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CHAPTER 2

REVIEW OF RELATED LITERATURE

2.1 CUSTOMERS-SELLER BOND

A research about customers-seller bond gave the following three levels of customer-seller bond (Berry and Parasuraman, 1991):

1) Financial bond: In this financial bond between customer and seller, they have a strongly connected via price factor;

2) Social bond: In the social bond between customer and seller, they are strongly connected via social relations like attachments, friendships; and

3) Structural bond: In this structural bond between customer and seller, they have a strongly connected via partnership.

Furthermore, the connection between a bank and a customer can be of following three types (Berry and Parasuraman, 1991):

1) Using of bank`s ATM machines or using other technologies to interact with bank`s customers.

2) Customer-bank connection via bank`s representatives, for instance front desk bank`s officers interaction with bank`s customers, bank`s customer services representatives interaction with bank`s customers, and

3) Both 1 & 2 above.

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2.2 CUSTOMER LOYALTY AS A FOCUS OF CUSTOMER RELATIONSHIP MANAGEMENT

It is generally known that customers who are loyal to any organizations products and services become the major profit giver to that organization. Customers become loyal when they are satisfied and they believe that they are getting the best value from that product or service. Customer loyalty as a focus of Customer Relationship Management (CRM) helps banks to compete better in the highly competitive banking sector.

Organizations are trying their best to have closest relations with their customers by focusing more on satisfying their needs and wants better than their competitors (El Sawy and Bowles, 1997).

Organizations need to focus more on the existing customers and to strengthen relations with existing customers rather than focusing on the entire market (Peppers and Rogers, 1995). Similarly, organizations should focus on customer loyalty, as loyal customer is less costly than obtaining a new customer (Reichheld and Sasser, 1990).

Banks generally do segmentation of their customers based on age, income level, education etc but these factors are not very strong to identify the needs of customers. Organizations (Figure 2.1) try to group their customers according to similarities and customers having similar characteristics are placed one group and so on (Machauer, A. and Morgner, S., 2001). The basic purpose of is to achieve improved customer loyalty and less cost.

Figure 2.1: Financial services customer segmentation (Machauer, A. and Morgner, S., 2001)

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A model of Customer-Centric philosophy in Customer Relationship Management (CRM) evaluation, presents a customer-focused viewpoint that focuses on customer loyalty as a focus of Customer Relationship Management (Kim, 2003).

In the present age of globalization, almost all the businesses depend on the regular customers and not on the occasional customers therefore, in order to remain and compete in the present highly competitive environment, customer loyalty is vital. Mostly businesses are of the view that people know about me so they will come to me in any case but it is not true as your competitors are also there in the market so they can reach customers before you do.

For example, car manufacturer`s showrooms in Pakistan may send reminders to their existing customers about new features about new or existing products and services as well about their car tuning dates. Therefore, these reminders not only make their customers much delighted but also strengthen their relations with them.

If any occasional customer turns into a loyal customer then of course organization`s profit

will increase much. These loyal customers not only buy more but also at the same do your marketing as a volunteer by mouth reference. In a country like Pakistan, personal references about any product or service are considered of higher importance than any other effort.

Customer frequency depends on the type of product or service. For instance, daily or on alternate days, going to buy bread is a good frequency and buying shoes after 6 to 8 months is considered a good frequency.

Loyal customers open great opportunities for organizations as loyal customers buy more, buy other products and services offered by the same seller, and also become organization`s volunteer marketer by recommending organization`s products and services to their friends and relatives. Furthermore, organizations may go for joint ventures that result in effective customer loyalty.

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Everyone is not buying all the time, so organizations should keep in contact with their customers so whenever customers are willing to buy, there are better chances that your organizations products and services will be their first preference.

At present, almost all the persons are busy and new improved products and services are easily available in the market or via internet or telephone etc, so if an organization is already in contact with their customers then their chances are better than their competitors who are not in contact with their customers.

2.3 BANKING SECTOR OF PAKISTAN

Banks all over the world have the most significant impact on the economic development of any country. For instance, banks provide financial resources to various industries and sectors for their development. Banks also provide employment and tries to reduce poverty. In other words, banking sector has a control on providing financial resources to almost all sectors of an economy.

