Customer Switching Behavior Trend: An outlook of private banks in Karachi Background: The switching model developed by Keaveney (1995)

represents a major step forward in understanding consumer switching behavior across a broad spectrum of service providers. The study of Keaveney (1995) acts as a stimulus to those who are carrying out research on a specific sector of the services industry, such as banks. Gerrard and Cunningham (2000) appraised the eight-incident model of Keaveney (1995) when investigating the switching behavior of bank customers. Their findings were consistent with Keaveney (1995) in relation to the most influential switching incidents. In developing a greater awareness of switching behavior, researchers have tried to respond to some of the limitations of past studies.Keaveney (1995), for example, assumed that all consumers attached equal weights to each of the incidents causing consumers to switch between service providers. Gerrard and Cunningham (2000) developed a simplified weighting method which was applied to the various switching incidents that they created. However, to date, no one has asked switchers themselves to weight the various incidents which caused them to switch. As the respondents in this study were asked to provide weights, this in itself is a contribution to the literature. The purpose of this paper is to develop a model which identifies the critical incidents that explain bank switching and the extent to which switching might be influenced by single or multiple incidents. In regard to multiple incident switching, the objective is to establish whether, after applying the weights quoted by the respondents, the relative influence of the various switching incidents changes. A further aim is to establish the extent to which consumers discuss with bank staff those issues which are of concern to them before making the final decision to switch. An overview of the switching literature Switching incidents The pioneering study of Keaveney (1995) created a model which contained eight switching incidents. These incidents were pricing, inconvenience, core service failures, service encounter failures; employee responses to service failures, attraction by competitors, ethical problems and involuntary switching plus seldom mentioned incidents. These incidents, in overview, can be described as follows: pricing: this category subdivides into high prices, price increases, unfair pricing practices and deceptive pricing practices; inconvenience: this category subdivides into location, opening hours and waiting too long either for an appointment or for delivery; core service failures: this category subdivides into mistakes, billing errors and service catastrophes; service encounter failures: this category subdivides into uncaring, impolite, unresponsive or unknowledgeable staff; employee responses to service failures: this category subdivides into reluctant responses, a failure to respond or patently negative responses; attraction by competitors: this category subdivides into consumers whose responses focused on the pluses of the service provider they switched to as opposed to the negatives relating to the service provider they switched from; ethical problems: this category subdivides into dishonest behavior, intimidating behavior, unsafe or unhealthy practices or conflicts of interest; and

involuntary switching and seldom-mentioned incidents: this category subdivides into switching because the service provider or customer had shifted location or the service provider had changed alliance.

In conducting the above-mentioned study, the various switching incidents were not weighted. This aspect of the study is reflective of the initial service quality studies of Parasuraman et al. (1985, 1988). In their later work (e.g. Parasuraman et al., 1991), this team of researchers modified their original model to incorporate component weights, as provided by respondents. In the present study, the switching literature will be developed in a way which parallels the pattern exhibited in the service quality literature. Stewart (1998), in a review of what she called the exit process in banking, mentioned four types of switching incidents: charges and their implementation, facilities and their availability, provision of information and confidentiality and services issues relating to how customers are treated. Gerrard and Cunningham (2000) identified six incidents which they considered to be important in gaining an understanding of switching between banks. These incidents were labeled inconvenience, service failures, pricing, unacceptable behavior, attitude or knowledge of staff, involuntary/seldom mentioned incidents and attraction by competitors. Other researchers, such as Lewis (1982), Lewis and Bingham (1991), Font (1993), Lunt (1993), Colgate (1994), O'Dea (1995) and Colgate et al. (1996) have briefly mentioned reasons why their respondents switched between banks. These studies generally investigated a range of matters associated with the banker-customer relationship, and thus their contribution to the development of the switching literature is limited. Single incident/multiple incident switching Only two research papers were sourced which quoted a number of incidents which were found to have influenced consumers to switch between service providers. Keaveney (1995) noted that some 45 percent of her respondents who had switched were influenced by one incident or, put another way, some 55 percent switched because of two or more incidents. Gerrard and Cunningham (2000) mentioned that just over two-thirds of the switching decisions of their respondents were influenced by more than one incident. Single incident switching between service providers appears to occur far less often than multiple incident switching, especially in banking. Consumers who use certain types of non-bank service provider, such as car mechanics, are more likely to switch after a single problem has been experienced, partly because they are not locked into a relationship with that service provider. However, with bank customers, they become bonded to their bank due to the existence of account and other contractual relationships (Gerrard and Doyle, 1990; Laidlaw and Roberts, 1990). This relationship, which begins with a reference letter, develops as the customer requests loans and begins to use other services. Many consumers arrange for their salary to be paid directly into their bank account by their employer's banker. Customers also provide their bank with an authority to pay their utility and other regular bills (such as credit card bills, telephone bills and life assurance premiums) by way of standing order or direct debit (the texts of Hanson (1987) and Gerrard and Doyle (1992) explain the distinction between these two types of payment instruction). Some customers deposit items for safe keeping with their bank. Over the years, customers become progressively more committed to staying with their bank. Customer discontentment with their bank may have a negative impact on the complex web that has sometimes evolved over many years. Severing the banker-customer relationship requires the web to be untangled and a new one to be built with another bank. Some customers, when considering switching, may say it is not worthwhile (see Jones et al., 2000, who make reference to switching costs and Colgate and Lang, 2001 who make reference to apathy in their respective investigations of switching barriers), especially if there has only been a single incident

