Introduction/Background
This study aims at investigating the impact of customer satisfaction and customer loyalty on the banking sector in New Zealand. Customer satisfaction can be defined as the measure of the extent to which a good or service consumed by a customer has met or exceeded their expectations. Customer satisfaction can also be defined as the extent to which a good or service fulfills the needs of the customer. Customer satisfaction helps in determining the buying patterns of customers. It also helps in establishing customer loyalty. Customer loyalty is the measure of the extent to which customers are dedicated to a particular brand or products and their unwillingness to substitute the product with another that fulfills the same needs (Butler, 2012). Customer loyalty arises as a result of several factors such as customer satisfaction and good customer relations.
The banking system of New Zealand is highly concentrated. The banking sector in New Zealand mainly lends to the non-financial private sector. Currently, there are 24 registered banks in New Zealand. The big four banks in New Zealand represents 87% of the market share of the banking sector in New Zealand. These banks include ANZ, ASB, BNZ and Westpac (Reichheld& Teal, 2011). These banks are owned by Australians. The New Zealand owned banks account for 8% of the market share. From these statistics, it is clear that there is a great deal of competition between the four largest lenders in the country. The other remaining banks fight for the niche markets and they do not match the size and capacity of the other group. It is important to analyze and evaluate how customer satisfaction and customer loyalty impacts on the banking sector in this country. This study is carried by collecting secondary data to determine how these two factors impact on the banking industry in New Zealand.
The scope of the study in the impact of customer satisfaction and customer loyalty on the banking sector in New Zealand is wide. This is because customer satisfaction is the main determinant of the customers buying patterns. It also determines whether or not a customer will buy from the same person again and again and hence resulting to repeated buying. This is what eventually graduates to customer loyalty. It is vital to investigate the level of satisfaction attained by customers when they transact through a particular bank and comparing the satisfaction of the same customer with a different bank (Fisher-Buttinger & Vallaster, 2008).
Scope of the Study
Customer satisfaction is determined by a combination of different factors. Some of these factors include the price of the product, quality of customer service, attitudes and emotional state of the customer. The determinants of customer satisfaction can be analyzed in a future research. This study will seek to identify how customer satisfaction has impacted on all the banks in this industry. It will also help us to answer the questions such as has customer satisfaction contributed to the huge difference between the leading pack of four banks and the rest of the banks in the industry?
This study is conducted with the aim of determining the impact that customer satisfaction and customer loyalty have on the banking industry in New Zealand. Customer satisfaction is core to the success of each and every business. This is because the most important thing in any business is the customer. Businesses are created or they exist in order to help fulfill the needs of a customer. Due to this reason, it is very important for a business to fulfill the needs of the customers and ensures that the customers have a unique customer experience (Dixon, Toman & DeLisi, 2013). The banking industry in New Zealand is very competitive and it is very critical for each of the banks to satisfy their customers so that they can remain loyal to the bank. By satisfying the customer, the banks will also be able to get many more customers because the most effective means of marketing is through word of mouth. When a customer gets good services and products in a bank, they are most likely going to refer another client to get banking services from the bank. This will contribute to an increase in customer numbers and to the growth of the brand name of the institution. Therefore, this study seeks to establish how the level of customer satisfaction contributes to customer loyalty and how this influences the performance of a bank in the industry.
Significant research has been done on this subject before. However, a gap exists when it comes to the investigation on how satisfaction of customers affects the banking industry. Many types of research have focused on how the price and product quality aspect of customer satisfaction and how it impacts on banks in general. This study will establish how each of the factors contributing to customer satisfaction impact on the performance of banks in New Zealand. Continued and persistent satisfaction of customer needs results to customer loyalty. The impact of customer loyalty or lack of it will be investigated to determine how it affects the banks in this country.
Statement of the Problem
What is the impact of customer satisfaction and loyalty on publicly owned commercial banks in New Zealand?
What is the impact of customer satisfaction and loyalty on the private commercial banks in New Zealand?
What are the factors that influence the level of customer satisfaction in the banking sector in New Zealand?
The main objective of this study is to examine the impact that customer satisfaction and customer loyalty have on banks in New Zealand. The research will help to fill the gap on how significant customer satisfaction is in the service industry and how the presence or lack of it may impact on the performance of a bank.
The study is also conducted with the objective of establishing whether or not customer satisfaction and loyalty contribute to retention and attraction of new customers.
This research also determines the relationship between customer satisfaction and profits made by the bank in New Zealand.
This study is conducted because of the gap in research that has been identified in the banking industry in New Zealand. The country has approximately 24 banks. Of the 24 banks, four own approximately 87% market share (Eid,2017). This means that they have almost absolute control of the banking system in this country. In the course of researching on why there is a huge difference, it was identified that customer satisfaction is one of the most important factors that determined where a customer decides to bank their money. It was also established that very few people are willing to substitute the bank they use for another bank (Faed,2013). This, therefore, means that customers in this market are very loyal. Due to this reason, it becomes vitally important to research on the impact that customer satisfaction and customer loyalty have on the banking industry in New Zealand. This research can help banks to understand how customer satisfaction impacts on them and how they can use the aspect of customer satisfaction and loyalty to gain a competitive advantage over their rivals (Aliah Hanim Mohd, et al., n.d.).
