The banking sector plays an essential role in the economy of Saudi Arabia. As the country aims to diversify its economy and reduce its dependence on oil, the banking sector has become increasingly important. In this context, it is crucial for banks to understand the aspects that influence customer loyalty, customer satisfaction, and customer trust (Zafar et al. 2012
). Customer Knowledge Management (CKM) is an emerging concept in the banking industry and is seen as a critical tool for building and maintaining customer relationships.
CKM refers to the systematic collection, analysis, and dissemination of customer information to create value for both the organization and the customer. This process helps the organization to obtain a deeper understanding of its customers, their needs, and preferences (Al Ali 2021
). By using CKM, banks can tailor their services and products to meet the specific needs of their customers, thereby increasing customer satisfaction and loyalty.
The extent at which a customer is pleased with services or products offered by a business or organisation is known as “Customer satisfaction.” It is a crucial factor in developing and sustaining strong customer relationships, as it directly affects customer loyalty (Pasaribu et al. 2022
). If the customers are satisfied with a bank’s products or services, there is a greater possibility that the customers will continue to engage in business with the bank and will also recommend it to others.
Customer loyalty refers to the extent to which a customer remains committed to an organization over time. Customer loyalty is closely related to customer satisfaction, as customers that are satisfied with a bank’s services or products are more likely to remain loyal to the bank (Ebrahim 2020
It is essential for a business to successfully manage customer relationships and deliver happiness to its clients in the cutthroat business world of today (Albarq 2021
). A company must draw in fresh clients while retaining its current clientele. Customer switching behavior is common in the banking industry as a result of increased competition, as well as the uniformity of the goods and services provided by all retail banks. In order to eliminate such client behavior, banks must concentrate on fostering and preserving customer loyalty (Hride et al. 2022
The demographics achieved by analyzing the data of the respondents are shown in Table 2
Four constructs were made which illustrated the relationship between observed and unobserved variables, which were tested for validity and authenticity using CFA. The results are presented in Table 3
The model was assessed by various indices, mainly the ratio of the chi-square minimum to the degree of freedom (CMIN/df) which, if below the cut-off criterion of 3.00 (Hair et al. 2010
), was considered a good fit. Hair et al.
) also suggests that the goodness-of-fit index (GFI), adjusted goodness-of-fit index (AGFI), Bentler’s comparative fit index (CFI), the Bentler–Bonett normed fit index (NFI), and the Tucker–Lewis index (TLI) should all be greater than 0.9, along with the root mean square error of approximation (RMSEA) value, which should be less than 0.1.
The statistical significance of the variables was determined by the critical ratio. Factor loadings of all items from all four constructs were found to be greater than 0.60 which suggested a notably higher convergent validity, as shown in Table 4
. The average variance extracted (AVE), which reflects “the variation between the constructed structures as compared to the error which occurs due to wrong measurements”, should be 0.50 to have reliability. The discriminant validity Hair et al.
) was calculated by the square root average variance and was compared with the factors’ correlation coefficients of other factors. Table 5
presents the results of the discriminant validity test.
The SEM method and the maximum likelihood estimation method were used to analyze the research model. The strength of the model was based on the intrinsic and extrinsic variables. The results shown in Table 6
illustrate a good fit of the hypothesized model; thus, it is authentic for evaluation.
A parameter’s standardization is judged on the basis of regression weights (SE) and (CR) Hair et al.
), and then the critical ratio (CR) is divided by SE. It is clear from the results shown in Table 7
that the structural model supports the study’s hypotheses.
The survey was administered to 600 consumers, and each item was scored on a scale of 1 to 5, with 5 being the best. “The bank provides channels to enable ongoing two-way communication between customers and employees”. The mean score for this statement is 4.235, which is near to the midpoint of the scale (4.0), and the standard deviation is 0.4244, indicating that the responses to this statement are generally close to the mean. This shows that clients have a favorable opinion of the bank’s communication channels in general. “The customers are kept informed about the latest benefits and offers regarding various products and services.” In terms of mean and standard deviation, this statement has a mean score of 4.257 and a standard deviation of 0.4372, which is comparable to the first statement. Customers appear to be generally happy with the bank’s attempts to keep them informed. “The bank fully understands the needs of customers”. This statement has a mean score of 4.195 and a standard deviation of 0.4872, which is lower than the previous two statements and implies that answers are more spread. This shows that some consumers believe the bank understands their demands completely, while others do not. The “Bank always provides statements with accurate data.” In terms of mean and standard deviation, this statement has a mean score of 4.268 and a standard deviation of 0.4435, which is identical to the second statement. This indicates that clients trust the bank offers accurate data in their statements. “The bank provides services to customers according to their business policy but not according to customer expectations.” This statement has a mean score of 4.382 and a standard deviation of 0.4862, which is greater than the preceding statements and suggests that the responses are pretty close to the mean. This implies that consumers usually feel the bank offers services in accordance with their business policies but not necessarily with customer expectations. “I feel secure while authorizing transactions with the bank.” This statement has a mean score of 4.562 and a standard deviation of 0.4966, making it one of the statements with the highest scores.
