Determinants of Bank Selection by Customers: An Empirical Analysis in Addis Ababa
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Date
2016-05
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Addis Ababa University
Abstract
The general objective of this paper was to investigate the determinants of bank selection by customer investigate their relationships with satisfaction on banking association. It also aimed at examining the association between staff competency, service efficiency, tangibles, reputation, technology, convenience and recommendation on Satisfaction on Bank Preference. The study was done in Addis Ababa in selected commercial private and public bank branches. The study used quantitative research methodology. 325 questionnaires were distributed with a response rate of 61 percent. Data was collected through self-administered questionnaire. Data was analyzed using SPSS 20. Principal component analysis with varimax orthogonal method was conducted to reduce bank selection variables into manageable factors. Eight factors were identified. These were staff competency, service efficiency, reputation, convenience, tangibles, recommendation, technology, and price/financials. The Cronbach’s alpha was used to test the reliability of the factors. The results showed that all the eight factors were important determinants in the choice of commercial banks. Staff competency, which composed of courtesy, expertise and knowledge of staff, solving customers’ problems and concerns, received the highest importance by the respondents, followed by service efficiency, which comprises accuracy of account information, speed of transaction processing, fast and efficient bank service, and ease of obtaining loans. Descriptive statistics was used to prioritize the 28 variables grouped under the eight factors. Among these, high interest rate paid by banks, fast service at the counter, courtesy of front line staff received more weight, while long years of experience, attractiveness of bank building, and financial stability received lowest mean scores. Inferential statistics was done using t-test and ANOVA to test impacts of demographics on bank selection factors. In most cases, no statistically significant differences were observed. Moreover a multiple linear regression analysis was conducted to answer the study’s research questions and to test formulated hypothesis. Service efficiency, technology, tangibles, and convenience turned out to be positively and significantly affecting satisfaction on bank preference by customers at p<0.1. To address these issues, banks should emphasize on developing their human resources in terms of skill, knowledge and attitude and advance in technological innovations.More emphasis should also be given to tailor their marketing strategies based on the preference of their existing and prospective customers
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Keywords
satisfaction, Data, bank service