Determinants of Customer Retention in Ethiopia

Insurance Corporation in the case of Batu Town

MADDAWALABU UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MARKETING MANAGEMENT

RESEARCH THESIS SUBMITTED TO THE DEPARTMENT OF

MARKETING MANAGEMENT IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE DEGREE OF MASTER OF MARKETING
MANAGEMENT

BY;AYANO BEDASO

ADVISOR; DR. TESHALE TERAFA (PHD)

SEPTEMBER 2022
SHASHAMANE ETHIOPIA

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 Madda Walabu University
College Of Business and Economics
Department of Marketing Management

This is to certify that the thesis is prepared by Ayano Bedaso entitled;

Determinants of Customer Retention in Ethiopia Insurance Corporation in
the Case of Batu town in partial fulfillment of the requirements for the award of
the Degree of Master of Arts in Marketing Management with the regulation of
the University and the accepted standards with respect to originality.

Approved by;
______________________ ________________________ __________________

Thesis Advisor Signature Date

_____________________ ________________________ __________________

Internal Examiner Signature Date

______________________ ________________________ __________________

External Examiner Signature Date

Acknowledgement

First, I would like to thank almighty God, the compassionate, the most merciful and source of
knowledge and wisdom, who bestowed upon me the health, the power of communication and
the audacity to accomplish this thesis.

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 I am grateful to Dr. Teshale T for his valuable comments in the process of development of
proposal. I would also like to extend my gratitude to Madda Walabu University School of
business and economics especially marketing management department for helping me in the
development of research proposal title to final thesis.

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 Table of Contents

Contents
Abstract......................................................................................................................................................... vii

CHAPTER ONE ............................................................................................................................................. 1

INTRODUCTION .......................................................................................................................................... 1

1.1. Back Ground of the Study ................................................................................................................... 1

1.2. Statement of the Problem .................................................................................................................... 3

1.3. Research objectives ............................................................................................................................. 5

1.3.1. General objectives ...................................................................................................................... 5

1.4.2. Specific Objectives of the Study ................................................................................................ 5

1.4 Research Hypotheses ............................................................................................................................ 5

H33: There is a significant positive relationship between Communication and customer Retention. ....... 6

1.5. Significance of the Study..................................................................................................................... 6

1.6. Scope of the Study ............................................................................................................................... 6

1.7. Definitions of Key Terms .................................................................................................................... 7

CHAPTER TWO ............................................................................................................................................ 9

2. REVIEW OF RELATED LITERATURE .................................................................................................. 9

2.1 Theoretical Review ............................................................................................................................... 9

2.1.1 The Concept of Customer Retention ................................................................................................. 9

The Relationship between Customer Relationship Management and Customer Satisfaction.................. 10

The Relationship between Customer Relationship Management and Customer Retention ..................... 11

World Insurance Service Trends .............................................................................................................. 12

2.1.2 Factors Influencing Customer Retention ......................................................................................... 13

2.1.2.1. Customer Relationship Management .................................................................................. 13

2.1.2.2. Customer Satisfaction ........................................................................................................... 14

2.1.2.3 Switching Barriers .................................................................................................................. 15

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 2.2. Empirical Review .............................................................................................................................. 15

2.3. Conceptual Framework of the Research ........................................................................................ 19

CHAPTER THREE ...................................................................................................................................... 20

3. RESEARCH METHODOLOGY ......................................................................................................... 20

3.1. Research Approach ............................................................................................................................ 20

3.2. Study Design ..................................................................................................................................... 20

3.4. Study Population ............................................................................................................................... 21

3.5. Sample Size Determination ............................................................................................................... 21

3.5. Data Type, Source, and Method of Data Collection.......................................................................... 21

3.5.1. Type of Data Source ................................................................................................................. 21

3.5.2. Method of Data Collection ....................................................................................................... 22

3.6. Methods of data Analysis .................................................................................................................. 22

3.6. Validity and Reliability Test ............................................................................................................. 23

3.6.1. Validity ...................................................................................................................................... 23

3.6.2. Reliability Test ........................................................................................................................... 23

3.7. Ethical Consideration ........................................................................................................................ 23

CHAPTER FOUR ........................................................................................................................................ 25

4. DATA PRESENTATION, ANALYSIS, AND DISCUSSION..................................................................... 25

4.1. Introduction...................................................................................................................................... 25

4.1.1. Response Rate ................................................................................................................................ 25

4.1.2. Data Analysis and Discussion ........................................................................................................ 26

4.2. Demographic, Social and Economic Characteristics of Respondents .............................................. 26

4.2.1 Respondents Demographic Characteristics ..................................................................................... 28

4.3. Descriptive Analysis .......................................................................................................................... 29

4.3.1. Measures of Central Tendency and Dispersion of Determinants Of Customers Retention ........... 29

4.3.2. Switching Barriers Dimension ....................................................................................................... 31

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 4.3.3. Relationship Dimension ................................................................................................................. 32

4.3.3.2 Commitment Dimension .............................................................................................................. 33

4.3.3.3 Communication Dimension .......................................................................................................... 34

4.4. Customer Retention Dimension ........................................................................................................ 35

4.5. Results and Discussions of Descriptive Statistics.......................................................................... 36

