Title

An emperical study on the service quality and customer retention in the Singapore stock broking industry

Document Type

Thesis

Publication details

Lim, C 2016, 'An emperical study on the service quality and customer retention in the Singapore stock broking industry', DBA Thesis, Southern Cross University, Lismore, NSW.

Copyright C Lim 2016

Abstract

To generate the competitive edge in any business environment and to propel it forward, companies must dig deep and learn to truly understand the importance of service quality and customer retention. These concepts are even more crucial in the current arena of the Singapore stock broking industry, where the pie of the customer base is getting smaller, and getting a share of it more demanding. Stockbrokers are spending more resources and funds on upgrading their online trading platforms owing to popular demand, without justifying the benefits they bring, at the expense of traditional brokers. Also, while stockbroking companies focus almost entirely on online trading, they fail to leverage on mining customer information that is available in their database, which may lead to long-term retention and may encourage repurchase intentions. Therefore, a gap is present for this study to develop a conceptual framework which could be tested by means of survey data collected from customers of XYZ Holdings, a stock broking firm in Singapore.

In addition, there are questions around customer demographic profiling relating to choices of online or traditional brokering services. The research raises the question as to whether stockbroking firms truly understand the customers and their choices. The issue of identifying determinants or enabling practices that influence customer retention, such as service quality, has attracted academic attention in relation to a range of industries. Scholars suggest that knowing and mining customer demographic profiles is an important strategy to engage the customer and build lasting value, and that customer data can be employed to moderate the relationship between perceived service quality and customer retention in order to make more effective use of limited company resources.

However, few studies have investigated whether the same enabling practices and client demographic factors have a differential effect on service quality and thus customer retention in the stock broking arena. This research examines how customer information like gender, income, age and experience, influence customer retention and why customers prefer broker-assist service to online services and vice versa. The aim of this study is to highlight the significance of functional service quality and technical service quality on customer retention in the Singapore stock broking setting with an emphasis on customer demographic profiling so that brokerages may allocate their resources productively and traditional brokers could rely on a dependable instrument to retain their customers and prolong their business.

The objective of this research was to develop a conceptual model for service quality and customer retention which could be empirically validated by demographic and available data collected from customers of the mentioned stock brokerage firm. This model could be employed by a stockbroking company to test for customer retention probability. If stockbroking firms are able to identify precisely the type of customer they have and then attend to their needs, they will be able to maximise the potential of each customer by delivering on the customer’s needs and demands.

The research questions of the thesis are: Does perceived service quality (also known as functional quality) of broker -assist service influence customer retention in a stock broking firm? Does perceived service quality (also known as technical quality) of Internet trading influence customer retention in a stock broking firm? Does the information/profile (namely; gender, income, age, experience) of the customer in a stock broking firm moderate the strength and direction of the relationships between functional quality, technical quality, and influence customer retention?

The methodological approach adopted for this study began with identifying the characteristics of perceived service quality in general, and then with reference to stock brokerage firms. With these issues in mind, the SERVQUAL instrument was adopted as the primary data collection method for this research. The five-dimension SERVQUAL instrument, already widely used to measure service quality throughout the services sector, was developed be the researcher to include a technical (Internet trading) dimension. The purpose of using such a modified version of the SERVQUAL instrument was to capture the essence of perceived service quality in its entirety in the local context. A pilot study with a sample size of 35 customers was conducted to refine the questionnaire developed from the SERVQUAL instrument. User feedback assisted in refinement of the survey to give it a more user-friendly and practical feel. Subsequently, the final survey was distributed using a convenience sampling technique and was mailed to 2,000 respondents; 1,000 who subscribed to traditional broker-assist trades and 1,000 who engaged in Internet trading. This research received at least 150 returns of useable data from each type of respondent to test the model.

Then, the main study consisting of a self-completion questionnaire was developed from the SERVQUAL instrument and distributed using a convenience sampling technique and was mailed to 2000 respondents, 1000 who subscribed to traditional broker-assist trades and 1000 who engaged in Internet trading.

Findings of this study show that good service has a higher leveraging potential for a firm as compared to offering monetary baits. This may be due to the fact that high-standard of services were inclined to good impressions, thus allowing the customers to repurchase with assured satisfaction and expectations of similar level of service. While the findings pertain to one company, similar research could and should be expanded to other stock brokerages and other sectors. In order to consolidate the model proposed in this thesis, it would be desirable to conduct more evaluations of service quality over a period of time.

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