Customer Retention in the Context of City Bank Limited

Customer Retention in the Context of City Bank Limited

The main objective of this report is to analysis Customer Retention In the Context of City Bank Limited. General objectives of this reports art to explore the factors that can ensure customer retention and The City Bank’s performance in those factors and to the service need gap and set up proper strategy to improve further to the extent that customers remain satisfied and loyal. Finally this report make swot analysis Customer Retention In the Context of City Bank Limited.



The banking system started years back with a view to facilitate people with liquid money (CASH) who was short in cash but was rich in terms of asset. The concept was to lend them enough money against some capital assets with resell value which they had to pay back with an extra amount (interest). However, the money given to them was actually gathered from other people, who for security & future emergencies kept the extra bit of their living (as savings) in the banks from which they also expect to earn a few bucks via interest. During those years the transaction was done between only a few people of a small locality. And in most cases an individual person remained responsible for coordinating the task and assumed commission at mutual benefit of all. Over these long years, the concept stayed almost same only except the fact that now a huge no. of people from all over the country involve in the transaction and the coordination is done by an institution commonly called a BANK. The system has been on practice all over the world and so as Bangladesh. Now a huge number of banking institutions are operating in the country and most of these have tailored its service according to the on going customer need of online banking. But few, due to some reasons have lacked in following this trend. Among those few, most are government operated and a tiny portion is half privatized property. Among these tiny, The City Bank Ltd is one that has managed to create a customer base even though their popularity level is not as high as others. However, the growing acceptance of online banking has put up a great concern over the sustainability of the bank. The Bank has made quite a few cost effectiveness analyses to explore the financial impact of introducing on line system. But the banks present financial status does not seem to allow them going for this investment in near future. So, the bank is looking for an alternative way to ensure customer retention until they can introduce online banking. For this they have assigned me the task to do a short study on their customers and find what factors are important for customer retention and recommend strategies based on my findings so that they can a get a feel of what factors to be monitored closely.

  • Statement of the Problem

     The City Bank Ltd is threatened to loose their existing market share due to their incapability of offering on-line banking service which is commonly offered by other banks. This has enticed them to conduct a survey to find alternative solution to retain their customers. For that I was assigned to explore the factors (that they need to look at or do further research on) related to customer retention.


Purpose of the Study

The key purpose of this study is to explore the factors that can ensure customer retention and The City Bank’s performance in those factors. Thus identify the service need gap and set up proper strategy to improve further to the extent that customers remain satisfied and loyal.


Overview of The City Bank Ltd.

City Bank is one of the oldest private Commercial Banks operating in Bangladesh. It is a top bank among the oldest five Commercial Banks in the country which started their operations in 1983. The Bank started its journey on 27th March 1983 through opening its first branch at B. B. Avenue Branch in the capital, Dhaka city. It was the visionary entrepreneurship of around 13 local businessmen who braved the immense uncertainties and risks with courage and zeal that made the establishment & forward march of the bank possible. Those sponsor directors commenced the journey with only Taka 3.4 crore worth of Capital, which now is a respectable Taka 330.77 crore as capital & reserve.

The bank currently has 83 online branches spread across the length & breadth of the country that include a full fledged Islami Banking branch. Besides these traditional delivery points, the bank is also very active in the alternative delivery area. It currently has 25 ATMs of its own; and ATM sharing arrangement with a partner bank that has 225 ATMs in place; SMS Banking; Interest Banking and so on. Soon its Customer Call Center is going to start operation. The bank has a plan to end the current year with 50 own ATMs.

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card. The bank is a principal member of VISA international and it issues both Local Currency (Taka) & Foreign Currency (US Dollar) card limits in a single plastic. VISA Debit Card is another popular product which the bank is pushing hard in order to ease out the queues at the branch created by its astounding base of some 400,000 retail customers. The launch of VISA Prepaid Card for the travel sector is currently underway.

City Bank prides itself in offering a very personalized and friendly customer service. It has in place a customized service excellence model called GAP (Graceful-Appropriate-Pleasing) that focuses on ensuring happy customers through setting benchmarks for the bank’s employees’ attitude, behavior, readiness level, accuracy and timelines of service quality.

