Customer defection in retail banking

Abstract

Purpose – The purpose of this paper is to provide managers and researchers a comprehensive view of the root causes of customer departure and empirically test the attitudinal and behavioural consequences of failed service quality in a retail banking context. Design/methodology/approach – A quantitative study was conducted among retail banking customers who had defected from a large retail bank provider. Data from 989 usable responses to a questionnaire filled through a telephone survey were applied to model estimation through structural equation modelling. Findings – Findings demonstrate the effect of failed service quality on customers’ negative attitudes towards the retail bank provider (dissatisfaction and lack of commitment), the direct negative impact of failed service quality on loyalty (the opposite of defection), as well as its indirect negative impact on loyalty through negative attitudes. The moderating role of customers’ switching costs and subjective knowledge of the bank’s products is revealed and the relative impact of each failed service quality factor on negative attitudes and behavioural intentions is assessed. Practical implications – Key areas causing customer dissatisfaction and eventually defection are shown to bank managers, providing direction for implementing strategies and mechanisms in order to effectively reduce the defection rate. Originality/value – The theoretical model, which was in large confirmed through the empirical data, offers for the first time empirical evidence regarding the extent to which the general categories of reasons to defect in a service context identified in the literature are indeed causing customer exit.