Introduction and Background: Customer loyalty
In essence, it refers to the steadfast commitment of customers to a particular company. Even when businesses make errors, loyal customers tend to remain dedicated. The recent economic downturn and financial crisis significantly impacted the United Kingdom’s economy. During this period, they witnessed shifts in consumer preferences, declining family incomes, and rising unemployment rates. Given these transformations, it becomes intriguing to investigate whether customer loyalty also experienced changes during this recessionary period. It is particularly pertinent to delve into customer loyalty within the context of the banking industry, as it was one of the sectors profoundly affected by the recession.
Although the concept of customer loyalty was extensively studied in the 1990s, there has been a noticeable decline in research on this subject in recent years. However, the contemporary business landscape is marked by heightened competition and globalization (Cahill, 2007:6). Kincaid (2003:10) defines customer loyalty as “a consumer behavior founded on positive experiences and value, which leads to the continued purchase of products, even when such a choice may not appear to be the most rational decision” (Kincaid, 2003:10). Furthermore, this concept has been further subdivided into behavioristic and neo-behavioristic dimensions, with the latter focusing more on the underlying factors influencing customer loyalty and consumer attitudes (Peppers and Rogers, 2004:57). Consequently, in the examination of customer loyalty, it is relevant to explore two key aspects: consumer behaviors and their intentions (Schweizer, 2008:8).
The issue of customer loyalty holds significant importance in the banking industry due to the limited empirical evidence available concerning the impact of the recession on customer loyalty, particularly within this sector. Therefore, this research contributes substantially to this field by investigating the effects of the recession on customer loyalty, specifically focusing on the banking sector.
- Aims and Objectives The primary objective of this research is to examine the repercussions of economic recession on customer loyalty towards banks in the United Kingdom. The research endeavors to achieve the following specific objectives:
- To elucidate the theoretical framework underpinning customer loyalty.
- To analyze the transformations within the financial sector that transpired during the recession.
- To evaluate customer satisfaction with banks and their corresponding loyalty.
- To assess the alterations in customer loyalty patterns and provide forecasts based on identified trends.
- To propose recommendations aimed at enhancing customer loyalty within the banking sector.
This research predominantly concentrates on current accounts, intending to unveil how consumer loyalty towards their banks was altered after the economic recession.
- Review of Literature While research on the nexus between economic recession and customer loyalty remains relatively scarce, specific empirical evidence is available. Williams and Naumann (2011:20) investigated the phenomenon of customer loyalty and its fluctuations during periods of economic crises and recessions. Their study scrutinized the most prominent corporations within the Fortune 100. It is worth noting, however, that these researchers did not conduct a primary survey—a factor typically viewed as a strength in research of this nature. Prior investigations primarily entailed secondary data analyses, concluding that the 2009 recession contributed to a decline in customer loyalty towards these significant organizations. This decline can be attributed to deteriorating corporate performance, disrupted corporate governance, and dwindling consumer trust in these entities.
The erosion of trust can be interpreted as a response to apprehensions regarding even more dismal future performance, potentially jeopardizing both customers and stakeholders associated with these companies. Therefore, as Williams and Naumann (2011:20) pos, one of the pivotal determinants of customer loyalty during economic recessions pertains to organizations’ financial performance and solvency.
Stone et al. (2000:12) contend that consumer loyalty hinges on several customer-related factors, notably how customers perceive a business rather than its actual operations. Consequently, this research endeavors to ascertain whether customer loyalty toward banks depends on factors such as customers’ age, gender, and occupation.
A study investigating customer loyalty amid the economic recession, employing primary data, was carried out by Chung et al. (2011:14). However, this study was limited to the retail sector in China, encompassing both interview and questionnaire-based primary data collection methods. The study involved nearly a hundred retail establishments in China, thereby enhancing its generalizability. While more than twenty top managers participated in the interviews, surveying customers as they express loyalty is advisable, facilitating a more comprehensive investigation. Chung et al.’s (2011:14) findings aligned with a prior study conducted by Uncles et al. (2003:249). Researchers concur that external and individual factors influence customer loyalty in both instances.
Chung et al. (2011:14) discerned that alterations in the economic environment negatively impacted customer loyalty within the context of retail stores in China. Retailers sought to bolster customer loyalty through various marketing strategies, including modifications in distribution channels. Nonetheless, it is noteworthy that the researchers omitted practical recommendations for companies seeking to enhance customer loyalty.
