Estimating customer defection in personal retail banking

Abstract

Using Juster’s probability scale, this study examines a sample of 881 customers’ self‐reported estimates of probable defection from their main bank. One year later these customers’ statuses with their main bank were reviewed, allowing comparison of intended with actual defection. This methodology allows not only investigation of the Juster scale’s performance in a “subscription” type market but also identification of those customers with a predisposition to switch banks. Bank management can then decide if and how they might address their switch‐prone customers. Respondents were asked to allocate their probability of closing all accounts at their main bank in the next 12 months. The sample estimate was 10 percent while the actual defection result was 5 percent. While this may seem somewhat inaccurate, similar studies in the literature report the tendency of the Juster scale to over‐estimate switching behaviour, but its estimates have consistently proved superior previously to those derived from attitudinally based intention‐to‐buy scales and at least the equal of the Conversion Model.

Determinants of retail bank choice in Nigeria: a focus on gender-based choice decisions

“…Retail banking financial products has been broadly classified under the following headings: transaction and payment products, such as cheque accounts and debit cards; investment products, such as savings accounts, fixed deposits and unit trusts; credit and borrowing products, such as credit cards, home loans, overdrafts and car finance; and financial planning products such as retirement annuity plans and education policies. Garland (2002) observed that retail banks usually operate on a long-term ''cradleto-grave'' customer management strategy. This means that some customers may be regarded as being unprofitable in the short terms but become profitable over time (see also Trubik and Smith 2000).…”

Customer Retention Management Strategies in Freight Transport Service Industry in Ghana.

“…Customer defection is explained as a critical situation where customers leave and abandon a service provider and opt for another (Garland, 2002). Similarly, customer defection rate had been explained to be the degree to which customers terminate the relationship they have had with businesses over a period (Page et al, 1996).…”

Examining Customer Switching Behavior in Cellular Industry

“…Customer defection occurs when customers switch between service providers in the service environment (Garland, 2002). It can be total or partial (Stewart, 1998;Colgate and Hedge, 2001).…”

“…According to Dibb and Meadows (2001), relationship marketing has been one of the best approaches that are probable to meet with a lot of interest with respect to switching behavior. When customers abandon one service provider for another it means customer switching or swapping (Garland, 2002). Complete or fractional understanding can exist as explained by Stewart, 1998;Colgate and Hedge, 2001.…”