Search

Since the early 1980s, the international banking industry has confronted a cascade of marketing challenges as the protective walls of bank regulation have given way to an era of deregulation, new competition, and expanding product lines. These forces of change have prompted banks to move towards customer-oriented strategies with the end of their monopoly positions in the provision of traditional banking services. However, for customers, intense competition means more options and substitutes are available for banking products and services. As a consequence, deregulation has caused customer switching to be an international issue in the banking industry. This situation is also evident in the New Zealand banking industry. Therefore, this research will focus on switching behaviour in the banking industry and analyze it in detail. Based on four hundred and fifty-four useable sample respondents, the findings reveal that reputation, service quality, customer satisfaction, and customer commitment have an impact on customers' switching behaviour. The results also determined that young aged group and low-educational level group are more likely to switch banks. From the sensitivity analysis, the marginal effects indicate that customer commitment is the most important variable that influences customers to switch banks. Service quality is ranked the second most important factor. The third and fourth most important factors are reputation and customer satisfaction. In addition, the low educational level group and young-aged group ranked as the fifth and sixth most important factors. One-way ANOVA and T-tests also indicated that when customers decide to switch banks, there are differences in the importance of the variables in terms of gender, age, ethnic background, occupation, and personal income. This study makes several contributions to the marketing literature on the banking industry from both an academic and practitioners' perspective. The most important contribution is to provide an improved understanding of how price, reputation, responses to service failure, customer satisfaction, service quality, service products, effective advertising competition, customer commitment, demographic characteristics, and involuntary switching affect switching-behaviour in the banking industry. The second contribution is that service marketers and practitioners should benefit from the research findings and be able to develop and implement services marketing strategies to decrease defection rates, and in turn increase bank profits. Finally, a theoretical model of customer-switching behaviour in the New Zealand banking industry is developed. This model provides useful information for future researchers who study switching-behaviour in the banking industry, and other service industries.