Determinants of Customers’ Choice of Bank: An Empirical Investigation of Customers’ Preferences in Addis Ababa City

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Addis Ababa University


Banks should identify main factors that determine the basis upon which customers select commercial banks in order to develop effective marketing strategies needed to attract new customers and retain the existing ones. In this context, the purpose of this study is to determine the criteria (factors) that customers consider important when selecting a bank and how these criteria are prioritized according to their importance. A survey questionnaire was used to collect responses from 311 customers of seven major commercial banks in Addis Ababa city through non-probabilistic convenience sampling method and responses to the questionnaire were measured on a four point Likert-type scale of importance ranging from 1 (not important at all) to 4 (most important). 36 bank selection criteria that were used in the survey questionnaire were gathered from various studies and from the relevant literature, revised and adopted to the Ethiopian banking context. Descriptive statistics was used to identify respondents’ profile and their banking behavior and exploratory factor analysis technique was performed on 36 bank selection criteria items to reduce the variables to a manageable number of constructs. One sample t-test was used to test the significance of identified factors for customer bank selection decision. The results of this study reveal the first three most important factors that are considered significant by perception of customers in bank selection decision are “Personal characteristics”, Service provision” and “E-banking Technology”. Factors that are considered least significant by customers include “physical facility and image of the bank” and “Marketing and promotion”. From 36 motivational items analyzed, willingness of employees to help customers and provide prompt service is the most important motivational items considered significant by customers’ perception followed by bank employees' knowledge and courteousness to inspire trust and confidence and electronically networked bank branches. Hence, the managerial implication of these findings is that banks have to take significant efforts in selecting, training and motivating the staff members to perform to the satisfaction of customers. Banks also need to ensure higher level of competence and professionalism in terms of faster and wider delivery of services.



Banks, marketing strategies, customers