of

perpetrated and often inherited relationship between a customer and his bank is

limited in the new market place. In order to increase the customer loyalty, many

banks have introduced innovative products and services. Being able to build

customer loyalty is considered as the basic factor in acquiring market share and

developing a defensible competitive advantage in today’s aggressive market.

Therefore, the managers must apprehend the factors and causes which dominate

the loyalty of the customers towards their banks. As it is always challenging and

costly to attract the new customers, the bankers must always try to find new

approach to detain their accustomed consumers and focus on the numerous

factors which amplify the loyalty among the bank customers. In this quandary,

an attempt was made to analyse the acceptance level of the respondents towards

their loyalty with the select commercial banks.

Table 2: Gender and Acceptance towards the Loyalty with the Banks

Gender No. of Respondents Mean Score Standard Deviation Co-variation

Male 600 31.24 4.09 13.09

Female 150 30.99 4.39 14.17

Total 750 31.19 4.15 13.31

Source: Primary Data

Comparison of Acceptance between the Male and Female Respondents t Value D.F Table Value at 5% Result

0.673 748 1.963 Not significant

The calculated ‘t’ value (0.673) is less than the table value (1.963) at 5 per cent

level of significance. The test is insignificant. Thus, no significant difference is

found between the acceptance level of male and female respondents towards

loyalty to their banks. Therefore, the null hypothesis (Ho) is accepted. The

mean acceptance score of the male respondents (31.24) is high, followed by

female respondents (30.99). It reveals that male respondents have a higher

acceptance level towards loyalty with their banks. Moreover, the variation in the

acceptance level (13.09 per cent) is low among the male respondents. This

means that there exists consistency in the acceptance level of male respondents

towards the loyalty with their banks.

Table 3: Type of Account and Acceptance towards the Loyalty with the Banks

Type of Account No. of Respondents Mean Score Standard Deviation Co-variation

Savings bank account 500 31.11 4.24 13.63

Current account 250 31.35 3.96 12.63

Total 750 31.19 4.15 13.31



309

Comparison of Acceptance between the Current and Savings Bank Accountholders

t Value D.F Table Value at 5% Result

0.753 748 1.963 Not significant

The calculated ‘t’ value is (0.753) less than the table value (1.963) at 5 per cent

level of significance. Therefore, no significant difference is found between the

acceptance levels of the current and savings bank accountholders towards

loyalty with their banks in Kolar district. Therefore, the null hypothesis (H0) is

accepted. Since the mean acceptance score of the current accountholders (31.35)

is high, they have higher amount of loyalty with their banks. The variation in

the acceptance level is high among the savings bank accountholders (13.63%),

followed by the current accountholders (12.63%) towards loyalty with their

banks in Kolar District.

Table 4: Banks Belongs to and Acceptance towards Loyalty

Bank No. of Respondents Mean Score Standard Deviation Co-variation

Canara Bank 210 32.43 3.95 12.18

State Bank of Mysore 180 30.10 4.43 14.72

Kotak Mahindra Bank 120 29.78 3.99 13.40

Vijaya Bank 90 30.78 3.85 12.51

Corporation Bank 90 32.03 3.58 11.18

State Bank of India 60 32.30 3.81 11.80

Total 750 31.19 4.15 13.31


Relationship between the Bank and Acceptance Source of Variation D.F Sum of

Squares

Mean

Squares

Calculated

Value

Table

Value at

1%

Result

Between groups 5 926.684 185.337 11.517 3.042 Significant

Within groups 744 11973.051 16.093

Total 749 12899.735

The calculated ‘F’ value is (11.517) greater than the table value (3.042) at 1 per

cent level of significance. Hence, a significant relationship is found among the

acceptance levels of the respondents belonging to different commercial banks

towards loyalty. Therefore, the null hypothesis (Ho) is rejected. The mean

acceptance score of the respondents belonging to Canara Bank (32.43) is high,

followed by the customers of the State Bank of India (32.30). Thus, the customers

of the Canara Bank have a higher acceptance level towards loyalty. Besides, the

variation in the acceptance level (14.72 per cent) is high among the customers of

the State Bank of Mysore and it is low (11.18 per cent) among the customers of the

Corporation Bank. It is concluded that there exists consistency in the acceptance

level of the the customers of the Corporation Bank towards the loyalty.

