The effect of customer service on customer loyalty.

Abstract

South African banks have recognised that their landscape is changing and the market is evolving. Service is a variable that will create a differentiation and separate one institution from their competitors. Global and local competition has increased the importance of quality service, customer satisfaction and subsequently customer loyalty, towards creating a sustainable competitive advantage. Whilst operating in such a regulated and complex environment, bank managers need to understand the importance of customer service and satisfaction and its effect on customer loyalty and ultimately the effect on profitability and market share. Service firms need to adhere to their customers’ needs and continuously focus on satisfying these needs. In order to survive, service firms, including banking institutions, require a loyal client base. The aim of this study was to investigate the effect of customer service on customer loyalty at Nedbank, Retail Banking at the Musgrave Branch. One hundred clients were selected using the simple random sample method; a response rate was seventy seven percent was achieved through a quantitative study, with a self-administered questionnaire. The service quality was tested through the SERVQUAL model. This study also attempted to test the relationship between customer satisfaction and customer loyalty. The data collected was aligned to the objectives and have provided distinct answers to the research question. It was evident from this study that a positive relationship exists between service quality and customer satisfaction. The dimension of customer satisfaction and customer loyalty also showed a positive relationship, however the price satisfaction and customer satisfaction dimension showed a moderate correlation indicating that this is an improvement area. The results of this study have confirmed the theory reviewed in the literature that a relationship exists between service quality, customer satisfaction and customer loyalty. The recommendations included reviewing the current internal process and efficiencies, enhancing technology and leveraging the benefits of a multi-channel service strategy to create ‘moment of truth’ moment for Nedbank customers.