Analyzing the Effectiveness of Customer Retention Strategies with Existing Customers in Banking Industry

Introduction

Berry and Parasuraman (1991) defined relationship marketing as a process of attracting, maintaining and enhancing relationships with customers. It benefits the customers as well as the organizations. Customers can reduce their time and search costs and avoid anxiety by selecting services from a known supplier. Organizations can also save on the time and effort involved in attracting new customers.

Relationship marketing is not a new concept but still is of great importance as the competition is increasing day by day. It has been defined by different authors as -Relationship marketing is attracting, maintaining and – in multiservice organizations-enhancing customer relationships (Berry & Parasuraman, 1991).

Relationship Marketing is an integrated and coordinated effort to identify, maintain and build up a network with individual consumers and employees and continuously strengthen the network for mutual benefits of both sides through interactive, individualized and value added contacts continuously over a long period of time (Shani & Chalasani, 1992).

The purpose of relationship marketing is to identify and establish, maintain and enhance and when necessary terminate relationships with customers and other parties so that the objectives regarding economic and other variables of all parties are met and this is Achieved through a mutual exchange and fulfillment of promises (Christian, 2001).

Here, the study focuses on relationship marketing in banking benefits customers as well as banks. Customers can reduce their time and search costs and avoid anxiety by selecting banking services from a bank. The banks can also save on the time and effort involved in attracting new customers. They can also benefit from the positive word of mouth publicity given by loyal customers. Some of the factors of relationship marketing are: Focus on customer service, Long term orientation, High commitment to customers, more customer interaction, commitment to quality. It is always said that its worth to retain a customer as they are the assets and the best and cost efficient promotional channel. Some of the retention strategies used by the customers are: offering financial incentives, forming social bonds, customization and social bonds, monitoring relationships, adding value to the services, increasing customer contact, enhancing customer service (Kotler, 2001).

Sometimes, despite the efforts made by the banks to offer service with zero defects, some errors creep in and the customer may experience problems. To deal with such situations, banks maintain a proper recovery system in place to identify and solve problems at the earliest and minimize the inconvenience caused to customers. The banks practicing relationship marketing give the utmost importance to two way communication to reap the desired benefits.

Literature Review

The survey of literature reveals some of the critical dimensions of Relationship Marketing in banking industry. We shall focus on a few vital facets. Thus, based on the variables extracted in the Literature, our study will be specifically dealing with retention strategies.