Effects of Perceived Value and Trust on Customer Loyalty towards ...
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Global Journal of Emerging Trends in e-Business, Marketing and Consumer Psychology (GJETeMCP) An Online International Research Journal (ISSN: 2311-3170)
2014 Vol: 1 Issue 2
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Effects of Perceived Value and Trust on Customer Loyalty towards
Foreign Banks in Sabah, Malaysia
Haslinda Hasan,
Faculty of Business, Economics, and Accountancy
Universiti Malaysia Sabah, Kota Kinabalu, Malaysia.
Email: [email protected]
Teo Poh Kiong,
Faculty of Business, Economics, and Accountancy
Universiti Malaysia Sabah, Kota Kinabalu, Malaysia.
Raja Azimah Ainuddin,
Faculty of Business, Economics, and Accountancy
Universiti Malaysia Sabah, Kota Kinabalu, Malaysia.
_____________________________________________________________________
Abstract
Liberalization of the Malaysian banking industry has attracted a number of foreign banks to
set up branches in Malaysia providing competition to the local banking industry. Foreign
banks such as Standard Chartered, HSBC, OCBC, and Bangkok Bank have been here for
decades and despite facing various restrictions, they have survived and remained competitive
until today. Newer banks such as Al-Rajhi Bank and Kuwait Finance House have also joined
in this increasingly competitive landscape. This study focused on factors influencing customer
loyalty in foreign banks at Kota Kinabalu, Sabah. Previous studies have shown that customer
loyalty played an important role in determining the competitive advantage of banks. This
study examined the level of customer loyalty towards foreign banks in Malaysia and
investigated whether factors such as perceived value and trust influenced loyalty. Data were
obtained from 239 customers of foreign banks located in Kota Kinabalu, Sabah who
responded to a self-administered survey questionnaire. The analyses showed that customer
loyalty is relatively above average, at a mean of 4.86 (based on a seven-point Likert scale)
and that both perceived value and trust showed positive and significant effects on customer
loyalty. Implications of the study are discussed and suggestions for future research are
provided.
___________________________________________________________________________
Keywords: Customer loyalty, Perceived value, Trust, Foreign banks, Malaysia
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1. Introduction
The trend towards globalization has led to many changes in the world economy and
business environment. The financial sector is one of the sectors affected by this trend which is
growing rapidly with globalization especially within the recent two decades (Rehman and
Ahmed, 2008). According to Herrero and Simon (2006), internationalisation of the financial
sector has grown significantly during the 1990s. Most established banks have expanded their
business into the international market place and cross border operations. The key reasons of
expanding operations into the international market are to achieve competitive advantage,
efficiencies and geographical risk diversification. In order to survive in this competitive
market, banks have to differentiate themselves from their competitors as a means of attracting
customers (Blankson et al., 2007). In 2001, the Central Bank of Malaysia (BNM) introduced
and implemented the Financial Sector Master Plan with the objective to strengthen domestic
financial institutions (BNM, 2001). Under the BNM guidelines, all foreign banks in Malaysia
must operate as locally controlled subsidiaries, with the equity stake at 49% for foreign
investment banks and 30% for foreign commercial banks. The existing foreign banks that
entered the Malaysian financial market before 2001 were allowed to open one branch in an
urban commercial market, two in semi-urban centres, and one in a rural area.
According to Thwaites and Vere (1995), financial institutions are continually
experiencing pressure to increase their profitability as a result of low growth and strong
competition in the market. This aggressive competition has weakened the relationships
between the customers and the financial institutions. Hence, offensive strategies for acquiring
new customers and defensive strategies in strengthening customer loyalty become important
(Miles, 1994). As stated by Thomas, Judith, Cesar and Chia (2009), it is crucial to develop
and maintain customer loyalty in the service industry because loyalty has a strong correlation
with increased sales and profit through repeat patronage of the services or products, positive
word-of-mouth to the public and less price sensitivity. Hence customer loyalty is also
important in defining market share and profitability (Jones and Sasser, 1995; Meidan, 1996).
As supported by Pont and Mcquilken (2005), financial institutions must be conscious and
aware of all those factors that lead to customer satisfaction in order to achieve customer
loyalty.