World is a global village and almost every organization is facing high competition and banking sector is no exception. Therefore, banks are trying their best to compete and perform better than their competitors. Hence, banks are focusing on new methods of interactions with their customers.

It is easily observed that banking sector is changing rapidly due to the advancement of new channels of communication, internet, online accounts, and so on. Due to technological advancements, competition among banks has increased a lot.

The financial sector in Pakistan comprises of Commercial Banks, Development Finance Institutions (DFIs), Microfinance Banks (MFBs), Non-banking Finance Companies (NBFCs) (leasing companies, Investment Banks, Discount Houses, Housing Finance Companies, Venture Capital Companies, Mutual Funds), Modarabas, Stock Exchange and Insurance Companies (State Bank of Pakistan, 2008). The Central Board of Directors of the State Bank of Pakistan (SBP) comprises of seven members, one corporate secretary, and boards Chairman is the Governor. The

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Organogram and details of Central Board of Directors of the State Bank of Pakistan (SBP) is at Appendix-II and Appendix-VIII respectively. It is functioning in areas of agriculture, onsite inspections, policy and regulations, Surveillance, and so on; its complete detail is shown in Appendix-IX.

The Quaid-i-Azam Muhammad Ali Jinnah in his address to the SBP on 1st July, 1948, emphasized its major role and responsibilities in socio-economic development of Islamic Republic of Pakistan, details at Appendix-X.

The major statutory obligations of the State Bank of Pakistan (SBP) are statutory cash reserve, statutory liquidity requirement, maintenance of liquidity against certain liabilities, submission of annual audited accounts, annual accounts, minimum capital requirements, and submission of returns as shown in Appendix-XI.

The State Bank of Pakistan (SBP) monitors and supervises banks, Development Finance Institutions (DFIs), and Microfinance Banks (MFBs) whereas all other financial institutions supervised by Securities and Exchange Commission and Controller of Insurance.

At present, there are 41 scheduled banks, 6 Development Finance Institutions (DFIs), and 2 Microfinance Banks (MFBs) operating in Pakistan whose activities are regulated and supervised by the State Bank of Pakistan. The commercial banks comprise of 3 nationalized banks, 3 privatized banks, 15 private sector banks, 14 foreign banks, 2 provincial scheduled banks, and 4 specialized banks (State Bank of Pakistan, 2008).

The banking industrys assets have risen to over $60 billion, and almost 81% of banking assets are in the private hands (Akhtar, 2007). Now banks are trying to make all of their accounts profitable. Core Functions of the State Bank of Pakistan are regulation of liquidity, regulation and supervision, exchange rate management and balance of payments, and developmental role of state bank as described in detail at Appendix-XII.

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Banking sector in Pakistan in an effort to reduce cost of services is now moving towards adopting most advanced technologies. Now customers of banks can operate their accounts online but there are issues like online frauds etc so banks need to have most secure online systems. Many of the new technologies may give immediate benefits to banks but in the long run, the only competitive advantage banks can have is their strong relations with their customers.

There is less human interaction of banks with their customers due to new technologies (Puccinelli, 1999). Customers needs and wants change rapidly and this forces banks to act accordingly. Those banks that are taking care of their customers better than their competitors are ahead in competition.

On the other side, technology has a vital impact on service delivery; customers get immediate information and response from banks.

It is generally seen that new technology is replacing employees like Automated Teller Machines (ATMs) have replaced cashiers, and so on. Technology is replacing human interactions because banks are trying to provide services as quickly as possible to remain ahead of their competitors.

Banks are trying to strengthen their relations with their customers (Durkin, M., 2004). Banks are using different technologies like emails to respond to their customers. Customers are provided immediate response of their queries through these emails managed by artificial intelligence system. In case of any unsolved or unique issue, these artificial intelligence systems direct the said emails of customers to bank concerned employees for their individual attention.

The impact of new technology is immense on the financial sector (Sherif, 2002). Banks were dependent on manual work and branch operations for the last many decades but since 1980, new technology has changed working of banks and as a result, computers are replacing humans in most of the banking operations.

