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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS An Empirical Study on Customers Satisfaction towards Banking Services in Trichy.
Mahalakshmi. V

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Asst Professor (senior Grade) Department of Management studies, J.J. College of Engineering and Technology, Trichy.
Dr. M. G. Saravanaraj

Professor & Head, Department of Management studies, Muthayammal Engineering college, Rasipuram.
Abstract

The purpose of this research article is to find out the customer satisfaction towards the services rendered by banks in Trichy. The authors conducted a literature search on banking services and interviews with 150 customers of Public and Private sector banks. The study also focused on various factors that influence towards the selection of a bank. General banking services, Infra-structure facility, Value added services and loan oriented services are connected towards customer satisfaction. Analysis was made by using various tools like Percentage Analysis, Ranking, T-test analysis and Correlation. The result showed that there exists a relationship among the variables of customer satisfaction and Banking services. Thus the bank must give importance to these variables in order to be effective.
Key words: Banking services, Customer satisfaction and customer retention. I. Introduction

The banking industry is highly competitive, with banks not only competing among each other; but also with non-banks and other financial institutions .Most bank product developments are easy to duplicate and when banks provide nearly identical services, they can only distinguish themselves on the basis of price and quality. The majority of Indian banks has non-domestic owners, and is not very diversified in terms of the products and services they offer (Hull, 2002). This suggests that the Indian banking industry has reached the maturity phase of the product lifecycle and has become commoditized, since banks offer nearly identical products. This carries the danger of

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creating a downward spiral of perpetual price discounting -- fighting for customer share (Mendzela, 1999). One strategic focus that banks can implement to remain competitive would be to retain as many customers as possible.
i. Customer Satisfaction

In businesses where the underlying products have become commodity-like, quality of service depends heavily on the quality of its personnel. This is well documented in a study by Leeds (1992), who documented that approximately 40 percent of customers switched banks because of what they considered to be poor service. Leeds further argued that nearly three-quarters of the banking customers mentioned teller courtesy as a prime consideration in choosing a bank. The study also showed that increased use of service quality/sales and professional behaviors (such as formal greetings) improved customer satisfaction and reduced customer attrition. Indeed, customer satisfaction has for many years been perceived as key in determining why customers leave or stay with an organization. Organizations need to know how to keep their customers, even if they appear to be satisfied. Reichheld (1996) suggests that unsatisfied customers may choose not to defect, because they do not expect to receive better service elsewhere. Additionally, satisfied customers may look for other providers because they believe they might receive better service elsewhere. However, keeping customers is also dependent on a number of other factors. These include a wider range of product choices, greater convenience, better prices, and enhanced income (Storbacka et al., 1994). Fornell (1992), in his study of Swedish consumers, notes that although customer satisfaction and quality appear to be important for all firms, satisfaction is more important for loyalty in industries such as banks, insurance, mail order, and automobiles. Ioanna (2002) further proposed that product differentiation is impossible in a competitive environment like the banking industry. Banks everywhere are delivering the same products. For example, there is usually only minimal variation in interest rates charged or the range of products available to customers. Bank prices are fixed and driven by the marketplace. Thus, bank management tends to differentiate their firm from competitors through service quality. Service quality is an imperative element impacting customers satisfaction level in the banking industry. In banking, quality is a multi-

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portfolio, and critically, the staff delivering the service.

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variable concept, which includes differing types of convenience, reliability, services

ii. Customer Perceptions of Value

Today, customers are more value oriented in their consumption of services because they have alternative choices (Slater, 1997; Woodruff, 1997). For example, Gale and Wood (1994) explained how customers make purchase decisions between competing providers. The author argued that customers buy on value; they do not simply buy products. Interestingly, it was observed that customers learn to think objectively about value in the form of preferred attributes, attribute performance, and consequences from using a product in a use situation (Woodruff, 1997). Thus, banks must be able to provide up-close personal service for customers who come with high expectations. For customers who value convenience most, banks must offer the latest product such as electronic banking, touch-tone phone account access and internet banking. Clearly, customer value can be a strong driver of customer retention. Reidenbach (1995) argued that customer value is a more viable element than customer satisfaction because it includes not only the usual benefits that most banks focus on but also a consideration of the price that the customer pays. Customer value is a dynamic that must be managed. Customer satisfaction is merely a response to the value proposition offered in specific products/markets (Reidenbach, 1995). By this view, banks must determine how customers define value in order to provide added-value services.
iii.Corporate Image

