Programa Erasmus+

This section provides a definition to be used in the current study. Loyalty was examined and defined in different contexts, including the traditional context (Dick and Basu, 1994, Bloemer et al., 1998, Oliver, 1999) and the e-commerce context (Suh and Han, 2002, Cyr et al., 2005, Cyr, 2008, Jin et al., 2008). Table 3.2 shows loyalty’s definitions. It can be noted that these definitions are show some similarities. In this section, these definitions will be compared and a loyalty definition in the current study will be stated.

In the traditional context, Dick and Basu (1994) suggested that when customer loyalty is defined, customer attitude and repeat patronage should be considered together. Customer

105

loyalty is a complex concept and in order to understand it, one might need to differentiate between four types of customer loyalty (Dick and Basu, 1994). The first type is the case where no customer loyalty exists; customers have low relative attitude and low repeat patronage. The second type is spurious loyalty; customers show low relative attitude and high repeat patronage. The third type is latent loyalty; customers have high relative attitude with low repeat patronage. Finally, loyalty where there is a combination of high relative attitude and high repeat patronage. According to this differentiation, of all types of loyalty, customer loyalty (the last type) is the preferred one, with most companies striving to reach this level of loyalty. In addition, it can be understood from the Dick and Basu’s (1994) definition that customer loyalty should be composed of a psychology perspective (attitude) that can be translated into actual behaviour (repeat patronage).

Moreover, loyalty has been defined in traditional contexts by (Bloemer et al., 1998, Oliver, 1999). Emphasized that individuals have to be willing to re-buy and show commitment towards specific brands or services. Customers’ behaviours towards some brands and services should continue in the future and switching behaviour should be minimal. In the banking sector, customers should have a preference towards a particular bank over others in the market. They should also have behavioural intentions to visit or re-visit, show commitment and build a long-term relationship with that bank. In terms of Internet banking, Suh and Han (2002) stated that customers should show their preferences and invest to build and maintain the existing relationships with their banks.

In the e-commerce context, Cyr et al. (2005), Cyr (2008), and Jin et al.(2008) mentioned three conditions that distinguish loyal and disloyal customers. The first condition is that customers should be willing to repeat their purchase intention to buy or use online services.

The second condition is that customers should revisit a particular website and use it in the future. Finally, they should be driven towards a specific website and use a particular e-vendor as shown by both attitudinal and behavioural aspects.

According to the above definitions, the current study defined customers’ loyalty towards Internet banking as willingness to visit and revisit a particular Internet banking service provider in the future over other providers in the market and over other financial distribution channels, and be willing to provide recommendations to use that site through positive word-of-mouth to other customers.

106 preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behaviour”. (p. 34)

Bloemer et al. 1998 “The biased (non-random) behavioural response (revisit), expressed over time, by some decision-making unit with respect to one bank out of a set of banks, which is a function of psychological (decision-making and evaluative) processes resulting in brand commitment”. (p. 277)

Moutinho and Smith

2000 “Repeat purchase intention, attitudes or alternatively measures of actual behaviour, including repeat purchase, recommendation”. (p. 125)

Suh and Han 2002 “a customer’s enduring desire to maintain a valued relationship with a store”.

Srinivasan et al.

2002 “A customer’s favourable attitude toward the e-retailer that results in repeat buying behaviour”. (p. 24)

Anderson and Srinivasan

2003 “The customer’s favourable attitude toward an electronic business resulting in repeat buying behaviour”. (p. 125

Shankar et al. 2003 “Deep commitment to the service provider”.

Cyr et al. 2005 “Repeat purchase intention or intended return visits to a website”. (p. 29)

The following sections will provide some of the previous literature studied in both offline and online loyalty contexts. Particular focus will be on the latter as the context of the current study is Internet banking.

107 3.6.2 Customers Loyalty in Traditional Context

Customer loyalty has been examined theoretically and empirically in pervious literature and different conceptual models have been provided to examine and identify factors influence customers’ loyalty towards a particular brand, services and store (Sharp and Sharp, 1997, Macintosh and Lockshin, 1997, Oliver, 1999, Corstjens and Lal, 2000, Schultz and Bailey, 2000, Chaudhuri and Holbrook, 2001, Sun and Lin, 2010, Jambulingam et al., 2011).

Different factors were provided to help to explain how and why customers have different loyalty levels. For example, Sharp and Sharp (1997) examined the effects of loyalty programs on repeat purchase loyalty behaviour in Australia. While Macintosh and Lockshin (1997) proposed a store loyalty model which includes relationships at the person-to-store and person-to-person levels, and how this model could be affected by customers’ trust in a salesperson and customers’ trust in the store. Oliver (1999) examined theoretically what aspects of customer satisfaction affect loyalty and what proportion of the loyalty is explained by the satisfaction component. Corstjens and Lal (2000) investigated the role of a store brand in building store loyalty and argued that store differentiation, store loyalty, and store profitability can be generated by the quality of store brands. Two aspects of brand loyalty, namely purchase loyalty and attitudinal loyalty were examined (Chaudhuri and Holbrook, 2001). These two aspects were proposed to be influenced positively by brand trust and brand effect and it was found that the effects supported. Sun and Lin (2010) examined empirically whether there is any significant influence of the seller’s characteristics and the consumer’s characteristics on the person-to-person and person-to-firm trust, and how customers’ loyalty can be affected by trust in department stores and trust in salespersons. Sun and Lin (2010) found significant influences of trust in department stores and trust in salespersons on customers’ loyalty. In the B2B context, Jambulingam et al. (2011) examined the mediating role of trust in the fairness-loyalty relationship between suppliers (wholesalers) and buyers (retailers), and they found that trust completely mediated the relationship.