Additional empirical evidence pertaining to customer loyalty was presented by Lee et al. (2011:150). Their study specifically focused on the influence of commercial advertising on alterations in customer loyalty. Moreover, the researchers investigated customer loyalty in the backdrop of an economic crisis, with a noteworthy inclusion of the banking sector in their analysis.
The analysis examined over two thousand advertisements, revealing consumer loyalty has deteriorated since the economic recession and financial crisis.
Lee et al. (2011:150) also unveiled a reduction in bank advertisements published during the economic recession. This observation contributed to the researchers’ conclusion regarding the relationship between advertising and customer loyalty. According to Lee et al. (2011:150), companies employ advertising to enhance brand image, subsequently influencing consumer behavior. Consumer behavior ultimately determines whether customers develop loyalty to the brand. Nevertheless, it could be contended that the decline in the number of advertisements occurred as banks and other companies endeavored to curtail expenses and maintain profitability.
Ehigie (2006:494) and Baumann et al. (2011:247) also explored customer loyalty to banks. Ehigie (2006:494) evaluated the impact of customer satisfaction, expectations, and perceived service quality on customer loyalty to banks, with customer satisfaction emerging as the most influential factor among these variables. However, it is crucial to note that this study was conducted within the context of an emerging economy.
In contrast, Baumann et al. (2011:247) identified the pursuit of variety and resistance to change as the most significant factors contributing to customer loyalty to banks. The subsequent section elucidates the research methodology employed to investigate customer loyalty in the UK banking sector and its fluctuations during the economic recession.
Methodology
The primary research hypothesis under examination is as follows: H0: The economic recession in the UK has adversely impacted customer loyalty to major financial institutions.
A combined approach of the case study and survey strategies will be employed to conduct the research and fulfill its aims and objectives.
The research will focus on six of the largest banks in the UK as case studies: The Royal Bank of Scotland Group, Barclays, HSBC, Lloyds Banking Group, Standard Chartered, and Citigroup. Given the nature of the case study strategy, data will be gathered from various sources, necessitating both primary and secondary research. Preliminary data will be collected through surveys, while secondary data will be sourced from publicly available annual reports of the six banks. The annual reports will serve as valuable secondary data sources.
The primary data collected from the surveys will be used to assess customer loyalty and related factors. The following financial indicators will be extracted from the annual reports to evaluate the banks’ performance before and after the recession (covering the period from 2006 to 2010):
- Total revenue of the banks
- Net profit of the banks
- Total amount of deposits
- Total amount of lending to customers
- Total number of customers and annual changes
These indicators will provide insights into the financial performance of the banks during the recession, allowing for an examination of factors such as changes in revenue from consumer departments and fluctuations in net operating profits. Correlation analysis will investigate whether changes in financial performance during the recession are linked to shifts in customer loyalty. The assessment of customer loyalty will be based on the analysis of primary data obtained from the structured questionnaire, which is included in the appendix.
The structured questionnaire represents a primary data collection method commonly utilized in survey strategies (Saunders et al., 2009; Bryman and Bell, 2008).
The questionnaire has been meticulously crafted to serve a dual purpose: to capture respondents’ demographic characteristics and to gauge their loyalty to major banks.
Demographic variables will play a crucial role in this study for several reasons. Firstly, the research will explore whether older customers exhibit higher loyalty levels than their younger counterparts. Secondly, an investigation will be conducted to ascertain whether gender plays a role in determining loyalty to banks, specifically whether women tend to be more loyal than men. Thirdly, the study will examine whether wealthier customers are more loyal to their primary banks than those with lower income levels. Lastly, an exploration will determine whether customers with lower educational attainment are more loyal to banks than their highly educated peers.
The Likert scale has been employed to ensure the data collected is quantitative. This approach allows for subsequent analysis using statistical software such as SPSS. The primary data analysis methods will encompass Analysis of Variance (ANOVA), regression analysis, correlation analysis, and the chi-square test. Additionally, frequency tables will be generated to illustrate the distribution of respondent’s responses. Cross-tabulation will be combined with chi-square tests to examine variations in customer loyalty concerning demographic factors such as age, gender, and education.
Frequency tables will depict the percentage of respondents who agreed or disagreed with the statements in the questionnaire, highlighting dominant response trends. Cross-tabulation and chi-square tests will elucidate differences in consumer loyalty based on demographics, including age, gender, and education.
