AN ASSESMENT ON THE LEVEL OF CUSTOMER RETENTION OF

AMERICAN EXPRESS CREDIT CARD OF THE NATIONS TRUST BANK

By
Prasanga A.W.R.P.S

An Integrated Research Project submitted to the Sri Lanka Institute of Marketing in partial
fulfilment of the requirements for the Postgraduate Diploma in Marketing

Supervisor: Mr. Nalin Munasinghe

Sri Lanka Institute of Marketing

Colombo
June, 2016

Research Proposal Evaluation IRP

Marking Scheme
Student Name

Prasanga AWRPS

Registration Number

0000017969

Criteria

Allocated
Marks

Awarded
Marks

The background of the problem

10

The significance/rationale of the exploration of the problem

10

The objective/s of the report

15

Brief Literature Review

10

Methodology of perspective
5

5.1

Conceptual framework

15

5.2

Operationalisation

10

The approach to data collection

Delimitations of the study

The Time Plan

References (Harvard Reference System)

10

Adherence to stipulated format

Total

10

100

Special Remarks:

Signature of Examiner
2

AN ASSESMENT ON THE LEVEL OF CUSTOMER RETENTION OF

AMERICAN EXPRESS CREDIT CARD OF THE NATIONS TRUST BANK

by

Prasanga A.W.R.P.S
0000017969

This is to certify that I have examined and supervised the above integrated research project and
have found that it is complete and satisfactory in all respects and that all revisions required by the
evaluation/examination committee have been made.

(Mr. Nalin Munasinghe)

(Signature of supervisor & date)

Head of Education - SLIM

Sri Lanka Institute of Marketing
June, 2016

INTEGRATED RESEARCH PROJECT LOG

SHEET
JANUARY - JUNE 2016 INTAKE

Name of Student: ............................

Registration Number: 00000

Study Center: .

Date of commencement of study: /../2016

Name of Research Supervisor:

Participation of the Candidate:

Week

Log Sheet
Date

Signature

Date

Signature

Date

Signature

Date

Signature

Date

Signature

Week 1

Week 2

Week 3

Week 4

Week 5

Week 6

Week 7

Week

Log Sheet
Date

Signature

Date

Signature

Date

Signature

Date

Signature

Date

Signatur
e

Week 8

Week 9

Week 10

Research Proposal Approved:

Signature of Supervisor:

Date of Approval:

Research Report Approved:

Signature of Supervisor:

Date of Approval:

Official Seal of Supervisor:

Comments by the Supervisor:

.
.
.
.
.
.

TABLE OF CONTENT
1. Background of the problem...8
1.1.Introduction......8
2. The significance of the exploration of the problem. 9
3. The objective of the research 11
4. Brief literature review....12
4.1. Customer Retention12
4.1.1 Relationship marketing and customer loyalty...13
4.1.2. Relationship Marketing and Customer Satisfaction.13
4.1.3. Relationship Marketing and Customer Trust ..14
4.1.4 Customer Satisfaction, Customer Trust and Customer Loyalty..14
4.1.5 Customer loyalty influences customer retention..16
5. Methodology perspective.17
5.1. Operationalization18
6. The approach to data collection..19
6.1. Quantitative design.19
6.2. Primary data....19
6.3. Secondary data19
6.4. Sampling design.19
6.4.1. Research population.20
6.4.2. Sampling techniques....20
6.4.3. Sampling size..20
6.5. Research instruments21
6.6. Method of data analysis..21
7. Delimitations of the study 22
9. References. 23

List of Figures
1. Customer satisfaction index rating . 9
2. Credit card usage limit.. 10

List of Tables
1. Hypothesis testing 11
2. Methodology framework. 17
3. Operationalization customer retention..18

