The Effect of Quality of Service on Customers’ Loyalty to Financial Institutions: A Survey of Financial Institutions in Nyahururu Town, Kenya

Abstract

The financial institutions in Nyahururu have experienced a scenario in which customers shift loyalty to different institutions over time, a situation that has led to managers’ complaints on matters of customers’ retention. This study aimed at examining the factors that influence customer loyalty to financial institutions in Nyahururu town. The study objective was to examine the effect of quality of service on customers’ loyalty to financial institutions. The study was based on the Loyalty Business Model as advocated for by Strorback, Strandvik, & Gronroos, (1994) and customer loyalty theory by Reynolds (2015). Descriptive survey design was applied with a target a population of 28860 staff members and customers served by the 6 Micro-Finance institutions in Nyahururu, Kenya. A stratified sampling method was applied to obtain 384 staff members and customers from 6 Micro- finance institutions in Nyahururu Town. Primary data was collected through the use of questionnaires. The data collected was sorted and then coded before analysis. Data was analyzed quantitatively and qualitatively. In descriptive data analysis, mean, standard deviation and percentages were used. The SPSS computer program was used to aid in analysis. Multiple linear regression and correlation model was also used to analyze data by establishing the interrelationships between independent and dependent variable. Implementing the recommendations from the study would be useful to financial institutions seeking to improve the customer loyalty. This research study has also contributed to the body of knowledge on the best practices of retaining customers within financial institutions.

Keywords: Customer’s loyalty, Customer Loyalty, Customer’s retention, Financial Institutions, quality of service