Impact of Switching Costs on Reducing Customer Churn in Commercial Banks

In order to gain competitiveness in the increasingly aggressive market, commercial banks are known to have been focusing more on deploying substantial resources on marketing for survival. However, research amid all facets of customer relationship management increasingly suggests the importance of switching costs in retaining customers. This study examines the impact of switching costs in reducing customer churn. The study took interpretative paradigm stance which advocates qualitative approach. Forty business bank customers were interviewed. Themes and codes, using content analysis, were used to generalise the views of the participants. The study revealed that service, accessibility, technology and risk are the leading factors of switching costs that discourage customers from switching banks. Banks need to consider and manage these factors in their customer retention strategies. The study recommends that banks should not discourage switching in a way perceived burdensome but employ more customer oriented strategies that satisfy and retain old customers whilst attracting new customers as well. However, switching costs may not be enough to reduce customer churn, other customer retention strategies still remain relevant.