Effect of Strategic Management Practices On Customer Retention in Commercial Banks in Kenya

Abstract

The banks should adopt customer retention as a strategic management tool to gain competitive advantage over its competitors; hence the purpose of this study was to find out the effect of Strategic Management Practices on Customer Retention in Commercial Banks in Kenya. Four Specific Objectives formed the basis of the Study namely: leadership practice, corporate governance practice, organizational cultural practice and strategic customer relation practice on customer retention in the commercial banks in Kenya. The theories used were transformational leadership theory, stewardship theory, strategic management fit theory, institutional theory and theory of competitive advantage. The total number of banks that are registered with the Central Bank of Kenya is forty-three (43) hence a survey method was used. The questionnaires were distributed to all banks and the managers and the department heads were requested to fill in. The total number issued was 117 questionnaires and 100 were returned, giving a response rate of 86%. In analyzing the responses, the statistical package for social science (SPSS) version 22.0 was used to present descriptive statistics such as frequency distributions, measures of central tendencies and measures of variations. Data analysis and interpretation was presented using descriptive statistics and measures of dispersion as well as inferential statistics, Pearson correlation, factor analysis and analysis of variance (ANOVA) were used. Multilinear regression model was used in explaining the effect of strategic management practice on customer retention in commercial Banks in Kenya. The study results indicate that the strategic management practices (measures of strategic leadership practice, strategic corporate governance practice, strategic organization culture practice and strategic customer relation management practice) had a significant positive effect on customer retention of commercial banks in Kenya. The main findings of the study were: one that variations in the four strategic management practices namely; leadership, corporate governance, organization culture and customer relation management accounted for 74.9% of the variation in customer retention. Unit improvement of the variables led to increase in customer retention. all variables were important with strategic leadership, strategic corporate governance and strategic customer relation management being the best predictor of customer retention, organization culture can be further be investigated to see how best it can increase customer retention. The summary of findings focuses on the specific objectives that guided the study. Therefore the study recommends that it would be appropriate for management to address challenges of competition, and embracing change in order to gain competitive advantage over their competitors. Hence it is important for banks to design comprehensive motivating programs for employees in dealing with the customer by being prompt in offering service and solving problems, pleasing and courteous while communicating with them. There was also need for management to encourage continued use of modern technology to optimize customer retention and by consequence gain in the market share. This study therefore gave insights on enhancing of capabilities on employees in order to satisfy customers, create loyalty and finally retain them in ways that would enable the management of the banking industry to achieve its objectives in a dynamic and competitive business environment using strategic management practices.