Todays consumers have more choices for their financial needs than ever before. Technology, globalization, increased competition and increased consumer mobility have dramatically changed the way people bank (Harwood, 2002). Many financial institutions are looking at branding techniques to differentiate themselves. Harwood (2002) argued that branding, as a tool to build image, is critical in the banking industry where all firms offer about the same kinds of products. Hence, it is critical that banks have a comprehensive knowledge of customers values, attitudes, needs and perceptions of various services the bank offers and the image which customers have of the bank itself (Kaynak, 1986a, 1986b). Accordingly, bankers must be able to build and manage their

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competitors.

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banks image in order to clearly define the differences between their bank and its Bharadwaj et al. (1993) argue that services are highly intangible and are, therefore, high in experience and credence qualities. As a consequence, brand reputation is important as a potential competitive advantage. Alvarez (2001) proposed that logic is no longer enough to sell the benefits of an intangible product or service, especially with commodity products and skeptical consumers. This situation calls for emotion or image to change the perception of the audience in any real or profound way (Alvarez, 2001). Furthermore, both Marthur (1988) and Gronroos (1984) proposed image as an alternative to product differentiation.
iv. Customer retention

Customer retention improves profitability principally by reducing costs incurred in acquiring new customers. A prime objective of retention strategies must therefore be zero defections of profitable customers (Reichheld, 1996a). There is, however, a distinction between customers who are simply retained and those who are loyal. The concept of consumer inertia implies that some customers are only being retained, rather than expressing loyalty. Truly loyal customers are usually portrayed as being less pricesensitive and more inclined to increase the number and/or frequency of purchases. They may become advocates of the organization concerned and play a role in the decision making of their peers or family. Satisfaction with a bank's products and services thus also plays a role in generating loyalty that might be absent in the retention situation. Customer loyalty is therefore not the same as customer retention, as loyalty is distinct from simple repurchase behavior. Loyalty is only a valid concept in situations where customers can choose other providers. Companies thus need to understand the nature of their consumers reasons for staying and must not assume that it is a positive, conscious choice (Colgate et al., 1996). Changes in the industrial context of banking could also have an impact on the durability of customer-bank relationships. In New Zealand, these changes have included consolidation through mergers and acquisitions, and the introduction of a new, stateowned bank in 2002. In the former case, banks not only acquire physical assets and human resources, they also acquire the customers of their previous competitors, making assessments of loyalty more complicated. In the case of the new bank, called Kiwibank, its relative youth compromises interpretations of durability. In contrast, the four major

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banks operating in New Zealand all have histories of well over 100 years. These include the Auckland Savings Bank (ASB), the Australia and New Zealand Bank (ANZ/National), the Bank of New Zealand (BNZ), and Westpac Trust. With the exception of Kiwibank, all major banks in New Zealand are now foreign owned.
iv. Switching Barriers

Switching barriers have been used as marketing strategies to make it costly for customers to switch to another organization. Such barriers include search costs, transaction costs, learning costs, loyal customer discounts and emotional costs (Fornell, 1992). These barriers provide disincentives for the customer to leave the current organization. Curasi and Kennedy (2002) have shown that customer satisfaction does not predict the continuation of the relationship. High switching costs are an important factor binding the customer to the service organization. Even with relatively low levels of satisfaction, the customer continues to patronize the service provider because repurchasing is easier and more cost effective than searching for a new provider or sampling the services of an unknown provider (Curasi and Kennedy, 2002). Other than switching costs, cross-selling is another critical variable driving customer retention. Cross-selling is the banks effort to sell as many different products and services as they can to a particular customer (Daniell, 2000). One aspect of loyalty is the impact of cross-selling, which forms a critical element in increasing revenue. Profitability could, as a consequence, be threatened not only by loss of market share but also by diminished opportunities for cross-selling (Jones and Farquhar, 2003). Furthermore, the more products or services you sell to a customer, the less likely it is that they will sever the relationship (Daniell, 2000).
II Review of Literature: Beckett et al. (2000) draw tentative conclusions as to why consumers appear to remain

loyal to the same financial provider, even though in many instances they hold less favorable views toward these service providers. For example, many consumers appear to perceive little differentiation between financial providers, making any change essentially worthless. Secondly, consumers appear to be motivated by convenience or inertia. Finally, consumers associate changing banks with high switching costs in terms of the potential sacrifice and effort involved.