Table 5: Type of Bank and Acceptance towards Loyalty Type of Bank No. of

Respondents

Mean

Score

Standard Deviation Coefficient of

Variation

Public sector bank 630 31.46 4.13 13.13

New generation bank 120 29.78 3.99 13.40

Total 750 31.19 4.15 13.31



310

Comparison of Acceptance between Public Sector and New Generation Banks

Calculated

t value

D.F Table Value

at 1%

Result

4.096 748 2.582 Significant

The calculated ‘t’ value is (4.096) greater than the table value (2.582) at 1 per

cent level of significance. It is inferred that there is a significant difference

between the acceptance level of the customers of the public sector and new

generation banks towards loyalty. As a result, the null hypothesis is (Ho)

rejected. The mean acceptance score of the customers of the public sector banks

is (31.46) high, followed by the customers of the new generation bank (29.78).

Thus, the customers of the public sector banks have a higher acceptance level

towards loyalty. There exists a consistency in the acceptance level of the

customers of public sector banks (13.13%) towards loyalty in Kolar District.

Table 6: Respondents’ Level of Acceptance towards the Loyalty with the

Banks

Statements Level of Acceptance Total Mean

Str

on

gly

Ag

ree

Ag

ree

Nei

ther

Ag

ree

No

r D

isa

gre

e

Dis

ag

ree

Str

on

gly

Dis

ag

ree

I consider my bank’s services

are good.

82

(10.93)

161

(21.47)

153

(20.40)

321

(42.80)

33

(4.40)

750

(100.00)

2.92

My bank’s services are better than those of the

other banks.

69

(9.20)

221

(29.4)

156

(20.80)

268

(35.73)

36

(4.80)

750

(100.00)

3.03

In general, the quality of my bank’s service is

high.

122

(16.27)

149

(19.87)

122

(16.27)

293

(39.06)

64

(8.53)

750

(100.00)

2.96

I will say positive things about my bank to other

people.

44

(5.87)

245

(32.67)

174

(23.20)

218

(29.07)

69

(9.20)

750

(100.00)

2.97

I will recommend my bank to someone who seeks

my advice.

148

(19.73)

203

(27.07)

160

(21.33)

207

(27.60)

32

(4.27)

750

(100.00)

3.30

I will encourage my friends and relatives to do

business with my bank.

119

(15.87)

223

(29.73)

155

(20.67)

226

(30.13)

27

(3.60)

750

(100.00)

3.24

I consider my bank the first choice to transact

service.

139

(18.53)

278

(37.06)

153

(20.40)

131

(17.47)

49

(6.53)

750

(100.00)

3.44

I will do more business with my bank in the next

few years.

101

(13.47)

216

(28.80)

228

(30.40)

149

(19.87)

56

(7.47)

750

(100.00)

3.21

I will open an account with my bank branch only,

in the case I change my residence to any another

locality.

87

(11.60)

153

(20.40)

213

(28.40)

196

(26.13)

101

(13.47)

750

(100.00)

2.91

In every visit to my bank, I find better quality in

service.

152

(20.27)

165

(22.00)

184

(24.53)

194

(25.87)

55

(7.33)

750

(100.00)

3.22

Total 106

(14.13)

202

(26.93)

170

(22.67)

220

(29.33)

52

(6.93)

750

(100.00)

3.12


Out of 750 respondents, 29.33% of the respondents disagree about their loyalty

with the commercial banks, followed by agree (26.93%), and neither agree nor


311

disagree (22.67%). 14.13% and 6.93% of the respondents strongly agree and

strongly disagree in that order. The mean acceptance score reveals that the

respondents have a higher acceptance level towards thefirst choice of their bank

to transact service(3.44), followed by recommending the bank to someone who

seeks their advice (3.30). In case of ‘opening an account with their bank branch

only, while they change their residence to any another locality’, the respondents

have lower acceptance score (2.91).

12. Findings

1. The mean acceptance score of the male respondents is high (31.24),

followed by female respondents (30.99). It reveals that male respondents

have a higher acceptance towards loyalty with their banks. The variation

in the acceptance level (13.09) is less among the male respondents,

compared to female respondents (14.17). It means that the consistency

among male respondents is more than the female respondents towards

the loyalty with their banks.

2. The mean acceptance score of the current account holders is high

(31.35), compared to the savings bank account holders towards loyalty

with their banks as they transact frequently with the bank. The variation

in the acceptance level is high among the Savings Bank accountholders

(13.63), followed by current accountholders (12.63). It means that there

is less consistency among the Savings Bank account holders towards the

loyalty with their banks.

