Research System How

1. INVESTIGATING AND AUTHENTICATING SOCIAL
IDENTIFICATION AND SOCIAL EXCHANGE-BASED
ANTECEDENTS OF BANKING CUSTOMER LOYALTY
Supervisor: Sir Babrak Ali Panezai
Co-Supervisor: Sir Manzoor Ali
Department of Management Sciences
Balochistan University of Information Technology, Engineering and Management Sciences,
Quetta
MS in Management Sciences
Presented by: Muhammad Yasir Khan

2. Contents
2
Customer Loyalty and its importance
Antecedents of Customer Loyalty
Definitions
Research Gap
Research Objectives
Literature Review
Theoretical underpinnings
Conceptual Framework and Research Methodology
Research Methodology
Results and Discussion
Conclusion
Implication
Limitations and Future Research

3. Customer Loyalty and its importance
Customer loyalty development is one of the most desired marketing objectives and has,
therefore, received extensive attention in the literature (Kandampully et al., 2015; Huang et. al.,
2017) due its direct effect on profitability (Pizam et al., 2016; Nunkoo et al., 2017; Van Doorn et
al., 2010) and higher cost associated with attracting new customers than retaining current ones
(Huang et al., 2017; Reichheld and Sasser, 1990).
For a bank it can be thought of as continuing patronage over time. Its degree can be evaluated
by tracking customer accounts over a span of time and noting the degree of continuity in
patronage (Yi and Jeon, 2003).

4. Customer Loyalty and its importance
In financial industry loss of a customer is seen as a deep concern (Evanschitzky et al., 2012),
therefore, managers are forever looking for ways to stimulate customer retention and increase
their lifetime value (Rust et al., 2004), but still a committed relationship between customers and
their banks is becoming increasingly scarce (Lee et al., 2001) due to severe competition,
customer expectations & demands and broader use of e-commerce or new technologies (Nellis
et al., 2004).
Customer Loyalty being a key construct of business performance (Oliver, 1997), is therefore
important for smooth functioning in market for a long period of time.

5. Antecedents of Customer Loyalty
Despite significance of customer loyalty, there is no consensus on loyalty’s key driving or
optimizing factors, which have been found to vary widely (Rather and Sharma, 2016a). Some
studies have focused on customer trust (So et al., 2013), satisfaction (Rather, 2018) as key loyalty
antecedents, others highlight the importance of customer commitment (Su et al., 2016),
engagement (Hollebeek et al., 2014, 2016a; Rather and Sharma, 2016b, 2017a).
Further, the literature to date has paid limited attention to social identification-related factors
(e.g. customer brand identification) on customer loyalty (Huang et al., 2017; Hollebeek, 2011a,
2011b), and scholar have shed much light on social exchange-related factors (e.g. customer
trust, customer satisfaction, customer engagement, commitment) to better understand service
(Harris and Goode 2004; Martinez and Rodriguez del Bosque 2014) to understand service.

6. Furthering understanding of loyalty’s key drivers is crucial for modern service organizations given
its direct effect on competitiveness and profitability (Nunkoo et al., 2017; Pizam et al., 2016). In
this study we have developed a model which integrates the following social exchange and social
identity based antecedents of customer loyalty:
1. Customer Brand Identification
2. Customer Engagement
3. Customer Commitment
4. Customer Satisfaction
5. Customer Trust
Antecedents of Customer Loyalty

7. Definitions
Customer Brand Identification
(BI)
• Striving for a sense of self (i.e., answering the question, “Who am I?”) is a fundamental aspect
of the human condition (Berger & Heath, 2007)
• “we are what we have”—what we buy, own, and consume define us to ourselves and others,
(Belk 1988, p. 160), hence, it is widely recognized that brands have the ability to embody,
inform, and communicate desirable consumer identities (Schillewaert, 2010).
• In this context, Customer Brand identification denotes a consumer’s “psychological state of
perceiving, feeling, and valuing ones’ belongingness to an organization” (Becerra &
Badrinarayanan, 2013).