This implies that clients are at ease while approving transactions with the bank. “I prefer this bank each time I make any financial transaction.” This statement has a mean score of 4.462 and a standard deviation of 0.4989, which is identical to the preceding statement. This shows that clients favor this bank for its financial transactions in general. “The bank maintains the RBI norms fully.” This statement has a mean score of 4.462 and a standard deviation of 0.4989, which is identical to the preceding statement. This shows that clients favor this bank for its financial transactions in general. “I consider this bank as my preferred one.” This statement has a mean score of 4.463 and a standard deviation of 0.4991, which is identical to the mean and standard deviation of the preceding two statements. This indicates that customers regard this bank to be their favored one. “I trust the know-how of this bank.” This statement has a mean score of 4.300 and a standard deviation of 0.4586, which is lower than the previous three but still near to the mean. This indicates that clients typically trust this bank’s expertise. “When the bank suggests that I buy a new product it is because it is best for my situation.” This statement has a 4.320 average rating and a standard deviation of 0.4669. This indicates that the majority of consumers feel the bank recommends new products that are best suited to their needs. “The bank treats me in an honest way in every transaction.” This statement has a mean rating of 4.523 and a standard deviation of 0.4999. This suggests that a substantial proportion of consumers believe the bank is honest in all transactions. “I have intention to recommend the bank to others.” This statement’s average rating is 4.153, with a standard deviation of 0.4621. This shows that while some consumers are inclined to promote the bank to others, there may be a subset of customers who are not. “I have no intention to switch over to other bank.” This statement has a 4.120 average rating and a standard deviation of 0.5060. This shows that some customers are considering moving to another bank, but a sizable minority of consumers have no plans to do so. “I like to use the services provided by the bank.” This statement has an average rating of 4.328 and a standard deviation of 0.5517. This shows that a modest number of clients are satisfied with the bank’s services. “I will prefer new services if offered by the bank.” This statement has a mean rating of 4.343 and a standard deviation of 0.5562.
Customers are more willing to consider new services offered by the bank as a result of this. “I prefer this bank over other banks.” This statement has a mean rating of 4.355 and a standard deviation of 0.5593. This implies that a sizable proportion of clients prefer this bank above others. “I will do more business with my bank in the next few years.” This statement has a mean rating of 4.277 and a standard deviation of 0.6640. This shows that while some customers are likely to do more business with the bank in the subsequent years, there may be a part of customers who are not. “Complaints are welcomed and individual attention is given to every customer complaint.” This statement has a mean rating of 4.297 and a standard deviation of 0.7277. This indicates that clients have a favorable impression of the bank’s handling of customer complaints. “The bank maintains personal relationship with the customer.” This statement has a mean rating of 4.377 and a standard deviation of 0.7455. This suggests that a sizable proportion of clients feel the bank has a personal relationship with them. “Periodic feedback review is sought after raising complaint.” This statement has a mean rating of 4.337 and a standard deviation of 0.5482. This shows that clients feel the bank solicits input after receiving complaints. “I am satisfied with the overall interaction with the staff.” This statement has a mean rating of 4.338 and a standard deviation of 0.5487. This shows that a reasonable number of consumers are pleased with their entire engagement with bank personnel.
The structural model demonstrates CKM and customer satisfaction as chief determinants of customer trust. Trust is a prerequisite for generational customer loyalty and CKM positively impacts customer satisfaction. The study revealed that CKM and customer satisfaction better explicate variance in customer trust (R2
= 0.30) than customer loyalty (R2
= 0.18), where CKM attributes to only 19 per cent of variance in the customer satisfaction (R2
= 0.21). Customer knowledge and customer information can be used by banks as tools for developing a foundation by enhancing satisfaction, cultivating trust, building loyalty, and maintaining cordial relationships with customers (Patwa and Patwa 2014
). On the other hand, the findings prove that companies which fail to incorporate the concept of CKM towards development of their products and services lose their customers to the competition. Findings depict CKM and customer trust as the major components for customer satisfaction and customer loyalty, respectively. The results are justified by the fact that a mediating variable may exist between customer satisfaction and customer loyalty which holds satisfaction and loyalty together (Sirdeshmukh et al. 2002
; Ahmed et al. 2020
; Mansouri et al. 2022
Furthermore, the research concludes that there is a strong link between customer trust and customer loyalty and is further reinforced by the earlier findings of Lin et al.
). However, some business professionals and academicians. Halim et al.
) argue that customers who display satisfaction can cease to be loyal, hence suggesting that all loyal customers may not be satisfied whereas all satisfied customers do tend to be loyal.
This study infers that the impact of CKM is more on customer trust than on customer satisfaction. Furthermore, mediation analysis highlighted customer trust as the precursor to customer loyalty (Utz et al. 2023
). Thus, a bank can enhance customer loyalty by understanding the dynamic behavior of the customers and maintaining their up-to-date information. Building a knowledge base of customers and developing customer trust leads to a positive impact on customer loyalty management initiatives. Managerial competence, knowledge management, and technological innovations contribute to developing customer trust and ensure cultural integrity in customer loyalty management. Moreover, trust plays an intermediary role between the satisfaction and the loyalty of a customer. Nonetheless, a few studies claim that satisfied customers are not always loyal customers. Therefore, this study recommends the need for developing strategic interventions of trust between customer satisfaction and loyalty by highlighting the role of trust in building satisfaction, which results in loyalty. For banks to improve their customer relationships, constant monitoring of customer behavior and internal processes is necessary, without which the relationship can be strained by making customers re-consider their loyalties and form a negative opinion of the bank. This results in the loss of a bank’s reputation and long-term competitiveness.
5.1. Managerial Implications
For managers in the Saudi banking industry, the study’s conclusions will have significant ramifications. Managers will be better prepared to plan and implement customer-centric strategies that increase customer satisfaction and loyalty by comprehending the influence of CKM on these two metrics, as well as the mediating function of customer trust.
5.2. Limitations and Future Research
The study is limited to the Saudi banking sector and may not be generalizable to other industries. Additionally, the study is based on self-reported data from customers, which may not accurately reflect their true opinions and behaviors. Further research is needed to validate the findings of this study and explore the impact of CKM on customer satisfaction and customer loyalty in other industries and regions.