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Customer Loyalty of Islamic Banks

Pramono Hari Adi
By Pramono Hari Adi
4 years ago
Customer Loyalty of Islamic Banks

Islamic banking, Sales


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  1. Customer Loyalty of Islamic Banks 3Customer Loyalty of Islamic Banks Pramono Hari Adi1 1 Jenderal Soedirman University , Purwokerto, Indonesia Abstract The highly rapid growth of sharia commercial banks have required them to compete in obtaining and retaining customers. Therefore, it is important to look carefully at the position of their brands within the industry. Among the measures to see how strong the position of a brand in the market is the level of customers’ brand loyalty. There are five levels of brand loyalty, each of which indicates particular marketing challenge to be addressed. Those levels - from least loyal to most loyal - include switcher, habitual buyer, satisfied buyer, liking the brand, and committed buyer. Using questionnaire to collect primary data from 100 respondents, the results indicate that the highest brand loyalty to Islamic banks has been at the level of satisfied buyer and liking the brand, indicating that consumer loyalty to the Islamic banks has not been perfect. Loyalty needs to be improved towards the committed buyer. Keywords: Brand, Customer Loyalty, Islamic Bank 1. INTRODUCTION The Government of Indonesia through Bank Indonesia has established a policy to develop a dual (conventional and Islamic) banking system. Since then, number of sharia commercial banks has been growing very rapidly in Indonesia. By the end of 2013 there have been 11 Islamic banks, 24 sharia business units, and 160 sharia people loan banks (Bank Indonesia, 2013). This development cannot be separated from the economic crisis in 2008 leading to the assumed inability of conventional economic system to develop the economy and the search for an alternative economic system which is considered more appropriate. Noting the number of existing banks, Islamic banks are required to compete in creating and maintaining customers, not only with the conventional banking but also with other Islamic banks. Therefore, various marketing efforts should be made to introduce the products and the brand of Islamic banking institution to the community. Facing the competition, it is important to look carefully at the position of their brands within the industry. Among the measures to see how strong the position of a brand in the market is the level of customers’ brand loyalty (Aaker, 1996). Because there have been many Islamic banks with diverse and innovative products, it cannot be well predicted that the two major players (Bank Muamalat Indonesia and Bank Syariah Mandiri) in the Indonesian Islamic banking market today are continuously able to maintain their position as the most powerful brands * Corresponding author. Email address: hariadipramono@yahoo.com 13
  2. Customer Loyalty of Islamic Banks in the market (Karim Counsultant, 2009). The level of consumer loyalty to Islamic banking services will continue to change along with the increasing competition. 2. LITERATURE STUDY The existence of Islamic banks in Indonesia has been driven by the desire of the Indonesian people (especially the Muslim community) who believe that interest is usury. Usury means addition. In linguistics, usury means to grow and expand (Saeed, 1996). Antonio (1999) mentions that technically, usury means making additional principal or capital unfairly. For religious reasons, there have been customers who are loyal to sharia banking; however, there have been others who access services from sharia as well as conventional banking services. Brand loyalty measures customer attachment to a brand. This measure provides an overview of the likelihood of a customer to switch to another product, especially if the brand is experiencing a change, either in relation to price or other attributes. A customer who is very loyal to one brand will not easily switch their purchases to other brands, no matter what happens with the brand. When customer loyalty to a brand increases, the vulnerability of the customer group against competitors’ threat and attack can be reduced. Thus, the role of brand loyalty is a core indicator of brand equity, which is clearly related to sales opportunities, thus guarantee of the company's profit in the future. Loyal customers in general will continue to purchase the brand even though they have many alternative brands that offer superior productc characteristics. Having many customers of a product in this category means that the brand has a strong brand equity. On the contrary, unfaithful customers, at the time they make a purchase of the brand generally do not base on their interest in the product, price and convenience of use or various other attributes offered by other alternative brands. When most customers of a brand fall within this category, it means that brand equity is weak. Brand loyalty of the customers is a strategic asset. When it is properly managed and exploited, it will potentially provide values in some forms, which in turn gives a positive value for the customer and for the company. The company also has to keep creating and maintaining brand loyalty in various ways, such as by treating customers with decent, establishing a close relationship with customers, managing customer satisfaction, creating switching costs, and providing extra services (Aaker, 1997). There are several levels of brand loyalty, each of which indicates particular marketing challenge to be addressed. The levels of brand loyalty include the following (Rangkuti, 2002): a. Switchers, are customers who are at the most basic level. The higher the frequency the customers switch to other brands, indicating whether buyers are loyal.Usually this type of customer buys products due to low price. b. Habitual buyers, are those who are satisfied with the products or at least do not experience disappointment, so that they do not switch to other brands. 14
  3. Customer Loyalty of Islamic Banks c. d. e. Satisfied buyers, are customers who are satisfied but they have to bear the costs of transition, including time, money, and risk to switch to other brands. Liking-the-brand customers are those who really like the brand. Their choice of a brand is based on associations, such as a symbol of the series of experiences in using the brand or an impression of high quality. Commited buyers are those who take pride of using a brand. An actualization of brand loyalty is to recommend and promote the brand to others. 3. RESEARCH METHODOLOGY This study is a survey research with primary data in the form of responses to questionnaires. It also collected data obtained from secondary sources. The population of this study are customers of Islamic banks in Purwokerto, the number of which is difficult to find out. With a confidence coefficient of 0.05 which is equal to 1.96, and determination of error of 10%, the minimum sample size is 96.04 and is rounded to 100 respondents. Respondents were selected purposively and were distributed on existing Islamic banks. Operational definition of brand loyalty Brand loyalty is a measure of customer attachment to a brand. This measure provides an overview of the likelihood that a customer switch to other brands, especially when the particular brand is experiencing a change in price or other attributes. Loyalty is an indicator of brand equity which is associated with future sales and earnings. Loyalty consists of five levels (from low to high): switcher, habitual buyer, satisfied buyer, liking the brand, and committed buyer. Data Analysis Brand loyalty was measured using five-point Likert scales (strongly agree, agree, neutral, disagree, and strongly disagree). Before testing the hypotheses, data obtained from the respondents were tested for validity to determine how accurate an instrument performs the function of measuring. After that, reliability testing was performed to determine the stability of the instrument. The next step is tabulation of data to determine the average value to classify the levels of customers’ brand loyalty. Switchers are customers who are sensitive to price changes. Therefore, those fall in this category give responses such as "often" or "always". From tabulated data, the average values were obtained. The result of the calculation was mapped into a range of scales that produce interval (Durianto et al, 2001): Interval = ℎ