Determinants of Customers’ Bank Selection Decision: The Case of Bank Customers in Addis Ababa

Abstract

Commercial banks need to identify the criteria on which potential customers determine theirbank selection decision in order to plan an appropriate marketing strategy for keeping present customers and attracting new ones. In light of this, this research set out with an objective of identifying factors that determine customer’s choice of a bank, with due emphasis on an exhaustive list of potential factors. The study was designed as aquantitative descriptive research andemployed survey type specifically questionnaire to collect data from sample respondents of 280 customers (73.29% response rate from 380 distributed) at the commercial banks in Addis Ababa. Exploratory factor analysis was implemented for data reduction and finding an optimum grouping and number of common factors influencing a set of measures from the 34 items included in the survey. Accordingly, 32 of the items were maintained and grouped in to seven components that incorporated social factors, technological factors, financial factors, promotional factors, convenience factor, speed and service quality factors as well as image and reputation. The one sample t-test conducted confirmed the importance of all seven factors in customers bank selection decision at p< 0.01. The ranking of the seven factors using their mean values showed that convenience factors (location and proximity) were the highest followed by image and reputation (overall image of the bank, goodwill of the bank and previous experience). financial factors, speed and service quality and technology ranked fromthird to fifth. Promotional factor and social factors were the least ranked bank selection factors. Keywords: ,