1. Background of the problem

1.1. Introduction
This study will be focused on the level of customer retention of American express card of the
Nations Trust bank. As there are many competitive banks in credit card business in Sri Lanka it is
important to be a prominent issuer among them.
Currently NTB is maintaining its position being as market leader and highest card issuer in card
sales business. Be the best one is not the hardest part, but keeping the position as it is, the
hardest. Customer retention is a series of activities and/or strategies aimed at keeping customers
from defecting to your competitors.
So to keep the position and dominate the market share, it is important to track the customer
feedbacks and take appropriate actions to develop business.
The satisfaction of the customer is directly affected to the Customer Loyalty and it leads to
customer retention in the period of the service economy, improving the service quality has
always been considered as one of the effective ways to improve customer satisfaction.
The study is a research work which uses a literature based research instrument [questionnaire]
to measure the application customer retention level to figure out the industry average of
international credit card market comparing NTB American express card.
After the research work the researcher should be able to identify key factors to create the loyal
customers and retain through customer service in the credit card industry. And it will be
important for newcomers to the industry as well as to the top management in the industry to
identify the facts important to maintain higher customer retention ratio.

2. The significance of the exploration of the problem

It is obvious that customers are important for the business and their satisfaction is a priority
to management of the organization. Customer satisfaction has been a subject of great interest
to organizations and researchers alike. In recent years, organizations are obliged to render
more services in addition to their offers. The quality of customer service has become an aspect
of customer satisfaction. It has been proven by some researchers that service quality relates to
customer satisfaction, and also uses service quality dimensions to evaluate service quality.
A lot of financial companies think pumping more and more customers into their company will
sustain their position in the market. But according to the model of churn it is important to keep
a low rate of customers who discontinue a service during a specified time period divided by the
average total number of customers. Churn rate tells you how quickly your customers are leaving.
Customer satisfaction, loyalty and retention can be achieved through consistently delivered
level of customer service that exceeds and still anticipates the customer's expectations for worth
and also Customer retention is significant to most companies as the cost of acquiring a fresh
client is faraway superior than the cost of maintaining a bond with an existing client." (Ro King 2005)
The main purpose of this study is to examine the level of retention of customers who are
existing or left the company to measure average industry standard of international market along
with NTB American express local card users. According to current statistics, Customer satisfaction
index ranking (based on a 1,000 point scale) is running in US, Singapore & Australia as follows.

Fig No.1- Customer satisfaction index ranking

(www.jdpower.com/2015)
9

Banks & Finance companies are the key players in financial market operations and play a major
role in keeping the economy running smoothly of a country. In todays highly competitive
corporate environment, quality of services is an essential element for enhancing customer
satisfaction and customer loyalty. These are major factors in improving the retention ratio far
more above the industry standard with compared to international markets.
The Sri Lankan credit card market consists of 11 card issuers and Just five years ago, there
were 824,309 card users in the country, with a total outstanding debt of Rs. 29.99 billion. A pretty
low penetration compared to global standards, particularly in comparison to the advanced
economies, economist Deshal de Mel told Roar.

Fig No.2- Credit card usage limit

(www.roar.lk/2016/01/creditcard)

Going by Central Bank of Sri Lanka data, however, there is an observable upward trend. As of
September 2015, there are 1,115,299 active credit cards in use. Of these, 31,289 are accepted
only locally, while 1,084,010 (over 97%) are accepted globally.
As well as, professional customer segments demand better quality service from banks; it has
bested the competition among various credit card issuers particularly those private sectors.
Therefore, this study found outs will helpful to find out factors and retention ratio of Nations
Trust bank American express card.

10

3. The Objectives of the research

This study will be undertaken an assessment of level of customer retention of American
express card of the Nations Trust bank.
It will focus on the relationship of four independent variables of customer satisfaction,
customer, trust, customer loyalty, and relational marketing tactics with the identified dependent
variable.
Hypothesis 1

Relationship marketing influences customer loyalty

Hypothesis 2

Relational marketing tactics influences customer satisfaction

Hypothesis 3

Relationship marketing tactics affect customer trust

Hypothesis 4

Customer satisfaction influences customer loyalty

Hypothesis 5

Customer trust affect customer loyalty

Hypothesis 6

Customer loyalty influences customer retention

The researcher should focus the following model of hypothesis testing:

