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Brand preference in Islamic banking
Design/methodology/approach – The sample was based on 300 students at the International Islamic University of Malaysia. The study utilised five selection criteria based on previous research, personal experience and interview with bank officials and university students. The study also provides some insight into the younger generation's awareness of Islamic banking and the processes involved in the selection of their preferred brand.
Findings – It would seem that whilst the importance of religion is a major driver in the choice of Islamic banking the fundamental differences between Islamic and conventional banking are poorly understood. What is important is brand, ease of use and the quality of the customer interaction.
Originality/value – The paper investigates the factors which determine a customer's choice of a particular bank and provides insights into cementing relationships with existing customers as well as how to gain new ones.
1.1 Research objectives
- to determine the demographic profile of Islamic bank customers in IIUM;
- to study the brand awareness and usage of various Islamic bank product/services among Islamic bank customers in the university;
- to identify any demographic relationships with the usage of different products and services offered by Islamic banks; and
- to measure the level of customer satisfaction with various basic brand attributes.
1.2.1 Data collection
1.2.2 Data analysis
2 Findings and results
2.1 Respondent profiles
2.2 Convenience and location
2.3 Charges for transactions
2.4 Technology and physical facilities
2.5 Brand choice
- customer interaction (mean 3.78);
- brand and recommendations (3.76);
- technology and physical facilities (3.74);
- convenience (3.55); and
- financial benefits (3.31).
4 Conclusions and recommendations
Table IGender of respondents
Table IINationality of respondents
Table IIIConvenience factors
Table IVThe importance of low service charges
Table VTechnology and physical factors
Table VIBrand choice
Table VIIThe importance of Islam
Table VIIIThe importance of choice
- Some parts of this paper's findings are presented in international conference elsewhere.
Citing the challenges for the industry, people usually opine that the industry needs to create awareness about itself, its products and the concepts underpinning their development.
One listed Islamic bank in Pakistan showed Rs 47 million on the expenditures side in 2010 which was more than the Rs 41 million in profits it reported for the same year. Of note is that it is the first time the bank had reported profits and, as odd as this ratio might appear, it nevertheless tells us that a good sum of money was spent on advertising. Another listed Pakistani Islamic bank had also spent Rs 43 million on publicity in 2010.
Creative advertising is also finding its way into these marketing campaigns as evidenced by the few examples of original marketing slogans used by some Islamic banks, which names will not be revealed.
"Finally, a car that lets you fly. Finance your dream car."
"Live in your dream home."
"Drive your dream car."
"Shariat Mein Barkat. (It means blessing is only in Islamic law)"
Sadly, though these slogans have contributed their share in promoting consumerism in Pakistani society they failed to hail Islamic virtues of Shukr (thankfulness), Sabr (patience), Tawakkul (steadfastness), Infaaq (payment to charity), refraining from Israaf (extravagance), hubb-e-maal (love of wealth) and hubb-e-dunya (love of materialism).
The prevalent practice of marketing efforts includes billboard advertising, TV commercials, print media and additionally running paid content in the form of discussion programs on TV. But, in the name of creating awareness, serious discussions and arguments usually lie missing in the paid discussion programs run on TV.
The proponents of Islamic banking repeatedly try to give some logical answers to support the case of Islamic banking and argue that the end result of many activities could be similar, but their interpretation for Halal and Haram could still be different. These logical arguments are analyzed briefly.
A McDonalds burger in the West may taste the same as in the East, but one may be permissible i.e. Halal and one may be prohibited i.e. Haram if the animal from which the meat was prepared was not slaughtered in the prescribed Shari'ah manner. The forbidden burger is not prohibited on the basis of taste, but rather due to the manner of slaughtering. But regardless of the argument, the way the burger is advertised fails to remind the consumer of the fact that it is God Almighty who has given man permission to take the life of an animal for food consumption.
Similarly, pre-marital and post-marital sex may prompt similar physical and emotional responses, but in Islam, the former is prohibited while the latter is permissible. Here again, the reason for prohibiting pre-marital sex is not biological or utility related, but rather social i.e. Islam treasures the family system and wants to protect its sanctity at all cost, else, from a social point of view, humans would be no different than animals.
If one does not wish to invest money for profit purposes, but has some surplus funds, Islam has encouraged spending on charity over lending for interest and it is supported through many verses. "They ask thee how much they are to spend; Say: "What is beyond your needs." Thus doth Allah make clear to you His Signs: In order that ye may consider." (Al-Baqarah: 219).
"In their wealth, there is a known right for those who ask for it and those who have need for it." (Al-Muarij: 24-25).
Instead of those Islamic institutions who are working in conformity with Islamic rules and principles trying to create awareness about these virtues, emphasis has been on creating wealth. By not using the Islamic virtues mentioned above, Islamic banks have essentially failed to create brand affinity among the masses on the basis of what Islam promulgates as core to its followers beliefs. This is not to deny the efforts and achievements of Islamic banks, but rather meant to point out the shortcomings which need to be looked at and addressed right away.