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Globalization has brought creativity and innovation in doing business as well as new challenges to the banks. In order to remain competitive or in some cases, in order to survive in the market, banks need to react rapidly to these global challenges.

As we know that customer is the real king or the real boss, is very true for the banking sector as well. It is the customer who decides what you offer and how you offer, not the bank therefore, its vital to develop a comprehensive data base of customers in order to not only know customer`s changing needs and wants but also banks can use this customer`s data base to predict their future needs and wants.

Government rules and regulations have also increased customer rights so it is also important to fulfil their rights better than competitors. As we also observe that internet has also changed the behaviour of customers, their lifestyles, and most importantly their awareness regarding banking services.

2.3.1 Customer Relationship Management in the banking sector

These days, banks are focusing on Self-Service Technologies (SSTs). In SSTs, customers can use bank services when and where they want without time or place barriers, without any personal contact with the banks (Durkin, & Howcroft (2003).

Organizations are focusing on strengthening their relations with their customers (Palmer, 2001; Robertson & Kellow, 2001). Organizations focusing on customer loyalty which is a major competitive advantage (Galbreath & Rogers, 1999; Valentine, 1999).

Developing and strengthening relations with customers is not only a software or technical issue, it is the communication of all business activities with customers in the most efficient and effective manner.

Customer correct need identification helps CRM work effectively. Following are the major needs of customers of banks in Pakistan:

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a) customers need to get better bank services at low cost; b) customers having more than one bank accounts should have convenience in

managing their accounts.;

c) banks should offer the best products and services to satisfy and retain customers.

Companies should focus on the integration of people, processes and technology to gain long-term competitive edge over competitors and in order to earn profit (Bygstad, 2002 cited Ciborra and Failla, 2000). At present, Customer Relationship Management (CRM) is under energetic thoughts of organizations all over the world (Fox, 2001). Customer focus is the basic concept behind Customer Relationship Management (CRM).

All over the world, there are quick changes due to changes in the business environment. Due to globalization, there is a tight completion in the business world. Therefore, in order to remain and beat competitors, companies need to keep on improving their strategies.

Banks in Pakistan are already using various CRM activities like communicational and operational CRM. For example, checking account balances, checking bank account records, getting check books, transferring funds, payment to others, paying utility bills, and paying bank credit card bills. In banks in Pakistan, following are the major channels of communication with the customers:

1) Bank branches: there is a face-to-face communication between customers and banks in various bank branches.

2) Automated Teller Machine (ATM): customers of banks can draw cash from these machines round the clock.

3) Internet banking: customers can access their accounts and do transactions while sitting in their offices, homes, or from anywhere with the help of computers.

4) Mobile banking: customers can access their accounts and do transactions from anywhere with the help of their mobiles.

5) Technological help: in case of any problem, customers of banks can get support and help from technological help centers via telephone or in person.

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6) Marketing channels: various marketing channels like print and electronic media are used by banks these days to reach and satisfy their customers better than their competitors.

7) Follow-up: after sales services to customers through customer follow-ups.

These contact points provide required information immediately that results in more customer satisfaction. Customers spend less time to get more information, as these days, almost everyone is busy doing something so when a bank saves precious time of its customers, it makes its customers more loyal (Lindgreen, 2005).

Almost all businesses are going through quick changes that demands long-term competitive strategies in the world. Due to increased technology, customers are well informed about products and services and it is easy to access information within seconds about any product or service. Hence, banks are moving towards customer-centric strategies. As customer is the real source of information, so the methods of working have changed. Therefore, banks do what their customers need and want.

E-banking is categorized into following 4 categories (Jayawardhena, 2000):

1) Account balances or credit transfers viewing, 2) Account control functions, 3) New services, and 4) Reconciliation functions.

1- Account balances or credit transfers viewing:

Mostly customers need to view their account balances or credit transfers. This view-only function allows customers to view their account information at any time. Before this function, bank employees maximum time spent on providing this account balance information to their customers but now due to this function, workload on bank employees have decreased a lot and on the other side, customers also get the required information immediately at their own convenience.

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2- Account control functions:

Few controls of customers like payment of utility bills, account transfers between different bank accounts or transferring amount to other`s bank accounts are some of the functions of this account control function.