8. Definitions
Customer Engagement (CE)
• The level of an individual customer’s state of mind characterized by levels of activity in brand
interactions (Hollebeek 2011), and it indicates a customer's level of satisfaction, trust, and
dedication, as well as forecast loyalty (Flynn, 2012).
It is simply, an emotional connection between a customer and a brand. Highly engaged customers
buy more, promote more, and demonstrate more loyalty.

9. Customer Trust (CT)
• A confidence level in counterpart’s integrity plus reliability which is revealed based on honesty,
benevolence, consistency, and competency (Leninkumar, 2017), and it is critical in establishing a
relationship between a brand and its customers; it is one of the determinants of brand loyalty
(Mukherjee & Nath, 2007).
When customers trust your business, they find you credible and want to do business with you. This
means greater advocacy, loyalty, and engagement from customers
Definitions

10. Customer Satisfaction (CS)
• Customer satisfaction is defined as the degree of agreement between a customer's perceived and expected
performance in terms of the value received (Kim, 2011).
It is a measurement that determines how happy customers are with a company's products, services, and
capabilities
Customer Commitment (CM)
• Customer commitment is defined as “an enduring desire to maintain a valued relationship”
(Morgan and Hunt, 1994, p. 23).
In the context of banking industry, it is the customer’s desire and effort to maintain a relationship with a
particular bank.
Definitions

11. Customer Loyalty (CL)
• It is defined as "a firmly held commitment to repurchase or re-patronize a favored product/service in the
future, resulting in repetitive same-brand or same-brand-set purchasing, despite situational influences
and marketing efforts." (Rahim et al., 2012).
Customer loyalty is the act of choosing one company's products and services consistently over their
competitors. When a customer is loyal to one company, they aren't easily swayed by price or availability. ...
Customers that trust the companies they do business with will be more likely to purchase again in the
future.
Definitions

12. Research Gap
Despite growing academic interest in social identification (e.g. customer brand identification)
and social exchange (e.g. CE/CS/CM/CT/loyalty), little remains known regarding the theoretical
interface of these concepts in banking sector. Building on this research gap, the purpose of this
study is to develop and test a model that explores the effects of brand identification,
satisfaction, commitment, engagement and trust on customer loyalty in banking sector of
Quetta.

13. Research Objectives
1. To identify the impact of brand identification on customer loyalty in banking industry of
Quetta.
2. To identify the effect of customer engagement on customer loyalty in banking industry of
Quetta.
3. To identify the impact of customer satisfaction on customer loyalty in banking industry of
Quetta. .
4. To find out how customer trust affects customer loyalty in banking industry of Quetta. .
5. To ascertain exactly, either the customer commitment, customer satisfaction, customer
engagement, and customer trust mediates the relationship between customer-brand
identification and customer loyalty in banking industry of Quetta.

14. Literature Review
1. Rather and Hollebeek, 2019), the findings of this study indicated that BI, CT, CM and CS
exerts a positive impact on loyalty.
2. Rather, R. A. (2018), customer brand identification has positive influence on loyalty,
commitment, satisfaction and trust. Commitment mediates the relationships between the
customer identification, trust, satisfaction and brand loyalty.
3. Rather, R., & Sharma, J. (2016), findings revealed that customer brand identification, brand
satisfaction, brand commitment and brand loyalty are significantly related to one another
and are useful for service sector operators to promote long-term business success, generate
competitive advantages, and differentiate from its competitors in building and maintaining
long term relationship with customers

15. Theoretical underpinning
SOCIAL EXCHANGE THEORY
SET is the reward expected by people from social efforts (Lambe et al., 2001; Blau, 1964).
It supports this concept of investment that each and every customer assess the
intangible/tangible benefits/ costs of engaging in relationships (Cropanzano et al., 2017)
consequently, customers achieve a balance in these benefits & costs over a time (Cretu
& Brodie, 2007; Hollebeek, 2011).

16. Theoretical underpinning
SOCIAL IDENTIFICATION THEORY
SIT advocates that people will make all efforts for developing their own social identity,
besides their private identity (Bhattacharya & Sen, 2003; Rather & Hollebeek, 2019). This
includes a process of mental classification in which they segregate themselves based on
similarities with the members (Hollebeek et al., 2019) which leads to the development
of perception resultantly subjects are anticipated to identify with the object (Martínez et
al., 2014a).

