What Drives Exporting SMEs’ Banking Loyalty?

Abstract

The concept of customer loyalty is gaining extreme importance in the banking industry these days. This is due to the benefits offered by loyal customers to the bank like price premium, repeated purchases etc. and secondly on account of lesser cost involved in retention of existing customer as compared to acquisition of a new customer. But development of effective loyalty building strategies requires deeper understanding of the drivers of customer loyalty. The paper aims at identifying the drivers of exporting SMEs’ banking loyalty. SMEs have been specifically focused upon in this research study as these have been identified as an important segment of banks’ market. A cross‐sectional research on 300 small and medium exporting enterprises through a structured questionnaire has been conducted. The results indicate that presently switching rate of exporting SMEs is low but potential switchers do exist who consider switching to a new bank. Results further conclude service quality as multi‐factor predictor of customer loyalty. Customized services followed by service speed & efficiency and financial factors have been identified as the main drivers of exporting SMEs’ banking loyalty. Apart from researchers, the present study is very beneficial for banks also since an important segment of banks’ customers named as ‘Potential Switchers’ has been identified who needs specific attention. Hence, these customers can be targeted with effective retention strategies and can be converted into satisfied stayers.