4.6. Summary Mean and Standard Deviation of Determinants Of Customers Retention Dimension ..... 37

4.7. Inferential Statistics ......................................................................................................................... 38

4.7.1. Correlation Analysis ....................................................................................................................... 38

4.7.2. Results and Discussions of Correlation .......................................................................................... 42

4.8. Multiple Regressions Analysis ........................................................................................................ 43

4.8.1.1 Assumptions of Multiple Regression Model: - ............................................................................ 43

4.8.1.1 Normality Test .......................................................................................................................... 43

4.8.1.2. Test for Linearity ................................................................................................................... 44

4.8.2. Multicolinearity Test .................................................................................................................. 46

4.9. Coefficient Model .............................................................................................................................. 48

4.10. Results and Discussions of Regression ........................................................................................... 52

4.11. Hypothesis Testing and Discussions ............................................................................................... 54

CHAPTER FIVE .......................................................................................................................................... 56

5. SUMMARIES, CONCLUSIONS, AND RECOMMENDATIONS .............................................................. 56

This chapter provides Summary, conclusions, recommendations and future research directions. ...... 56

5.1. Summary of the Findings ......................................................................................................... 56

5.2. Conclusions .................................................................................................................................. 56

5.3. Recommendations........................................................................................................................ 58

5.4. Direction for Further Research .............................................................................................................. 60

Bibliography ................................................................................................................................................... F

Appendix 1:- Questionnaires .......................................................................................................................... J

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 List of table and figure

Table 4. 1 Statistics for Respondents Age, Educational Level, Gender, Insurance Type, and Business
Category ...................................................................................................................................................... 28
Table 4. 2 Standardized Agreed List Range ................................................................................................ 29
Table 4. 3 Descriptive statics for Satisfaction .............................................................................................. 30
Table 4. 4 Descriptive statistics of Switching Barriers ................................................................................ 31
Table 4. 5 Descriptive statistics of Trust ..................................................................................................... 32
Table 4. 6 Descriptive statistics of Commitment ......................................................................................... 33
Table 4. 7 Communication Dimension ........................................................................................................ 34
Table 4. 8 Customer Retension Dimension ................................................................................................. 35
Table 4. 9 Summary Mean and Standard Deviation of determinants of customers retention Dimension ... 37
Table 4. 10 Rule of Thumb For About the Strength of Correlation of Coefficients .................................... 39
Table 4. 11 Relationship between Dimension of relationship marketing and customer Retention ............. 40
Table 4. 12 Normality Test .......................................................................................................................... 43
Table 4. 13 Multicollinearity Test ................................................................................................................ 47
Table 4. 14 Multiple Regression Results of Determinants Customers Retention Dimensions .................. 48
Table 4. 15 Coefficients of Customer Retention Determinants Dimensions in Regression Analysis ......... 50
Table 4. 16 Model Summaries Multiple Regression Of Customer Retention Determinants ....................... 51
Table 4. 17 ANOVA ................................................................................................................................... 51
Table 4. 18 Hypotheses Summary ............................................................................................................... 54

List of figure

Figure 4. 1 Response Rate ............................................................................................................................ 26

Figure 4. 2 Normal P-P Plot of regression ................................................................................................... 44
Figure 4. 3 Histogram ...................................................................................................................................

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 Abstract
Investigating the determinants of customer retention has been argued to be helpful to insurance
companies in formulating the appropriate marketing strategies for reaching, attracting and
retaining customers. In addition, to design a suitable marketing strategy, insurance companies
need to identify the effects of each factor on companies’ market share and profitability in return.
However, the previous studies in Ethiopia have not given enough attention to measures the
determinants of customer retention; so, the study aimed to assess the determinant factor for
customers retention in insurance companies. The questionnaire was distributed to 368 for
Ethiopian insurance corporation customers and interview questions for branch Insurance
managers. From a total of 368 customers, 315(85%) were completed the questions, and
53(15%) were not complete. For conducting this study non-probability sampling techniques,
specifically, convenience and Purposive sampling techniques were used. The study is based on
data composed from both primary and secondary sources of data. Data analyses were analyzed
using descriptive and inferential statistics of; bivariate correlations, and multiple regressions
then analyzed by spss version 24. Research findings indicate that there is a significant and
strong correlation between the constructed marketing dimensions and customer retention.
Moreover, the study reveals that there is a significant effect on Satisfaction, switching cost and
Relationship marketing (Trust, Commitment and Communication), on predicting customers’
retention. The study concludes that Ethiopian insurance corporation should apply forwarded
marketing variables in order to maintain its market share in the marketplace.

Keywords: Customer retention, Satisfaction, Relationship marketing, switching barriers.

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 CHAPTER ONE

INTRODUCTION

1.1. Back Ground of the Study

There is an observable worldwide shift toward loyalty marketing in most of the sectors across
various industries. The earlier business goal of ensuring customer satisfaction has got
undermined due to prevailing colossal relationship orientation of businesses that calls for going
beyond the boundaries of satisfaction and create a commitment based enduring association with
customers that renders immunity to the business against competitive pressures. Apart from
bringing it to the center stage of customer related affairs of the company, the ethereal, yet
corporeal advantages of customer loyalty have rendered it a place of supreme importance in
academic circles as well. The value of customer loyalty for service industries has been
recognized by many researchers (Caruana, 2002; Asuncion et al., 2004).

