SEUSL Journal of Marketing, Vol. 4, No.

1, 2019 ISSN 2513-3071

RELATIONSHIP QUALITY AND CUSTOMER LOYALTY: A

STUDY IN THE BANKING CLIENTS IN SRI LANKA
M. I. Mujahid Hilal
Faculty of Management & Commerce
South Eastern University of Sri Lanka
mujahidh@[Link]

Abstract
The objectives of the study is to explore the effect of relationship quality on the
customer loyalty among banking customers and to identify the factors that mostly
influence on the customer loyalty among banking customers. In order to meet the
objective, researcher used a questionnaire survey to collect data from 225 banking
customers in the Eastern province of Sri Lanka. Data were analyzed using multiple
regression. Analysis revealed that trust, commitment, satisfaction and communication
are important for banking sectors to create customer loyalty.

Keywords: Relationship Quality, Loyalty, Trust, Commitment, Communication

1. Introduction
Relationship and customer loyalty are important determinant for business success today
to have competitive advantage which may help grow in the industry. Researchers find that
relationship quality is one of the critical success factors that positively influences on the
competitiveness of an organization. Nowadays, due to intense competition within banking
industry, customers switch from one bank to another to enjoy service experiences. Therefore,
banks are immensely investing to improve the relationship quality and enhance their customer
loyalty (Roberts et al, 2003) which in turn impact on the profitability of the firms. In the
service industry, customer loyalty is another important factor that has received more attention
from the managers (Bodet, 2008). Customer retention and customer satisfaction are important
to address customer loyalty of a firm (Mubarak, 2019).
Thus, it is important to investigate the relationship quality of banking industry and its
impact on the customer loyalty from the perspective of customers. Therefore, research
questions of this study are what is the level relationship quality and how does it affect the
customer loyalty among banking customers in Sri Lanka. What are the most important factors
bankers should focus on? Hence, the objective of the study was to explore the effect of
relationship quality on the customer loyalty among banking customers and to identify the factor
mostly influencing on the customer loyalty among banking customers.

2. Review of Literature and Theoretical Framework

Ward & Dagger (2007) emphasize that concept of relationship marketing is now very
important for firms as it focus on long term marketing. This importantly focuses on
relationship marketing that creates customer loyalty. According to Terblanche (2003),
relationship marketing helps enhance productivity through efficiency and effectiveness of
marketing by reducing costs and increase quality of marketing. In addition, relationship
marketing emphasizes the creation of long-term relationship between firm and customers
(Sheth and Parvatiyar, 1995). This is important because strong relationship is an intangible
asset that cannot be imitated by competitors easily (Wong et al., 2007).
Relationship quality infers that “how the relationship help fulfill the expectations,

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SEUSL Journal of Marketing, Vol. 4, No. 1, 2019 ISSN 2513-3071

