Customer retention measurement in the UAE banking sector

INTRODUCTION

In the Middle East markets, where business is thriving, companies are confused about how best to treat and manage their customers' needs. The Middle East markets are in fact characterised by having two facets: one modern and dynamic, the other medieval and traditional. The region's banking sector is no exception. Its most sophisticated banks tend to be found in the United Arab Emirates (UAE), Kuwait, Bahrain and Saudi Arabia, where it is reported that banks in these locations are just as technologically up-to-date as those in the United States or Europe. ^{1, 2} Yet, the traditional banking services that are common in developed economies are still at their embryonic stage in this regional banking market. This situation creates an ambiguous and confusing image in the minds of consumers with respect to the general quality of services provided. This situation generally pushes customers to look for better service offering banks or alternative financial institutions that offer services similar to those banks.

To compete in a changing and dynamic environment, organisations have to constantly struggle to search for new resources of competitive advantage to offer their stakeholders and customers something different in their services in order to distinguish them from the rest. ³ Creation of a strong corporate identity and image is the most effective means for differentiation in banking^{3, 4, 5, 6} and the starting point for subsequent customer loyalty-building.³⁷ Traditionally, customer satisfaction has been regarded as a fundamental determinant of long-term consumer behaviour;^{8, 9} that is, the more satisfied the customers, the greater is their retention.^{10, 11} Customer retention, however, can be achieved in two fundamental ways. First, according to Patterson and Smith¹² , true attitudinal and behavioural loyalty might have been established so customers have little interest in competitive offerings.¹² Loyalty and retention, however, do not always come from satisfaction. Secondly is to erect switching barriers, such as the costs (financial, time and psychological) of changing to an alternative provider act, as disincentives or obstacles to defection. Thus, switching barriers are also important to customers' retention. ¹³

Indeed, both service researchers and practitioners have realised that customer switching behaviour can have a negative effect on a firm's market share and profit.^{14, 15, 16, 17}...