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Athanassopoulus et al (2001) examined the impact of customer satisfaction on customer

behavioral responses. The sample consisted of 793 individual customers of commercial retail banks of Athens, Greece. Statistical tools such as chi-square test, Bentlers comparative fit, Root Mean square of Approximation (RMESA) and confirmatory factor analysis were used for the analysis. The result showed that there is a direct effect of customer satisfaction on the following behavioral responses of customers :(1) decision to stay with existing service provider; (2) positive word of mouth communications; and (3) intentions to stay with the existing service providers.
Aish et al., (2003) compared the bank selection decisions of the small business market

across UK and Egypt and the

results advocated various similarities and provides

evidence to suggest that brand place major role in the bank selection decisions of the small businesses at both UK and Egypt. The study rein forces the opinion that technical quality (quality of services itself) is more important than functional quality (quality of the service provider) in the bank selection customers attitude towards commercial banks were positive. The factors that resulted in customer satisfaction were positive staff attitude. Employee professionalism, timely responses to correspondence, confidentiality of the bank, promptness in correcting errors, and providing accurate billing.
Devlin and Gerrard (2005) studied the relative importance of various choice criteria for

main and secondary banks. Results showed that relatively rudimentary factors such as locations, recommendation and relationships were important choice criteria when choosing a right bank though the same criteria were found to be strongly influential in choosing the secondary bank, offering an incentive was also significantly more important in prompting the choice of secondary bank service exception was found to be significantly more important for main bank as were low fees and over draft charges. Indian financial market is very diverse and the preferences of services change across demographic factors like education, age, sex, salary/earnings level etc.,
Aydin et al., (2005) noted that perceived switching cost had a moderate effect on the

relationship between the customer satisfaction and loyalty, and trust and loyalty. The effect of customer satisfaction on loyalty in customers is less, when the switching cost is perceived to be high rather than low.
Koutouvalas and Siomkos (2006) examined the following issues relating to customer

satisfaction in Greek banks: 1. The factor shaping Greek banks customers perceptions of service quality

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and switching intentions among public and private bank customers

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2. Direct influence of perceptions on customer loyalty customer perceptions

A sample of 200 customers was taken for primary survey. The results of regression analysis showed that, there was a direct and positive correlation between perceive service quality and customer loyalty in the case of both private and the public sectors banks, significant relationship was recorded between demographic characteristic and perceived quality of both types of banks. Customers of both the banks were willing to express their complaints to banks employees. Thus, bank employees were the bank agents and were acting as the connecting link between banks and customers. Customer loyalty was related only to educational level since a higher educational level was related to an increased tendency for information search regarding competitive product\services\providers. Banks promotional efforts, aimed at providing relevant information to the public might increase loyalty level. In such promotional efforts, the service quality and the reputation were the main areas to be emphasized.
Manrai and Manarai (2007) investigated the overall dimensions of customer

satisfaction with bank services in the US. The sample comprised of 578 respondents and for measurement of customers satisfaction factor analysis technique was used. The study identified four overall dimensions of customer satisfaction. These were personnel related considerations financial considerations and convenience related considerations (ATM and hours). The findings suggested that bank marketers should pay much more attention towards promoting factors like personnel, atmospherics, and convenience than what was done in the past. This would help the banks in differentiating their offerings in customers perceptions and thus attracting they form the competitors.
III Research Methodology

Research is the process of a carefully planned scientific way of inquiry for solution of a problem, through an organized method. Research methodology is the description, explanation, and justification of various methods in the research process. The why and how of various aspects encountered in the research process is answered in the research methodology. A good research design provides a clear description about the statement of problem, hypotheses, design, variables, tools used, sample dealings, method of data collection and analysis. Respondents were asked to give opinion on different aspects of customer satisfaction towards the services provided by the banks on a five-point scale ranging from
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through SPSS version 17 Statistical package.
OBJECTIVES OF THE STUDY

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Strongly agree to Strongly disagree and on Ranking. The analysis was conducted

To examine the various services provided by Public and Private sectors banks in Trichy. To identify the factors that influencing towards the selection of a bank. To study the Customer Satisfaction towards the services provided by the banks. To make suggestions for improving the bank customer services.