H2

RELATIONAL
MARKETING
TACTICS

H3

CUSTOMER
SATISFACTION

H1

H4

CUSTOMER
LOYALTY

CUSTOMER TRUST

CUSTOMER
RETENTION

H6

H5

Table No.1- Hypothesis testing

11

4. Brief Literature Review

This is presents the overview of current literature in the frame of the presented research
problem. Each of the bodies of literature is discussed which is focus on the specific nature of the
relevant literatures that relates to this study.
A literature review is a step by step process that involves the identification of published and
unpublished work from secondary data sources on the topic interest, the evaluation of this work
in relation to the problem and the documentation of this work (Sekaran and Bougie 2010).
Therefore, in this study, each independent variables and a dependent variable will be reviewed
on previous studies that are related to this topic.

4.1. Customer retention

Customer retention is a series of activities and/or strategies aimed at keeping customers from
defecting to competitors and also Customer Retention marketing is the kind of approach that is
tactically-driven and is based on customer conduct or attitude.
Services are a continues process of on-going interactions between customers and service
providers comprising a number of intangible activities provided as premium solutions to the
problems of customers and including the physical and financial resources and any other useful
elements of the system involved in providing these services (Gronroos, 2004).
Customer satisfaction, loyalty and retention can be achieved through consistently delivered
level of customer service that exceeds and still anticipates the customer's expectations for worth.
Relationship management is superfluous if customers defect as there is no longer a relationship
to deal with. In order to retain clients, merchants should keep them pleased. When clients are
pleased, they stay loyal longer, purchase more, talk kindly about the corporation and its products,
and cost a smaller amount to service because the transactions become more regular (Kotler,
2000).
Keeping customers content is cost effective, as it costs more money to draw a customer away
from the competition than to maintain an existing one (Kotler, 2000).
Acquiring fresh clients can charge five times more than the costs caught up in pleasing and
retaining existing clients (Reichheld, 1996a).
A content purchaser tends to tell at least three other individuals regarding their shopping
experience while a discontented purchaser tends to complain to at least nine other individuals.
Content shoppers also tend to become loyal clients (Sheth, Mitral, & Newman, 1999).

12

Through the following research framework the researcher has discussed how the factors of
hypothesis testing affects to the customer retention.
A brief explanation of these dimensions is given below.

4.1.1. Relationship marketing and customer loyalty

The basic philosophies of relationship marketing are based on the assumption that companycustomer interactions and strategies can earn and keep the loyalty of customers (Berry, 1995).
Relationship marketing refers "to all marketing activities aimed at forming, increasing, and
maintaining winning relational contacts". The management of customer relationships is precious
for the company (Morgan &Hunt, 1994; Webster, 1992).
Relationship marketing is targeted at improving long run profitability by deemphasizing
captivating fresh clients and emphasizing customer retention through efficient management of
customer relationships (Christopher, Payne, & Ballantyne, 1991). Relationship marketing refers
"to all marketing activities aimed at establishing, budding, and maintaining booming relational
exchanges" (Morgan & Hunt, 1994).
Prior studies confirm that service companies have received incredible benefits of loyal
customers (Bagherzad, Chavosh, and Hosseinikhah, 2011). Moorman, Zaltman, and Deshpand
(1992) stated that customer loyalty was an intention to keep a valued relationship.
In the banking sector, it is the main job of manager and marketers to create and develop
customer loyalty if they want to maintain their company and increase its profitability. Therefore,
we hypothesize the association between relationship marketing and customer loyalty as follows:

H1: Relationship marketing influences customer loyalty.

4.1.2 Relationship Marketing and Customer Satisfaction
Doyle (2002) argues that the three cornerstones of relationship marketing are: planning and
controlling of customer satisfaction, building and maintaining stable relationships (customer
loyalty) and customer value management. Satisfaction is a feeling that surfaces from an
evaluation process, i.e. when the consumer of a good or service compares what is received
against what is expected from the utilization of that good or service (Kotler et al., 2009). The
13

customer will be satisfied if the performance matches or exceeds the expectations, and in
contrary, the customer will be dissatisfied if the performance falls short of the expectation.
Each organization wants to know how to retain their clients, even if they show to be satisfied.
Richards refers that a few unsatisfied clients may wish not to defect, because they do not look
forward to be given improved service somewhere else and that some satisfied clients may look
for other options if they think they can get improved services in another place
So, some techniques to maintain and improve satisfaction must be considered. An effective
complaint handling system is an excellent defensive tool. Ongoing surveys to measure customer
satisfaction and loyalty, and capture the voice of the customer are also essential. The wellsatisfied customer will bring the repeat sale that counts. James Cash Penney
Therefore, based on those empirical findings, hypothesis 2 is proposed as below:

