The Impact of Service Quality and Service Characteristics on Customer Retention: Small Businesses and their Banks in the UK¹

TLDR

Recent relationship‑marketing research highlights that investing in service quality and customer relationships can boost loyalty, retention, and profitability, yet empirical evidence remains incomplete. The study investigates how service quality and customer relationships influence loyalty and retention among small‑business customers of UK banks. Using empirical data from UK banks and their small‑business clients, the authors assess the impact of service quality and relationships on loyalty and retention.

Abstract

The recent developments in relationship marketing have increasingly focused attention on the beneficial effects of customer retention. The notion of building relationships and delivering quality service in order to encourage loyalty is perhaps of particular importance in the service sector where it is often argued that customer attraction costs are significantly higher than retention costs. Central to the idea of investment in the development of service quality and customer relationships is the belief that such investments will enhance loyalty, retention and profitability. Empirical evidence on the extent to which such links exist is still partial. This paper explores the relationship between service qualitylcustomer relationships and customer loyalty and retention using evidence from the UK banking sector and its small business customers.