Dissertation Outline

The Impact of Economic Recession on Customer Loyalty to Banks

1. Introduction
Customer loyalty is defined as the adherence of people to a company or organization. Customer
loyalty implies that even if a company makes minor errors or mistakes, customers will still be
willing to do business with them or maintain relations. The economic recession in the UK has
changed consumer preferences, affected the income of households and changed the financial
sector significantly. In the light of these changes, it is important to eamine whether customers
remain loyal to the banks they used before the recession.
1.1. Aims and Objectives
The aim of the research is to find out the impact of the economic recession on customer loyalty
to banks in the UK. The following ob!ectives are pursued"
o To discuss the theoretical framework of customer loyalty#
o To discuss the changes in the financial sector during the recession#
o To assess customer satisfaction with the banks and customers loyalty to them#
o $ssess how customer loyalty patterns have changed and provide a forecast based on the
trends identified
o To make recommendations on how banks can improve customer loyalty.
2. Literature Review
This chapter is divided into two ma!or sections" theoretical literature review and empirical
literature review. The theoretical part discusses the concept of customer loyalty and the factors
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that affect it. The second part of the chapter reviews how customer loyalty has changed during
economically unstable periods. %urthermore, the chapter reviews the previous empirical findings
regarding customer loyalty in the contet of the banking industry.
The structure of the chapter is as follows"
&.'. Theoretical literature review
&.'.'. %our C(s of customer loyalty
&.'.&. )ternal and Internal %actors that influence customer loyalty
&.'.*. +trategies of customer loyalty
&.&. )mpirical literature review
&.&.'. Customer ,oyalty in the banking sector
&.&.&. Customer loyalty during economic recession
&.*. +ummary of literature review
The chapter reviews a large variety of studies, some of which include -uffy .&//*0, 1owley
.&//20, -uffy .'3340, Uncles et al. .&//*0, 5owen and Chen .&//'0, 6ee et al. .&//40, )higie
.&//70, 5aumann et al, .&/''0.
3. Methodology
The research is based on the case studies of the si largest banks in the UK, namely 1oyal 5ank
of +cotland 6roup, 5arclays, 8+5C, ,loyds 5anking 6roup, +tandard Chartered and Citigroup.
The strategy of case study implies triangulation of data, i.e. collection of variables from multiple
sources. 9rimary and secondary data has been used to provide triangulation. +econdary data has
been collected form the annual reports of the banks. The data includes the following variables"
o 1evenue of banks
o :et profit of banks
o Total amount of deposits
o Total amount of lending to customers.
o Total number of customers and annual changes
These indicators are analysed in the period from &//2 to &/'/.
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9rimary data has been gathered using a survey of customers in each of the si banks. The
;uestionnaire that was spread amongst the banks customers has been provided in the $ppendi.
The first set of ;uestions in the survey aims to separate the respondents into several demographic
groups in order to reveal the links between customer loyalty to banks after recession and their
demographic characteristics. The second set of ;uestions is aimed at evaluating the loyalty of
consumers to the banks that they used. The ;uestionnaire uses a ,ikert scale that helps to rank
the responses and the respondents( attitudes towards the statements .+aunders et al, &//3#
5ryman and 5ell, &//40.
4. Findings and Analysis
This chapter provides the analysis of the results. The analysis is conducted in +9++ using
statistical tools and instruments. The analytical techni;ues used in the chapter include the
analysis of variance .$:<=$0 and regression analysis. The presentation of data was conducted
using fre;uency tables that showed a breakdown of responses. These tables helped to calculate
the percentages. Cross tabulation and chi>s;uare tests were implemented to analyse whether
there was a significant difference in the customer loyalty to financial institutions among different
demographic groups. These demographic groups were distinguished by age, gender, occupation,
education and eperience.
$:<=$ is used to identify the differences in customer loyalty between different demographic
groups of the respondents. 1egression analysis is used to determine the factors that affected
customer loyalty to banks after the economic recession in the UK.
5. Discussion and onclusion
This chapter provides a summary of findings that were achieved in the research pro!ect. These
findings are compared to the results of previous empirical studies and theoretical works. %inal
conclusions are drawn from the discussion and recommendations are made.
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Re!erences
5aumann, C., )lliott, 6. and 8amin, 8. .&/''0 ?@odelling customer loyalty in financial
services" $ hybrid of formative and reflective constructs?, International Aournal of 5ank
@arketing, =ol. &3 Iss" *, pp.&BC > &7C
5owen, A. and Chen, +. .&//'0 ?The relationship between customer loyalty and customer
satisfaction?, International Aournal of Contemporary 8ospitality @anagement, =ol. '* Iss" 2,
pp.&'* > &'C
5ryman, $. and 5ell, ). .&//40 5usiness 1esearch @ethods, &
nd
ed., <ford" <ford University
9ress.
