An assessment of forerunners for customer loyalty in the selected financial sector by SEM approach toward their effect on business

DOIhttps://doi.org/10.1108/DTA-04-2019-0059
Date03 September 2019
Published date03 September 2019
Pages546-561
AuthorSubhankar Das,Anand Nayyar,Inderpal Singh
Subject MatterLibrary & information science
An assessment of forerunners
for customer loyalty in the
selected financial sector by
SEM approach toward their
effect on business
Subhankar Das
Institute of Socio-Economics,
Duy Tan University, Da Nang, Vietnam
Anand Nayyar
Duy Tan University, Da Nang, Vietnam, and
Inderpal Singh
Institute of Management and Technology,
Lyallpur Khalsa College, Jalandhar, India
Abstract
Purpose The purpose of this paper is to identify and describe the relationship between the
precursors and consequence s of customer loyalty (CL) in the In dian financial sector, speci ally
banking and insurance context, taking a sample of individual customers as respondents from the Indian
State of Punjab.
Design/methodology/approach The collected data have been analyzed using univariate, bivariate and
multivariate analysis techniques. Specifically, descriptive statistics have been assessed to examine the basic
characteristics of the sample data. Confirmatory factor analysis with maximum likelihood criteria has been
adopted for the measurement and validation of various constructs. Independent samples t-test has been used
to compare the CL of public and private firms, banks and insurance firms, and for some of the demographic
variables like gender, marital status, etc. One-way ANOVA has been used to compare the CL for variables
having more than two groups. Structural equation modeling (SEM) has been used to measure the impact of
CL on the BP of financial services firms.
Findings The result shows that BP is a hi gher-order construc t measured in terms of word- of-mouth,
repurchase intentio n, price premium and share of wallet. Though each of t he four measures of CL
is special and unique in n ature, yet a high level of po sitive correlation ha s been seen among these
dimensions. The study re veals that CL is not significantly different f or the banking firms and ins urance
firms in Punjab.
Research limitations/implications The authors consider this work as one of the foundational elements
that will enable further advances toward the governance of multi-layer business impact modeling systems.
Extensive usability tests would enable to further confirm the findings of the paper. This study contributes to
the customer relationship management and services marketing literature by providing empirical support for
CL and BP relationship in the Indian context.
Practical implications The approach described here should improve the maintainability, reuse and
clarity of business process models and in extension improve data for CL in large banking and insurance
organizations. The approaches described here should improve the maintainability, reuse and clarity of loyalty
and relationship of the customer with that of organizations. This can improve data for customer relationship
and loyalty in banking and insurance sector.
Originality/value This paper fulfills an identified gap to enabling SEM enabled models for data regarding
customer relationship and loyalty. Loyalty revolves around the concept of relationship. CL is not a
new concept, but recent years have demonstrated a developing interest to fabricate CL because of
customer-oriented techniques or strategies. Over the previous era, CL has been broadly inspected inside
marketing, trades and transactions. It can be concluded that the CL significantly influences BP.
Keywords India, SEM
Paper type Research paper
Data Technologies and
Applications
Vol. 53 No. 4, 2019
pp. 546-561
© Emerald PublishingLimited
2514-9288
DOI 10.1108/DTA-04-2019-0059
Received 9 April 2019
Revised 20 August 2019
Accepted 3 September 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2514-9288.htm
546
DTA
53,4
1. Introduction
Loyalty revolves around the concept of relationship. Customer loyalty (CL) is not a new
concept, but recent years have demonstrated a developing interest to fabricate CL because
of customer-oriented techniques or strategies. Over the previous era, CL has been broadly
inspected inside marketing, trades and transaction-based literature.
The literature suggests that CL is an important driver of business performance (BP). CL
has been shown to improve exchange relationships, increase advocacy or word-of-mouth
(WOM) (Akbari et al., 2016), increase repurchase intention (RI), positive behavioral intention,
increase price (Aaker, 1996), increase profits, increase share of wallet (SOW) and increase
overall financial performance. CL is a hidden force and it is not easily identifiable. There is a
challenge to the marketers to know the essential factors which influence CL and their effects.
Research has identified main precursors of CL, namely, customer satisfaction (CS),
commitment, trust and image. The more loyal the customers, the longer the relationships;
which accelerate sales, generate a positive intention, price premium (PP) and profits to the
supplier. Positive WOM, RI, PP and SOW are the likely consequences of CL.
1.1 Financial services sector in India
India has a broadened, diversified and expanded financial service sector experiencing quick
development, in existing finance related services firms as well as new elements entering the
market. This financial segment contains insurance agencies, mutual funds, commercial banks,
non-banking financialorganizations,co-operatives,public funds, pensionfunds, capital market
and other monetary benefits derived from smaller organizations. Commercial banks represent
more than 60 percent of the aggregate resources held by the financial system in India.
According to IBEF, The Indian banking system consists of 27 public-sector banks, 26
private sector banks, 46 foreign banks, 56 regional, rural banks, 1,574 urban cooperative
banks and 93,913 rural cooperative banks, in addition to cooperative credit institutions.
Public-sector banks control more than 70 percent of the banking system assets, thereby
leaving a comparatively smaller share for its private peers. ICRA estimates that credit
growth in the Indias[sic.] banking sector would be at 7-8 percent in FY 2017-18.
According to IBEF, The insurance industry of India consists of 57 insurance companies
of which 24 are in life insurance business and 33 are non-life insurers. Among the life
insurers, life insurance corporation (LIC) is the sole public-sector company. The number of
lives covered under health insurance policies during 2015-16 was 36 crore, which is
approximately 30 percent of Indias total population. The number, has seen an increase
every subsequent year as 28.80 crore people had the policy in the previous fiscal. During
June 2016 to May 2017 period, the life insurance industry recorded a new premium income of
Rs. 1.87 trillion (US$ 29.03 billion. The life insurance industry reported a 9 percent increase
in the overall annual premium equivalent in April-November 2016(Figure 1).
With the support of structured banking and insurance system, today, India is one of the
most alive or vibrant global economies. Indian financial sector is not just a key factor of
strength in the worldwide economy, but also a source of massive financial opportunity for the
world. Many foreign companies in a joint venture with Indian companies have announced their
stakes enhancing plans. This all happens due to entry barrierrelaxation of foreigninvestment.
Over the coming years, a series of the joint venture can be seen between global financial players
with the domestic players. In the insurance sector, the insurance penetration ratio is also
having a probability to cross over 4 percent in the coming years as of now is less than
3.5 percent. Investment corpus in the Indian insurance sector can rise to $1 trillion by 2025.
The current study is focused on identifying and describing the relationship between the
precursors and consequences of CL in the Indian context, taking a sample of individual
customers as respondents from the Indian State of Punjab. The study tests the following
conceptual model as provided in Figure 2.
547
An assessment
of forerunners
for customer
loyalty

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