Price sensitivity as an indicator of customer defection in retail banking

Abstract

Purpose The purpose of this research is to analyse how different dimensions of perceived service loyalty including price sensitivity explains the consumer defection in retail banking. Design/methodology/approach Empirical tests were conducted with survey data from nearly 1,700 consumers in Finland. Findings The findings support previous suggestion that service loyalty can be determined by following four dimensions, although a shade of interference in the unidimensionality of the service loyalty instrument in question was observed: purchase intention; word‐of‐mouth communication; price sensitivity; and complaining behaviour. Originality/value It was found that only the price sensitivity dimension – in which reliability and unidimensionality was strongly verified – was related to the likelihood of defection in the case of low‐price and limited product range driven sales offers. Results show that loyal customers are also open to attractive marketing information. This outcome is important since the willingness to acquire information on the rival offer was related to customer defection.

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