The Moderating Effect of Firm-Specific Factors on the Relationship Marketing - Customer Retention Association: Evidence from Kenya’s Microfinance Sector

Abstract

Retaining customers is a considered a key determinant of the long term survival of a firm. Existing studies show a positive association between relationship marketing and customer retention. As such, firms employ relationship marketing strategies with the aim of retaining customers. In recent times though, many businesses seem to be facing customer retention challenges despite employing relationship marketing strategies. This implies there could be third forces affecting this direct association between relationship and customer retention. However, empirical evidence on the moderating effect of such third forces is very scarce. This research sought to investigate the moderating effect of firm-specific factors on the relationship marketing-customer retention association, by using a sample of 48 managers and 492 customers from Kenya’s microfinance institutions. Data was analyzed by applying simple and multiple regression. Results showed firm-specific factors had a statistically significant but negative moderating effect. This study makes a theoretical contribution to relationship marketing knowledge base by proposing a model which explains the role of moderating factors in the relationship marketing–customer retention association. The study’s empirical evidence thus supports a more complex structure of the relationship marketing-customer retention link. Practically, the findings suggest marketers should combine relationship marketing with firm specific factors for optimum customer retention results.

Keywords: Relationship marketing, Firm specific factors, Customer retention