THE EFFECT OF RELATIONSHIP MARKETING ON CUSTOMER RETENTION: EVIDENCES FROM WEGAGEN BANK ADDIS ABABA, ETHIOPIA

Abstract

Retaining customers in the service industry has become a major objective of relationship marketing. This study investigated the effect of relationship marketing on customers’ retention in case of Wegagen bank in Addis Ababa. The study’s independent variables are customer satisfaction, trust, commitment and promise keeping while the dependant variable is customer retention.The study attended 76 % of responses rate. Twenty-four percent (24%) of the questionnaires were unreturned. The reliability, validity and pilot tests were conducted. Stratified sampling was applied based on the surveyed company branches. Descriptive statistics like frequency and percentage were employed to analyze background information of respondent. Thus, this study found that customers strongly feel a sense of belonging to the Bank. As promised, this bank offers greater benefits to card-members. Using correlation analysis, the test result showed that customer satisfaction, trust, commitment and keeping promises have has positively significant relationship with customer retention. In addition, multiple regressions have been employed and this study found that there is a positive and significant effect of trust, commitment and keeping promises and customer retention. This study concluded that customer satisfaction, trust, commitment and keeping promises enhance customer retention. Therefore, the banking industry must practice and improve strong relationships with their customers in order to compete and retain successfully and effectively in the competitive retail banking environment.