The conceptualization and measurement of loyalty has significant difference in a number
of studies (Oliver, 1999) and though loyalty in relation to tangible goods and brands have
been extensively studied limited theoretical or empirical studies have been conducted on
service loyalty (Bloemer, De Ruyter and Wetzels, 1999). According to Berry (1983),
perceived value is an important component in relationship marketing which consists of
creating, maintaining and growing of long term relationships in order to benefit from
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customers’ loyalty. Johnston (1997) states that although banks try hard to generate positive
perceived value for the customer, they still experience high levels of dissatisfaction because
most banks do not fully understand what customers want. Hence, values that a customer
generates towards a bank is more important and effective compared to the values generated
by a bank to the customer (Payne, Holt and Frow, 2000) as higher perceived value is the
source of competitive advantage in today’s competitive market (Woodruff, 1997). The above
discussion has led to this study to explore the variables of perceived value and trust; on the
relationship between both variables and loyalty which has been supported by previous
empirical studies and holds a significant influence towards customer loyalty.
2. Literature Review
Customer loyalty is defined as the behaviour where consumers have it in mind to
repurchase or repatronage favoured products or services continuously (Oliver, 1999). Loyalty
is important for an organization and it is equally important to customers as well because
customers are willing to invest their loyalty in products or services that are expected to bring
greater value compared to the organization’s competitors (Reichheld, 1996). When a
customer has developed loyalty towards the products or services provided by a certain
organization, it has directly minimized the time consumed in searching, locating and
evaluating the same services provided by other competitors. Customer loyalty can be
measured by behavioural and attitudinal elements or both (Day, 1969; Grisaffe, 2001;
Russell-Bennett, Mccoll-Kennedy and Coote, 2007). As a result, customer loyalty can be a
major source of sustained growth and profit and a strong asset to an organization (Anderson
and Mittal, 2000).
According to Zeithaml (1988), the definition of value results from the comparison
between the benefits obtained and scarifies made. Value is considered as a subjective and
personal concept toward the products, services and relationships (Parasuraman, Zeithaml and
Berry, 1985). Customer perceived value is described as the perception of quality, mindset,
benefits gained and the financial value of the products or services (Bishop, 1984; Velimirovie,
Velimirovie and Stankovic, 2011).
Oliver and DeSarbo (1988) state that perceived value reflected the relation of the
consumer’s outcome or input to that of the firm’s outcome or input in equity theory. The
equity concept is related with customer perception and evaluation of what is right, fair and
worth in price and value in obtaining the product or services (Bolton and Lemon, 1999). In
another word, customer perceived value is the result from a calculation of the rewards and
expenses related with what the firm is offering. Customers feel fairly treated if the calculation
of the outcome to input is equally measurable to what the firm is offering and receiving
(Oliver and DeSarbo, 1988). As supported by previous research and studies, perceived value
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is a main element of customer loyalty in a majority of organizations in the service industry
such as telecommunication (Bolton and Drew, 1991), airline travel, tourism and retail
(Sirdeshmukh, Singh and Sabol, 2002). Chang and Wildt (1994) indicate that customer
perceived value is inter-related to purchase intention. Higher perceived value will lead to
repurchasing intention towards the services and products offered which develops customer
loyalty in the long run.
Mayer, Davis and Schoorman (1995) refer trusting beliefs to the trustworthiness of the
firms and consumer’s perceptions towards the abilities, integrity, honesty and goodwill
showed by the organization in handling the transactions in the e-commerce service context
(McKnight et al., 2002; Kim and Benbasat, 2003). McKnight et al., (2002) further explains
that trusting intentions means the customer is willing to trust or depend on the organization.
Referring to previous studies, most of the researchers agreed that trusting beliefs have a
positive relationship in influencing trusting intentions (McKnight et al., 1998, 2002; Kim and
Benbasat, 2003). In general, researchers have commonly classified trust as trusting beliefs
(Ganesan, 1994; Gefen and Silver, 1999) and trusting intentions (Hosmer, 1995). This study
will discuss whether trust-related behavioral intentions will lead to more frequent visits or
repeat patronage of a bank’s products or services.