Customer satisfaction has been a major theoretical subject of discussion for many centuries. The term customer satisfaction was however used for the first time in the mid-1970s.Eid,(2017). Different authors have different perspectives about customer satisfaction. The subject is studied from different aspects. Eid, (2017)defines customer satisfaction as the extent to the performance of a product or service meets or exceeds the expectations of the consumer before purchasing the product. Different researchers view customer satisfaction on a wide scope. Some are of the view that customer satisfaction is on the basis of psychological aspects. Oliver, Romm-Livermore & Sudweeks (2009)argues that customer satisfaction is mainly influenced by the psychology of the person consuming the product. He argues that two different customers can be offered a product of similar quality but at the same time the level of satisfaction will not be the same. Therefore, apart from performance, aspects such as attitudes and perceptions are important I determining consumer satisfaction.
Research Questions
Rao & Chandra,(2013))identified four ideal types of consumer expectations which influence the level of satisfaction of a consumer. The first type is the ideal type, the second is the expected, then minimum tolerable level and finally the desirable level. The researcher explains that the level of satisfaction to be achieved by a customer depends on the type of expectations they had before purchasing a product.
Mba(2013)explains that the most significant expectation by a consumer includes those to do with costs of the products or service, nature of the product, the effort required in order to reap the benefits of the product as finally the social values associated with the product or service. He argues that customer satisfaction has a very big impact on any business. Businesses exist to fulfill the needs of the customer. Therefore, if a business fails to fulfill the needs of its customers, the customers will find an alternative. This means that the business will lose customers and may eventually collapse. He conducted his research on the impact that customer satisfaction has on the customer loyalty and sales volume in the supermarket retail industry (Nor& Universiti Utara Malaysia, 2009). The results of the study indicated that the aspect of customer satisfaction is the fulcrum that determines the future of any business. He found out that customers only come back to buy at the same outlet because they were previously satisfied with the products they bought or the services they received.
Huo(2013)also finds a significant relationship between customer satisfaction and customer loyalty and the impact that both have on the service industry. Customer satisfaction term is more significant in the service industry than in the goods market. Huo(2013)carried out a research to examine how customer satisfaction and customer loyalty affects the performance of banks in the USA. The study was conducted using a sample of 21 banks that are registered in the USA and that are of different sizes in terms of customer numbers and assets. The research established that banks that are able to understand the needs of their customers and exceed their expectations perform better than banks that are not able to meet the expectations of customers. The banks that performed well had many innovative products like mobile banking apps and more flexible credit facility (Caywood, 2012). The efficiency in the banks is also different with the banks that performed well-serving customers within a record period of time.
Aims and Objectives of the Study
In New Zealand, various researches have been done on the factors affecting the banking industry in the country. However, there is no research that has been constructed to examine how customer satisfaction and customer loyalty impacted on the industry as a whole. This study, therefore, seeks to fill this gap by studying the impact that these two factors have on the provision of banking services in New Zealand. This literature review on similar research constructed in different countries will help in identifying the most suitable research methods, data collection techniques and analysis technique for this research.
The research methodology to be used in this study is the qualitative research design. This research design will be used to conduct this study mainly because the nature of the subject of study is descriptive. The data that is expected to be collected is also descriptive and hence making it the only research design that can be used (Hayes, 2008). The subject of study involves perceptions and psychological orientations which cannot be measured numerically.
Data for this study will be secondary data. The study will depend on data collected by various researchers and organizations on the trends and factors affecting the banking industry in New Zealand. Up to date data is available on the aspects of customer satisfaction that are relevant in this industry. The study will depend mainly on data from the internet sources. Some of the internet sources that will be used include Financial Times, Euro Monitor, SPglobal.com, dataconomy.com and hrb.org (A. K. Saxena, 2009). These sites contain useful information on the banking industry in New Zealand and they can give up to date information that is helpful in conducting this study. The study will also rely on peer-reviewed journals. Information collected through peer-reviewed journals is dependable. The journals will help in understanding the customer needs in the banking industry in New Zealand. They will also help us to identify the steps and action taken by the banks in New Zealand to improve the levels of customer satisfaction. Books will also be used to provide secondary information that can be compared to other sources to help get an insight on the impact that customer loyalty and customer satisfaction have on the banking industry (Patil & In Bhakkad, 2014). The researches done in the other industries can be compared to that of Australia to identify the similarities and the differences.
Data collected will be analyzed by formulating hypothesis which can be tested. The grounded theory of data analysis will be used to analyze the data collected depending on the suitability. Data will be presented through graphs and tables.
Justification of the Study
Conclusion and Implications
Many studies have been conducted on the impact of customer satisfaction and customer loyalty in the banking industry in various countries. However, very few researchers have been carried out on how customer satisfaction and customer loyalty impacts on the New Zealand banking industry. The New Zealand banking system is very complicated. 87% of the overall industry is controlled by only four banks. This, therefore, means that the other banks share the remaining market share which results in a market share of less than 1% for most banks (Rai, 2013). Therefore, it is important to study the reasons why there is such a big disparity in this industry. The influence that customer satisfaction has on this industry cannot be underestimated since most customers decide on whether or not they will continue being customers depending on their level of satisfaction. This research will help the banks in New Zealand to understand the impact that customer satisfaction and customer loyalty has on them and hence helping them to make changes that will achieve higher levels of customer satisfaction.
References
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Butler, K. C. (2012). Multinational finance: Evaluating opportunities, costs, and risks of operations. Hoboken, NJ: Wiley.
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