Customer Loyalty in the Indonesian Banking Industry

An investment model approach has been applied to examine customer loyalty. The model consists of three variables—satisfaction, quality of alternatives, and investment size. Customer satisfaction is described as a postconsumption evaluation on the quality of service applying the cumulative approach. Furthermore, the quality of service is measured by five dimensions-tangibles, reliability, responsiveness, assurance, and empathy. All five dimensions constitute the service firm’s readiness to provide each customer with a personal treatment. This study investigates whether all those variables have a significant effect to customer loyalty, which are measured in three dimensions–attitudinal, behavioral, and cognitive. The respondents comprised of 403 customers taken from the top ten Indonesian Banks that are listed with the highest assets. The data is gathered by distributing a questionnaire and analyzed by using Structural Equation Modeling (SEM). The findings of this study indicate that satisfaction and investment size have a positive impact on customer loyalty while, the quality of alternatives shows negative impact. The strongest impact occurs in the investment size variable, followed by the satisfaction and the quality of alternatives having less impact. This study is expected to help bank managers in reducing customer dissatisfaction and achieving customer loyalty in the Indonesian banking industry.