In context of personal relationships, loyalty implies a feeling or an attitude of devoted

attachment caused by affection. Such attachment makes a person feel responsible to persevere
with that relationship even in adverse times. However, loyalty in commercial relationships
involving company and its’ customer denote a subtly different meaning. Rundle. T (2005)
explained this change in meaning of loyalty and opined that loyalty in business relationships
misses the component of ‘an attitude of devoted attachment’. A customer can persevere in his
relationship with the company and exhibit loyal behaviors on the basis of his faith in the brand.
Homburg and Giering (2001) noted that initially, customer loyalty has been perceived to be a
behavioral concept entailing repeat buying of product or service measured as the series or share
of purchases, referrals, magnitude of relationship or all of the above mingled together.

Liu (2006) provides an analysis of monetary and non-monetary costs incorporated in searching
for and finding a new service provider. The salient costs incurred by customers involved
financial expense as well as time and effort involved in establishing and maintaining a new
service relationship (Zeithaml, 1988). This coincides with Gupta et al.‟s (2004) results which
indicated that a 1 % increase in customer retention had almost five times more impact on firm
value than a 1% change in discount rate or cost of capital.

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 Guillen et al. (2008) noted that the number of empirical studies on customer retention in the
insurance sector is low. They contended that it is important to monitor customer loyalty and
business risk for the life insurance companies due to reasons such as access to information
related to the quality of portfolio, effective handling of customer recruitment and retention
strategies, evaluation of market’s competitiveness in the insurance sector and company’s
position in that market. Durvasula et al. (2004); Tsoukatos and Rand (2006) described life
insurance services are highly intangible.

Retaining customers in highly competitive business environments is critical for any company’s
survival because a lost customer represents more than the loss of the next sale.
The company loses the future profits from that customer’s lifetime of purchases. Also, keeping
customers makes the cost of selling to existing customers lower than the cost of selling to new
customers (Aydin and Ozer, 2005). Therefore, acquisition should be secondary to retaining
customers and enhancing relationships with them. That is because, according to Levy (2008),
new customers are more difficult to find and reach, they buy 10% less than existing customers,
and they are less engaged in the buying process and relationship with retailers in general. Beerli
et al (2002) indicated that factors affecting customer retention have been attracting a lot of
attention in the recent years from academicians as well as marketers in service industry.

Ethiopia’s insurance industry has grown rapidly over the past few years. According to the
report of National Insurance of Ethiopia (2014), there are 17 insurance companies with 312
branches. However, as researches indicated, the insurance sector in Ethiopia is less known at
early stages of development with limited skills, capacity, and incentive to push market
extension (Smith and Chamberlain 2009). This can be further explained by low level of
insurance per capital and penetration. As of June 30 2014 insurance branches to population
ratio (No of branches/Total population) was 1: 264,000, insurance density
(premium/population) was Br. 57 per person. The Insurance penetration (Premium/GDP)
registered less than 1 percent. The measures categorically show that significant portion of the
total population has limited access to insurance services (Smith & Chamberlain, 2009).

Most insurance product developments are easy to increase and when insurance companies
provide nearly similar services, they can only distinguish themselves based on effective
customer relationship management (CRM) and customer satisfaction practice. Customer
retention is the central concern for CRM. Customer satisfaction, which refers to the comparison
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 of customers‟ expectations with his or her perception of being satisfied, is the essential
condition for retaining customers (Kracklauer et al., 2004). Therefore, customer retention is an
effective and importance tool that insurance companies can use to gain a strategic advantage
and survive in today’s ever increasing insurance competitive environment. Thus the purpose
of the study is to identify the determinant factors for customer retention in the insurance
cooperation.

1.2. Statement of the Problem

Customer retention (CR) is a crucial area of study in the field of relationship marketing that is
mainly concerned with keeping customers in the long term. Customer retention is essential for
all firms in the service sector in the present consumer market and it will receive a great deal of
attention over the next few years. This is because customers are considered a real asset to firms,
the majority of which are facing consumer base losses to a considerable degree (Swanson and
Hsu, 2009).

Therefore, the “customer retention” trend has emerged in order to increase organizations‟
profits and minimize both costs and customer switching in the long run. This view is confirmed
by Farquhar (2003) who explained that, in order to be able to build long-term relationships with
customers, institutions must first be able to retain existing customers. Accordingly, customer
retention is that part of relationship marketing knowledge concerned mainly with maintaining
existing customers by manipulating the relationship in a way that enables parties, the firm and
the customer, to benefit through long-term, repeat business (Leong Yow and Qing, 2006; Chang
and Chen, 2007).

The majority of organizations have specific management units which tackle the main retention
strategies and activities duties (e.g. customer retention department) (Blattberg et al., 2002) and
turn their attention and resources towards increasing the retention rate of customers and users
(Wirtz and Lihotzky, 2003). However, Pruden (2000) stated that “we are not entering the era
of relationship marketing yet and retention marketing has yet to progress beyond a topic for
articles and speeches, with little real action”. This is supported by Clapp (2005) who contends
that the majority of institutions value new customers over existing ones in order to develop
their enterprise and replace lost business. Weinstein (2002) has provided evidence that shows

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 acquiring new customers and chasing new business still takes up most companies‟ time,
energy, and resources.

