Factors that influence customer loyalty in the short term insurance industry in South Africa
Date
2012-10-04
Authors
Parbhoo, Nikesh Harish
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
Customer loyalty is a key driver of customer retention, retaining market share, increasing
profitability and decreasing both customer acquisition and customer retention costs in
any business. The South African short term insurance players face many challenges
such as increased competition from non-traditional insurers, increased customer
sophistication, and a move away from the traditional broker model of selling. Customer
retention has become more difficult than ever. This study fills the gap in the research
with regards to the drivers of customer loyalty, specifically within the short term insurance
industry in South Africa.
This study identifies the loyalty measure types that describe customer loyalty, and the
various customer clusters that exemplify the identified loyalty factors. It also establishes
whether customer rewards programs have any influence on customer loyalty.
A quantitative research approach was followed. A questionnaire using a 7-point Likert
scale was developed and piloted. The final questionnaire was administered on a sample
set of 194 respondents, based mainly in Johannesburg. The results were subject to an
exploratory factor analysis to determine the loyalty factors, a cluster analysis to
determine the relevant customer clusters, and a T-test to determine if loyalty reward
programs have any influence on the identified loyalty factors.
3 customer loyalty factors emerged: price, brand loyalty and brand promotion.
Furthermore, four customer cluster types emerged: the brand savvy cluster that is very
brand aware; the price sensitive cluster that will defect on premium increases; the
‘problem childs’ cluster that has a high propensity to complain and not defect; and the
loyal cluster that is the most price insensitive but also will not easily brand switch nor will
they bad-mouth their insurance company. Another key insight has been that loyalty
reward programs do not have any influence on the 3 loyalty factors.
Recommendations are provided to executives and management to improve customer
loyalty
Description
MBA thesis - WBS
Keywords
Consumer loyalty, Insurance, Short-term, Short-term insurance, Customer loyalty