which is causing concern. If customers become dissatisfied due to more than one incident, they may have a stronger desire to switch, even if there are high switching costs. Because many bank relationships grow over time, there are strong grounds for suggesting that the majority of bank switching, especially with more mature customers, would be caused by two or more incidents (i.e. it would be complex by the definition ofKeaveney, 1995). Extent of contact with the previous bank before the switch Boshoff (1997) reports that, in many instances, dissatisfied consumers simply do not complain to those service providers who have caused one or more problems. The comments of Boshoff (1997) reflect the experiences of one of the authors who, for some time, worked in the retail division of one of the UK's largest banks. One of the consequences of consumers not bringing negative experiences to the attention of the service providers is that they switch silently. Various reasons can be suggested as to why silent switching is so common in the banking industry. One of the causes of silence may arise because many bank switching decisions could be strongly influenced by changes in bank policy. Examples of policy changes which have a negative impact on customers are decisions to close certain branches or to introduce a higher fee structure. These policy decisions are made at the highest level in banks. Individuals or groups of individuals are unlikely to have sufficient clout to get senior executives of banks to reverse their earlier decisions.

Reference:
Boshoff, C. (1997), "An experimental study of service recovery options", International Journal of Service Industry Management, Vol. 18 No.2, pp.110-30. Colgate, M. (1994), "Banking on university students", Banking Ireland, Vol. Autumn pp.12-16. Colgate, M., Lang, B. (2001), "Switching barriers in consumer markets: an investigation of the financial services industry", Journal of Consumer Marketing, Vol. 18 No.4, pp.332-47. Colgate, M., Stewart, K., Kinsella, R. (1996), "Customer retention: a study of the market in Ireland", International Journal of Bank Marketing, Vol. 14 No.3, pp.23-9. Font, B.B. (1993), "Retail banking in Spain: recent changes and their effect on the content and culture of front-line jobs", International Journal of Bank Marketing, Vol. 11 No.1, pp.11-17. Gerrard, P., Cunningham, J.B. (2000), "The bank switching behaviour of Singapore's graduates", Journal of Financial Services Marketing, Vol. 5 No.2, pp.118-28. Gerrard, P., Doyle, E.P. (1990), Law Relating to Banking Services, 4th ed., Northwick, Worcester, MA, . Gerrard, P., Doyle, E.P. (1992), Branch Banking: Lending and Marketing, 2nd ed., Northwick, Worcester, MA, . Hanson, D.G. (1987), Service Banking: The All-Purpose Bank, 3rd ed., The Chartered Institute of Bankers, London, pp.51-2.

Jones, M.A., Mothersbaugh, D.L., Beatty, S.E. (2000), "Switching barriers and repurchase intentions in services", Journal of Retailing, Vol. 76 No.2, pp.259-74. Keaveney, S.M. (1995), "Customer switching behaviour in the service industries: an exploratory study", Journal of Marketing, Vol. 59 No.Spring, pp.71-82. Laidlaw, A., Roberts, G. (1990), Law Relating to Banking Services, Bankers Books, London, . Lewis, B.R. (1982), "Student accounts a profitable segment", European Journal of Marketing, Vol. 16 No.3, pp.63-72. Lewis, B.R., Bingham, G.H. (1991), "The youth market for financial services", International Journal of Bank Marketing, Vol. 9 No.2, pp.3-11. Lunt, P. (1993), "How do you catch a straying customer?", ABA Banking Journal, Vol. 85 No.9, pp.66-9. O'Dea, A. (1995), "The bank marketing survey", Bank Marketing International, Vol. 13 No.June, pp.11. Parasuraman, A., Zeithaml, V., Berry, L.L. (1985), "A conceptual model of service quality and its implications for future research",Journal of Marketing, Vol. 49 No.Fall, pp.41-50. Parasuraman, A., Zeithaml, V., Berry, L.L. (1988), "SERVQUAL: a multiple-item scale for measuring consumer perceptions of service quality", Journal of Retailing, Vol. 64 No.Spring, pp.12-37. Stewart, K. (1998), "An exploration of customer exit in retail banking", International Journal of Bank Marketing, Vol. 16 No.1, pp.6-14.

Main article from where I have copied the literature: Gerrard, P., Cunningham, J.B. (2004), "Consumer switching behavior in the Asian banking market", Journal of Services Marketing, Vol. 18 No.3, pp.215-23.