SCOPE OF THE STUDY

The survey is confined to opinion survey about the various services provided by the Bank at Trichy. The study also involves in identifying and analyzing the Customer satisfaction towards the selection of a Bank.

LIMITATIONS OF THE STUDY

The survey has been conducted only on 150 respondents. Unwillingness of some respondents to provide information is another limitation. Findings of the study may be influenced by personal bias of the respondents.

Problem Statement

The bank has been offering various Banking services like Deposit oriented services, Infra-structure facilities, Value added services, Agency services and identified towards the selection of a Bank.
Sample technique and Size:

Loan oriented

services provided by the banks and in this study the level of customer satisfaction is

Sampling is a technique or a method of selection of samples. Convenient sampling method is used. The researchers have taken 150 samples.
Sampling Area:

This study was undertaken in Trichy city.


Method of Data Collection:

Data collection for this study consists of Primary sources of data collected through structured questionnaire by way of personal interview.
Secondary sources of data collected through magazines, journals and website

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Tools Used

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Percentage Analysis Ranking T-test Inter-correlation Matrix

IV DATA ANALYSIS AND INTERPRETATION

The data has been collected with the help of questionnaire. And it has been analyzed and Interpreted with the help of tables along with relevant descriptions. Appropriate treatment Has been done to the raw data and logical conclusions are drawn based on the findings.
Table 1: Demographic variables Demographic Variables Sex No of Respondents Percentage

Male
Age

93 110 23 12 5

62 73.3 15.3 8.0 3.3

20 to 25 yrs 26-30 yrs 31-35 yrs 36 & above


Marital Status

Married Unmarried
Educational Level

100 50 14 41 90

75 25 9.3 27.3 60.0

School Graduation Professional

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Status & Occupation

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Private Government Business Professional Others


Monthly Income (Rs)

33 4 45 63 5 27 81 42

22.0 2.7 30.0 42.0 3.3 18 54 28

Below 10,000 10001-20000 Above 20000

From the above table it is clear that Total number of respondents were 150 out of which 93(62%) were males and 57(38%) were females. Further Age wise 110(73.3%) were in the age group of 20 to 25 years, 23(15.3%) in the age group of 26 to 30 years, 12(8%) were in the age group of 31 to 35 years, 5(3.3%) were in the age group of above 36 years. Marital status wise 100(75%) were married and 50 (25%) were unmarried. Among educational level 14(9.3%) belongs to school level, 41 (27.3%) belongs to graduation level and 90 (60%) belongs to professionals. Among occupational categories 33(22%) respondents were working in private organizations, 4(2.7%) were working in government organizations, 45 (30%) were working in business, 63(42%) were professionals, and 5(3.3%) belongs to other category. Income wise 27(18%) were in monthly income group below Rs10,000. 81(54%) were in the monthly income group of 10,001 to 20,000 and 42(28%) were in monthly income group of above 20,000.

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Table 2. Ranking of selection of a Bank on the basis of Various Factors

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The factors that influence towards the selection of a bank by the customer were enlisted as (1) Reputation of the bank. (2) Bank promotion attributes (3) Value added services (4) Branch Reputation (5) Schemes and (6) Any other services.
Reputation Rank name) n % of Bank attributes n % Value added services n % the bank (Brach promotion Branch reputation n % Any Scheme n % others. Specify n %

st

54 21 23 22 20 10

36.0 33 14.0 22 15.3 25 14.7 33 13.3 23 6.7 14

22.0 58 38.7 37 14.7 21 14.0 22 16.7 19 12.7 25 22.0 26 17.3 33 15.3 13 8.7 9.3 13 8.7 21 12

24.7 14.7 16.7 22.0 14.0 8.0

36 24.0 28 18.7 24 16.0 24 16.0 22 14.7 24 16.0 25 16.7 22 14.7 29 19.3 26 17.3 14 9.3 26 17.3