3- New services:

Any new customer is allowed to fill new bank account opening forms in this function. However, due to some legal requirements, new customers have to visit banks for signatures and providing attested hardcopies of required documents.

4- Reconciliation functions:

Now banks offer downloading and other relevant services to their customers through this function. Customers can download their account related information from the bank website to their personal documents.

Customer Relationship Management applications generally include (Reynols, 2002):

Call Center Automation, Campaign Management,

Contact Management, Data Warehousing,

Email Management,

Field Service Automation, Knowledge Management, Marketing Automation,

Personalization, and Sales Force Automation.

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At present, banks are using the best available technology resulting in the best use of each customer contact more effectively than ever. As described by many researchers, an effective CRM application helps organizations to manage their customers in better manner by focusing on customers that are more profitable that result in improved profitability.

Banks use Customer Relationship Management (CRM) techniques to obtain following results (Foss, 2002):

1) To develop customer-centric environment in banks; 2) To develop and strengthen relations with their customers; 3) To deliver best products and services to customers; and 4) To identify the cost-effective customers in banks.

Firstly, almost all the major organizations including banks are focusing on customers as it is the customer who can really strengthen your bank. Hence, as Foss has mentioned above that having a more customer focused culture can enable the banks to achieve their objectives better than their competitors can. Secondly, as earlier discussed, relationships play a vital role in human lives so it is almost impossible for banks to ignore this most important factor of their customers. Thirdly, by delivering and providing the best services to customers can help banks achieve their financial goals, and finally Customer Relationship Management (CRM) helps to indentify and focus on the most profitable customers.

Increasing competition and decreasing margins have made it mandatory for banks to adopt Customer Relationship Management (CRM) strategies and technologies with the purpose of satisfying ever-increasing needs of their shareholders and customers. More recently, banks have begun to realize its fundamental value as it facilitates banks:

To focus on those customers that give the maximum profit

To focus on those customers who have a higher frequency

To focus on the what and how much buying of customers To know better their customers

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To know their needs, wants, desires To know their family size, likes, dislikes, background etc, and To develop proactive strategies regarding their customers, products, and

services

If banks have a comprehensive awareness of their customers then this definitely can bring a better change as earlier described in Customer Relationship Management (CRM). Understanding customer is not an easy task for banks as now competition among banks is on building their customers loyal. Customer Relationship Management (CRM) helps banks to target and reward most profitable customers.

2.4 CUSTOMER LOYALTY

Today in almost every field, there is high competition and all organizations are trying to do their best in the market if they want to remain and grow in the market. If organizations need to develop, strong long-term competitive edges then they have to make their customers loyal. Making customers loyal is not easy for the organizations because of high awareness of today`s customers. Print & electronic media and other sources of information has increased customer`s knowledge and awareness about most advanced most attractive products and services offering a benchmark quality in the markets. New and improved products and services enter market rapidly so its becoming really hard for organizations to compete on the basis of most rapid changes therefore the only competitive long-term edge they may have is to build their customer`s loyalty.

Customer`s loyalty means that customers have a commitment to repurchase product/service even other organizations are offering better products/services and doing a lot of marketing but your customers remain with you (Oliver, 1999).

Customers loyalty is the positive attitude of customers toward repurchase (Lin and Wang, 2006).

During the past many decades, organizations got customers because of lack of competition or no competition at all. Generally customers have no choices or options or substitutes and the markets were growing rapidly and mostly organizations didnt worry about the customer`s

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satisfaction. Organizations thought that there will be high demand of their products and services and if they are unable to retain 200 customers, they get 2000 more customers quickly and this goes on for many years. Organizations believed that there are always new customers to replace the defecting ones (Kotler p. 405).

Customer loyalty has become the most important aspect of organizations because getting a new customer costs much higher than retaining an existing customer so organizations should focus more on customer loyalty in order to be profitable (Ro King, 2005).

In most of the organizations, like banks, losing only few most profitable customers may result in big loss as compare to losing many average customers. Therefore, customer loyalty results in profit as well as collection of further data about customers. This large customer data helps organizations like banks to communicate better with its customers, developing better strategies about their products and services, more customer satisfaction, prediction of customer wants resulting in more purchases by the customers.

