Role of Switching Barriers as an Antecedent of Customer Loyalty in Private and Public Banks of India

Abstract

Losing customers negatively impacts a bank's profits and its market share. Customer retention by inducing loyalty is a top priority in the fiercely competitive Indian banking industry. The objective of the present study is to find out how switching barriers affect customer loyalty in private and public sector banks in the wake of bank privatisation in India. Data was collected by means of a questionnaire from a sample of 609 bank customers in India. The collected data was analysed using descriptive analysis, comparison of means, ANOVA and regression. Comparison of means and ANOVA were used to find if there was considerable difference in customer loyalty and perception of the switching barrier variables for private and public sector banks and among male and female bank customers. Based on regression, the effect of switching barriers on customer loyalty for private and public sector banks were determined. It was found that confidence benefits played a significant role in determining customer loyalty in private and public sector banks. For public sector banks, special treatment benefits and confidence benefits are found to play a considerable role in determining customer loyalty. It also shows that if suitable attractive alternatives are available, switching is a possibility for public sector banks. For private sector banks, all dimensions of switching barriers other than the availability of attractive alternatives considerably impact customer loyalty. This study affirms previous models showing that all five switching barrier variables affect customer loyalty of banks. However, the results show that the availability of attractive alternatives plays an insignificant role for private sector banks, while social benefits and switching costs play an insignificant role for public sector banks. Moreover, the results also reveal that female customers tend to be more loyal to their banks compared to their male counterparts.