2.1 Tripartite Attitude Model: Cognitive-Affective-Conative
The tripartite attitude model: cognitive, affective, and conative has been commonly used
in conducting consumer research. Oliver (1999), Fishbein and Ajzen (1975) and Dabholkar
(1994) have used this model in conducting consumer behaviour related research. Fishbein and
Ajzen (1975) viewed cognition as an individual belief, perception and opinion toward the
products or services but Day (1972) describes cognition as the information or knowledge that
the customer has about the product. According to Oliver (1999), cognitive attitude can be
formed prior to knowledge or experience about the product from the customers’ perception or
observation. Hence, Sivadas and Baker- Prewitt (2000) consider consumer perceptions of
service quality or value assessments as part of the formation of a cognitive response. The
affective component of attitude refers to the individual’s overall feeling of like or dislike
towards a brand or product with regards to the situation, concept and person (Fishbein and
Ajzen, 1975). Many scholars have agreed that customer satisfaction an affective attitude or
emotional response (Fishbein and Ajzen, 1975; Oliver, 1997; Sivadas and Baker-Prewitt,
2000).
2.2 Relationship between Customer Loyalty and Perceived Value
Oliver and DeSarbo (1998) state that customers are motivated to feel justifiably treated if
they perceive that the ratio of their outcome to input is comparable to the ratio of outcome to
input experienced by the company. In the other words, customers often measure a company’s
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ratio of outcome to input by making comparisons with its competitors’ offers in the market.
Holbrook (1994) states customer value as the fundamental basis for all marketing activities.
The higher the customer value, the higher the chances of a customer repurchasing the product
or services because a high perceived value is one of the primary motivations for patronage.
Sirdeshmukh et al. (2002) stated that customer value is a super ordinate goal and
customer loyalty is a subordinate goal for the businesses as it is a behavioral intention.
Previous empirical research also identified perceived value as a major cause of customer
loyalty in most service industries such as telephone services (Bolton and Drew, 1991), airline
travel, tourism and retail services where a significant relationship was found between the
variables (Sirdeshmukh et al., 2002). Furthermore, Chang and Wildt (1994) also found that
customer perceived value is one of the key contributors to purchase intention because higher
perceived value of a service provider will create the behavioral intention to purchase and
patronize the product or services offered which will directly increase the firm’s sale and
revenue.
Hypothesis 1: There is a positive relationship between perceived value and customer
loyalty.
2.3 Relationship between Customer Loyalty and Trust
According to Fukuyama (1995) and Dasgupta (1998) trust is a fundamental aspect in
many business relationships especially in those containing an element of risk. Most
researchers agreed that trusting beliefs directly influenced trusting intentions (McKnight et
al., 2002; Kim and Benbasat, 2003). Trust is an important factor in affecting relationship
commitment and customer loyalty (Aydin and Ozer, 2005) besides perceived value and
satisfaction. Trust is considered a component of customer loyalty that has an influence on
building customer loyalty (Aydin and Ozer, 2005; Chen and Xie, 2007; Du Plessis, 2010).
Strong customer trusting behavior will enable the customer to make a confident
prediction about the service provider’s future transactions hence influencing customer loyalty
and attitude. Trust influences loyalty by affecting the customer’s perception of congruence in
values with the service provider, which is significantly related to the customer’s satisfaction
and loyalty. The development of trust is further considered as an important result of investing
in affective relationship between the parties in the relationship. A customer will continue
maintaining a good business relationship with a specific business or service provider if he
finds that the benefits received is exceeding the effort in obtaining benefits. Thus, both parties
in the relationship have a certain costs or effort, but also expect benefits (Rootman, 2006).
The benefits that customers seek through the relationship are satisfaction, value and quality
but what the business eventually looks forward to is creating and maintaining a long-term
customer loyalty and higher organization profitability (Wetsch, 2005).
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Hypothesis 2: There is a positive relationship between trust and customer loyalty.
