Do Customer Loyalty Programs have an impact on customer retention in banks?
Banks are increasingly revealing their growing interest in customer loyalty programs in an attempt to enhance their relationships with customers. For a long time, banks have relied on customer loyalty programs in a bid to retain their existing customers. For instance, credit card issues by banks provide regular customers with various valuable benefits as long as they keep banking with their current bank. The main reason why banks would want to embrace loyalty programs as part of their growth and development strategy is that they present customers with extra incentives to remain with the bank. The reasons why loyalty programs have proven to be more profitable to firms is because they are less price sensitive, result in reduced servicing costs, and increased spending. It is easier to do business with an existing customer than to entice a new one. To a certain extent, loyalty programs impact customer retention in the banking sector. However, the impact they have could in fact be deemed as negligible in comparison with the impact they have on the quality of service provided to customers, image, and satisfaction. In the study research conducted in the UAE, it became apparent that the major determinant of customer retention was actually directly and highly influenced by satisfaction.
Therefore factors that lead to customer satisfaction (for example, the company’s image), play a greater role in retention compared with loyalty programs offered by banks. In this case, regardless of whether a bank is offering loyalty programs to its customers, as long as they are not satisfied with its services, this will have no impact on customer retention. What should actually be considered is whether to increase customer satisfaction or not. This can however only be done through the following ways. First, it can be achieved through constant measurements of the levels of satisfaction so as to ensure that they do not deteriorate as per the consumer’s standards. This could be done through constant market research and consumer surveys, involving the bank’s services. In this regard also, the bank should continuously improve and come up with innovative products so as to excite consumers. They should always have something new to look forward to. Since the image is everything and a key issue in relation to retention, banks in the UAE should always ensure that through corporate advertisements, they will be considered by the retail market as being valid vocal, and visible in the financial sector. This will create a sense of security for their customers and ultimate retention guaranteed.
Which customer care aspects would you like to add in the banking context with suitable reasoning?
Over and above the customer care aspects that have been provided in table 4 of the study on customer retention measurements within the banking sector in the UAE, I would also add a few other aspects. To start with, I would include a detailed security system that makes the customers feel safe whenever they have to transact large amounts of money especially in the case of withdrawals. This will always encourage them to bank at any time with the ease of not being robbed or attacked at any one point. Secondly, I would also include overtime banking hours especially for the corporate section of the bank. This is because there are a lot of small and medium enterprises (SMEs) as well as individual entrepreneurs who would want to bank beyond the banking hours but cannot do so because they are busy attending to their businesses. For the same reason, other corporate individuals would prefer to bank very early in the morning and for their sake, it would be prudent to open earlier than usual. I would also include a home banking service that meets the needs of stay at home mothers and other customers who work from home and would prefer to bank at their own confines. These customers hardly have the time to move around or simply want convenience.
I would also include elements of service quality as illustrated below:
Reliability: This refers to the ability of the bank to deliver services that it promises its customers accurately and dependably.
Tangibles: this has to do with the equipment, the appearance of physical environment components, communication materials (for example, billing statements and reports), and personnel. The bank has to ensure that all its tangibles are directed towards improving customer service.
Assurance: this has to do with the employees’ courtesy and knowledge, along with their ability to inspire confidence and trust.
Responsiveness: this entails the bank employees’ willingness to offer prompt services and to assist customers in the shortest time possible
Empathy: it has to do with the individualized attention and care that bank employees give to their customers. The above five elements of service quality would help to increase customer retention and loyalty.
Which aspects of customer care do you think the local UAE banks need to enhance for outperforming their foreign counterparts operating in the Middle East?
Several aspects of customer care that are practiced by local banks in the UAE need to be enhanced if at all they are to outperform their foreign counterparts operating in the Middle East. To start with, it is important to ensure that the staffs of the local UAE banks are in a position to demonstrate absolute knowledge of the products and services offered by the banks and should be able to perform the services to the best of their knowledge, where a customer is concerned. When confronted by a customer about an issue, they should always show responsiveness and be in a position to offer the service as promised. To create an ever welcoming environment, the employees of the local banks in the UAE should always be pleasant, courteous, and highly friendly. This way, the customers will always feel at ease when at the bank.
In relation to the banking environment, the banks should ensure that they are ever open at the convenient banking and even go the extra mile of working odd hours to cater for the ever-busy corporate individuals. Their information about the products they offer should always be simple and easy to understand, as tabulated and formulated in the newsletters and pamphlets. When clients come to the bank, they hardly want to experience problems related to never ending queues. Therefore, services should be conducted in a fast and timely manner to help avoid long waiting times. In cases where it is inevitable, enough seating space should be available for the waiting customers.
In addition, the billing integrity factor should also be considered as it is highly relevant as well. In this case, the bank should ensure that there are no errors whatsoever involving the transactions conducted by the customers, either manually or electronically. This can be achieved by ensuring that the invoices sent to the customers are clear and readable and that the layout of the statements of account is easy to understand. This way, we can minimize complaints or issues that could arise due to the same. Similarly, the banks should ensure that any invoices to be sent are dispatched on time so that the customers can make an arrangement of any pending payments without being inconvenienced budget-wise.