City Bank is one of the largest corporate banks in the country with a current business model that heavily encourages and supports the growth of the bank in Retail and SME Banking. The bank is very much on its way to opening many independent SME centers across the country within a short time. The bank is also very active in the workers’ foreign remittance business. It has strong tie-ups with major exchange companies in the Middle East, Europe, Far East & USA, from where thousands of individual remittances come to the country every month for disbursements through the bank’s large network of 83 online branches.

City Bank is among the very few local banks which do not follow the traditional, decentralized, geographically managed, branch based business or profit model. Instead the bank manages its business and operation vertically from the head office through 4 distinct business divisions namely.


Products and services offered by The City Bank

  1. Corporate & Investment Banking;
  2. Retail Banking (including Cards);
  3. SME Banking; &
  4. Treasury & Market Risks.

Under a real-time online banking platform, these 4 business divisions are supported at the back by a robust service delivery or operations setup and also a smart IT Backbone. Such centralized business segment based business & operating model ensure specialized treatment and services to the bank’s different customer segments.

The current senior management leaders of the bank consist of mostly people form the multinational banks with superior management skills and knowledge in their respective “specialized” areas. The bank this year, is celebrating its 25th year of journey with the clear ambition of becoming the no.1 private commercial bank in the country in 3 years time. The newly launched logo and the pay-off line of the bank are just one initial step towards reaching that point.



Corporate & Investment Banking

City Bank is a major player in Bangladesh wholesale banking industry to offer the full scope of innovative, customized solutions and services. City Bank offer service at the highest level. Our focus is not on short-term profit, but on building long-term relationships and standing by our clients whenever they need.

City Bank have a unique business focus on enabling project financing, trade, investment and supply chain financing for clients. We aim to be a one-stop gateway for corporate and financial institutions looking to extend their business. And we are committed to using our country wide network to facilitate our clients’ growing trade and investment flows and supply chain financing needs across our business footprint.

City Bank focus exclusively on corporate and institutional clients domiciled or conducting business in our footprint, offering clients access to our extensive branch network and award-winning suite of state of the art services.

Retail Banking (including Cards);

One of the most remarkable success stories of last 50 years’ banking industry globally has been the conceptualization and innovative execution of banking with individual customers, their friends & families. The industry has termed it as Retail Banking or Personal Banking or Consumer Banking; and it has now – at a very rapid pace – become the major revenue line for most of the top banks in the world.

City Bank, too, recently has started its journey in Retail Banking.

“City Retail – add a little city to your life” is the new brand-mantra, the pay-off line for City Retail.

City Bank aim is clear. City Bank wants to become the most preferred bank to all individual clientele of the country, at least of the cities and towns where we operate. City Bank want to provide our customers the best-in-class services, innovative products and financial solutions from smart outlets – all with a big smile that conveys and generates happiness all the way!

Current Account

Saving Account

City Onayash

City Shomridhdhi

City Projonmo

City Ichchapurun


City Drive

City Solution

NRBDebit Card

VISA Electron

Credit Card

VISA Classic Local

VISA Classic Dual

VISA Gold Local

VISA Gold Dual


City Foreign Remittance

By your side – all the way

The city Bank’s Foreign Remittance unit meets growing customer needs for fast, sucure & easy money transfers to an extensive range of destinations. Being a committed bank to its customers, we go all the lengths to remit your hard earned money safely to your loved ones. With us, apart from a range of high-class modem remittance solutions, you will get peace of mind which we believe counts to most.


City Bank Limited has 83 online branches across the country, Besides, the Bank has a storng remittance network with other major banks of the country. Therefore, wherever your account is, we are able to send your money instantly.

CBL understands the value of your precious time. That’s why have made the payment procedure simple & easy. You have the privilege of enchashing the remitted money instantly from your branch counter without going through any hassle. That is to say, if you are an account holder of City Bank, we can instantly credit the money to your account or pay cash to the receiver




Debit Card

CITY Visa Electron Debit Card – By your side, round the clock

Now comes the Visa Debit Card from City Bank. Your life, therefore, becomes hassle-free and safe; and it is Visa Electron branded, which makes you the proud owner of a meaningful plastic.