H2: Relationship marketing tactics influence customer satisfaction.

4.1.3. Relationship Marketing and Customer Trust

The final concept necessary to build relationships is trust. In business, trust refers to the
confidence that one partner, the customer, has in the businesss reliability and integrity to deliver
goods and services (Proctor, 2000).
Branding is not merely about differentiating products; it is about striking emotional chords with
consumers. It is about cultivating identity, attachment, and trust to inspire customer loyalty.
Chinese brands score low on attributes such as 'sophisticated,' 'desirable,' 'innovative,' 'friendly,'
and 'trustworthy.' (Nirmalya Kumar)The development of trust between salespeople and their
customers has traditionally been considered a critical element in developing and maintaining a
successful sales relationship.
Relationships with customers and in maintaining a companys market share. Therefore, based
on the prior empirical findings, hypothesis 3 is proposed as below:

H3: Relationship marketing tactics affect customer trust.

4.1.4. Customer Satisfaction, Customer Trust and Customer Loyalty
Satisfied customer is the best source of advertisement (G.S. Alag) A customer talking about
their experience with you is worth ten times that which you write or say about yourself. (David
J. Greer, Wind in Your Sails)
14

As business marketers placed greater emphasis on building long term relationships, trust has
assumed a central role in the development of marketing theory (Dwyer,Schurr and OH
1987:Morgan and Hunt 1994)and practice (Dertouzos,Lestr and Solow 1989)
"Unless you have 100% customer satisfactionyou must improve." ~ Horst Schulze, Ritz Carlton
According to Doyle (2002), a highly satisfied customer will exhibit the following characteristics:
(1) stays in loyal longer, (2) buys more, (3) talks favorably about the company, (4) pays less
attention to competing brands and advertising, and (5) the company will cost less to serve than
new customers.
Loyalty cannot be blueprinted. It cannot be produced on an assembly line. In fact, it cannot
be manufactured at all, for its origin is the human heart-the center of self-respect and human
dignity. It is a force which leaps into being only when conditions are exactly right for it-and it is a
force very sensitive to betrayal. Maurice Franks
If people believe they share values with a company, they will stay loyal to the brand. Howard
Schultz
Based on those empirical findings, we proposed the following hypothesis:
H4: Customer satisfaction influences customer loyalty
More than half of bank customers believe that having a relationship of trust with their financial
institution is more important than getting the best value for money according to the study of
Coulter and Coulter (2003). It describes that when the customers have trust on the services and
products of a company, then it will lead them towards loyalty (Ribbink, Liljander, and Streukens,
2004).
Get closer than ever to your customers. So close that you tell them what they need well before
they realize it themselves (Steve Jobs).
Listening offers data. Hearing offers empathy and intelligence. Activity, action, and
engagement steer perspective and encourage a sense of community and advocacy. Brian Solis
We see our customers as invited guests to a party, and we are the hosts. Its our job every day
to make every important aspect of the customer experience a little bit better. Jeff Bezos
The key is to set realistic customer expectations, and then not to just meet them, but to
exceed them preferably in unexpected and helpful ways. Richard Branson
The role of trust is a crucial one (Harris and Goode, 2004). It affirms that customer loyalty
begins with trust. Based on those prior findings, the hypothesize the relation between customer
trust and customer loyalty can be mentioned as follows,

15

H5: Customer trust affects customer loyalty.