prediction, goals and desires of customers” (Jarvelin and Lehtinen, 1996). Relationship quality
is depending on the relationship marketing of an organization as it is an outcome derived from
relationship that supports to meet needs and expectation of customers and organizations
involved (Smith, 1998).
Many authors and researchers agree that trust, commitment, satisfaction and
communication are the most important elements of the dimension of relationship quality.
Relationship quality is not consistently defined by any researchers (Henning-Thurau et al.,
2002). Relationship quality stresses that quality need to be considered in maintaining the
relationship with customers and that helps reduce transaction cost. Many studies find that
relationship quality includes three dimensions such as trust, satisfaction and commitment
(Kumar et al, 1995; Smith, 1998). Therefore, this study also incorporates these three
dimensions as independent variables.
Trust is the first factor that influences and create relationship quality. Trust is actually
important to create relationship and it is important for long term relationship (Johnson and
Grayson, 2005). Since the outcome of the relationship is important and may have uncertainty
for the party involved, trust is paramount in the business (Doney and Cannon, 1997). In the
case of commitment, it is also very important factors that create long term relationship
(Biedenbach and Marell, 2010). Commitment is vital for safeguard the investments in
relationship. When customers feel that they get more value from the relationship, there will be
higher the commitment (Botha and van Rensburg, 2010). The third factor is customer
satisfaction. According to Hennig-Thurau and Klee, 1997, satisfaction is necessary for keeping
customers. Satisfaction is important determinant of customer retention (Kotler, 1994).
Customer satisfaction has been discussed linking with customer loyalty of the firm (Bitner,
1995; Crosby et al., 1990). Another factor that influence on the customer loyalty is
communication. Communication is taking place between organization and its customers during
preselling, selling, consuming and post consuming stages of the transaction. This is also
applicable in the relationship too. According to Ndubisi and Wah (2005), trusted
communication should be taken place, when there is a problem, solution should be given to
customers. This will boost the relationship quality between organization and customers.
Kim and Yoon (2004) define the customer loyalty as customers’ willingness to have
relationship and sustain it with the service or product. Customer loyalty can be divided into
two. One is behavioral and the other one is on the basis of attitudes (Guillen et al., 2011).
Loyalty is also associated with behavioural loyalty i.e. a customer is ready to repurchase and
continue his relationship with one organization (Rauyruen and Miller, 2007). It was also found
that the sales of product or service can be ensured by customer loyalty (Gerpott, et al., 2001).
Customer loyalty is essential for an organization to the continuing existence and operation of
the business (Chen & Hu, 2010). While customer loyalty is contributing to the increased sales,
customer loyalty is also important for maintaining competitive advantage (Lin & Wang, 2006).
When analyzing the literatures on customer loyalty, there are many studies available with
regard to relationship quality and customer loyalty. For example, Auruskeviciene et al. (2010)
find that there is a positive relationship between relationship quality and customer loyalty in a
professional service company. Relationship quality also positively impact on customer loyalty
and thereby increase customer satisfaction (Haung, 2012).

By analyzing the literatures, the following conceptual framework is given.

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SEUSL Journal of Marketing, Vol. 4, No. 1, 2019 ISSN 2513-3071

Figure 1 Conceptual Model

Trust

Commitment
Customer loyalty

Satisfaction

Communication

Source: Review of Literatures

Based on the conceptual framework, the following hypotheses have been formulated.
H1 : Customer trust on the service of the bank is contributing to the customer loyalty in the
banking sector.
H2 : Customer commitment in service of the bank is positively impacting the customer
loyalty in the banking sector.
H3 : Customer satisfaction is leading to customer loyalty in the banking sector
H4 : Communication at banks is positively contributing to the customer loyalty of the
banking sector.

3. Methodology
This study is quantitative in nature. Deductive approach of the research has been
adopted for this study. Since it was difficult to get the list of customers of commercial banks,
convenience sampling techniques was adopted. 350 questionnaires were distributed only 225
respondents sent duty filled questionnaires and were taken into account. This is shown in Table
below.

Table 1 Questionnaire Distribution

Districts Distribution Returned Response Rate
Ampara 152 98 64%
Batticaloa 90 51 57%
Trincomalee 108 76 70%
Total 350 225 64%

Data were collected in the Eastern province of Sri Lanka which includes Ampara,
Batticaloa and Tricomalee districts. Response rate is 64 per cent. Research strategy used for
this study was survey methodology. Hence, Questionnaire was used to collect the data.
Questionnaire was prepared with the help of five-point Likert scale. Time horizon for this
study was cross sectional.

Multiple regression was used to analyze the data. The multiple regression is given us under.
𝑦 = 𝛽$ + 𝑥' 𝛽' + 𝑥) 𝛽) + 𝑥* 𝛽* + 𝑥+ 𝛽+ + 𝑒
Where y is dependent variable customer loyalty

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SEUSL Journal of Marketing, Vol. 4, No. 1, 2019 ISSN 2513-3071

𝛽$ is constant
𝑥' is independent variable trust
𝑥) is independent variable commitment
𝑥* is independent variable satisfaction
𝑥+ is independent variable communication
e represents the error term.

4. Results and Discussion

Pilot survey with 30 respondents were conducted and the Cronbach’s alpha values are
given in Table 2.

Table 2 Cronbach’s Alpha Values

Variables No. of Items Cronbach’s Alpha
Trust 4 0.75
Commitment 4 0.72
Satisfaction 3 0.84
Communication 4 0.86
Customer loyalty 4 0.79

0.75 for trust, 0.72 for commitment, 0.84 for satisfaction and 0.86 for communication
and 0.79 for customer loyalty. This shows that there is an internal consistency. Factor analysis
was carried out for data reduction purpose and all communalities for all items were more than
0.50 and therefore, it was taken for the analysis.