-uffy, -. .'3340 ?Customer loyalty strategies?, Aournal of Consumer @arketing, =ol. '2 Iss" 2,
pp.B*2 > BB4
-uffy, -. .&//*0 ?Internal and eternal factors which affect customer loyalty?, Aournal of
Consumer @arketing, =ol. &/ Iss" 2, pp.B4/ D B42
)higie, 5. .&//70 ?Correlates of customer loyalty to their bank" a case study in :igeria?,
International Aournal of 5ank @arketing, =ol. &B Iss" C, pp.B3B > 2/4
6ee, 1., Coates, 6. and :icholson, @. .&//40 ?Understanding and profitably managing customer
loyalty?, @arketing Intelligence E 9lanning, =ol. &7 Iss" B, pp.*23 > *CB
1owley, A. .&//20 ?The four Cs of customer loyalty?, @arketing Intelligence E 9lanning, =ol.
&* Iss" 7, pp.2CB > 24'
+aunders, @., ,ewis, 9. and Thornhill, $. .&//30 1esearch @ethods for 5usiness +tudents, B
th
ed., 8arlow" 9rentice 8all.
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Uncles, @., -owling, 6. and 8ammond, K. .&//*0 ?Customer loyalty and customer loyalty
programs?, Aournal of Consumer @arketing, =ol. &/ Iss" B, pp.&3B D *'7
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A""endi# $ %uestionnaire
Questionnaire
F'" 8ow long have you been the customer of the bankG
o ,ess than a year
o ' D * years
o * D 2 years
o @ore than 2 years
F&" Hhat is your ageG
o '4 D &' years old
o && D &3 years old
o */ D B/ years old
o B' D 2/ years old
o <lder than 2/ years old
F*" Hhat is your genderG
o @ale
o %emale
FB" Hhat is your annual incomeG
o ,ess than I&2,/// a year
o I&2,/// > I*B,333 a year
o I*2,/// > IB3,333 a year
o I2/,/// > I73,333 a year
o @ore than IC/,/// a year
F2" Hhat is your educationG
o 8igh school
o +ome college courses
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o Undergraduate
o 9ost 6raduate
F7" Hhat is your !obG
o :on>skilled labour
o +killed manual labour
o +killed non>manual labour
o @anagerial position
FC" 8ow many banks altogether do you bank withG
o <ne
o Two
o Three
o %our
o %ive or more
F4" 8ow would you rank your satisfaction with the bank services on a scale from ' to 2 .2 being
the best0G
o '
o &
o *
o B
o 2
-o you agree or disagree with the following statements"
F3" I have not been loyal to my primary bank and even started considering changing the bank
after the economic recession
o +trongly disagree
o -isagree
o :either agree nor disagree
o $gree
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o +trongly agree
F'/" I can tolerate minor mistakes at my bank and they do not affect my loyalty negatively
o +trongly disagree
o -isagree
o :either agree nor disagree
o $gree
o +trongly agree
F''" The bank did not satisfy my needs fully even before the recession and I considered
changing it.
o +trongly disagree
o -isagree
o :either agree nor disagree
o $gree
o +trongly agree
F'&" The bank(s services worsened during the economic recession
o +trongly disagree
o -isagree
o :either agree nor disagree
o $gree
o +trongly agree
F'*" Hhat factors affect your loyalty to a particular bankG
o 6ood customer service
o 6ood internet and mobile banking service
o 5ank(s charges
o $ccount types and 5ank(s offers
o 5ank(s location
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F'B" 8ow did the economic recession impact your behaviourG
o I started shopping and spending less
o I have changed my bank
o I increased my savings in the bank
o @y spending behaviour has not changed
F'2" Hhat is your primary bankG
o 1oyal 5ank of +cotland
o 5arclays
o 8+5C
o Citigroup
o ,loyds 5anking 6roup
o +tandard Chartered
F'7" 8ow does the information that you obtain about the bank affect your attitude to the
financial institutionG
o 9ositive information and earnings announcements usually make me more confident with
the bank and improve my loyalty(
o I do not track such information and it has no impact on my loyalty to the bank
o I am more sensitive to negative information about the bank that appears in the press# such
information can have a negative impact on trust and my loyalty to the bank.
F'C" @y loyalty to the bank has been constantly increasing since &//2 and the economic
recession has not had an impact on it.
o +trongly disagree
o -isagree
o :either agree nor disagree
o $gree
o +trongly agree
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