Identifying the link between bank’s customer satisfaction scores and switching rates

Abstract

Purpose This study examines the extent to which bank’s scores on customer satisfaction are related to their switching, or churn rates. Design/methodology/approach The study uses quarterly data for 11 UK banks over a period of 8.75 years. The satisfaction data were provided by YouGov, and the switching data comes from the UK government “switch guarantee” program. The study examines satisfaction scores, as well as developing hypotheses about three aspects of bank’s customer profile (age, income and gender) and their likely relationship to switching rates. Findings The study finds an association between higher bank satisfaction scores and lower rates of switching. That said, satisfaction accounts for a fairly small amount of the total variation in switching levels (11%). Additionally, banks with a customer base that skew towards high-income customers tended to have higher rates of switching, controlling for other factors. Switching also appears to have been influenced by macro-level factors such as the covid epidemic, and seasonality. Practical implications The findings will help services managers understand and contextualize their own firm’s performance in terms of customer switching. The results also form a sound basis for researchers to better understand the association between satisfaction and loyalty at the brand level. Originality/value This study represents a novel contribution by analyzing longitudinal data (as opposed to individual-level survey data or cross-sectional data) on satisfaction and bank switching rates.