ANOVA testing will ascertain whether customers’ loyalty to their primary bank is influenced when they have accounts with multiple other banks. Correlation analysis will quantify the strength of the relationships between the various factors impacting customer loyalty to banks. Regression analysis will reveal the statistical significance of each element influencing customer loyalty to banks.
Ethical Considerations
This research project predominantly relies on primary data collection, which involves the active participation of bank customers in the survey. This approach inherently raises ethical considerations that must be thoughtfully addressed.
The foremost ethical concern pertains to the confidentiality of the respondents. Participants were assured of the utmost confidentiality throughout the research process. An agreement was established, stating that the information they provided for this study would remain entirely confidential and not be utilized in any other research project or context.
The second ethical matter under consideration is that of political correctness. The questionnaire’s design required careful selection and formulation of questions to ensure that respondents did not encounter discomfort or offense. To address this concern, a pilot study involving only five respondents was conducted to gauge their reactions to the questions. Following the pilot study, it was evident that all questions were phrased politely and appropriately, thus warranting their inclusion in the final questionnaire.
Intended Outcomes
The anticipated outcomes of this research project revolve around the revelation that consumer loyalty to their primary banks has experienced a decline since the onset of the economic recession in the UK. This expectation is grounded in the adverse impact of the recession on consumer incomes, erosion of trust in major financial institutions, and shifts in household spending and saving behaviors.
Additionally, demographic factors are expected not substantially to influence customer loyalty toward financial institutions. The research findings will be communicated to the banks involved and are poised to contribute to the effective management of these financial institutions. Recommendations will be specifically tailored for bank management, offering guidance on enhancing customer loyalty among their consumer base. Consequently, the primary stakeholders for this research are the bank managers in the UK. However, the insights gained will also serve as valuable guidance for marketing researchers seeking to delve deeper into this issue in future investigations.
Frequently Asked Questions About Writing A Dissertation Proposal
What is a dissertation proposal?
A dissertation proposal is a document outlining the plan and structure of your upcoming dissertation research. It serves as a blueprint for your dissertation project.
What is the purpose of a dissertation proposal?
The main purpose of a dissertation proposal is to propose your research idea, justify its significance, outline the research methodology, and gain approval from your academic institution.
How long should a dissertation proposal be?
The length of a dissertation proposal can vary, but it’s typically between 1,500 and 3,000 words, excluding references and appendices.
What should be included in a dissertation proposal?
A dissertation proposal should include sections such as the introduction, research objectives or questions, literature review, research methodology, ethical considerations, and a timeline.
How do I choose a dissertation topic for my proposal?
Select a topic that aligns with your academic interests, is researchable, and addresses a specific research gap or problem in your field.
What is the importance of the literature review in a proposal?
The literature review section demonstrates your understanding of existing research related to your topic. It also helps you position your study within the broader academic context.
How do I formulate research objectives or questions?
Research objectives or questions should be clear, specific, and aligned with the scope of your study. They guide your research and help you stay focused on your goals.
What is the significance of the research methodology section?
The research methodology outlines the methods you plan to use for data collection and analysis. It provides a roadmap for conducting your research.
Are there any ethical considerations in writing a proposal?
Yes, ethical considerations are crucial. You should address issues like informed consent, confidentiality, and any potential harm to participants in your proposal.
How do I create a timeline for my dissertation research in the proposal?
Your timeline should outline the major milestones and activities required to complete your dissertation. It helps you manage your time effectively.
Do I need to include references in my proposal?
You should include a list of references or a bibliography to show the sources you’ve consulted while preparing your proposal.
What is the process for getting my proposal approved?
The process may vary by institution, but typically, you’ll submit your proposal to your academic advisor or committee for review. They may provide feedback or request revisions before granting approval.
Can I make changes to my research topic or methodology after the proposal is approved?
Depending on your institution’s policies, you may be able to make minor adjustments, but significant changes usually require formal approval.
Where can I find examples of dissertation proposals for reference?
You can often find examples of dissertation proposals in your university’s library, academic journals, or online databases. Your advisor may also have sample proposals.
What if my proposal is rejected?
If your proposal is rejected, don’t be discouraged. Review the feedback provided and make necessary improvements. Seek guidance from your advisor to ensure your next submission is stronger.