Influence of service quality differentiation strategy on customer loyalty in commercial banks within Nakuru municipality

Abstract

the modern customer centric competitive arena, service quality and customer loyalty prove I ':e key factors reciprocally interrelated in a causal, cyclical relationship. Bank services are ‘- :1 similar and yet differentiable. Empirical evidence points to the influence of service :_;;2.lity differentiation on customer loyalty in developed countries. However, there is still need for extension of these studies to the developing countries, especially in Africa. The purpose of ‘his study was to determine the influence of service quality differentiation strategy on customer loyalty in commercial banks within Nakuru Municipality. The study had five specific research objectives: to determine the influence of service environment on customer loyalty: to find out the influence of interaction quality on customer loyalty; to establish the :.";luence of empathy on customer loyalty; to determine the influence of reliability on :‘.L<tomer loyalty and to determine the composite influence of service environment, interaction quality. empathy and reliability on customer loyalty in commercial banks within Nakuru .\lunicipality. The study adopted a descriptive survey design and employed purposive sampling technique in the identification of the banks and systematic random sampling in the selection of the respondents. The study sample was drawn from customers of banks that had operated in Nakuru Municipality for more than five years. A representative sample of 384 bank customers was chosen and the process of data collection was conducted over a period of one month. The study used a questionnaire for data collection. Data collected was analyzed for descriptive statistics and inferential statistics (correlation and regression) using Statistical Package for Social Sciences (SPSS) computer software version 15. Research findings were presented in the form of tabular summaries. The significance level used for the study was 0.05. The results revealed that most bank customers agreed that banks used the service quality differentiation strategy dimensions and they also agreed with the aspects of customer loyalty as being present among most customers. Results also revealed that service environment was not significantly related to customer loyalty while interaction quality, empathy and reliability were significantly negatively correlated with customer loyalty. The study concluded that service quality differentiation dimensions influenced customer loyalty significantly yet negatively. The study recommended that bank managers should change the application of the service quality differentiation dimension and they should also differentiate on aspects that increase customer loyalty. The study recommended that similar studies should be carried out in other pans of the country and in different sectors of the economy; and that factors that mm customer loyalty that are not discussed in the study should be researched on.