3. Methodology
The main purpose of this research is to test the variables that influence customer loyalty
towards foreign bank in Kota Kinabalu, Sabah and the mediating effect of customer
satisfaction between independent and dependent variables. Respondents were selected using
convenience sampling consisting of walk in customers, existing account holders, credit card
holders, ATM users or users of any other banking facilities of the chosen foreign banks and
snowball sampling on the friends and family of respondents.
3.1 Measurement Items of Perceived Value, Trust and Customer Loyalty
Table 1: Measurement Items for Perceived Value
No. Perceived Value
1. The bank service fees are fair and reasonable.
2. This bank offers the best service for the bank charges I had to pay.
3. The bank provides high quality customer services.
4. This bank creates positive atmosphere.
5. When in this bank I feel relaxed.
6. I feel safe keeping my money in this bank.
7. I feel trust and confident in this bank.
Adapted from Roiget al. (2006)
Table 2: Measurement Items for Trust
No. Trust
1. I trust this bank to have my best interest at heart.
2. I trust this bank to do what it says it will do.
3. This bank is reliable.
4. This bank has a reputation for being dependable.
5. This bank has a reputation for being honest.
6. This bank has a reputation for being reliable.
7. This bank has a reputation for looking after its customers.
8. This bank has a reputation for having its customers’ interest at heart.
9. This bank makes every effort to address my needs.
10. I feel I can trust this bank.
11. I feel that this bank is trustworthy. Adapted from Sekhon et al. (2013)
Table 3: Measurement Items for Customer Loyalty
No. Customer Loyalty
1. This bank has always been my first choice.
2. I will say positive things about this bank to other people.
3. I consider myself as a loyal customer of this bank.
4. I will definitely continue using this bank.
5. I will do most of my banking needs with this bank.
6. I will encourage my friends and relatives to choose this bank.
7. I will recommend this bank to anyone who seeks my advice. Adapted from Zeithaml et al. (1996).
Perceived value was measured using seven items measurement adapted from Roig,
Garcia, Tena and Monzonis (2006) as can be seen in Table 3.1. Table 3.2 shows eleven
measurement items of trust adapted from Sekhon et al. (2013). The measurement items for
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customer loyalty can be seen in Table 3.3 as adapted from Zeithaml et al. (1996). The seven-
point Likert scale of strongly disagree (1) to strongly agree (7) was used to assess each
statement.
4. Findings and Discussion
4.1 Profile of Respondents
Table 4: Profile of respondents
Demographic Variables Categories Frequency Percentage
Gender Male 118 49.4
Female 121 50.6
Marital Status Single 86 36.0
Married 139 58.2
Other Divorced 14 5.8
Age (years) Less than 30 62 25.9
30 – 39 102 42.7
40 – 49 56 23.4
50 and more 19 8.0
Education SPM 26 10.9
STPM 40 16.7
College Diploma 89 37.2
Bachelor Degree 69 28.9
Master Degree 13 5.4
Other 2 0.8
Occupation Public Sector Employee 106 44.4
Private Sector Employee 79 33.1
Self-Employed 43 18.0
Unemployed 4 1.7
Housewife 7 2.9
Income (per month) RM5,000 and less 169 70.7
RM5,001 – RM10,000 39 16.3
RM10,001 – RM15,000 19 7.9
RM15,001 – RM20,000 6 2.5
More than RM20,000 6 2.5
Table 4 shows the demographic profile of the respondents. A total of 239 participants were
included in the final sample. Out of the 239 respondents, 118 were male (49.4%) and 121
(50.6%) were female. The majority of the respondent were 30-39 years old (42.7%). 25.9%
were between 20-29, 23.4% were in the range of 40-49, while 7.0% and 1.0% were from the
groups of 50-59 and 60-69 years old respectively. The majority of the respondents were
College/Diploma holders or higher with 71.5%. Most of the respondents were also from the
government sector, comprising 106 respondents (44.4%). 33.1% were from the private sector
and the rest were either self-employed or non-working (e.g., retirees, students, unemployed).