3. The mean acceptance score of the respondents of Canara bank is high

(32.43), followed by the customers of the State Bank of India (32.30),

followed by Corporation Bank (32.03), the least being the acceptance

score of Kotak Mahindra Bank (29.78). Thus the customers of Canara

Bank have a higher acceptance level and the customer Kotak Mahindra

Bank have a lowest acceptance level towards the loyalty with their

banks. The variation in the acceptance level is high (14.72 per cent)

among the customers of the State Bank of Mysore and is low (11.18

percent) among the customers of Corporation Bank. It indicates that

there exist more consistency among the customers of Corporation Bank

towards the loyalty with their banks.

4. The mean acceptance score of the customers of the public sector banks

is high (31.46) followed by the customers of new generation bank

(29.78). It indicates that the customers of public sector banks have

higher acceptance level towards the loyalty. The variation in the new

generation banks is high 13.40 among the customers of new generation

banks compared to the public sector banks (13.13). Therefore there

exists a consistency in the acceptance level of the customers of public

sector banks towards the loyalty with their banks.

5. Out of 750 respondents, 29.33% of the respondents disagree about their

loyalty with the commercial banks, followed by agree (26.93%), and

neither agree nor disagree (22.67%). 14.13% and 6.93% of the

respondents strongly agree and strongly disagree in that order. The mean


312

acceptance score reveals that the respondents have a higher acceptance

level towards thefirst choice of their bank to transact service(3.44),

followed by recommending the bank to someone who seeks their advice

(3.30). In case of ‘opening an account with their bank branch only, while

they change their residence to any another locality’, the respondents

have a lower acceptance score (2.91).

13. Suggestions

1. The banks need to device appropriate schemes for the female customers

and should facilitate the female customers at the time of transacting the

business in order to increase the consistency in their loyalty.

2. A more critical aspect of marketing is to retain the customers, turn them

into loyalists and repeat the customers which has to be done by leveraging

customer segmentation models to enhance targeted offerings by

formulating appropriate schemes and facilities for both the current and

savings bank account holders. The select commercial banks should focus

on the needs of the savings bank account holders and design the services

accordingly.

3. The select commercial banks needs to make smart decisions through

loyalty analysis and future proof their business by employing the right

customer retention strategies in order to increase the consistency towards

the loyalty with their banks.

4. ‘On an average a loyal customer is worth upto 10 times as much as their

first purchase’ therefore, good customer service is the best strategy for the

select commercial banks. When customers are taken care of in sensitive

way, they are more likely to come back and often recommend others

about the same.

5. The select commercial banks should conduct surveys through the external

agencies so that the public reposes confidence on the results of the

surveys. Opinion polls should be carried out from time to time to

understand the perceptions of the customers about the banking services

of the commercial banks.

14. Conclusion

Service quality and all its dimensions have a indicative and absolute association

with the customer satisfaction and customer loyalty. Service quality analysis

makes an impact on the development of the customer loyalty concept and is a

contributory factor towards the customer satisfaction and customer loyalty.

The findings of the present research reveals that nearly one third of the

customers disagree with the loyalty of the customers whereas only seven

percent of the respondents strongly agree with the loyalty statements with their

banks. Moreover that consistency in the loyalty is less among the female

respondents, Savings Bank accountholders, new generation banks when

compared to male respondents, Current accountholders and public sector banks


313

respectively. The commercial banks must breach with conventional, one-sided,

internally focused consumer initiatives and move toward a cognizant, customer

oriented model to escapade the potential of its most treasured customers. It’s

very important for the select commercial banks to remember the value behind

customer retention and customer loyalty.

References

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[2] Caruana Albert, Service Quality: The Effects of Service Quality and the Mediating Role of Customer Satisfaction. European Journal of Marketing 36 (7&8) (2002), 811-828.

[3] Gronroos C., Relationship Approach to Marketing in Service Contexts: The Marketing and Organizational Behaviour Interface, Journal of Business Research 20 (1990), 3-11.

[4] Loudon D., Bitta D.A.J., Consumer Behaviour: Concepts and Applications, New York: McGraw-Hill, 1988.

[5] Lovelock C., Loyalty in Private Retail Banking: An Empirical Study, IUP Journal of Management Research 9 (4) (2001), 21-38.

[6] Yong J.K., A Multi-dimensional and Hierarchical Model of Service Quality in the Participant Sport Industry, Thesis Submitted to Ohio State University (2000).

[7] Zeithmal V.A., Service Quality Delivery through Websites: A Critical Review of Extant Knowledge, Journal of the Academy of Marketing Science 30 (4) (2000), 362-375.


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