Service Recovery Strategies and Customer Retention of Selected Banks in Lagos State, Nigeria

Abstract

This study explores the relationship between service recovery strategies and customer retention of selected banks in Lagos, Nigeria. Service failure occurs when the quality of service delivery fall short of customers’ expectations. That is, when customers receive services of lower quality than they wish to receive or lower than they can tolerate. Service recovery is crucial to the survival of any business organisation whether for profit-making or not--profit making. Service recovery strategies are the actions taken by a company in response to service failure. It is the action taken by companies to satisfy and retain its valued customers when service standards and qualities do not meet the customers' expectations and bring about satisfaction. While literature has been inundated with various forms of customer attraction and retention strategies, little has been done in the area of process, customer relations, complaints handling, and compensation recovery strategies. To address these service gaps, the study focused on the effect of process recovery strategy on customer repurchase of bank services; the influence of customer relation strategy on customer loyalty.The study adopted descriptive survey research design. The target population for this study was 4,800,000 customers that registered for Bank Verification Number (BVN) in Lagos State out of which a sample of 520 was picked. To determine a desirable sample from the population, Yamane (1967) sampling formula was used. A multiple sampling method was adopted - first step was stratified sampling, followed by proportional and simple random sampling process. The response of completed questionnaire was 458, this constitutes 88.09% rate. Data were analysed using descriptive and inferential (Pearson's Product Moment Correlation and Linear Regression) analysis.Finding shows that process recovery strategy has a positive and significant effect on customer repurchase of bank services (β = 0.817, t = 30.765, ρ<0.05). The R-squared value reveals that process recovery strategy explained almost 67.5 percent of the variances in customer repurchase of bank services (R²=0.675; p<0.05).The study also shows the Unstandardised coefficient of customer relation strategy to be 0.879 (β = 0.879, t= 18.737, ρ = 0.000) meaning that customer relation strategy has a statistically significant influence on customer loyalty. The study concluded that process and customer relations recovery strategies have a positive and significant influence on customer retention of selected banks in Lagos, Nigeria. It is recommended, therefore, that in addition of banks meeting their customers’ expectations, they should focus on recovery of services for sustainable customer retention.

Keywords:Service failures, service recoveries, process recovery, customer relations recovery, repurchase of bank services, Customer loyalty, customer retention.