Effects of non-financial factors on customer retention in the banking sector: the case of commercial banks in Nakuru Municipality
Customer retention is an important element of banking strategy in today's increasingly competitive business environment. Bank management must identify and improve upon factors that can increase customer retention. There are compelling arguments for bank management to carefully consider the factors that might increase customer retention rates. Customer retention has been hypothesized to be a function of both financial and non financial factors. Non financial factors can be categorized as either personal, physical, product packaging and service delivery factors. The main purpose of this study was to establish the effects of non-financial factors on customer retention in banks in Nakuru municipality. Nakuru municipality was chosen as a study point because of its proximity and its diversity in demographics. Nakuru municipality currently has an establishment of over twenty four banks; these banks have and continue to rely on the attrition of customers from other existing banks and also sourcing for new ones in the market. This study examined the extent to which personal factors; product packaging factors, physical factors, service delivery factors influenced customer retention, in banks within Nakuru Municipality. The study was carried out in six banks in Nakuru municipality namely; KCB, Barclays Bank, National Bank of Kenya, Stanchart, Equity Bank, and Cooperative Bank, amongst its customers. These banks were selected because they are the oldest banks in the area and customer retention patterns could thus be easily examined over the last 10 years. The study adopted the cross-sectional survey design. The study used stratified sampling technique to select a sample of 317. Data collected by use of questionnaire was then coded and analyzed using descriptive statistics especially percentages, frequencies and means with the aid of Statistical Package for Social Scientists and Microsoft: Excel computer software. Results were presented in tables. The study was successful in addressing the study objectives and answering the research questions. It was established that some of the personal factors examined e.g. gender, influence of associates and age of the respondents did not influence customer retention. The level of education and the customers' marital status significantly influenced retention. The study also established that location of the bank, banking hall space, security of the bank and interior bank design significantly influenced retention; while colour scheme of the bank did not influence retention. The product packages factors that were found to influence customer retention were; ease of account opening, range of opening hours, product information availability and adequate feed back. The study also found out that service delivery factors influenced customer retention to a moderate extent in banks within Nakuru Municipality. The customers indicated that their level of satisfaction of this service quality factors was moderate. From the findings the study concluded that it was necessary that banks consider strengthening these factors for the enhancement of customer retention levels amidst competition. Following the findings, the study recommends banks to consider employee training on customer retention tactics, timely provision of product information to customers, physical expansion and improvement of bank facilities in Nakuru Municipality. There is need for further research to be carried out to establish the role of technology and challenges that the banks face in enhancing customer retention and also assess the strategies adopted by banks in retaining their customers.