It has been illustrated that customer retention is practiced by many organizations because it
enables them to gain a competitive advantage in the market, which is essential for business and
firms‟ survival (Flambard-Ruaud, 2005).

Therefore, organizations should make more effort to enhance customer retention rates,
especially in highly changeable markets such as the mobile phone sector which reached high
levels of market penetration within a short period of time (Yang, 2006). However frequently,
the main theme of customer retention studies has focused on studying the supplier sides and
how they maintain relationships with customers (Khalifa, 2004; Buttle, 2008). Even from the
supplier side, the bulk of previous customer retention literature has focused on the economic
aspects of retaining customers and how firms develop strategies to improve customer retention
and maximize returns through the customers‟ life cycles (Clarke et al., 2002). Scholars and
practitioners‟ interest in the economic aspects of retaining customers has increased since
Dawkins and Reichheld (2000) reported that a 5% increase in customer retention generated an
increase in customer net present value of between 25% and 95% in a wide range of business
sectors. Also, according to Hanks (2007), a mere 5% improvement in customer retention can
lead to a 75% increase in profitability. However, establishing and maintaining strong
relationships with all customers may not be the primary aim of some organizations because not
all customers and their relationships are similar or profitable (Hausman, 2001; Chen and
Popovich, 2003). Moreover, it has been explained that the majority of firms focus on
customers‟ current period revenues and costs and pay no attention to potential cash flows over
customers‟ lifetimes.

Most insurance product developments are easy to increase and when insurance companies
provide nearly similar services, they can only distinguish themselves based on effective
customer relationship management (CRM) and customer satisfaction practice (Kracklauer et
al., 2013). Customer retention is the central concern for CRM. Customer satisfaction, which
refers to the comparison of customers’ expectations with his or her perception of being
satisfied, is the essential condition for retaining customers (Kracklauer et al., 2013). Therefore,
customer retention is an effective and important tool which enables companies to gain a
strategic advantage and survive in today’s ever-increasing competitive business environment.

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 Thus, when organizations concentrate on customers by practicing marketing strategies, they
can understand customer needs, and provide greater customer care which will improve the
position of the company in the competitive market and retention of customers. The question
then is: what are the determinants of customer retention in the insurance industry. Therefor the
study intended to analysis determinant factors for customer retention in the study area.

1.3. Research objectives

1.3.1. General objectives

The general objectives of the research is to identify determinants of customer retention in
Ethiopia Insurance Corporation

1.4.2. Specific Objectives of the Study

The specific objectives of this research are:

1. To examine the relationship between customer relationship management and

customers’ retention in the insurance corporation
2. To examine the relationship between customer satisfaction and customer retention in
the insurance corporation
3. To examine the relationship between switching barriers (switching costs and
interpersonal relationship) and customer retention
4. To examine the challenges obstructing customer retentions strategies in the insurance
corporation

1.4 Research Hypotheses

The main objective of the study is to identify the sound determinants of customer retention
customers in Batu town. Therefore, based on the above objectives the following were
hypotheses proposed so as to achieve this study:

H1: There is a significant positive relationship between Satisfaction and customer

Retention.

H2: There is a significant positive relationship between Switching barriers and customer
retention.
H3: There is a significant positive relationship Marketing and Customer Retention

H31: There is a significant positive relationship between trust and customer retention.
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 H32:: There is a significant positive relationship between Commitment and customer
retention.

H33: There is a significant positive relationship between Communication and customer

Retention.

1.5. Significance of the Study

This study will gives all marketing professionals, specifically those who operate in the
insurance sector, a clearly understand of the application of customer relationship marketing in
terms of customer retention in the insurance industry. It also enhances decision makers
objectively to shape their marketing strategy toward customer retention through customer
relationship marketing. And it shows the big picture of customer relationship marketing on
customer retention. This research also gives all practitioners an insight on the gaps for further
study.

1.6. Scope of the Study

This research has bordered the scope; geographically, conceptually, and methodologically.

Conceptually scope; the study is delimited to assessing factors that have contribution on
customer retention in insurance sector. Conceptually only three factors (customer satisfaction,
relationship marketing, and switching barriers) will be captured for this research purpose.

Methodological Scope: - This study will use both quantitative and qualitative in the path of
researching primary and secondary data will be used. With regard to the secondary sources
various publications, books, reports, online, and journals concerning the argument matter will
be addressed and the population of the study will be insurance customers in Batu town and to
achieve the objective of the study well design structured questionnaire will distributed among
the study respondents selected convenience sampling basis.
Geographical scope; the study is delimited to the town of Batu and thus the findings of the
study could not be generalized to the insurance sector of Ethiopia.

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 1.7. Definitions of Key Terms

Relationship Marketing: The process of identifying and establishing, maintaining, enhancing

and when necessary terminating relationships with customers and other stakeholders, at a
profit, so that the objectives of all parties involved are met, where this is done by a mutual
giving and fulfilment of promises (Grönroos, 1997).

Trust: The confidence in the exchange partner’s reliability and integrity Morgan and Hunt
(1994).

Commitment: An exchange partner believing that an ongoing relationship with another is so

important as to warrant maximum efforts at maintaining it; that is, the committed party believes
the relationship is worth working on to ensure that it endures indefinitely Morgan and Hunt
(1994).