  • Cash withdrawal from 500+ Visa ATMs 24/7/365 all over the country
  • Shop and dine at hundreds of merchant Visa outlets all over the country
  • Balance enquiry
  • Fund transfer from your account to credit card 24/7/365
  • PIN Change
  • Mini statement
  • Cash withdrawal @ Taka 12 per transaction at 250+ DBBL ATMs


If you are an individual and have a savings, current or STD account in CBL, you are eligible avail this card. Just drop in any nearby CBL branch, collect an application form and submit duly filled up form. Within shortest time you will get the card delivered at your mailing address or at your designated branch.


Credit Card

VISA Classic Local

This is a local Visa Credit Card which is valid only in Bangladesh.

It can only be used in local currency (BDT) within the country. This type of credit card has a limit ranging from BDT 10,000 to BDT 49,999. This type of card has designed for medium earner category customers.


  • Local Classic/Silver Card (For Domestic use only)


  • Local Classic/Silver Card BDT 10,000 – BDT 49,999


VISA Classic Dual

This is basically one plastic that has dual options to make transaction in two currencies. Its acceptance jurisdiction is in country and outside country in BDT and USD respectively. Classic dual is for the medium earner category customers. Its credit limit is USD 100 to 1000 and BDT 10,000 to BDT 49,999.


  • Dual Classic/Silver Card (For both International & Domestic use)


  • Dual Classic/Silver Card BDT 10,000 – BDT 49,999 + US$ 500 – USS$ 1,999


VISA Gold Local

This type of card is taka card of which acceptance jurisdiction is only in Bangladesh and transaction currency is BDT. The differences between these two cards are higher credit limit than classic card. Credit limit of Visa Gold card is ranging from BDT 50,000 to BDT 5, 00,000. This type of card has been designed for the higher earner category customers.


  • Local Gold Card (For Domestic use only)


  • Local Gold Card BDT 50,000 – BDT 500,000


SME Banking

SME Banking of City Bank is assuming a new and modern dimension. It is entering in to a wider horizon. The philosophy of extending banking services to SME’s of the country is to meaningfully push every one of them up to the next level of respective business operations. The upward push would be meaningful as they would be business wise competitive for a sustainable future. It is therefore would be turning in to an abode of SME’s to grow to the next level. Hence, the bank has named it City Business – for taking SME’s to the next level.

For the first time in the history of City Bank, SME Banking business processes are going to be driven thru a centralized platform model. This is a fundamental move away from a 25 years legacy system of decentralized geography based branch banking model. We all know this transformation process and momentum is already in place. This would be completed by 2008.


Treasury & Market Risks

City Bank Ltd. has a dedicated Treasury team who is capable of providing all treasury Solutions. Through our foreign correspondent business partners CBL is providing a wide range of Treasury products. In CBL Treasury, there are four teams who are specialized in their own area to ensure the best possible solution to our customer requirement. CBL has following teams in the Treasury:

  • Foreign Exchange ( Local & G7)
  • Money Market
  • Corporate Sales
  • ALM & Market Research

Each team is dedicated to provide best solutions to their respective areas. Through our four dedicated team we provide the following services:


Client Solution & Risk Management

  • Hedging solutions against adverse market movements
  • Advice on efficient hedging policy
  • Structured products to match customers’ needs
  • Corporate Advisory Services

Product Range

  • Foreign Exchange
  • Local Currency spot & Forward*
  • G7 Spot & Forward
  • Money Market
  • Call Money
  • Term Deposits
  • Securities ( T-Bills, T-Bonds)
  • Repo & Reverse Repo
  • Foreign Exchange & FC Interest Rate SWAP
  • Foreign Currency & Commodity Derivatives

Market Information & News Update

  • Economic Research & Technical Analysis
  • Market Report ( Daily, Quarterly & Half Yearly)



Literature Review

Customer Satisfaction

Gardial & Woodruff (1996) mentioned that a customer’s positive or negative attitude toward the value of using a business service in a specific situation is customer satisfaction. Where as, Vukmir (2006) said that the amount of the timing and caring driving customer satisfaction in business service. Bennet (2004) stated that positive high level of loyalty is not always a result of high level of customer satisfaction. According to Muffatto (1995), customer satisfaction makes a business competitive and facilitates its future planning. Hansemark (2004) said that, good relationship with a customer can create satisfied feelings. And Leonard, Johnson and Walker said (2006), customer satisfaction drives profitability.