4.1.5. Customer loyalty influences customer retention

Loyal customers have a positive effect on customer retention, but customer loyalty is not
customer retention. Loyalty is only a valid concept in situations where customers have options
to choose from. The main issue is that retention should not be taken as a substitute for loyalty
and this suggests that banks need to understand why their consumers choose to stay and should
not assume that it is a positive conscious choice (Colgate et al., 1996).
A service recovery effort is also necessary, where a service provider is notified that a problem
has occurred (Trubik and Smith, 2000). A service recovery processes encompasses all the actions
taken to get a disappointed customer back to a state of satisfaction. The plethora of literature on
service recovery, both management and academic suggests that service recovery is the most
important factor in driving a customer to exit or stay after a service failure. As a result, switching
behavior can increase, as do complaints, cynicism toward the concept of loyalty, and litigious
activities (Schriver, 1997).
Retaining customers also make it difficult for competitors to enter the market or to increase
their market share, and loyal customers often refer new customers to the service provider, which
is very beneficial, as there is no expenditure in gaining the new customers (Du Plessis 2010: 63;
Kuusik 2007: 5; Rootman 2006: 36).

16

5. Methodology of Perspective
Survey method will be used for this study using questionnaire as data collection instrument.
The questionnaire will be adapted from scales already used for previous studies in the literature.
Systematic sampling technique used to select the individuals from membership directory data
collection was done through telephonic questionnaire survey.

Relational marketing tactics

Customer satisfaction
Customer loyalty
Customer trust
Independent variable

H1

Customer Retention

H2
H3
H4

Dependent Variables

Table No.2- Methodology framework

The framework above shows proposed framework to serve as foundation of this study.the
purpose of this study is to examine how above mention factors affect to customer retention of
Nations Trust bank American Express card

17

5.1. Operationalization
Operationalization of customer retention

Variable

Item

Item Indicator

RETENTION LEVEL OF RELATIONAL MARKETING Speed of need fulfillment

Understandable communication
CUSTOMERS
TACTICS
Interest in solving problems

SATISFICATION

Overall satisfaction
Satisfaction about service quality
Satisfaction about sales executive

TRUST

Speed response to complaints

Consistency of service

LOYALTY

Listen to customer feed back

Comparative price and affordability
Feeling pleasure

Table No.3

18

6. The approach to data collection

In this study, the researcher will be gathering data through primary data, but also will be used
secondary data to gather research population and industry analysis.

6.1. Quantitative, Design

Quantitative research will be applied based on the nature of studies to gather a
representative data from the targeted respondents. To better understand the relationship
between service quality, customer satisfaction and customer retention through a SERVQUAL
analysis, it will be used to quantify attitudes, behaviors of the customers that consume
American Express credit card of NTB.
The advantage of using quantitative research is that it produces reliable data that are usually
qualified to some large population (Wyse, 2011). In this study,
A questionnaire will be used to collect the data from the respondents.

6.2. Primary data

Primary data will be organized for the specific purpose of addressing the problem at hand. In
this research, the primary data will be used is questionnaire survey through telephonic
conversation while delivering the questions researcher need cooperation and clarification from
the respondents. Besides that, primary data refer as first-hand information or data obtained
originally by the researcher on the variables of interest for the specific purpose of the study. The
respondents (professionals) will be selected as per a systematic manner.

6.3. Secondary data

Secondary data refer to information gathered by other parties that already conduct a previous
study. It helps researchers to get better understand to obtain research population for
questionnaire survey and collect financial data to analyze primary data. To obtain secondary data,
can be obtained the relevant articles and other sources through internet and online library are
aiding in the research. The researcher should collect customer information from IESL directory
and the directory of charted institute of accountants since it is the interested population for the
study

6.4. Sampling design

There are few steps under sampling design as follows;
19

6.4.1. Research population

Research population is the group of people where the researcher is interested in analyzing to
get relevant information for research purpose.
The population refers to the entire group of people, events, or things of interest that the
researcher wishes to investigate. (Sekaran & Bougie, 2009, p. 262). On the other hand, systematic
sampling has been chosen in order to select professionals which is the respondents in this study.
, systematic sampling is one of the probabilities sampling, which researcher first randomly picks
the first item or subject from the population. Then, the researcher will select each not subject
from the list.
The sample has been selected from the charted accountants and IESL engineers who have
obtained their memberships after 2006 and the sample compromised 150 individuals from each
segment 75, who have obtained card facility regardless existing or cancel the facility. When
choosing the sample researcher will select every 3rd individual systematically along with
membership nos issued after 2006 because each individual in the population has an equal
likelihood or chance to be chosen.