BOX: Islamic Credit Cards: A Necessity or Luxury
Islam never encourages one to become indebted unless it is absolutely necessary. Many a -hadith show the viewpoint of Islam on debt creation, especially when it is beyond ones capacity to repay, and points to what extent it should be avoided and used to meet ones necessary requirements.
Prophet Muhammad (pbuh) said:
About the Author
Salman Ahmed Shaikh is a researcher in Islamic Economics. He is author of "Proposal for a New Economic Framework Based on Islamic Principles". He has also written 20 papers and more than four dozen articles on Islamic Economics. He can be contacted at firstname.lastname@example.org. Courtesy provided by Halal Tamweel.
By. MWO Maznah Wan Omar
Islamic banks' ability to withstand the global downturn has fuelled an expansion of Islamic finance around the world. Islamic banks have learned that customer loyalty and brand loyalty must be earned. Brand loyalty and relationship marketing among banking consumers particularly in the islamic banking system in Malaysia has captured great interest among the Malaysian public as a whole (i.e. relationship between employees and customers). Relationship marketing is not more than just getting the customers but it is also how to maintain the existing customers as much as possible. There are important dimensions that supported the strength of relationship marketing that can lead to brand loyalty. In relation, brand loyalty refers to the favorable attitude towards a brand in addition to purchasing it repeatedly by the customer. The customer tends to be loyal since there is relationship marketing between them and the organization. This study will show the influence of relationship marketing through Bank Islam employees in Malaysia on Brand Loyalty. The data for this study will be acquired from 3 Bank Islam business premises in Pulau Pinang, Kedah, and Perlis which represent the northern states of Peninsular Malaysia. Various data-analytic tools will be used to analyze the data such as test of differences, reliability analysis, factor analysis, and multiple regression analysis. The study tries to determine how relationship marketing which is measured through three dimensions, that is Customer trust on Bank Islam staff, Bank Islam Staff commitment during the service delivery, and the communication skills among Bank Islam Staff can have an influence on Brand Loyalty among Bank Islam customers.
In recent years there has been growing interest in relationship marketing (i.e. relationship between employees and customers) since there has been a change in terms of marketing philosophy which is marketing orientation. One of the most important areas in marketing orientation includes relationship marketing. Relationship marketing is not more than just getting the customers but it is also how to maintain the existing customers as much as possible.
There are important dimensions that supported the strength of relationship marketing that can lead to brand loyalty. In relation, Brand loyalty refers to the favorable attitude towards a brand in addition to purchasing it repeatedly by the customer. The customer tends to be loyal since there is relationship marketing between them and the organization. This study will show the influence of relationship marketing through Bank Islam employees in Malaysia on Brand Loyalty. The data for this study will be acquired from 3 Bank Islam business premises in Pulau Pinang, Kedah, and Perlis which represent the northern states of Peninsula Malaysia.
Various data-analytic tools will be used to analyze the data such as test of differences, reliability analysis, factor analysis, and multiple regression analysis. The study try to determine whether relationship marketing which is measured through three dimensions, that is Customer trust on Bank
Islam staffs, Bank Islam Staff commitment during the service delivery, and the communication skills among Bank Islam Staff do have an influence on Brand Loyalty among Bank Islam customers. Finally the study also attempts to determine if Customer Overall satisfaction would have a mediating effect on the relationship between relationship marketing and Brand Loyalty in the case of Bank Islam.
2. LITERATURE REVIEW
Brand management is an area of increasing importance to marketers today, particularly as organizations attempts to communicate the ever complex and intangible messages as part of brand management strategies (Davis, 2000; Goodchild & Callow, 2001). One of the many interesting questions facing today's brand managers concerns how to develop a better understanding of the appropriate relationship between constructs such as relationship marketing and brand loyalty, particularly in relation to the myriad of known antecedents to brand loyalty in the marketing literature (Taylor et al., 2004). In this study we assess the relative importance of many of the known antecedents to brand loyalty, including overall customer satisfaction.
By having a strong brand, companies not only could facilitate the differentiation of their offer from the competitors. With branding, financial companies are able to create customer confidence and loyalty in their performance, exert greater control over promotion and distribution of the brand, as well as commanding a premium price over the competitors; all while impacting the valuation of the business (Holverson & Revaz, 2006; Pass et al., 1995).
The added value that a brand name gives to a product is now commonly referred to as "brand equity"
(Aaker, 1991). Brand name adds value to each of these interested parties which include the investors, manufacturers, and the retailers. Brand equity and brand loyalty provides a strong platform for introducing new products and insulates the brand against competitive attacks. From the perspective of the trade, brand loyalty contributes to the overall image of the retail outlet. It builds store traffic, ensures consistent volume, and reduces risk in allocating shelf space (Cobb-Walgren et al., 1995). However, if the brand has no meaning to the consumer, automatically there wouldn't be of any value to the investors, the manufacturer, and the retailer unless there is value to consumer (Farquhar, 1989; Crimmins, 1992).