The basic objective of any business is to create a customer (Peter Drucker, 1973). Five percent enhancement of loyalty enhances twenty five percent to ninety five percent worth (Dawkins and Reichheld, 1990). This most surprising finding brought a rapid change in the market regarding significance of customer loyalty. Therefore, organizations realized the vital importance of customer loyalty and almost all the major organizations developed various customer loyalty strategies according to their own business environments.

Customer loyalty is the most important objective of especially those organizations that are involved in Customer Relationship Management and it can be most beneficial for companies in this highly competitive world (Grnroos, 1991; and Coviello et al., 2002). They further reported that loyal customers of any company might pay even higher prices of offered products and services as compare to new customers who are not willing to pay higher price. Therefore, the result is

increased profits. This was a major finding in the area of customer loyalty in the world. Organizations then started focusing more on customer loyalty in order to improve their profits by developing long-term relations with their customers.

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Another most significant finding is that retaining a customer is 10 times less costly than getting a new customer, whereas to bring new customer on the same profit level is sixteen times more costly (Lindgreen, 2000).

Customers complaints are like a treasure to any organization. When any customer complains, the concerned organization gets the most important information about its weak areas without spending millions and millions of rupees on identification of their weak areas. Therefore, organizations through improved customer problem handling system have a better chance to fix that problem by working on the root causes of that identified problem. After identification of the root causes, organizations try to solve customers problems to make them loyal.

Customer`s increase in loyalty means that customers wants to stay with the current provider of products and services. Customer`s loyalty mostly depend on his/her values and successful organizations act accordingly. Therefore, organizations offering the most valued products and services to their customers have more loyal customers than their competitors.

If any organizations need to have, loyal customers then they should take measures to involve customers with them. Involvement results in increased loyalty (Zeithaml et al., 1988). When the customer-seller service is of long-term then these relationships become the most important for the organization (Zeithaml, 1981). These effective relationships between the customer and the service provider can result in customer retention. Furthermore, customer`s level of participation with the service provider can decide their level of customer-provider relationships (Farquahar, 2004; Ennew & Martin R. Binks, 1996).

2.5 CUSTOMER RELATIONSHIP MANAGEMENT AND CUSTOMER LOYALTY IN THE BANKING SECTOR

The major focus of Customer Relationship Management (CRM) in any organization is to build relations with customers (Rigby, Reichheld & Dawson, 2003). The basic purpose is to understand customers and factors that affect customer loyalty. Loyal customers for any company can always give a better competitive advantage than any other factor. Chances of customer accounts

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also grow with the age of customers so if those customers growing customers remain with their

banks then it gives a strong long-term competitive edge to their banks.

As the Customer Relationship Management (CRM) helps banks to make their customers loyal, and customer loyalty depends on certain factors that affect customer loyalty. Understanding and knowing those factors and their relationships with each other can help banks to develop better customer-centric strategies, which is a focus of Customer Relationship Management (CRM).

During last few decades, major changes occurred in the banking sector like privatization, and same is true for Pakistan. Many public banks have been privatized that results in high market competition.

Banks use new technology to provide quick services to their customers but on the other side, this technology results in decreased relations between the banks and their customers. Those banks that did not change or improve their products and services have lost their major market share. Hence, banks that are not considering this fast changing environment to maintain strong position are likely to lose their customers.

Banks have started realizing that no bank is excellent for all so banks are trying to explore innovative competitive advantage to compete and beat their competitors (Olsen, 1992). At present, strong relationships with customers have become vital, none of the banks can avoid it otherwise retaining, and increasing customers becomes very difficult. If a bank needs to have a competitive position then its relations with its customers becomes the most significant factor.

Customers loyalty is decreasing in different sectors including the banking sector. The basic reasons behind this customer`s declining loyalty towards different sectors are (Payne, Christopher, Clark, & Peck, 1999):

1) Use of latest technology: 2) High competition 3) Customers increased awareness

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1) Use of latest technology:

There is rapid improvement and innovation of technology in the world than ever, mostly companies using latest technology like internet, telemarketing, auto-

answering machines, and so on to satisfy their customers resulting in decreased loyalty as customers are more used to interact with machines.