2nd 3rd 4th 5th 6th

From the above table 2 it reveals that 54(36%) of the respondents were ranked 1st as reputation of the bank. 33(22%) of the respondents were ranked 1st as Bank promotion attributes. 58(38.7%) ranked 1st as Value added services, 37(24.7%) ranked 1st as Branch reputation, 36(24%) ranked as 1st on Various schemes and 28(18.7%) of the respondents were ranked 1st as other schemes provided by the banks. The reputation of the bank was ranked as 6th by 10(6.7%) respondents, Bank promotion attributes ranked as 6th by 14(9.3%) respondents, value added services were ranked as 6th by 13(8.7%) respondents, Branch reputation was ranked as 6th by 12 (8%) respondents, various schemes were ranked as 6th by 14 (9.3%) respondents and other services provided by banks were ranked as 6th by 26(17.3%) respondents respectively.

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Table 3.Ranking based on Agencies services Provided by the Banks to customer

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The following table shows that the agencies services provided by the banks were enlisted as (1) Foreign exchange (2) Insurance (3) Discounting bill (4) Shares (5) any other

Foreign Rank exchange n %

Insurance n %

Discounting bill n %

Shares n %

Any Specify n %

others.

st

28 32 31 30 29

18.7 21.3 20.7 20.0 19.3

30 23 32 33 32

20.0 15.3 21.3 22.0 21.3

28 28 31 29 34

18.7 18.7 20.7 19.3 22.7

28 18.7 29 26 17.3 34 39 26.0 28 33 22.0 28 24 16.0 31

19.3 22.7 18.7 18.7 20.7

2nd 3rd 4th 5th

From the above table 3 it reveals that 28(18.7%) of the respondents were ranked 1st as Foreign exchange. 30(20%) of the respondents were ranked 1st as insurance. 28(18.7%) ranked 1st as Discounting bill, 28(18.7%) ranked 1st as shares and 29(19.3%) ranked as 1st on any others Foreign exchange was ranked as 5th by 29(19.3%) respondents, Insurance ranked as 6th by 32(21.3%) respondents, Discounting bill were ranked as 6th by 34(22.7%) respondents, Shares was ranked as 6th by 24 (16%) respondents, any other were ranked as 6th by 31 (20.7%) respondents.

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office service provided by the bank. Sl.no Gender Mean S.D Statistical inference

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Table-4. T-test Difference between Gender of the respondents and their front

Time taken to attend

Male (n=93 ) Female (n=57) 2


Approach of the staff

3.38 3.93 3.62 3.49 3.25 3.81 3.55 3.44 3.48 3.56 3.25 3.68 3.32 3.60

1.382 1.083 1.310 1.136 1.404 1.342 1.355 1.310 1.486 1.268 1.479 1.152 1.453 1.294

T = -2.576 P < 0.05 Significant T = .631 P > 0.05 Not Significant T = -2.410 P < 0.05 Significant T = .488 P > 0.05 Not Significant T = -.327 P > 0.05 Not Significant T = -1.903 P < 0.05 Significant T = -1.167 P > 0.05 Not Significant

Male (n=93 ) Female (n=57) 3


Response to the complaints

Male (n=93 ) Female (n=57) 4


Guidelines by the staff

Male (n=93 ) Female (n=57) 5


Answering the queries

Male (n=93 ) Female (n=57) 6


Display of token number

Male (n=93 ) Female (n=57) 7


Any other specify and rate it

Male (n=93 ) Female (n=57)

Df = 148 Research hypothesis

There is a significant difference between gender of the respondents and their front office services provide by bank.
Null hypothesis There is no significant difference between gender of the respondents and their front office

services provide by bank.