6.4.2. Sampling techniques

In this study, systematic sampling technique was selected. To assess customer's perceptions
on quality of service in American express credit card researcher has to get organized sampling
frame. To accomplish this, the researcher will go through the directories of IESL engineers &
charted accountant to collect the customers information such as contact no and home or office
address.
Then should have to draw the sample can could be selected the particular sample through MS
Excel spreadsheet functions.

6.4.3. Sampling size

Before distributing the real questionnaire to the selected respondents, the researcher needs
to pre-test the questionnaires to the other people such as friends and family members. It will be
important to ensure the respondents understand the questionnaires and to avoid
misunderstanding occurs in the future. Researcher distributes 5 questionnaires for this pre-test.
Any misunderstanding about the questions, then researcher needs to redo the questionnaire
until it suits with the purposes of the study.

20

6.5. Research Instruments

Questionnaire survey has been used in this study. Questionnaires are defined as the series of
questions aim to gather prompt and accurate information from respondents. Thus, in order to
perform a good research, a good questionnaire must be designed. Hair, Babin, Money, and
Samuel (2003) mentioned that effectiveness and high response rate are the reasons for
researchers use questionnaire widely to collect primary data if the population of respondents is
well-educated. The main data collection instrument of this study is structured questionnaire
based on literature review focusing on the relationship between

6.6. Method of data analysis

The data analysis starts with an exploration of the response, the respondents and the reliability
of the item indicators of service quality and customer satisfaction.
Descriptive Statistics; are used to describe the basic features of the data in a study. They
provide simple summaries about the sample and the measures. Together with simple graphical
analysis, they form the basis of virtually every quantitative analysis of data. The Standard
Deviation is a more accurate and detailed estimate of dispersion because an outlier can greatly
exaggerate the range. The findings will be calculated by using SPSS and ANOVA.
(www.socialresearchmethods.net, 2015)

21

7. Delimitations of the study

The research population of this study will be limited to 150 individuals because of the cost and
time limitation.
Difficult to contact and get information due to busy life schedules of professionals.

22

References
Sekaran, U. and Bougie, R. (2009). Research Methods for Business: A Skill Building Approach. A
John Wiley and Sons, Ltd, Publication
Sekaran, U. and R. Bougie (2010). Research methods for business: A skill building approach.
Wiley, London.
Aydin, S., & zer, G. (2005). The analysis of antecedents of customer loyalty in the Turkish
mobile telecommunication market. European Journal of Marketing, 39(7/8), 910-925.
Blery, E., Batistatos, N., Papastratou, E., Perifanos, I., Remoundaki, G., & Retsina, M. (2009).
Service quality and customer retention in mobile telephony. Journal of Targeting, Measurement
and Analysis for Marketing, 17(1), 27-37.
Ismail, I., Haron, H., Ibrahim, D. N., & Isa, S. M. (2006). Service quality, client satisfaction and
loyalty towards audit firms: Perceptions of Malaysian public listed companies. Managerial
Auditing Journal, 21(7), 738-756.
Grnroos, C. (2004). The relationship marketing process: communication, interaction, dialogue,
value. Journal of Business & Industrial Marketing, 19(2), 99-113.
Kotler, P., Keller, K. L., Koshy, A., & Jha, M. (2009). Marketing management: A South Asian
perspective (13th ed.). New Delhi, DL: Pearson Prentice Hall.
Liu, Y., Li, Y., Tao, L., & Wang, Y. (2008). Relationship stability, trust and relational risk in
marketing channels: Evidence from China. Industrial Marketing Management, 37(4), 432-446.
Mark N.K. Saunders. (2009). Research Methods for Business Students (5th Edition). Prentice
Hall.

23