Page 101 - Contributed Paper Session (CPS) - Volume 8

CPS2205 Abdul Aziz A. Rahaman et al.
Comparative model analysis of customer
retention drivers of universal banks in Ghana:
Structural equation model and ordinal logit
model approaches
Abdul-Aziz A.Rahaman , Albert Luguterah , Bashiru I. I. Saeed
2
1
1
1 Department of Mathematics & Statistics, Kumasi Technical University, Ghana
2 Navrongo Campus, University for Development Studies, Ghana

Abstract
The competitive power and survival of a bank lies in the degree of its customer
retention. It depends on a myriad of factors and varies from product to
product. This realization has made industry players and academics pay
increasing attention to customer retention. This paper compared the
Structural Equation Modelling (SEM) against the Ordinal logit model using
primary data obtained from customers of selected universal banks in Ghana.
The SEM results showed that loyalty influence to a great deal the
trustworthiness and corporate image of universal banks in Ghana. Also, service
quality is a relevant contributing factor to empathy, reliability and assurance
of universal banks’ services. Service quality has both direct and indirect effect
on customer retention. However, satisfaction was deemed statistically
insignificant in contributing to customer retention. On the other hand, the
ordinal logit model results noted that service quality dimensions on tangible,
responsiveness, empathy and trust are relevant contributing factors to
customer satisfaction at universal banks. However, reliability and assurance, in
terms of, service quality aspects are not really contributing marginally to
customer satisfaction.

Keywords
Structural Equation Modelling; Ordinal Logit Model; Customer retention;
Service Quality

1. Introduction
Customer retention is very significant in the creation and maintenance of
competitive advantage in the service industry (Ndubisi, 2007). There are
economic advantages associated with retaining loyal customers as opposed
to recruiting new ones. This realization has made industry practitioners and
academics pay increasing attention to customer retention studies (Ndubisi,
2007 & Zineldin, 2006). Furthermore, the longer a loyal customer stays with a
firm, the more profitable it is to that firm (Kim and Cha, 2002). Loyalty in service
businesses refer to the customer’s commitment to do business with a
particular organization, purchasing their products (Anderson and Jacobson
(2000). The service sector has produced approximately two-thirds of

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