Research topic: The impact of internet banking on customer retention in the UK banking industry. A case study of Lloyds Bank
1.0 Research Title
The impact of internet banking on customer retention in the UK banking industry: A case study of Lloyds Bank
1.1 Research Background
Gaining improved customer loyalty has been the key objective of the banking sector including Lloyds Bank because of the competitive marketplace and rapid changes in technological development (Lloyds Bank Annual Report, 2014). Although banking sectors including Lloyds Bank have gained some market shares through internet banking services as marketing strategies, it has been facing challenges to gain an improved market share and customer loyalty. However, many banks have failed to identify customer requirements. Therefore, the undertaking research study will analyze the impact of internet banking services on customer loyalty levels in the banking industry. The research finding suggests Lloyds Bank defines effective strategies in internet banking service to improve its customer loyalty level.
1.3 Research rationales
The competitive marketplaces and technological development are forcing the banking industry to be more innovative and creative in its services (Kotler and Keller, 2012). In addition, technological development in the internet and mobile usages are changing consumer purchasing behaviors in the banking sector (Gerzema and Edward, 2009). According to Lloyds Bank Annual Report (2014), Lloyds Bank lost 5.9% local market share in 2014, where its sales revenue declined by 6.3% in 2014. As a result, The proposed research work will analyze the impact of internet banking service on customer loyalty level in banking sectors. Most importantly, the study will recommend Lloyds Bank on how it can use banking service more effectively as a marketing tool and make effective strategies when offering products and services through the internet to gain an improved customer loyalty level.
1.4 Research Aims and Objectives
1.2.1 Research Aims
The aims of the proposed study are to evaluate the impact of internet banking systems and services on customer loyalty for suggesting a particular bank of the UK, called Lloyds Bank.
1.2.2 Research Objectives
1.To investigate the impact of internet banking on customer loyalty
- To assess the current internet banking facilities provide by Lloyds Bank to its consumers
- To find out the weaknesses of Lloyds Bank’s Internet Banking services
- To recommend Lloyds Bank to improve its Internet Banking to retain consumers
1.3 Research Questions
- Is Lloyds Bank providing reliable Internet Banking services to the consumers?
- Are the customers motivated and encouraged by Internet Banking services in Lloyds Bank?
- How Lloyds Bank can improve its Internet Banking to improve customer loyalty?
2.1 Internet Banking services
2.1.1 Internet Banking and its services
Internet banking refers to the usages of internet and telecommunication technologies by financial institutions to deliver their services to consumers (Daniel, 2009). According to Leong, Srikanthan and Hura (2008), internet banking refers to the web application based on a client and server-based architecture shown in figure 1, where internet and telecommunication technologies play an important role.
Figure 1: Internet Banking application architecture Source: Leong, Srikanthan and Hura (2008)
2.1.2 How Internet Banking is benefited the financial institutions
As KPMG (2008) notes, Internet Banking provides very low costs transactions in comparison with manual ones. In addition, Internet Banking boosts banks’ revenue through, wider market reach, improved account sales, improved customer satisfaction, new market opportunities, and new fee-based income.
2.2 Customer loyalty
2.2.1. What is customer loyalty?
Customer loyalty refers to the deep hold consumers’ commitments toward repurchases and re-patronizes of the preferred products and services (Kotler, 2012). In another way, customer loyalty is the repetitive attitudes of the customers toward the same brand and its same products and services in spite of having alternative choices and influenced by situations and other marketers (Oliver, 2009).
2.2.2 Why customer loyalty is important for business organizations
Kotler et al. (2012) stated that customer loyalty is important for organizations in different ways: a) loyal customers mean they are retained for a long time to the brand and its products and services. This means organizations need less effort for attracting customers because they have already retained customers; b) as customers have been already retained, organizations do not need to put too many advertisements which very costs effective. This means it saves lots of money for business through reduced advertisements needed; c) as loyal customers are happy and committed to the brands and its products, they recommend others including relatives, friends and family members (Hallberg, 2009.
2.3 Impact of Internet Banking on customer loyalty
In terms of customer perspective, like KPMG (2008) notes, Internet Banking provides several opportunities to the consumers: a) convenience which saves money, time, and energy; b) available accessible information through websites for 24/7/365; c) low service charges. According to Chaffey (2004), customers can do most of the banking services through online seating at home, which supports them to conduct their other activities at a time. Consequently, customers are going to be loyal to the banks provided more Internet Banking opportunities………….