2) High competition:

There is high competition in the market due to new banks entering as well as cellular companies providing financial services like easy paisa by Telenor Cellular Company in Pakistan.

3) Customers increased awareness:

These days, customers are well informed than ever due to rapid expansion of print and electronic media in Pakistan. Media has increased customers awareness about what is going on in the world, and this increased awareness about financial services has increased customer demands and changed their behaviours towards financial services.

Relationship in the banking sector is becoming more and more significant (Colgate, Alexander, Marks & Spencer, 1998 ).

2.6 MODELS RELATING TO RESEARCH STUDY

Many philosophers presented customer loyalty models. In the loyalty model (Figure 2.2), presented by Beerli, Martin and Quintana, (2004) variables that impact customer`s loyalty namely perceived quality, satisfaction, and switching cost are shown. As shown in this model of loyalty, perceived quality influences customer satisfaction and in turn, customer satisfaction influences

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customer loyalty. Switching cost also influence customer loyalty (Beerli, Martin and Quintana, 2004).

Figure 2.2: Loyalty Model (Beerli, Martin & Quintana, 2004)

The integrative framework for customer value and CRM performance model (Figure 2.3) is developed by Wang et al., 2004. According to this model, if these four customer values are met then it results in customer satisfaction that turns into brand loyalty.

Here the researcher comments that customer satisfaction is the major influencing factor in the model presented by Wang et al. (2004) and also in the loyalty model presented by Beerli, Martin and Quintana (2004).

Perceived Quality

Satisfaction

Switching cost

Loyalty

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Figure 2.3. The Integrated Framework for Customer Value and CRM Performance. Source: Wang et al., 2004, p. 171

According to this model, employees behaviors depend on their attitude so we need to take care of the attitude of our employees if we want to increase profitability of our business resulting from customer retention.

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Figure 2.4: The Employee-Customer-Profit Chain at Sears

The CRM Value Chain Model, (Figure 2.5) presented by Francis Buttle (2004) as a guideline to apply CRM in organizations to improve their profits. The CRM Value Chain Model comprises of five primary stages and four supporting conditions Figure 2.5:

Figure 2.5: The CRM Value Chain (Source: Buttle 2004)

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The major objective of this model is establishing positive mutually beneficial relations between the customers and organizations.

2.7 OFFENSIVE AND DEFENSIVE STRATEGIES

The service providers have offensive and defensive strategies to manage their relationships with their customers (Fornell, 1992).

Fornell (1992) says that, in offensive strategy, a service provider attracts new customers whereas in defensive strategy, a service provider tries to retain the existing customers. Following Figure 2.6 presented by Fornell (1992) shows these offensive and defensive strategies:

Figure 2.6: Offensive and defensive strategies, Fornell, 1992, p-8

Generally, companies used to allocate more resources and energies towards getting new customers but presently that concept has changed and now the companies try to apply both the offensive and defensive strategies in a better manner than their competitors do. The possible result of these strategies is customer retention.

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2.8 FACTORS THAT AFFECT CUSTOMER LOYALTY IN THE BANKING SECTOR

Researcher here discusses the major influences of factors that affect customer loyalty in the banking sector.

2.8.1 Customer Trust Closer relations between bank and its customer, higher the customer trust and vice versa.

This close relationship between customer and bank is not due to any bias but it is due to a relationship between customer and bank that results in customer loyalty. Therefore, customer trust influences customer loyalty and higher the customer trust higher the customer loyalty.

It is a general truth that if you know and trust a person, you definitely give him/her importance in your decisions. Same is true for customers as those customers who knows your company`s products and services and trust you, they become regular customers. Any company that has effective channels of communications with its customers like customer services, companys

website, etc has better chances that its customers will trust them and this trust converts into loyalty.

2.8.2 Customer Perceived Value

There is rapidly growing interest in companies regarding customer value. Customer value is the most influencing factor (Watchword, 1990). Customer value is the core of marketing (Andreas Eggert and Wolfgang Ulaga, 1990).