In the context of the banking sector, customer retention and loyalty have been investigated (Bloemer et al., 1998, Farquhar, 2003, Jones and Farquhar, 2003, Farquhar, 2004, Panther and Farquhar, 2004, Farquhar, 2005, Leverin and Liljander, 2006, Farquhar and Panther, 2007, Jones and Farquhar, 2007, Farquhar and Panther, 2008, Farquhar et al., 2008). Bloemer et al. (1998) examined how image, perceived service quality and satisfaction influenced loyalty, and found that loyalty was significantly affected by service quality and customers’

108

satisfaction. Farquhar (2003) carried out a qualitative study with managers, who were responsible for retaining customers, to investigate organizational concerns towards retaining customers in the context of traditional retailing of financial services. Farquhar (2003) found that there were six matters that financial services providers were of concern with regard to managing retention customers; namely flux and evolution for change, managing sales and products, building relationships with customers, staff awareness of retention customers, different delivery options, and finally customer information. In the UK market, Jones and Farquhar (2003) examined how customer loyalty can be influenced by contact management and found that 74% of customers had no any problems and 25% had some financial problems. Those customers who did not have problems are likely to continue the relationship and recommend their services provider, whereas customers who did have problems their relationship with and recommendation to others of their services provider depends on how these problems have been solved and the satisfaction degree (satisfy, modify and dissatisfy) that customers experienced during the resolution of the problems. The more customers are satisfied with the problem solving, the more they will continue to recommend their services providers. Farquhar (2004) and Farquhar (2005) examined bank staff perceptions towards customer retention in the UK context and found that the direction and support that staff can get from top management was an critical issue for customer retention, as well as for the banks’ structure, customers’ selection and information system adoption. Panther and Farquhar (2004) investigated the relationship between customer dissatisfaction and loyalty in the context of financial services in the UK market. They found that customers who experienced dissatisfaction tend to be loyal with the services providers, even though they have an awareness of alternatives in the market. Those customers stated that it is difficult and time consuming to switch one provider to another. They stated that the risk for change, long term relationship, lack of time and no big differences between banks are the most cited reasons for staying.

Leverin and Liljander (2006) examined what factors affected customers’ loyalty, investigating the influence of relationship marketing strategy on customer relationships, and consequently loyalty towards the bank, across two high and less profitable segments. They found that there was no significant difference between these two segments and satisfaction was less important in determining loyalty. Some studies have focused on how financial services providers manage multiple channels for both customers acquisition and retention (Farquhar and Panther, 2007, Farquhar et al., 2008). Both studies identified five themes that

109

linked offensive marketing strategies (where companies look to acquire new customers) and defence marketing strategies (where companies focus on existing customers by building switching barriers and increase customer satisfaction). These themes are customer groupings, interaction style that customer preferred, improving the relationships and loyalty by providing new communication channels that can create exit barrier, changing structure to serve customers better, and finally developing services and increasing customer satisfaction. Jones and Farquhar (2007) examined the influence of customer satisfaction with service recovery on their loyalty (intention to continue their custom and make recommendation). They found that customers who had experienced problems with the services tend to continue their relationships but are less likely to make any recommendation. Farquhar and Panther (2008) examined how banks can strike a balance between customer retention and customer acquisition, finding that customer value (segmentation), branding, creating loyalty, maximising information, managing channels, pricing and product offering, and customer satisfaction level were the significant issues for managing customer acquisition and retention.

Recently, customers’ loyalty has been modelled in different ways in the context on banking sector (Foscht et al., 2009, Liang et al., 2009, Licata and Chakraborty, 2009, Baumann et al., 2011). For example, Foscht et al. (2009) examined the factors affecting the satisfaction, loyalty and behavioural intention, proposing that actual loyalty is influenced by overall satisfaction that includes satisfaction regarding employees, services, additional services and other aspect of services. They found that overall satisfaction has significant influence on actual loyalty. In Taiwan, Liang et al. (2009) developed a model to examine how financial performance of a merchant bank can be influenced by customer perceptions towards product attribute, benefits, customers’ satisfaction, trust, commitment and customer behavioural.

They found that customers’ loyalty was significantly influenced by trust and commitment.

Licata and Chakraborty (2009) developed a model to examine the influence of three drivers of loyalty (stake, satisfaction and value of switching service providers on the dimensions of loyalty (behavioural response, commitment to the people providing the service and commitment to the institution) in the USA market. Licata and Chakraborty (2009) found that the majority of the proposed relationships were supported. In the Australian market, Baumann et al. (2011) examined the direct influence of current behaviour (share of wallet) on future intention (customer loyalty) and found significant influence.

110

The following section will provide an overview about customers’ loyalty in online settings and the factors that affect it from previous literature.