The effects of customer equity and religious motivation on customer retention and switching intention

Abstract

PurposeThis paper aims to investigate the effects of intrinsic and extrinsic motivations represented in religious motivation and customer equity (CE) drivers, respectively, and switching costs (SCs), on customer’s retention to conventional banks and their switching intention (SI) to Islamic ones in the context of the Egyptian banking sector.Design/methodology/approachBased on the literature, a theoretical model is proposed and examined using structural equation modeling (AMOS) 24. Data were obtained using an intercept sample of 273 conventional bank customers in two major cities in Egypt, namely, Cairo and Giza.FindingsThe results supported the positive effect of CE and SCs on customer retention (CR) to conventional banks. Value equity has direct positive effect on CR. In addition, SC significantly mediated the relationship between relationship equity (RE) and service encounter employee’s equity (SEEE) and CR. Finally, religious motivations positively and significantly influence customers SI to Islamic banks.Practical implicationsCE, including all its drivers, namely, value, brand, relationship and SEEE, are the best force of CR in the Egyptian banking sector. The mediating role of SC in the relation between RE and SEEE and CR is perceived as a barrier to switch, instead of reflecting real desire from customers to stay tuned to their conventional banks. In addition, religious motivation should be considered while planning banking services because of its significant direct effect on customers SI from conventional banks to Islamic ones. Finally, both utilitarian extrinsic motivation and hedonic intrinsic ones are influencing customer’s retention and SI, respectively.Originality/valueThis paper develops and adds a fourth driver to previously examined and validated CE drivers, namely, SEEE. Further, it provides empirical analysis to the effect of religious motivation and CE drivers on SCs, CR and SI in a developing and Islamic dominating context, namely, Egypt. Moreover, it introduces a framework that could be examined and validated in other Islamic contexts to further comprehend bank customers' switching behavior. Yet, the current research focused on the Egyptian banking sector only, where the individual customers represent the sampling unit.