17. Conceptual Framework
Customer
Brand
Identification
Customer
Satisfaction
Customer
Commitment
Customer
Loyalty
Customer Brand
Trust
Customer
Engagement
H2
H3
H4
H1
H9
H5
H6
H8
H10
H7
H11 H12

18. Methodology
APPROACH TYPE OF STUDY STRATEGY POPULATION SAMPLE SIZE
Quantitative Exploratory
Survey
(Questionnaire)
Existing
customers of
Banks 290
INFERENCE VIA SOFTWARE
ACADEMIC
FORMAT
PLS-SEM SPSS/ Smart PLS APA 7th Edition

19. Scales & Constructs Adapted
# SCALE
# OF
ITEMS
AUTHOR(S), YEAR
1. Customer Trust 03 (Martinez and Rodriguez del Bosque, 2014; So et al. 2013)
2. Customer Commitment 04 (Su et al. 2016; Stokburger-Sauer et al. 2012)
3. Customer Satisfaction 08
(Yang et al. 2017; Su et al. 2016; Stokburger-Sauer et al.
2012)
4. Customer Loyalty 06
(Martinez and Rodriguez del Bosque 2013; Nunkoo et al.
2017; Huang et al. 2017; Stokburger-Sauer et al. 2012; So et
al. 2013; Liat et al. 2017)
5. Customer Loyalty 08
(Carvalho and Fernandes, 2018; Dwivedi, 2015; Hapsari et
al. (2017), Rather and Sharma 2017a; So et al. 2014)
6. Brand Identification 04 (Stokburger-Sauer et al. 2012; Su et al. 2016)

20. Procedure for Analysis
Data was analyzed using PLS-SEM:
Predictive approach (capture the maximum variance in DV by IV), extension in
theory, exploratory study
Measurement Model
Convergent validity
Indicators reliability
Discriminant validity
Structural Model
Coefficient of determination
and
Predictive relevance
Hypotheses testing

21. Results of Measurement Model
(Indicator and Internal Reliability)

22. Measurement Model
Validity & Reliability
Reliability and validity are concepts used to evaluate the
quality of research.
Validity: validity relates to accuracy of a measure.
Reliability: Reliability relates to the consistency of a
measure.

23. Results of Measurement model
Latent Construct Loadings Cronbach's Alpha CR AVE
Customer brand identification 0.807 0.874 0.634
BI1 0.804
BI2 0.788
BI3 0.859
BI4 0.730
Customers Engagement 0.811 0.859 0.506
CE2 0.670
CE3 0.650
CE5 0.697
CE6 0.732
CE7 0.776
CE8 0.733
Customers Loyalty 0.897 0.924 0.709
CL2 0.843
CL3 0.884
CL4 0.820
CL5 0.854
CL6 0.806
Customers Commitment 0.937 0.955 0.842
CM1 0.873
CM2 0.930
CM3 0.933
CM4 0.934
Customers Satisfaction 0.836 0.901 0.752
CS1 0.821
CS3 0.908
CS4 0.871
Customers Trust 0.738 0.835 0.559
CT1 0.701
CT2 0.784
CT3 0.762
CT4 0.742
Construct Validity and Reliability
All the values of AVE > 0.5;
Cronbach’s Alpha> 0.7, CR> 0.7,
therefore, all potential variables
meet the conditions of (Henseler
et al., 2015).

24. Results of Measurement model
(Discriminant Validity)
(Fornell & Larcker) BI CM CE CL CS CT
BI 0.796
CM 0.605 0.918
CE 0.121 0.186 0.711
CL 0.510 0.543 0.209 0.842
CS 0.305 0.334 0.081 0.317 0.867
CT 0.630 0.543 0.053 0.487 0.327 0.748
Hetero-trait Mono-trait ratio
(HTMT)
BI CM CE CL CS CT
BI -
CM 0.689
CE 0.136 0.184
CL 0.590 0.588 0.225
CS 0.366 0.368 0.148 0.359
CT 0.790 0.641 0.090 0.596 0.410 -