The most represented personal income in the sample was in the range of less than or equal to
RM5, 000 per month with 70.7%, followed by the income group of RM5,001 – RM10,000
with 16.3%. 7.9% of the respondents earned between RM10,001-RM15,000 monthly, 2.5%
earned RM15,001 – RM20,000 and another 2.5% of the respondents had a monthly income of
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more than RM20,001. The sample reflected that the majority of foreign banks’ customers
were made up of young, working and educated people. All the respondents were Malaysian.
Table 5: Respondents’ Banking Information
Categories Frequency Percentage
Al-Rajhi Bank (ARB) 6 2.5
Hong Kong and Shanghai Banking Corp. (HSBC) 73 30.5
Kuwait Finance House (KFH) 7 2.9
Overseas Chinese Banking Corporation (OCBC) 67 28.0
Standard Chartered Bank (SCB) 52 21.8
United Overseas Bank (UOB) 34 14.2
Table 5 shows the banking information of respondents. According to the table, the
majority of the respondents were Hong Kong and Shanghai Banking Corporation customers
comprising 30.5%, followed by Overseas Chinese Banking Corporation (28.0%), Standard
Chartered Bank (21.8%), United Overseas Bank (14.2%), Kuwait Finance House (2.9%) and
lastly Al-Rajhi (2.5%).
Table 6: Number of Bank Accounts per Customer and Services Obtained
Number of accounts Frequency Percentage
Number of foreign bank accounts One 148 61.9
Two 62 25.9
Three 24 10.0
Four and more 5 2.1
Number of local bank accounts One 97 40.6
Two 91 38.1
Three 42 17.6
Four and more 9 3.7
Number of services obtained One 58 24.3
Two 97 40.6
Three 58 24.3
Four and more 26 10.8
Table 6 shows the number of accounts with both local and foreign banks as well as the
services obtained from these banks in Kota Kinabalu per customer. The results show that
most of the respondents (61.9%) held only one foreign bank account and one local bank
account (40.6%). This suggests that most of the respondents had customer loyalty and
maintained an account with only one bank. 25.9% of the respondents held accounts in two
foreign banks, while 10.0% of respondents had borrowing or non-borrowing relationships
with three foreign banks. The remaining of 2.1% held accounts in four foreign banks or more.
The majority of the respondents used more than two services or products offered by the
foreign banks, including personal banking accounts, financing accounts (housing loan, hire
purchase, etc), credit cards, investments, ATM cards, online banking services and others. As
can be seen in the table, 40.6% of the respondents obtained two types of services offered
followed by 24.3% using one or three services, 10.8% using four services or more.
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Table 7: Method of Banking Transactions
Frequency Percentage
Method of Banking Bank premises only 106 44.4
Transactions Bank website only 1 0.4
Bank premises and website 132 55.2
Bank Premises Everyday 2 0.8
Twice a week 23 9.6
Once a week 16 6.7
Twice a month 31 13.0
Once a month 109 45.6
Less than once a month 58 24.2
Bank Website Everyday 8 3.3
Twice a week 21 8.8
Once a week 21 8.8
Twice a month 21 8.8
Once a month 28 11.7
Less than once a month 34 14.2
None 106 44.4
The method of conducting banking transactions and the frequency of respondents visiting
or conducting their transactions in either bank premises or online are presented in Table 4.4.
The majority of respondents conducted banking transactions at both bank premises and via e-
banking (55%), followed by bank premises only (44.4%) and e-banking only (0.4%).
Results also show that the majority of respondents visited bank premises once a month
(45.6%), followed by less than once a month (23.8%), twice a month (13.0%), twice a week
(9.6%), once a week (6.7%) and everyday (0.8%). Only 1 respondent out of 239 respondents
(0.4%) in the sample did not perform banking transactions at the bank premises. In addition,
results show that most of the respondents did not visit bank website (44.4%), 14.2% of
respondents visited the bank website less than once a month, followed by once a month
(11.7%), twice a month (8.8%), once a week (8.8%), and twice a week (8.8%). Only 3.3% of
respondents visited the bank website daily.