Interpersonal Relationship

According to Amy Hawke & Troy Heffernan interpersonal relationship increase commitment from both Customers & suppliers sides which finally increases trust between each other rendering business growth. According to Juan Pablo Maicas Lopez, Yolanda Polo Redondo and Fco. Javier Sese Olivan Customers maintaining a Long-lasting relationship will be less predisposed to switch as they are with the firm for a long time, using the service more in depth and investing in complementary services.

Expected Switching Cost

According to H Vasudevan, S.S. Gaur & R.K. Shinde customer will be retained if related switching cost is higher even when satisfaction is low. According to Juan Pablo Maicas Lopez, Yolanda Polo Redondo and Fco. Javier Sese Olivan, relationship marketing can set a obstacle into customers switching intention that ultimately adds to switching cost.

No Attractiveness of Alternatives

L.T Wright, A. Newman & C. Dennis stated that alternatives of competitors can turn unattractive or irrelevant if the existing service provider meets its customer demands on time. According to J.R. Olson & K.K Boyer, the alternative of searching in internet for information is far more attractive than other means as it is much effective & easy.

Customer Retention

According to Jones and Suh (2000), customer satisfaction directly influences retention. Bemmaor (1995) also mentioned, validity of repurchase intention is predictive. Howard (1997) added that, pre visits to the service lead to social influence that may result in customer retention. Hellier, Geursen, Carr, and Rickard (2003) said that customer satisfaction, expected switching cost, brand preference, equity and value, service quality and past loyalty.

Relationship between Satisfaction and Customer Retention

Howard 1997; & Bemmaor 1995 said that Here customer satisfaction is a major factor that can impact upon Customer retention. Tunca and Alomain and Zairi mentioned that a direct positive relationship between customer satisfaction and retention is supported by a wide variety service studies; Hansemark 2004; & Woodruff and Gardial, 1996 added that it is the simplification of the matter. They continued saying a strong association between customer satisfaction & retention seems visible and is supposedly different between low- high loyalty customers. Specifically, the temporary route of adjusted expectation has a greater impact for non-loyals than for loyals. Youjae Yi, Suna La finds that the effect of customer satisfaction on retention is mediated by adjusted expectations.

Relationship between Interpersonal Relationship and Customer Retention

Hawke & T. Hefferman said that chances of retention increases as relationship between customers & suppliers becomes strong. According to Juan Pablo Maicas Lopez, Yolanda Polo Redondo and Fco. Javier Sese Olivan, switching tendency of customers having long lasting relationship is much less than others.

Relationship between Expected Switching Cost and Customer Retention

According to H Vasudevan, S.S. Gaur & R.K. Shinde higher the switching cost better is the chances of customer retention. And J P M Lopez, Y P Redondo and F. J S Olivan said that switching cost can be increased via relationship marketing that will lead to customer retention.

Relationship between No Attractiveness of Alternatives & Customer Retention

According to J.R. Olson & K.K Boyer, internet searching for information as an alternative is much more attractive which enticed people to switch to internet than books for information. L.T Wright, A. Newman & C. Dennis stated that alternatives of meeting customer demands on time can retain customers as customers will not bother to look at competition alternatives.


Research Questions

  1. Does customer retention increases when customer’s satisfaction increase?
  2. Does customer retention increases when interpersonal relationship between customers & bank employees is good?
  3. Does customer retention increases when expected switching cost increases?
  4. Does customer retention increases when there is no attractiveness of Alternatives?


Research Hypotheses

  1. Increase in customer satisfaction leads to increase in customer retention.
  2. Better the interpersonal relationship better the chances of customer retention.
  3. Increase in expected switching cost will lead to increase in customer retention.
  4. Higher the No Attractiveness of Alternatives higher is customer retention.