25. Results of Structural model
Hypothesis testing (Direct path)
P<0.05 = significant relationship
Hypothesis Beta S. E T-values P-values Decision
H1 BICL 0.182 0.062 2.691 0.004 Supported
H2 BICE 0.121 0.063 1.946 0.026 Supported
H3 BICS 0.305 0.050 6.011 0.000 Supported
H4 BICT 0.630 0.033 18.902 0.000 Supported
H5 BICM 0.399 0.067 6.048 0.000 Supported
H6 CECL 0.115 0.045 2.528 0.006 Supported
H7 CECM 0.117 0.049 2.385 0.009 Supported
H8 CTCL 0.231 0.063 3.640 0.000 Supported
H9 CTCM 0.245 0.061 4.024 0.000 Supported
H10 CSCL 0.100 0.053 1.872 0.031 Supported
H11 CSCM 0.123 0.045 2.705 0.003 Supported
H12 CMCL 0.279 0.065 4.263 0.000 Supported

26. Results of Structural model
R2 and Q2
Structural Model (Indirect Path)
BI(f2) CE(f2) R2 Adjusted R2 Q2
CM 0.165 0.437 0.429 0.362
CE 0.015 * 0.015 0.011 0.005
CL - 0.003 0.389 0.378 0.264
CS 0.103 0.093 0.090 0.067
CT 0.67 * 0.397 0.395 0.217
Hypothesis Beta S. E T-values P-values Decision
H13 BICMCL 0.111 0.031 3.573 0.000 Supported
H14 BICSCL 0.030 0.017 1.741 0.041 Supported
H15 BICTCL 0.115 0.045 2.541 0.006 Supported
H16 BICECL 0.014 0.010 1.460 0.072 Slightly Supported
(at 10%)

27. Discussion
This is consistent with what has been found in previous
27
H1 : Brand Identification positively affects customers loyalty
Results showed a positive relation between BI and CL
• Supported by a previous study in the service industry (He et al., 2012).
H2 : Brand identification positively influences customer engagement
Results confirmed positive effect of BI on Customer Engagement.
• This is consistent with what has been found in previous studies of (Garcı´a De Los
Salmones et al., 2005, So et al., 2014; So, King, Sparks, et al., 2014) in the service industry.
H3 : Brand identification positively influences customer satisfaction
Results indicated that BI has a positive and significant effect on customer satisfaction.
• The results are in line with previous findings in the service industry by (Su.. et al., 2016;
Sen and Bhattacharya, 2003)

28. Discussion
28
H4 : Brand identification positively influences customer trust
Results showed a positive and a significant relation of Customer Trust and Brand
identification.
• Consistent with previous studies in service industry (So et al., 2013)
H5 : Brand identification positively influences customer commitment
Results confirmed positive effect of Brand identification on Customer commitment.
• Consistent with prior work of (Rather and Sharma, 2016a; Tuskej et al., 2013) conducted in
the service sector.
H6: Customer engagement positively influences Customer loyalty
Results Indicates positive effect of Customer Engagement on Customer Loyalty.
• Supported by previous findings of the study conducted in service sector (Sharma & Rather,
2016b; So et al., 2014; Sharma & Rather, 2016; Dwivedi.,2015; Sharma.& Rather, 2017)

29. Discussion
29
H7: Customer engagement positively affects Customer commitment
Results confirmed positive effect of Customer engagement on Customer commitment .
• Consistent with previous studies in service industry (Sashi, 2012; Rather and Sharma
2017a; Tellefsen & Thomas, 2005; Morgan & Hunt, 1994; Goodman & Dion, 2001)
H8: Customer brand trust positively affects Customer Loyalty
Results confirmed that Customer brand trust has a positive effect on Customer loyalty.
• Consistent with previous studies in health insurance industry (Iglesias et al., 2018), banking
industry (Khan et al., 2015), manufacturing industry (Singh et al., 2012).

