Impact of Customer Retention Strategies on Market Share among Commercial Banks in Kenya: A Case of I&M Bank

Abstract

The purpose of this study was to determine the impact of customer retention strategies on market share among commercial banks in Kenya, a case of I&M bank. The study aimed to answer four research questions: What is the impact of customer relationship management on market share? What is the impact of financial service diversity on market share? What is the impact of service quality improvement on market share? What is the impact of distribution channel diversification on market share? The study used a descriptive research design. The population of the study was 1,931 staff of the 43 I&M Bank branches. The target population was 160 staff members comprising of senior management, branch managers, and customer care staff. Stratified random sampling was used to categorize the respondents into the senior management, branch managers, and customer care staff strata. Simple random sampling was then used to select participants from each of these strata. The sample size was established as 114 respondents using a mathematical sampling formula. The data was collected using quantitative methods. A structured questionnaire was designed which consisted of 5-point likert scale items and close ended questions for personal information. The data was analysed using Statistical Package for Social Sciences (SPSS) Version 23 software. Descriptive statistics was used to summarize nominal data using frequencies and percentages and interval data was summarized using mean and standard deviation for each of the study variables. The study measured the relationship between the independent and dependent variables using the Pearson (r) correlation. Multiple regression analysis was also conducted to show the effect of predictor variables on the response variables. The personal information was presented in charts and the variables information was presented in tables and supported by the researcher’s interpretation. The findings show that a unit increase in service quality improvement results in a 0.259 increase in market share. A unit increase in financial service diversity results in a 0.230 increase in market share. A unit increase in customer relationship management results in a 0.193 increase in market share. A unit increase in distribution channel diversification results in a 0.096 increase in market share.

The study made the following conclusions based on the findings of the study: The study therefore concludes that I&M bank customer feedback system has a positive effect on market share; that financial services diversity through e-commerce strategy of I&M Bank contributed to their market share; that system automation strategy contributed to I&M Bank market share; and that that I&M branch network strategy contributed the least impact on the bank’s market share. The study recommends that commercial banks and I&M Bank should continuously engage their customers by integrating customer feedback systems into their day to day operations so as to be able to identify the various customer issues and respond to these issues in real time; that commercial banks should adopt e-commerce and innovate e-commerce services and products to cater to the customer base that use online and digital platforms to conduct their business; that commercial banks should seek to improve their system automation by supporting banks’ back office operations so as offer seamless services for their customers; and that commercial banks should offer customer services through different channels that are available in the market. The study recommends for further study on the impact of customer retention strategy on market share adopting different research approaches and also future studies to collect data from customers of commercial banks.