1.1 Background of the Study
Customer retention refers to customer’s stated continuation of a business relationship with the firm (Timothy et al, 2007). The banking industry is highly competitive, with banks not only competing among each other, but also with non-banks and other financial institution alike (Hull, 2012) most banks product development are easy to duplicate and when banks provide nearly identical services, they can only distinguish themselves on the basis of price and quality.
Therefore, customer retention is potentially an effective tool that banks can use to gain a strategic advantage and survive in today’s ever-increasing banking competitive environment (Bara, 2001).
In the last five years, the European banking market has witnessed unprecedented turmoil as it has undergone a period of massive uncertainty and change, with the Deposit Money Banks (formally known as commercial banks) that had enjoyed record profit in 2007 now the subject of intense public scrutiny and, in impact on customer retention seem inevitable (Ernest and Young 2011).
Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship (Atieno, 2001). A bank ability to attract and retain new customers is not only related to its products or services, but strongly related to the way it serves its existing customers and reputation it creates within and across the market place. In New Zealand, customer retention is an important element of banking strategy in its increasingly competitive environment (Gale and Wood 2003) and this also applies to Nigeria. Meanwhile financial institution management in Nigeria always identifies and improves upon factors that can limit customer defection.
Organizations worldwide have various ways of enhancing their customer retention although the ways vary from one organization to another depending on the actual functions of each organization; this is done in a bid to improve customer satisfaction with the organization.
Customer retention strategy has emerged as the most important phenomenon in organization in that it enables mangers to harness the energies of all customers to determine their strength and maximize both customer retention and satisfaction, the success of any of Deposit Money Bank involved in the process of credit services and lending money to its customers should rely on its credit policy which in any case should be developed with customer needs and expectation at the back of their mind, the neglect of which can lead to lending disaster, it is probable that Deposit Money Banks should follow a logical approach taking each important factor in financial services one at a time and assessing with the pending preposition (Alareon 2008). As Kelvin (2006) points out, customer locally is all about driving perceived value, whether that is rational (functional, quality, cost etc) emotional (trust, services, communication, information and brand equity) or a combination of these two dimensions.
First, identify what leverage top-end customer commitment and advocacy behavior and then build customer experience around it. According to Loulenstain (2001) there is no standard schedule for how often to communicate with customers to build locally. In his research, customers reported on interest in receiving communication from suppliers as long as they could see personal value in each message.
In Nigeria, Deposit Money Banks operate with a view to realize profit on the services advanced to the customers and for the recipient to better her economic life in terms of breaking the poverty cycle. However, for this to happen, the cost involved either side has got to be analyzed, measured and translated into the strategy affected in the performance of the Deposit Money Banks. Over the last few years in Nigeria, banks have continued to grow in assets, deposits profitability and products offered. The growth has mainly been attributed to festering local customer. It cost retails banks as