Influence of customer retention process on profitability in the banking industry: a case of Kenya commercial bank

Abstract

Customer retention is reflected on three crucial business attributes which include increased revenue, lower customer acquisition costs and increased referrals. Today, with rising customer acquisition costs, businesses are getting innovative and starting to take a proactive role in retaining their clients. Experts in service recovery and customer retention have documented that when service providers succeed in getting a high Customer retention, they not only attract more customers but they also increase their Customer loyalty which results to high business profitability. In addition, attracting and retaining new customers goes beyond the products and services to include how the service provider treats the existing customer to create a competitive advantage within and across the market place. The objective of this study was to find out the influence of customer retention processes on financial performance of KCB.The purpose of the study is to provide in-depth information for organizations on the influence of customer retention processes on financial performance especially the banking industry. The study has outlined and discussed customer retention processes. The study used descriptive design and the target population were KCB staff based at KCB Branches based in Nairobi region. The research instrument was a questionnaire and the data was collected in KCB Branches based in Nairobi region. A pilot study was carried out to pretest and validate the questionnaire. The data was then analyzed and the findings recorded by use of tables and figures. The process involved tallying up responses, computing percentages of variations in response as well as describing and interpreting the data in line with the study objectives through use of SPSS. The study sought to find out which of the business processes impacts customer retention the most. The business processes in order of popularity were Service guarantee, Loyalty/reward programs, Complaint management, Employee satisfaction and Service recovery.The study found out that an increase on the amount spent on customer retention there was an increase in profit. This shows that the higher the amount spent on customer retention, the higher the profit. Hence, this study concludes that customer retention has a positive impact on institutions profitability For effective future service recovery processes, this study calls for KCB to do a pre-operative assessment, planning and preparation of all initiatives as well as centralize system on customer complaints. In addition, the bank will have to ensure that customers fully understand the bank processes and have timely updates and responses to customers to build customer trust and improve service guarantee. Lastly the study recommends that the management should always pay attention to employee feedbacks on complaint resolutions and the way forward and restructure the flexibility of bank processes to reduce bureaucracy.