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Statistical test

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Student t test was used in the above hypothesis Time taken to attend = .011<0.05, Approach of the staff= .529>0.05, Response to the complaints=.017<0.05,Guidelines by the staff=.626>0.05, Answering the queries=.744>0.05 ,Display of token number=.059<0.05 , Any other specify and rate it=.245>0.05. Majority of the front office services provided by the banks does not influence the gender of the respondents. Hence, the calculated value is greater than table value. So the research hypothesis is rejected and the null hypothesis is accepted.
Table 5. Inter correlation Matrix between the value added banks. Credit Mobile A.T.M Debit card card banking facilities facilities facilities A.T.M 1 facilities Debit card .106 1 facilities Credit card -.296(**) -.173(*) 1 facilities Mobile -.222(**) -.438(**) .413(**) 1 banking Internet -.199(*) -.341(**) -.036 .342(**) banking Any others. .145 .115 .105 .119 specify n 150 150 150 150 services preferred from

Internet banking

Any others. specify

1 -.494(**)
150

1
150

* Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed). From the above table 5 it is clear that the correlation between the variables like mobile banking and credit card facilities are positively correlated 0.413 and it is 0.01 level of significant. Correlation between internet banking and mobile banking are correlated 0.342 and it is 0.01 level of significant. Thus internet banking, mobile banking and credit card facilities can predict the customer satisfaction towards banking services.

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the banks.

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Table 6. Inter correlation Matrix between the Deposit oriented services provided by

Number of counters Number of counters Procedural formalities Collateral securities Approach of the staff Repayment period Any other
n

Procedural Collateral formalities securities

Approach of staff the

Repayment period

Any other

1 .267(**) .148 .054 .330(**) .197(*)


150

1 .433(**) -.511(**) .305(**) .471(**)


150

1 -.642(**) .339(**) .501(**)


150

1 -.209(*) -.340(**)
150

1 .455(**)
150

1
150

* Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed). From the above table 6 it is clear that the correlation between the variables like Repayment period and other services provided by the banks are positively correlated 0.455 and it is 0.01 level of significant. Correlation between Procedural formalities and Collateral securities are correlated 0.433 and it is 0.01 level of significant. Thus formalities, securities and other services and repayment period can predict the customer satisfaction towards bank.
CONCLUSION

One strategic focus that banks can implement to remain competitive would be to retain as many customers as possible. The argument for customer retention is relatively straightforward. It is more economical to keep customers than to acquire new ones. The costs of acquiring customers to replace those who have been lost are high. This is because the expense of acquiring customers is incurred only in the beginning stages of the commercial relationship. In addition, longer-term customers buy more and, if satisfied, may generate positive word-of-mouth promotion for the company. Additionally, long-

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changes.

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term customers also take less of the companys time and are less sensitive to price The key factors influencing customers selection of a bank include the range of services, rates, fees and prices charged .It is apparent that superior service, alone, is not sufficient to satisfy customers. From this research study it is concluded that excellent front office service, Value added services, Deposit oriented services and providing innovative products will satisfy the client needs. Which are essential to Select, Succeed and Retain in the existing banking industries.

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References

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Aish EMA, Ennew CT, McKechnie SA, et al., (2003), A Cross-cultural perspective on the role of branding in financial services: The Small Business Market.Journal of Marketing Management; Vol.19, pp.1021-1042. Anthanassopoulas Antreas, Gounaris sprios and Stathakopoulas Vlassis (2001),``Behavioral Responses to Customer Satisfaction:An Empirical Study, European Journal of Marketing,Vol.35, Nos.5 and 6, pp.687-707. Aydin Sekran, Ozer Gokhan and Arasin Omer (2005), Customer Loyalty and the Effect of switching Costs as moderator Variable: A Case in the Turkish Mobile Phone Market, Marketing Intelligence and Planning, Vol.23,No.1,pp.89-103. Beckett, A., Hewer, P and Howcroft, B. (2000). An Exposition of Consumer Behaviour in the Financial Services Industry. The International Journal of Bank Marketing, 18(1), p. 15. Devlin J. Gerrard P.(2005), A study of Customer Choice Criteria for multiple bank users. Journal of Retailing and Customer Services; Vol.12, pp.297-306. Kotovalas K and Siomkos G J (2006), An examination of Relationship Between Service quality Perceptions and Customer Loyalty in Public Private Greek Banks, International Journal of Financial Services Management, Vol.14, pp.208-271. Manrai Lalita A and manirai Ajay K (2007), A Filed Study of Customers Switching Behavior for Bank Services, Journal of Retailing and Consumer Services, Vol.14, pp.208-215.

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