Table 8: Reliability Analysis of Study Variables
Construct Variables No. of Items Cronbach Alpha
Factors Perceived Value 6 .909
Trust 11 .935
Loyalty Customer Loyalty 7 .921
Table 8 shows the reliability analysis of study variables. According to Sekaran and
Bougie (2009), alpha values less than 0.6 considered poor, and values above 0.8 are good. As
shown in the table, all of the three variables have alpha values of 0.9 and above, indicating
that the variables are reliable with a high degree of consistency.
Table 9: Mean and standard deviation of Study Variables
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Variables Mean Standard Deviation
Perceived Value 4.9428 .83584
Trust 4.8836 .74613
Customer Loyalty 4.8643 .83038
Table 4.6 presents the mean and standard deviation values for all of the variables in this
study. Results show that the mean scores for the independent variables varied from 4.8836 to
4.9428 which indicates that all respondents had a moderate perception towards perceived
value and trust. The standard deviation for these variables ranged from 0.74613 to 0.83584.
Overall customer loyalty achieved a mean of 4.8643 with a standard deviation of 0.83038
which indicates that respondents have the intention to build long-term relationships and
loyalty to foreign banks. In summary, the means and standard deviations for the variables in
the study were found to be average.
Table 10: Pearson Correlations Matrix of Study Variables (N=239)
1. Perceived Value 1
2. Trust .819** 1
4. Customer Loyalty .697** .795** 1
Note: **Correlation is significant at the 0.01 level (2-tailed)
As shown in Table 10, results indicate that all variables were positively correlated with
customer loyalty. All the variables had the correlation values of greater than 0.5. Those
variables were perceived value (r=0.697, p<0.01), trust (r=0.795, p<0.01) and customer
satisfaction (r=0.699, p<0.01).Trust is a variable that is highly and positively associated with
loyalty intention (r=.795, p<0.01). A correlation coefficient value in which r=0.50 to 1.0 is
considered strong (Cohen, 1988). Therefore, three of the abovementioned variables have
strong significant or positive correlation with customer loyalty. In this study, trust is
significantly correlated with customer loyalty.
The correlation coefficient values between factors towards customer loyalty ranged
between 0.795 (p<1.00) to 0.696 (p<1.00). All of the variables were found to be positively
correlated with customer satisfaction. The correlation coefficient values of perceived value
(r=.790, p<0.01), trust (r=.808, p<0.01) and customer loyalty (r=.699, p<0.01) were strongly
and significantly correlated with customer satisfaction. The correlation coefficient values
between factors towards customer satisfaction are ranged between 0.808 (p<1.00) to 0.699
(p<1.00).
Overall, the results of the correlation coefficient analysis reveal that the correlation
between the independent variable, mediating variable and dependent variable are significant
and positive, as the correlation coefficient values between the independent variable, mediating
variable and dependent variable appear to be in the range of 0.697 to .819 (p<0.01) which
shows a strong, positive and significant relationship.
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Table 11: Regression Analysis of Perceived Value and Trust with Customer Loyalty
Dependent Variable Independent
Variable
Standard Coefficient
Beta (β) Significance
Customer Loyalty Perceived Value .140 .041*
Trust .680 .000**
R2 .639
Adjust R2 .636
Sig. F .000**
Note: Significant levels: **p<0.01, *p<0.05
Based on Table 11, 63.9% variances in customer loyalty can be explained by both factors
(R2=0.639, p>0.01). Shown are the regression results of the abovementioned hypotheses in
detail. For Hypothesis 1, it is anticipated that there is a positive relationship between
perceived value and customer loyalty. For Hypothesis 2, results show that there is a positive
relationship between trust and customer loyalty. Both of the independent variables were found
to have a positive influence on customer loyalty, perceived value (β=0.140, p<0.05), and trust
(β=0.680, p<0.01). Therefore, both Hypothesis 1 and Hypothesis 2 are supported in this
study.
Results indicate that perceived value has a significant effect on customer loyalty toward
the products and services provided by the foreign banks. The higher the perceived value such
as the perception of the quality of services, customer security and confidence will directly
increase the level of customer loyalty towards the bank. This result is similar to previous
studies carried out in the telecommunication (Bolton and Drew, 1991), banking (Roiget al.,
2006), airline, tourism and retail services industries (Sirdeshmukhet al., 2002; Parasuraman
and Grewal, 2000; Reichheld, 1996).
