Effects of Customer Retention Strategy on Performance of Commercial Banks in Kenya

Banking services in the markets, inclusive of emerging markets, are undergoing major change that is speared by change, regulations and customer sophistication. Customer retention is critical to attaining a sustainable competitive advantage. This study was designed to examine the effects of customer retention strategy on performance of commercial banks in Kenya. In order to capture the required information, the study was guided by four objectives, to determine the effect of location on the performance of commercial banks in Kenya, to determine the effect of credit process on the performance of commercial banks in Kenya, to determine the effect pricing on the performance of commercial banks in Kenya, and to determine the effect of Customer service on the performance of commercial banks in Kenya. The Study employed a descriptive survey design utilizing both primary and secondary data. Thirty five copies of Structured and unstructured questionnaires were used to collect primary data and were administered to five commercial banks in tier I through -drop and pick later- method while secondary data was collected through literature and document review. The postulated objectives were tested by employing the Pearson Correlation statistical tool which was facilitated by the statistical package for social sciences (SPSS), while the main method of data presentation was frequency distribution tables. Location was found to have a significant effect on performance of commercial banks, banks invested in opening more delivery channels that guaranteed higher customer retention. Credit process had a significant effect on the performance of the banks. Most banks were striving to remove bottle necks in credit decision making process and reduction in turnaround time of processing credit requests. Findings also showed that pricing and customer service had a direct impact on the performance of the commercial banks. The study therefore concludes that commercial banks in Kenya should increase customer identification and retention strategies since they commensurably impact on their level of performance. The study recommended that the key to efficient performance of commercial banks in Kenya is pegged on their ability to, attract, identify, retain and develop their customers better than competitors