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The Customer Loyalty Cascade and Its Impact on Profitability in Financial Services

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Partial Least Squares Structural Equation Modeling

Part of the book series: International Series in Operations Research & Management Science ((ISOR,volume 267))

Abstract

Building and maintaining successful, long-term relationships is one of the crucial tasks in today’s financial sector, the idea being that loyal customers purchase more, demonstrate a higher willingness to spend, and act as advocates for the company. However, there is also some controversy on whether profitability indeed increases with customer loyalty. We will analyze the process of loyalty development and evaluate if and how customer loyalty (positively) affects profitability. We will do so with reference to a four stage sequential loyalty model that grounds on a chain of effects from cognitive loyalty, affective loyalty, conative loyalty to action loyalty. We will make use of PLS structural equation modeling and analyze data of almost 7000 customers of a German bank surveyed by telephone. These analyses will support practitioners in the banking and financial sector in setting-up and steering their customer retention strategies and will provide a theoretical contribution to validating one of the most prominent customer loyalty models.

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Acknowledgements

This chapter uses the statistical software SmartPLS 3 (http://www.smartpls.com). Ringle acknowledges a financial interest in SmartPLS.

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Authors and Affiliations

  1. Fashion and Lifestyle, GfK SE, Nürnberg, Germany

    Anne-Kathrin Hegner-Kakar

  2. Hamburg University of Technology (TUHH), Hamburg, Germany

    Anne-Kathrin Hegner-Kakar

  3. University of Southern Denmark, Sønderborg, Denmark

    Nicole F. Richter

  4. Institute of HRM, Hamburg University of Technology, Hamburg, Germany

    Christian M. Ringle

  5. The University of Newcastle, Faculty of Business and Law Callaghan, Callaghan, NSW, Australia

    Christian M. Ringle

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  1. Anne-Kathrin Hegner-Kakar
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  2. Nicole F. Richter
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  3. Christian M. Ringle
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Correspondence to Anne-Kathrin Hegner-Kakar .

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Editors and Affiliations

  1. School of Business, University of Queensland, St Lucia, Queensland, Australia

    Necmi K. Avkiran

  2. Institute of HRM, Hamburg University of Technology, Hamburg, Germany

    Christian M. Ringle

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Hegner-Kakar, AK., Richter, N.F., Ringle, C.M. (2018). The Customer Loyalty Cascade and Its Impact on Profitability in Financial Services. In: Avkiran, N., Ringle, C. (eds) Partial Least Squares Structural Equation Modeling. International Series in Operations Research & Management Science, vol 267. Springer, Cham. https://doi.org/10.1007/978-3-319-71691-6_3

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