Determinants of customer satisfaction and retention: a survey of the banking industry in Kenya

Customers have become the lifeblood of any organisation. Without customers, or-ganisations would not exist let alone survive in this competitive global environment (Grigoroudis, Politis and Siskos, 2002). Banks depend on sufficient and sustaining profitability to survive in the global business world. Customers are the source of banks‟ profitability. By satisfying the customer, the bank is able to retain the custom-er and reap maximum benefits from the relationship which ultimately leads to higher profitability. Customer satisfaction has therefore evolved as a strategic business ini-tiative which banks cannot ignore. Retention of the bank customer has become one of the most important objectives of the overall marketing strategy of any bank. In Kenya, the term „customer service‟ came to the fore just over fifteen years ago when banks started acquiring customer service departments. Since then, many cus-tomer training programs for staff have been put in place to transform the image of the customer as not just a profit-maker for the banks but as a human being with needs, which if not fulfilled will cause the customer to look for alternatives in the market. Training has focused on the bank staff whose customer handling skills have been sharpened. In spite of this, no empirical study has attempted to find out if the intended satisfaction of the customer has been achieved or not, which is indicative of little or no attention being given to this important phenomenon. In Africa, with the ex-ception of South Africa, empirical studies on customer satisfaction in the banking in-dustry are few. This gap presented the motivation for this study. The primary objective was to establish the determinants of customer satisfaction and retention in the Kenyan banking industry. The secondary objectives were to establish the relationship between socio-economic factors and customer satisfaction in Ken-yan banks; secondly, to determine whether bank-related factors influence customer satisfaction in Kenyan banks; thirdly, to identify the various strategies known to cus-tomers and employed by Kenyan banks to ensure customer satisfaction and customer retention and finally, to analyse the relationship between customer satisfaction and customer retention in Kenyan banks. The study adopted a descriptive survey design to suit the target population which was dispersed over a wide geographical region spanning the entire Kenya. The tar-get population included every bank customer in Kenya. Both qualitative and quantita-tive data were used. The data collection instrument was a self-administered ques-tionnaire that contained both closed and open-ended questions. Statistical tests were done using Pearson, Chi Square, Anova, Pearson Correlation and Multi-linear re-gression. Data were presented using frequency distribution tables, percentages, cross tabulation and pie charts. The findings indicated a positive relationship be-tween bank-related factors and customer satisfaction and retention. The conclusion was that if banks improved on factors like quality service, staff orientation towards customers, availability of management and ATM uptimes just to name a few, propor-tionately, customer satisfaction and retention would be enhanced. Finally, recommendations based on the findings were made to the Kenyan banks highlighting antecedents which would enhance the customers‟ satisfaction and reten-tion in the Kenyan banking industry