Respondents characteristics for the study taken are given in Table 3.

Table 3 Respondents Characteristics

Characteristics No. of
respondents
Age
18-25 35
26-35 82
36-45 50
45-50 40
< 51 48
Income
Below Rs. 50,000 45
Rs. 50,000 – Rs. 100,000 72
Above Rs. 100,000 122
Educational Qualifications
Below GCE O/L 18
GCE O/L 48
GCE A/L 98
Degree 32
Postgraduate 27
Others 02

Multiple regression analysis was done and the results are given in Table 4.

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SEUSL Journal of Marketing, Vol. 4, No. 1, 2019 ISSN 2513-3071

Table 4 Multiple Regression Results

Predictive β t IVF
variable
Trust .016 0.242 1.019
Commitment .089 1.316 1.024
Satisfaction .029 0.431 1.026
Communication .083 1.223 1.019
Note: F4, 220 = 649.634, p < 0.05, R2 = 0.922, Adjusted R2 = 0.921, Durbin – Watson = 1.928
𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝐿𝑜𝑦𝑎𝑙𝑡𝑦 = 1.159𝐸 − 17 + 0.016𝑥' + 0.089𝑥) + 0.029𝑥* + 0.083𝑥+

Multiple regression results show that the model is best fitted and it can be concluded
that all independent variables such as trust, commitment, satisfaction and communication are
contributing to the customer loyalty of the banking industry in Sri Lanka. R2 value is 0.922
which shows that the explanatory power of the model is high and it infers that these
independent variables have power to explain the customer loyalty. Durbin-Watson value is
also close to 2 that also confirms the model.
Adequacy of the model is also tested and confirmed that the model is consistent with
assumption of normality. This is shown in Figure 2 and in Figure 3.

Figure 2 Residual Histogram

Probability plot has also been used to test the model. NPP also confirms its straight line and
all values are around the regression line. This is shown in Figure 3.

Figure 3 Probability Plot

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SEUSL Journal of Marketing, Vol. 4, No. 1, 2019 ISSN 2513-3071

All hypotheses developed in this study are accepted in this study. This is shown in the
following Table 5.

Table 5 Hypotheses testing

Hypotheses Results
H1: Trust -> Loyalty Supported
H2: Commitment -> Loyalty Supported
H3: Satisfaction -> Loyalty Supported
H4: Communication -> Loyalty Supported

The mostly influencing variable is commitment (p < 0.05, t = 0.242). Relationship

quality of the banking sector can be enhanced by investing more on the customer commitment.
Banking sectors need to make customers to become committed. Customer commitment is very
important for banking sector to create long term relationship. Banking sectors might create the
relationship that can be valued more by the customers. This will result in the commitment of
customers towards banking services. The second influencing variable is communication (p <
0.05, t = 1.223). Customer loyalty can be formed in the banking sector due to the
communication between banks and customers. This can be marketing communication or
communication during the service experience. Banks need to give more attention to the
communication to create customer loyalty. The third factor is satisfaction (p < 0.05, t = 0.431).
Satisfying the banking customers will be one of the determinants to keep them for a long time.
The fourth factor is trust (p < 0.05, t = 0.242). This is vital for creating the relationship that
would be of quality. Banking sectors need to provide more importance to the trust too in their
operation that will form customer loyalty.

5. Conclusion
The objective of the study was to explore the effect of relationship quality on the customer
loyalty among banking customers and to identify the factor mostly influencing on the customer
loyalty among banking customers. Trust, commitment, satisfaction and communication are
important factors for creating loyalty among bank customers. Analysis reveals that all four
variables positively contributing to the customer loyalty of banking sectors in Sri Lanka.
Therefore, it is important for banking sectors in Sri Lanka to focus and invest more on creating
trust on the banking services, to make customers committed towards banks, to satisfy the
customers well and to have good communication with customers are paramount for banking
sectors to create customer loyalty so that enjoy the competitive advantage.

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