Relationship between Service Quality and Customer Retention in the Selected Commercial Banks in Eldoret Town, Kenya

Abstract

Customer attraction and retention is an important element of banking strategy in today's increasingly competitive environment. Bank management must identify and improve upon factors that can attract customers and their defection. The study was undertaken with a purpose to investigate the influence of service quality and customer retention in the selected commercial banks in Eldoret town, Kenya. The study employed an explanatory survey design of selected banks. This study was a survey of selected banks in Eldoret town and purposive sampling technique was used to select nine banks. The targeted population was 225 respondents and simple random sample technique was used to select 20 customers and 5 employees from each bank. The questionnaires were used to collect information from the respondents. Data collected was analyzed using descriptive and inferential statistics. The Adjusted R square = .676 and this indicated that the customer retention was affected by their service (63.9%). This implies that 63.9% of the loyal customers are there because they are satisfied with the quality of services offered by the commercial banks in Kenya. There was a strong relationship between service quality of the banks and customer retention. It is implied that banks should avoid overcharging and inconveniencing customers, service failure and treat customers fairly. The study recommends that; banks should avoid overcharging, avoid inconveniences, avoid service failure, treat them in caring way, compete with their competitors to improve services, be responsive to complaints, adopt a customer focused approach and practice accountability.