According to Dasgupta (1998), trust is an important element in all business relationships.
Trust also leads loyalty and commitment because it can create and foster an mutually
beneficial relationship. Loyalty and commitment will lead to the process of purchase and
repatronage and continue maintaining the valued and important relationship that was created
by trust (Chaudhuri and Holbrook, 2001). In this study trust has a positive and significant
relationship with customer loyalty as a high perceived trust towards a foreign bank leads to
commitment and loyalty. The finding is similar to previous studies which stated that trust is
an important element in the service industry (McKnight et al., 1998; Kim and Benbasat, 2003;
Sheppard, Hartwick and Warshaw, 1998). Trust was found to be significantly related to
customer satisfaction. The greater the customer satisfaction with the foreign banks either due
to the product purchased or quality of services, the greater the trust generated in the customer.
Hence, the findings of this study are supported by previous literature which found that there
was a significant relationship between trust and satisfaction (Garbarino and Johnson, 1999;
Singh and Sirdeshmukh, 2000; Anderson and Srinivasan, 2003).
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This study provides empirical evidence supporting the relationship between perceived
value, trust, customer satisfaction and customer loyalty towards the foreign banks in Kota
Kinabalu. The results support the findings on perceived value and trust leading towards
customer loyalty with the mediating effects of satisfaction. At the same time, this study also
provides the empirical support for the Tripartite Attitude Model: Cognitive-Affective-
Conative. In this study, perceived value and trust is cognition where customers form a
positive perception towards foreign banks. Customer satisfaction is the affective component
where customers form a positive feeling towards the bank’s product and services. Customer
loyalty is the conative component where customers will have the intention to repatronage the
bank in the long run. Results show that perceived value, trust and customer satisfaction have a
strong effect and influence on customer loyalty towards foreign banks.
This study has also contributed to the literature to highlight the importance of building
strong customer loyalty in the banking industry because loyalty has a strong correlation to the
increase of sales and profit through repeat patronage, positive word of mouth and less price
sensitivity. It is important to know the perceived value and trust experienced by the customer
in order for a bank to improve its customer service as well as to survive in today’s
competitive market. Results suggest that foreign banks have created a good perception and
image to the public. At the same time, it shows that foreign banks are caring about the
customers and involved in developing customer loyalty.
5. Conclusion
Today’s competitive environment has directly encouraged the banking sector’s
development and growth through increasing efficiency and market discipline, as well as
introducing more sophisticated products and services. It is now important for banks to
understand the factors affecting customer loyalty and the process of development of customer
loyalty, customer relationship management and how to increase customer satisfaction as
customer loyalty is considered to be the foundation of a company’s competitive advantage
thus influencing performance (Rust et al., 2000). Further research is recommended to extend
the findings described in this study. For future research, more variables should be
incorporated into the model which should include both attitudinal and behavioural dimensions
to represent the entire relationship of customer loyalty in the banking industry. The sample
size can be increased in order to get more accurate and reliable data. The same model to
assess satisfaction and loyalty relationship also can be tested in other service industries such
as in hospitality, telecommunication and transportation industries.
Implementation of a customer loyalty program is important to retain the existing portfolio
because the cost of acquiring new customers is always higher than retention. Banks should
build a strong relationship with the customer and provide higher quality of services to reduce
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customer switching behaviour. As discussed earlier, perceived value and trust have a positive
and strong significant relationship towards customer satisfaction and loyalty. Bankers should
also focus on operational issues, especially staff service, customer relationship managers and
personal bankers. Furthermore, packages offered to the customer should match market
requirements. Customer retention relies on the quality of a bank’s services and products
This study indicates that if the customer is satisfied and happy, and assuming that the
banking products and services received by the customer is measurable and offer competitive
value, the customer will then remain loyal to the bank for the long term. Hence, innovation is
a factor of success as bankers need to continue to introduce and offer competitive products to
the market. In conclusion it is important for banks to focus on the development of customer
loyalty programs because strong loyalty will lead to profitability and competitive advantage.
This will enable them to sustain their business in the present competitive environment.
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