Customer satisfaction has arisen many questions in the minds of researchers like there are many examples that, where there is high customer satisfaction but on the other hand, companies market-shares are going down. Many researchers found it surprising and here critics have argued that old customer satisfaction models focused only on the existing customers satisfaction and those models completely ignored possible customers, new customers, non-customers, and competitors. This ignorance resulted in failures in achieving company`s objectives. Furthermore, customer`s thinking about 4Ps of marketing that is product, price, place, and promotion should also be

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considered. Therefore, in developing marketing strategies, customer perceived value has a vital role (Gross, 1997).

The researcher after going through detailed literature review found that there are generally three common elements of perceived value namely value components, value perceptions, and importance of competition.

As humans are different, so their perceptions are also different. Generally, people perceptions about any same product are different and so is the customer perceived value.

Finally, any company offering better value of their products and services than competitors can develop a competitive advantage. Generally, customers go for those products and services that offer better value in the market.

In Pakistan, customers also buy products and services due to their emotional attachments with a particular product and service. For example, customers buying shoes from Bata Shoe Company in Pakistan is also a result of emotional attachment with Bata Shoe Company and hence that results in more value and better perception about those company products.

Customer perceived value is closely related with the customer satisfaction and customer satisfaction in turn is closely related with customer loyalty. Customer`s satisfaction generally require his/her previous product/service experiences, price factors etc whereas customer`s perceived value is not dependent on customer`s previous experiences of products and services.

2.8.3 Customer Satisfaction

If there is no difference between customer satisfaction and customer`s expectations than the customer is satisfied, otherwise customer is not satisfied. Companies try to not only minimize the difference between these factors but also trying to provide products and services to their customers that exceed their expectations in order to retain them as loyal customers (Jamal and Kamal, 2002).

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Customer satisfaction is an important factor in customer retention. If customer satisfied then he/she may become volunteer marketer of that product or service.

Customer develops an attitude after using any product or service and it is called customer satisfaction (Jamal and Kamal, 2002).

Customer performs an emotional assessment about various products and services before buying and after using it (Lin, 2003). Customers have expectations about products and services they use and these expectations are developed from their previous buying, from friends and relatives opinions. If customers expectations are met then he/she is satisfied otherwise dissatisfied. Customer satisfaction is important and it is significant source of loyalty and retention.

2.8.3.1 Conceptual differences between customer satisfaction and customer perceived value

The literature review shows that customer satisfaction and customer perceived value are complementary, yet different constructs. Following Table 2.1 shows the conceptual differences between customer satisfaction and customer perceived value:

Table 2.1: conceptual differences between customer satisfaction and customer perceived value.

Customer Satisfaction Customer Perceived Value 1. Emotional factor

2. After buying customer`s viewpoint 3. Existing customers

1. Cognitive factor 2. Before buying customer`s viewpoint 3. Both existing customers and possible customers

2.8.4 Customer Switching Barriers

There are many switching barriers of customers like emotional barriers, cost barriers, time shortage barriers, and so on (Selnes, 1993).

Customer`s options availability plays an important role in his/her buying decision. Options availability of different products and services also influence customer`s loyalty. If any customer has

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more options available then his/her loyalty may also change as compare to a customer who has less or no other options available of other same products and services offered by some other providers. Loyalty is linked to customer`s behaviour and customer`s attitude.

2.8.5 Customer Culture

Culture (from the Latin cultura stemming from colere, meaning, "to cultivate) is a term that has different meanings. Culture can be defined in 164 ways (Alfred Kroeber and Clyde Kluckhohn, 1952).

Culture is basically, the common values, habits, attitudes, and behaviors of a group of people, or a company.

It is a fact that culture affects customers attitudes and customer`s behaviours (Hofstede, 1980). Therefore, customers who have proneness to any bank may become loyal customers. Here most of the philosophers are also of the view that customers who have stronger culture have high

loyalty for banks.

The researcher being a Pakistani has observed that mostly Pakistani people are strong in certain values of their culture. It is generally seen that people develop certain habits due to their culture and if banks discover those values of culture then it may help banks to develop better customer loyalty strategies, which is a focus of Customer Relationship Management.