Competitive Strategies and Customer Retention Among Commercial Banks in Kenya

Abstract

In most cases business loses some customers, but few ever measure or recognise how many of their customers become inactive. Most businesses, ironically, invest an enormous amount of time, effort and expense building that init ial customer relationship. Customers’ satisfaction is a key ingredient in retaining customers, it is important for the commercial banks to adopt competitive strategies in order to retain existing customers in the business and also attract prospective custo mers (Hunt, 2008). The Kenyan banking sector is facing stiff competition in terms of customer retention due to the increased competition in the sector. Customer retention is the goal of preventing customers from switching to the competitor. It is the way in which firms focus their efforts on existing customers in an effort to continue doing business with them . In order to retain their customers in a competitive market firms have been forced to come up with strategies that will give them competitive advantage . Competitive strategy is a long - term action plan that is defused to help a company gain a competitive advantage over its rivals. This study therefore sought the extent to which competitive strategies influence customer retention among commercial banks in Kenya. The study adopted a descriptive survey design and targeted all the forty four registered commercial banks in Kenya. The data was collected using questionnaires using the drop and pick later method. The questionnaires were then edited, coded and anal yzed using the statistical package for data analysis (Version 20). The study concluded that there is a significant relationship between cost leadership strategies and customer retention. The study also concluded that banks use low prices of the bank produc ts to target average customers and also develops new products that meet the market demands. The study also concluded that the banks adopt differentiation strategies by offering superior goods and services of high quality to their customers. The study also concludes that differentiation influences customer retention to a great extent. On focus strategy the study concluded that banks have developed products that tar get a particular market segment and that there is a measurable relationship between customer sa tisfaction and customer retention in banks. The study recommended that banks should adopt cost leadership strategies so as to attract and retain more customers, that banks should design products that are of superior quality compared to that of the competit ion so as to gain competitive advantage that banks should embrace focus strategy and design products that target different income classes and that banks adopt the various competitive strategies such as differentiation, cost leadership strategies and focus strategies so as to remain relevant to their customers by offering superior products that are of better quality.