The Influence of External and Internal Factors of Consumer Behavior on Customer Satisfaction and Its Implication on Customer Loyalty

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As one of strategic sub-sector of economy, the role of banking can be seen from its significant influence on the dynamics of economy of a nation. Furthermore, finding from previous studies have suggested that the dynamics influence of banking sector are not only limited on the scope of a country (Allen & Gale, 2009; Delhaise, 1998; Miller, Marcus & Lei Zhang, 2000). In this context, the dynamics of banking are known to comprise an effect that is contagious with a tendency to spread beyond geographical limit of a country (Kollmann & Malherbe, 2011). In addition, as stated by Siklos (2001:35), being viewed from its function as financial intermediary institution banking sector connects parties or agents with surplus and other parties or agents with deficit.
The role of assets in banking sector in Indonesia has reached almost 50% of the national GDP value. However, if this is being compared to the conditions in other ASEAN countries, then the value can relatively be considered as low. Even though the ratio between total amount of third party fund being collected and the amount of credit given by banking sector against the GDP in Indonesia is considerably high, the rate is still lower in contrast to average ratio of other ASEAN countries. This statement is strongly supported by data given in Table 1 where it can be seen that the banking sector in Indonesia can be considered as being left behind by the growth of banking sector in other ASEAN countries.
Furthermore, based on the World Bank reports and also the ADB 2014, financial access of Indonesian population who own account in formal financial institution is only 19.6%. Additionally, the amount of financial access on savings sector is only 15.3% while on credits is just 8.5%. These numbers are far behind Malaysia who has reached the level of 66.2% for access to bank account ownership, 35.4% on access to savings, and 11.2% for access to credits (ADB, 2014). These facts indicate that banking sector in other leading ASEAN countries have made their early starts in facing the ASEAN free trade specifically in banking sector. Consequently, this condition indicates that the majorities of Indonesian people are still lack of access to financial service and have a lesser amount of knowledge on banking literacy. Therefore, it can be stated that banking sector in Indonesia still need to be further managed so its contribution on the development of the nation economy will also be amplified.
In relation to the statement, Harker & Zenios (2000) have previously identified some factors that contribute to the optimum performance of a bank into three different categories. The first one is strategy, which consists of: 1) product or service mix; 2) client or customer mix; 3) geographical locations; 4) distribution channels; and 5) the organizational form. The second category is strategy execution, which consists of: 1) effort to apply strategy in marketing; 2) operation design; 3) organizational structure; and 4) human resource management to develop the operational capability, service quality, and bank performance in order to optimize the service-profit chain conducted by the bank. The final is the environment, which covers aspect of business competition, threats from new comers, threats coming from substituting products or services, bargaining power of the clients or customers, and also bargaining power from the suppliers (Porter, 2008) It can be understood from all the factors that were outlined above, factors that are related to consumers in particular those which are related to their behavior and also the strategy factor, specifically ones that are concerned with marketing strategy of bank services, are the most imperative issues in the banking dynamics.
Based on the account outlined previously, it can be stated that deep understanding about the background, characteristics, attitude determinant and consumer behavior, particularly in their relationships with customer satisfaction, is the most important factor to be understood by banks to increase their capability on maintaining the customers. In addition, statement made by Harker & Zenios (2000), which affirm that banks are not only functioning as financial intermediary institution but also as retail service providers is also in agreement with previous declaration.
The developing business competition in banking sector lately is another factor that leads to the importance of banks ability to understand their customer attitude and behavior, both while acting as surplus agents or as deficit agents. At the same time, banks also need to be able to comprehend their customer behavior when acting as retail services consumer.
Other studies has also revealed that attitude and consumer behavior are basically the presentations of how consumer, either as an individual human being or as a group, conduct buying, usage, application, acceptance, rejection, and substituting process of the products, services, ideas or other experiences in order to satisfy their needs and desires (Hawkins & Mothersbaugh, 2010; Peter & Olson, 2008; Solomon et.al, 2006).
In this context, Hawkins & Mothersbaugh (2010)stated that consumer behavior is a rational decision making process that involved a number of important factors, which are the external factors e.g., culture, social status, demography condition and family, and some internal factors e.g., perception, memory, motif, emotion, personality and attitude. Results from a survey that has been conducted by Hafied (2014), which found that internal factor of consumer behavior which are consisting of product, price, promotion, place, processes and the external factor which are consisting of religion, social class, reference, family, culture, and technology have significant influence on consumer behavior in selecting their bank, are actually in agreement with Hawkins & Mothersbaugh (2010) statement.
Additionally, Sakkthivel (2013) in his research mentioned that the consumer behavior internal factor that includes product, price, promotion, distribution, web design, secured payment gateway, buy back assurance, and ease of buy along with the external factor i.e. peer group influence, group opinion, culture, society, brand reputation, country of origin, reliability of website and previous experience, did demonstrate significant impact on the behavior of on-line banking consumer. Furthermore, Raghav, et.al. (2013) in their study also stated that both external and internal factor also show imperative influence on product selection. To conclude, Yaghoubi & Bahmani (2010), Zolait & Sulaiman (2008) and Shih & Fang (2004) have found that the consumer behavior on selecting their bank is also being influenced by factors of technology.
Like-minded with previously stated theories and findings, it can be pronounced that one of the main issues related to consumer behavior in banking sector is the consumer satisfaction aspect. Researches in the area of banking, performed by Sabir, et.al. (2014) and Zacharias, et.al. (2009), have found that the aspects of services, switching cost and also profitability have some influences that significantly increase the level of customer loyalty. As support to this finding, studies conducted by Munusamy et.al. (2010) and Abdullah, et.al. (2014) also stated that the factors of tangibility, empathy, reliability, responsiveness, and assurance also affect the level of customer satisfaction, which in the end implies to the level of customer loyalty. What’s more, according to Lovelock & Wright (2002) the further implication of consumer satisfaction is the existence of customer loyalty. Having loyalty as part of the business will on the next step contribute to the continuation of customer retention. Conclusively, it can be assumed that a Bank would be able to retain their customers that are by maintaining their loyalty, only if the customer satisfaction can be preserved in the longer term.

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