Over the past 15 years, a major shift has occurred in the ways that industrial companies deal with their customers and suppliers (Christopher et al., 1991; Ellram, 1995). This change has come about as companies have recognized that sustainable competitive advantage in the global economy increasingly requires companies to become trusted participants in various networks or sets of strategic alliances (Morgan & Hunt, 1994). Relationship marketing which is powered by the employees of an organization has emerged over the years as an exciting area of marketing that focuses on building long-term relationships among employees who is a proxy to their employer and customers that frequent to their business premises. As Gronroos (1993) observed: establishing a relationship, for example between an employee and a customer, can be divided into two parts: to attract the customer and to build the relationship with that customer so that the economic goals of the organization are achieved through that relationship.
3.1 The Objectives of This Study
b. To determine whether Relationship marketing within Bank Islam will have any influence on customer's overall satisfaction.
c. To determine whether customer Overall satisfaction with Bank Islam employee will have any influence on Brand loyalty.
d. To determine whether customer Overall satisfaction on Bank Islam employee mediates the relationship between Relationship marketing and Brand loyalty.
Hypothesis 1: There is positive relationship between relationship marketing and brand loyalty.1a: There is positive relationship between trust and brand loyalty.
1b: There is positive relationship between commitment and brand loyalty.
Hypothesis 2: There is a positive relationship between relationship marketing and overall satisfaction.H2a: There is a positive relationship between trust and overall satisfaction.
H2b: There is a positive relationship between commitment and overall satisfaction.
H2c: There is a positive relationship between communication and overall satisfaction.
Hypothesis 4: Overall satisfaction mediates the relationship between relationship marketing and brand loyalty.
3.3 Research Questions
From the previous discussion, we infer specific research questions for this study, they are:
Does customers trust towards the Bank Islam employee during their interaction influences Bank Islam Brand Loyalty?
b) Does Bank Islam employee's commitment towards their customers during employee/customers interaction influence Bank Islam Brand Loyalty?
c) Does Bank Islam employee's communications skills delivered during employee/customers interaction influences Bank Islam Brand Loyalty?
d) Does customer's overall satisfaction towards Bank Islam employee influences Bank Islam Brand loyalty?
e) Does customer's overall satisfaction mediates the relationship between Bank Islam relationship marketing and Bank Islam Brand loyalty?
The area of study for this research is limited to three Bank Islam business premises located in Pulau Pinang, Kedah, and Perlis. All the three states are located in the Northern States of Peninsular Malaysia.
4.1 Description of Methodology
Since the mailing list of Bank Islam customers/clients is not made available, a 2-stage systematic sampling technique will be employed.
A two-stage sampling technique is employed in this study. During the 1st stage = A random sampling technique is used to select the Bank Islam business premises. List of Bank Islam business premises will be retrieved from Bank Islam listing. 2nd stage = systematic sampling. A skip interval of 2 will be utilized in the selection of Bank Islam clients as our respondent (Arithmetic progression will be utilized).
A sample of 480 will be collected (16 items (independent variable) X 10 = 160 samples X 3 locations = 480 samples). To accommodate for non-responses, an additional of 20 samples will be collected. Therefore a total of 500 samples will be collected altogether for this study. Sample selected was based on 3 considerations:-
30< sample < 500. The size must be several times larger (10 times or more) for multiple regression analysis to be conducted.
b) Second considerations, Cohen & Cohen (1977); Sawyer & Ball (1981), believes that very large sample sizes usually allow even small effects to be statistically significant. It is especially important with highly powered research designs to measure and report effect sizes in addition to statistical significance.
Sawyer and Ball (1981) estimated that a proportion of 13% of the explained variance to effect size values, as a medium effect size for regression analysis. According to Sawyer and Ball (1981), the medium effect of 13% is sufficient for testing an existing model.
f² = R² = 0.13 = 0.1494
1- R² 1 – 0.13
ŋ* = L+K+1
= 13.62 + 3 + 1
= 117 samples.
Therefore, 117 samples x 3 locations = 351 samples (to be collected)
c) The third considerations, Issue's on response rate were covered. Response rate in Malaysia is between 15% - 30% base on the previous research/study/theses.
4.5 Questionnaire Design
Questionnaire consists of 3 Sections. Section A =Relationship marketing (Caceres & Paparoidamis, 2007). Section B = Overall customer satisfaction ( Bloemer & Ruyter, 1998). Section C = Brand loyalty (Aaker, 1996). An interval scale data (use for independent variable, mediating variable, and dependent variable) and a nominal scale data (demographic data) will be collected from the questionnaire distributed to the hotel guest. A Likert Scale of 1 to 5 will be used to frame answers in the questionnaire.
4.6 Translation Procedure