Research Methodology

Research Design

The conceptual framework work shows that there is a direct relationship between the independent variables and the dependent one. But it will be important to explore the type & intensity of this relationship so that the earlier mentioned purpose of the study can be met. The study will enable the bank to understand the factors influencing customer retention and identify service gap in these factors. Thus they can plan their future plan of action or strategies to keep strong hold of their current customer base.


A total of 100 customers to be interviewed from three main branches (Nikunja, Uttara & Motijheel) of DHAKA. A systematic random sampling method is to be used where every 3rd customer arriving in the branch will be contacted. Among those whoever falls under the criteria of holding an account for more than a year & visiting the branch at least once every two weeks will be interviewed.


Measurement Instrument/Questionnaire

A close ended definitive scale questionnaire has been used to collect survey data. The questionnaire has two parts. The first part is screening. In this part, the respondents are screened as per the sample design & frame. This means the respondents that do not fit the criteria set in the sample design & frame are screened out. The second part (MAIN PART) is done on the respondents that are selected via screening. This part contains questions on the dependent & independent variables. The questions are set in statement format where respondents are given a five point Likert scale to rate their level of agreement. The questionnaire is designed to assess the existing relation between dependent & independent variables. The statements are all set in a positive tone following laddering technique to collect responses on each of the variables. Each variable have their own constructs. Q1 to Q 4 are constructs for Customer Satisfaction (CS) where Q.6 judges CS from overall point of view. Then Q7 to Q10 are constructs for Interpersonal Relationship (IR) where Q.11 assesses IR in overall. Q12 & Q13 are constructs for Expected switching cost (ESC) where Q14 addresses ESC overall. Q16 & Q18 are the constructs for No Attractiveness of Alternatives (NAOA) where Q17 talks about NAOA alone. Q5 & Q15 are the constructs of dependent variable. Questions are intentionally set without a single order. This is done to eliminate the respondents answering bias. A close ended quantitative questionnaire with a definitive scale is designed in such a way so that all the respondents’ answers can be evaluated from the same platform. This gives a chance for unbiased comparison between variables and thus meets the purpose of identifying the relationship between the variables.

Data Collection

This has been done from 10th April to 25th April, 2008 in Nikunja, Uttara & Motijheel branch. Data is collected during 4 days full banking hour for each of this branch. However no branch wise quota maintained.

Data Analysis

This is done using SPSS 12 after data entry in an entry format designed considering questionnaire designed.



The data obtained from the research are analyzed through SPSS 12 where descriptive statistics, reliability and correlation value were calculated. The results of the analysis are shown in the table and corresponding interpretations of the results are given.

Descriptive & Reliability results.

Table 1

Descriptive statistics and Reliability Coefficient of-

VariablesNo of ItemsAlpha ValueMeanStandard Deviation

N= 100

Here, CS- customers’ satisfaction, IR means interpersonal relationship, ESC means expected switching cost, and NAOA means No Attractiveness of Alternatives& CR means Customer retention. No. of items meaning the no of questions asked for each variable. Alpha value shows the reliability meaning if a question is asked 100 times then let’s say 75 times it will have the same answer if the reliability is 0.75. For example here, reliability of CS is 0.72 meaning the questions asked for it were reliable since the value is above 0.5 and it means on an average 72 times out of 100 the same answer will come for the questions. The same sort of interpretation goes for all the rest. Here all the variables were reliable since all the score are above 0.5. The mean shows that the level of agreement for all the statements for CS, IR, ESC, NAOA & CR were positive (agreement) since the mean values are more then 3 on a 5-point Likert scale. The standard deviation is relatively on the lower side (less then 0.5) for all the variables that explains that there were not much differences in respondents opinions about different issues.




Since the purpose of the study is to find out whether there is any relationship between independent variables & dependent variable so a correlation analysis was inevitable.