Customer satisfaction: The extent to which a product’s perceived performance matches a

buyer’s expectations (Kotler and Armstrong, 2012).

Communication: The formal as well as informal sharing of meaningful and timely information
between firms Morgan and Hunt (1994).

Relationship benefit: The benefits received, including time saving, convenience,

companionship, and improved decision making from a customer–seller relationship (Palmatier,
2008).

Customer retention: The ability of a company to keep its existing customers (Leverin and
Liljander, 2006).

1.8. Organization of the Study

The study will be organized under five major sections.

Chapter one; presents background of the study, background of the industry, statement of the
problem, research questions, objectives of the study, research hypothesis, definitions of terms,
significance of the study, delimitation / scope of the study in brief are explained in brief.

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 Chapter two; the whole section of chapter two deals with literature review, in this chapter
major related literature such as articles and books have been thoroughly reviewed and the
conceptual framework will be developed.

Chapter three; is used to discuss the selected research method tools for this particular study
and present concrete justifies for the selected research design and methodology.

Chapter four; is used for data presentation, analysis and interpretation. Descriptive analysis,
correlation analysis, regression analysis will be carried out and the result of the research finding
were interpreted in this section of the research.

Chapter five; the last chapter of the study, chapter five, is used to summarize all the research
findings; conclusions and recommendations based on the research findings will be developed.
This last chapter is also used to indicate areas for further research study.

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 CHAPTER TWO
2. REVIEW OF RELATED LITERATURE

This chapter of the research portrayed a review of the related literature and establishes
theoretical and empirical foundations on which the study had learned. Specifically, the
literature review covered theoretical analysis composed of the concept of customer retention
and its determinants; customer relationship management (CRM), customer satisfaction and
switching barriers and another theoretical and empirical review relevant to the study subject.

2.1 Theoretical Review

2.1.1 The Concept of Customer Retention

Customer retention is defined as the future propensity of a customer to stay with the service
provider (Ranaweera & Prabhu, 2003). Some scholars have used the term future behavioral
intentions to describe the concept of customer retention (Zeithaml, Berry, & Parasuraman,
1996). Customer retention might be thought of as customers‟ continuous engagement with their
service supplier, forsaking all others (Ranaweera & Prabha, 2003); with repeated purchases
being one of the continuous engagement behaviors performed by customers. Customer
retention is concerned with repeated patronage, which is closely related to repeatpurchasing
behavior and brand loyalty (Buttle, 2004).

Customer retention is a process which makes customers loyal towards specific company and
repurchase product from this company (Cannie, 1994). Mostly companies gain benefits from
retention in the form of profit, lower cost and long lasting benefits. Retention is only one
element that increases profit from 5% to 85% (Zeithmal, 1996). Customer retention has
financial impact on company which is based on the assumption that obtaining new customers
are costly than retaining existing customer because for new customer different expenses are
incurred like advertising, operating expense and promotion (Anderson & Sullivan, 1990;
Reichheld & Sasser, 1990). Retention and acquiring new customers is used for revenue and
enhance market share of company (Rust, Zohorik & Keiningham 1995). Retention not only
enhances market share growth but also reduce the cost (Fornell & Wernerfelt, 1987).

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 Moreover, customer retention also has a positive influence on employee retention (Heskett,
Jones, Loveman, Sasser & Schlesinger, 2011). Regular customers are consistent with their
requirements and they have a more realistic expectation of the service delivery than new
customers; so they are easier to be serviced. Moreover, employees get greater work satisfaction
by serving loyal customers than serving dissatisfied and complaining customers.

It is difficult to discuss retention strategies without referring to the subject of switching costs.
Switching costs are effectively barriers to exit from the relationship from the perspective of the
consumer. Perceived wisdom is that relationship marketing strategies work best not only for
long time horizons but also high switching costs (Kinard and Capella 2006). These are costs
(monetary and non-monetary) that buyers encounter when switching from one supplier to
another. While largely self-evident in complex, business-to-business (B2B) marketing
relationships (sunken costs, search costs, etc.), they can equally be relevant to consumers
(Bhattacharya and Bolton, 2000). It is important to recognize that the ‘real’ costs may be greater
or less than that customer’s perception of them (Stewart, 1998).

It has been suggested that, when used with skill, customer retention leads to enhanced revenue,
reduced costs and improved financial performance. Reichheld (1996) echoes this claim by
proposing a list of accumulating benefits that contribute to an entire ‘life cycle of profits’ from
the customer. Reichheld model presented profit grow over time as a result spending grow over
time; cost saving over time; referral income; and price premium.

The Relationship between Customer Relationship Management and Customer Satisfaction

From literature, customer relationship management practice can impact on customer

satisfaction in three main means. Firstly, CRM permits organizations to modify their services
to suit every customer. Customer satisfaction is achieved when product or services are
customized to the taste of the customer. Hence, CRM influence customers’ satisfaction as a
result of perceived service or product quality. Secondly, CRM practices allow organizations
enhance the consistency of meeting customers’ request on time as well as managing customers’
information. Thirdly, CRM practices also enable organizations to control the three main stages
(starting, continuing and exiting) of customer relations successfully (Swift, 2012; Mithas et al.,
2005; Parvatiyar et al., 2011; Kincard, 2010; Reinartz et al., 2014; Anderson et al., 2004;
Crosby et al., 1990).

