Customer Retention and Loyalty
Customer retention is understood according to the previous conative approach where, precisely, the purchase of products or services will repetitively guarantee bonding with the company or brand, so it seems obvious to consider that both concepts are related (Diller, 1996).
In the financial industry this relationship was evidenced since ‘loyalty is described as the duration of the customer’s relationship with a provider and the number of products he purchases’, this definition being closely related to the concepts of satisfaction and confidence above.2The economic situation around the financial industry today (reduced interest rates, lower intermediation margins, search of efficiency and productivity, cost containment, etc..), has forced to focus the interest of financial institutions on the final client, so that the customer knowledge that an organization has, together with his experience, will be a decisive influence on the level of bank satisfaction. In addition, attracting new customers can be seen as a cost five times higher compared with maintaining an existing customer; thus, it seems clear that banks strive to keep their customers satisfied (Bhattacherjee, 2001) reducing the risk of attrition and favouring their retention. For this reason, many companies develop their business model through the Relationship Banking (Barrutia & Echebarria, 2002), which is based on favouring the most faithful customers in order to improve their profitability and make this satisfaction an exit barrier. In this regard, those customers with a higher level of connection will be more likely to hire new financial products and thus, improve their engagement and satisfaction as demonstrated below.
Consequently, we can describe customers’ loyalty to financial institutions in response to both satisfaction and confidence (Kim et al., 2009).