Table 2

Dependent VariableCR



**p<0.01 (two tailed)

A Bivariate correlation analysis was done from the collected data using SPSS 12. The results show that all the independent variables have significant relationship with dependent variable as evident from the ** sign which means p<0.01 and the significance level is two. The independent variable CS has a correlation value of (0.47) with dependent variable CR meaning there is a moderate (0.4-0.7 value means moderate) positive relationship between the two variables. Then IR has a correlation value of (0.36) with CR meaning there is a week (0.2-0.4 means week) positive relationship between the variables. Moreover, ESC has a correlation value of (0.51) with CR meaning there is a moderate (0.4-0.7 means moderate) positive relationship between the variables. After that, NAOA has a correlation value of (0.57) with CR meaning there is a moderate (0.4-0.7 means moderate) negative relationship between the variables.


A multiple regression was done to understand the influence of the four independent variables on the dependent variable.

Table 3

Multiple Regression-Enter method

ModelRR SquareAdjusted R SquareStd. Error of the Estimate

Predictors: (Constant), CS, IR, ESC, NAOA

Here the value of R square suggests that the four independent variables Customer satisfaction, Interpersonal Relationship, Expected Switching cost, No Attractiveness of Alternatives together can explain 35.5% of changes out of 100% change in dependent variable called customer retention.



Assessment of Research Hypothesis

Hypothesis 1

Increase in customer satisfaction leads to increase in customer retention in the context of Banking Service customers of The City Bank Ltd, Bangladesh.’

The correlation results show that there is a moderate (since 0.4-0.7 value means moderate) positive relationship between the two variables. However the hypothesis can be accepted since in this context the correlation was found.

Hypothesis 2

Better the interpersonal relationship better the chances of customer retention in the context of banking service customers of The City Bank Ltd, Bangladesh’

The correlation results show that there is a week (since 0.2-0.4 value means moderate) relationship between the variables. So the hypothesis can not be accepted. Further research needs to be done to validate the findings.

Hypothesis 3

“Increase in expected switching cost will lead to increase in customer retention in the context of banking service customers of The City Bank Ltd, Bangladesh’

The correlation results show that there is a moderate (since 0.4-0.7 value means moderate) positive relationship between the variables. So the hypothesis can be accepted.

Hypothesis 4

Higher the No Attractiveness of Alternatives higher is customer retention in the context of banking service customers of The City Bank Ltd, Bangladesh’.

The correlation results show that there is a moderate (since 0.4-0.7 value means moderate) negative relationship between the variables. So the hypothesis can be accepted.




The City Bank Ltd, Bangladesh seems to have received good level of satisfaction from its existing account holders. The interpersonal relationship between the customers and employees are also high. Both of these positively drive customer retention. However, in this research context, a weak positive relationship is found between Interpersonal relationship & Customer retention. So, bank needs to put some effort to maintain customer satisfaction in such competitive market situation via ensuring best possible quality management in terms of offices internal environment, customer attendant & efficient complaint handling. On the other hand, a very good sign is customers perceive expected switching cost of banking service to be high & No Attractiveness of Alternatives to be high. This means there is less chance for customers to consider other choices and since there is moderate positive relationship between ESC & CR and moderate positive relationship between NAOA & CR so the high ESC means high CR and high NAOA means better CR. Since The City bank Ltd, Bangladesh can not control its external environment such as competition behavior but it can at least take a step of its own via communicating that changing bank is hassle & undesired when customers can have some additional benefits from their existing bank. These additional benefits should be something to substitute competitive lag in terms of online banking. Overall, working on customer satisfaction, expected switching cost & No Attractiveness of Alternatives seem important since all these have moderate relationship with Customer retention. Interpersonal relationship, however needs to develop too even though a week relationship was found. Further research on this, may help gain fruitful insight to the situation.



In a nutshell, The City Bank Ltd, Bangladesh seems to have acceptable level of satisfaction & interpersonal relation with its customers. But on line banking in this country have brought in revolutionary change in banking service at it has made it much faster, easier & hassle free. Looking in to the future, there seems to be no alternative option to substitute this on line banking service. Even though satisfaction is high, The City Bank Ltd should try & adopt this as early as possible and till its introduction should retain its customers through offering them some additional value added service. However, a separate study needs to be conducted on each of those variables to understand them better.