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 According to Fornell et al., (1996), product manufacturing industries are able to achieve higher
customer satisfaction as compared to the service companies. As a result, effectively managing
client relations is paramount to customer satisfaction. The research findings show that, the
application of CRM in any business firm will produce success, increase income and ultimately
meet the desires of customers. CRM offers customer satisfaction to the fullest. Effectively
managing CRM results in achieving customer satisfaction will compel customers to witness
positively about the company. Information technology and information systems help in
combining CRM process to satisfy the needs of the customer (Chen & Popovich, 2013; Ngai,
2015). However, changes in the course of time in the relationship established through CRM
may affect customer satisfaction. Thus, information gathered from the various interactions with
the company may positively or negatively impact on customers’ satisfaction levels (Mazursky
& Geva 2009; Mittal et al., 2011).

The Relationship between Customer Relationship Management and Customer Retention

The establishment of profitable and long-lasting relationship with customers is very essential
in service industry (Christopher et al., 2001; Bejou & Palmer, 2008; Berry, 2015). Service
providers who practice CRM efficiently gain competitive advantage over their competitors and

are able to retain their customers (Uppal, 2008; Speier & Venkatesh, 2002; Bhattacharya, 2011;
Sharma et al., 2011). Further studies discovered that, retained customers are very crucial
business property for companies and this asset cannot be duplicated by competitors. Therefore,
there must be strong integration among customer related strategies (acquisition, retention and
add-ons) through CRM strategies (Webster, 2012; Kalakota & Robinson, 2009; Kotler et al.,
2011; Winder, 2012; Blattberg et al., 2012; Thomas, 2013; Reinartz et al., 2014; Collier &
Bienstock, 2006). In Addition, McKim & Hughes, (2011) studies classified customer
acquirement and customer retention as the main purpose of CRM. West, (2012) and Kincaid,
(2010) findings show that CRM provides a comprehensive set of strategies for managing those
relationships with customers that relate to the overall process of marketing, sales, service, and
support within the organization. Bradshaw et al., (2010) and Massey et al., (2008) defined CRM
as a management approach that involves identifying, attracting, developing, and maintaining
successful customer relationships over time in order to increase retention of profitable
customers. In accordance with literature, many organizations invest greatly in customer
relationship

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 management (CRM) strategies to create and cultivate long lasting and beneficial relations with

customer.

World Insurance Service Trends

Direct insurance increased by 3.7% in real terms in 1998 on worldwide premium. An increase
of 2.2% for non-life business was characterized by a decline in growth, while a positive growth
of 5.3% for life business was momentum. In global terms, +16.9% and +6.7070 where above
average rates of growth for Africa and Asia respectfully, whiles Europe gain +3.4%, Latin
America had +2.9%, given North America a +1.4% below average.

In 1998, the insurance business became sluggish in the non life area for the USA and Europe,
whiles an economic situation in Europe also lead to a weak demand for the service in a
depressed fermium volume. Comparatively, there were setback recoveries for the Japanese
insurance industry which gain a normal growth rates, living a two figure growth rates for the
South-East Asian region. An extreme rate of change for Africa and Oceania was primarily due
to volatile single premium life business in main markets at South Africa and Australia.

Whiles in 1998, an increase of US$ 143.4billion surpassed the mark for premium volume for
the first time; a 90% in turnover was attributed to industrialized counties market. The life
insurance premium volume was recorded at US$ 1,236.6billion, being 57.7% of total direct
insurance business, Asian countries, especially Japan and South Korea was at higher level in
the life insurance.

However, life insurance became also popular in South Africa, Switzerland and the UK, whiles
non-life insurance gained a turnover of US$ 906.8billion. North America and Western Europe
played a major role in this line of business gaining a world market share of 41.9% and 33.5%
respectively. Japan standing along made a global market volume of 14% in that same line. On
expenditure bases, a US$ 5,088 was spent on insurance for Japanese habitant, Swiss made US$
4,507 falling in second countries at third place with US$ 100 percent inhabitant on insurance
spent.

(http://www.managementparadise.com/forums/service trends-world-scenario-insurance.html

12 | P a g e
 2.1.2 Factors Influencing Customer Retention

The importance of customer retention for organizations along with the factors affecting it has
been underlined by different scholars. This section discusses the factors of customer retention.