30. Discussion
30
H9: Customer brand trust positively affects Customer commitment
Results confirmed positive effect of Customer brand trust on customer commitment.
• Findings are in accordance with findings reported by (He & Li, 2011) in the
telecommunication industry, Khan et al. (2015) in the banking industry, Valenzuela et al.
(2010) financial institution sectors, and in the cosmetic industry (He & Lai, 2014).
H10: Customer Satisfaction positively affects Customer Loyalty
Results confirmed that a customer satisfaction has a positive and significant effect on CL.
• Similar conclusion was reached by (Su et al., 2016; Liat et al., 2017) in service sector

31. Discussion
31
H11: Customer Satisfaction positively affects Customer commitment
Results confirmed positive effect of Customer satisfaction on customer commitment.
• Consistent with previous studies of (Su et al., 2016; Liat et al., 2017) conducted in the
service industry
H12: Customer commitment positively affects Customer Loyalty
Results confirmed a significant positive effect of Customer satisfaction on customer
commitment.
• Similar conclusion was reached by (Chang et al., 2012) in a service context
H13: Customer commitment mediates the relationship of customer brand identification and Customer
Loyalty
Results Confirmed mediating role of customer commitment
Supported by previous findings of past studies conducted by ((Hennig-Thurau et al., 2002;
Morgan and Hunt, 1994; So et al., 2013) in-service industry.

32. Discussion
32
H14: Customer Satisfaction mediates the relationship of customer brand identification and Customer Loyalty
Results confirmed mediating role of Customer satisfaction.
• Consistent with previous studies of (So et al., 2013) conducted in the manufacturing
industry
H15: Customer Trust mediates the relationship of customer brand identification and Customer Loyalty
Results confirmed mediating role Customer trust.
Similar conclusion was reached by (Hennig-Thurau et al., 2002; Morgan and Hunt, 1994; So
et al., 2013) in a service context.
H16: Customer Engagement mediates the relationship of customer brand identification and Customer
Loyalty
Results slightly supported/not supported mediating role of customer engagement in the
relationship of customer brand identification and customer loyalty.

33. Conclusion
Extending the understanding of Social identification and Social
exchange based drivers of customer loyalty, which can be an
important consideration for banking industry to generate loyal
customers.
Results indicates that BI, CT , CS, CE and CM are important factors
and exerts positive affect on customer loyalty, and that CS, CT, CM
have significant mediating role between BI and customer loyalty.

34. Theoretical Implication
• This study determines the SIT/SET based antecedents of
Customer Loyalty, integrative analysis of which is under
researched in banking sector of Quetta.
• Prior research found positive direct effect of CS, CT, CM and BI on customer
loyalty and mediating effects of CS, CT and CM (Hollebeek & Rather, 2019;
Hollebeek et al., 2019; Huang et al., 2020) in the hotel sector of service industry.
• Our study is conducted in banking sector of service industry by including
Customer engagement as an additional variable.

35. Practical Contribution
Study will help managers/bank management to stimulate customer retention
and increase their lifetime value (Rust et al., 2004), since attaining and
maintaining customer loyalty is crucial in the service sector due to high costs
associated with attracting new customers. Further, it is also an admitted fact
that Achievement and maintenance of CL is essential, because CL increases
the financial performance (H. S. Ergun, Zeynep Kabadayı Kuşcu; 2013).
Study helps the managers/management of the bank in understanding the
customer loyalty and its SIT/SET based determinants.

36. Future Research and Limitations
Limitations
• This study has considered a sample which is representative of the target
population of Quetta. Therefore, results of the study cannot be generalized.
• Study considered only the existing bank customers.
• Study considered only commercial banks of overall financial industry of
Pakistan; which includes other constituents also.
• Study has considered only banking industry of service sector. Thus, external
validity of the study is also an issue.
• Analyses restricted the applicability of our findings to a cross sectional study
which may differ throughout the customer journey.

37. Future Research and Limitations
Future Research
• Future research may incorporate different settings (other cities) into its research
design.
• Future research may include all customers of the banks i.e. existing & walk-in
customers.
• Future research may include all constituents of Financial sector of pakistan for
generalizability.
• This model can be tested in the context of other services.
• Future longitudinal study may adopt and test our model.
• Future research may include additional relational constructs into the model,
including but not limited to co-creation, customer experience, image.

38. Thank You