2.1.2.1. Customer Relationship Management

Relationship marketing indicates to all marketing behavior directed on the way to establishing,
developing, and maintaining successful relationship interactions (Mishra & Liy, 2008).
Gronroos (1990), states that the purpose of relationship marketing is to identify and set up,
preserve, and improve relationships with customers and other stakeholders, at a profit, so that
the objectives of all parties involved are meet” and that is done by a mutual exchange and
completion” relationship marketing hypothesis suggests that successful relationship marketing
results from certain aspects of cooperative relationships that characterize successful relational
exchange (Hunt, Arnett, and Madhavaram, 2005). Arnett and badrinarayanan (2005)
conceptualize a relationship marketing capability as a firm’s capability to identify, develop, and
administer cooperative relationships with solution customers characterized by trust,
relationship commitment, and message.
Kim et al. (2003) propose a framework of CRM from information processing view point in the
aspects of relationship initiation, worth, positioning and commitment. The approach suggests
that, customer information is crucial in administrating, attracting and retaining successful
relations with customers across the developmental phases. The argument continues that, when
organizations concentrate on their association with customers, some of the customers will be
retain and provide value for the firm in terms of generating higher profits. Therefore,
organizations can improve their relationships with customers by properly managing customer
information. A related conceptual framework of CRM was anticipated to integrate business
procedures, organizational arrangement, investigative structures and technology to represent
customers view (Chan, 2005). Kim et al. (2003), in a different study developed a framework of
CRME to consist of customer knowledge, interaction, value and satisfaction. The study declares
that, business interactions are handled well only when CRM activities aim at satisfying the
customers‟ personal and distinctive needs. Through incorporation of business processes and
technology, organizations are able to sustain and improve the relations with customers. From
functional and organizational capabilities perspective, Reinartz et al. (2004 ) offered a model
13 | P a g e
 for CRM processes based on three different levels of relationships namely; initiation,
maintenance, and termination. Payne et al. (2005) further studied the significance of business
strategy in CRM implementation. The authors developed a model that assigned the business
strategy with customer strategy to establish value for both firm and customers. By so doing, the
lifetime value of advantageous clients is maximized.

2.1.2.2. Customer Satisfaction

The factors affecting customer retention are diverse. Of the numerous factors, customer
satisfaction has been empirically validated to have relationship with customer retention in the
service sector (Brady & Hult, 2000) The importance of satisfaction on customer retention is so
well recognized that some major economies measure satisfaction at the industry level to predict
customer retention and future financial performance. Satisfaction is defined as the degree of
overall pleasure or contentment felt by the customer, resulting from the ability of the service to
fulfil the customer‟s desires, expectations, and needs (Hellier, Geursen, Carr, and Rickard,
2003). Customer satisfaction can be demarcated with two basic concepts such as cumulative
satisfaction and transaction specific (Herrmann & Gustafson, 2002).

Customer retention is one of the most important indicators of customer satisfaction. From the
literature review, it is discovered that customer satisfaction has traditionally been regarded as
a fundamental determinant of long-term customer behavior. The more satisfied customers are,
the greater is their customer retention (Ranaweera and Prabhu, 2003). Cronin and Taylor (2005)
found that customer satisfaction has a significant positive effect on repurchase intention in a
range of services. The authors stated that customer satisfaction is unquestionably the key
determinant in retaining current clients in professional services. Kotler (1994) stated that the
key to customer retention is customer satisfaction. High customer satisfaction increases
customer retention and repurchase intentions. Customer satisfaction has a greater influence to
build up customer repurchase behavior. Satisfied customers are also informed his positive
experience with friends and relatives which develop company feat and profit (Richens, 2005).
Customer satisfaction boosts the customer retention by improving product and service
performance. Gerpott, Rams, & Schindler, (2001) investigated that customer satisfaction is a
direct influential factor for retaining the customers in the mobile telecommunication industry.
Schiffman and Kanuk (2004) argued that organizations need to focus on getting highly satisfied
customers and that is necessary in order to get higher retention.

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 2.1.2.3 Switching Barriers
Perceived switching barriers is defined as the consumer’s assessment of the resources and
opportunities needed to perform the switching act, or alternatively, the constraints that prevent
the switching act (Ranaweera and Prabhu, 2003). According to Keaveney (2005), service
switching may be due to critical incidents, such as attraction by competitors, inappropriate
employee responses to service failures, pricing problems, core service failures, service
encounter failures, lack of convenience, ethical problems or changes in the consumer’s or
service provider’s situation (involuntary switching). Researches also show that switching
barriers may have both main and interaction effects on customer retention (Lee and Feick
2001). Jones, Mothers Baugh, & Beauty (2000) explained that switching barriers are the factors
that force the customers to stay with existing service providers. They investigated that
switching barriers such as switching cost and interpersonal relationship made the switching
costly for the customers.

2.2. Empirical Review

In the course of exploring the existing literatures on customer retention, the researcher brought
out empirical works that relate the independent variables listed under theoretical review with
customer retention.

Customer Satisfaction and Customer Retention

Empirical findings of preceding researchers on the relationship between customer satisfaction

and customer retention/loyalty in a number of industries. A positive relationship exists between
customer satisfaction and retention in auto liability insurance service in Taiwan (Lai, Liu and
Lin, 2011).

The effect of satisfaction and switching cost on customer loyalty is positive and significant in
the Insuranceing sector of Pakistan. However, the effect of satisfaction on customer loyalty is
quite low and switching cost has more influence on loyalty (Bilal). Customer satisfaction well
supported customer retention whereas customer commitment and trust both have negative
influences on customer retention in the context of Internet Insuranceing in Hong Kong among
professionals and business practitioners (Eppie , 2007). Customer satisfaction, customer
relationship, product image and trustworthiness of organization play very important role in
strengthening customer loyalty in Pakistan (Akhter,Abbasi, Ali, and Afzal, 2011).
15 | P a g e
 In the Telecom sector of Pakistan, satisfaction has a positive relationship with customer
retention because only those satisfied customers are using the services. Customer retention is
not possible without satisfaction. Trust is also playing an important role to achieve retention
level. Switching cost has less importance in telecom because when a customer is not satisfied
by the current service provider, he/she can easily shift to another service provider without
considering the cost of switching (Danish, Ahmad, Ateeq, Ali, Humayon 2015).

Trust and Customer Retention

Empirical findings of preceding researchers on the relationship between trust and customer
retention/loyalty in a number of industries.

Customer trust is an important antecedent of customer loyalty. Customer trust on employees

and customer trust on insurance company play a vital role in influencing customers towards
loyalty in insurance sector of Ethiopia. The correlation between customer trust on company
employees and customer loyalty is stronger than that of customer trust on insurance company
and customer loyalty (Kassegne and Pagidimarri, 2013).

Customer satisfaction has the largest impact on retention; however, trust also has a major impact
on retention. Trust and personal relationships are important in retaining customers in markets
where individual action can impact the outcome of a purchase (Wilson, Soni and O‟Keeffe,
1995).

2.1.1 Price and Customer Retention

Empirical findings of preceding researchers on the relationship between price and customer
retention/loyalty in a number of industries.

Fair price has a significant effect on customer switching intentions, which means that unfair
price motivates customer intentions to switch the Insurance in the case of Insurance of Palestine
and Cairo Amman Insurance in Gaza Strip (Murad, 2011).

Empirical support for the price perceptions – customer retention link in the service sector is
scant. Indeed, one of the few exceptions is the recent study by Varki and Colgate (2001). Their
review illustrated that given the importance of price perceptions, surprisingly little work has
been done on the impact of price in the service sector and they argued the need for future

16 | P a g e
 research to focus more on this link. Based on a survey of the Insuranceing sector, they found
evidence to support a direct positive association between price perceptions and customer
behavioural intentions. Indeed, if such a hypothesis holds true in a service shop environment
such as Insuranceing, it is expected that the same association would be similar, if not stronger,
in a mass service such as the fixed line telephone sector, where the importance of price has
been argued to be even more.

Switching Barriers and Customer Retention

Empirical findings of preceding researchers on the relationship between switching barriers and
customer retention/loyalty in a number of industries.

Customer satisfaction, customer trust and switching barriers are positively related to the overall
customer retention in the Malaysia retail market. In addition, the research finding also
concludes that customer satisfaction has a positive effect on customer trust (Danesh, Nasab and
Ling, 2012).

There exists positive and statistically significant relationship among customer satisfaction,
relationship quality, switching costs and customer retention in the case of Lithuanian mobile
operators. Switching costs have the greatest impact on the customer retention. The impact of
relationship quality is also very significant. Due to the fact that relationship quality is very
significant for switching costs as bettering relationship increases emotional loss or improving
relations increases the emotional damages, so the customers are reluctant to change the mobile
operator (Tamuliene, Gabryte 2014).

Switching costs (setup costs, search costs, learning costs, contractual costs, and continuity
costs) can play a significant role in the development of customer loyalty to service organizations
(Gremler and Brown, 1996).

Both switching barrier and customer commitment had strong and positive significant
relationship with customer retention. Customer satisfaction had weak positive relationship with
customer retention in the context of customers of Ghana Commercial Insurance within Agona
Swedru Municipality (Boohene, Agyapong and Gonu, 2013).

17 | P a g e
 The five specific relationship dimensions of interpersonal bonds (familiarity, care, friendship,
rapport, and trust) were found to have significant influence on service loyalty (Gremler and
Brown, 1996).

The factors switching barriers (Interpersonal relationship & Switching cost), Trust, Brand
Image, Price perception and customer satisfaction have the effect on customer retention towards
the Cellular industry in Pakistan However, customer satisfaction has little to do to increase the
customer retention (Qadri and Khan 2014).

As it can be seen from the above empirical findings different researchers addressed the issue of
retention in different industries found under the umbrella of service sector. This research is
intended to validate the relationship of independent variables (Customer satisfaction, Trust,
Price and Switching Barriers) with the dependent variable of customer retention and to test how
true the findings are in the context of non life insurance sector in Addis Ababa, Ethiopia.

18 | P a g e
 2.3. Conceptual Framework of the Research

In the present study according to the model Conceptual framework of the research Adapted and
modified from Hunt et al., (2006) variables of relationship marketing, satisfaction and Switching
barriers as fundamental variables of relationship marketing will be studied.

Independent
Variables
Dependent
Variable

Customer
Relationship

Satisfaction
Customer
Retention

Switching Barriers

Figure 2. 1: Conceptual Model adopted and modified from literature review

19 | P a g e
 CHAPTER THREE
3. RESEARCH METHODOLOGY

In this section, what is going to be done and where, how it was done, what data was needed,
the proposed tools to be used in the data collection and the methods of analyzing the data and
the expected sign of explanatory variables on the response variable was precisely described.

3.1. Research Approach

According to (Kothari..C.R, 2004) explained that research approaches are broadly classified
under two categories: quantitative and qualitative. The former involves the generation of data
in quantitative form which can be subjected to rigorous quantitative analysis, while the latter is
concerned with subjective assessment of attitudes, opinions and behavior where results either
in non-quantitative form or in the form which are not subjected to rigorous quantitative analysis.
The inferential research approach is among the sub-categories of quantitative approach and its
main purpose is to form a database from which to infer characteristics or relationships of
population.

Accordingly, this study utilized both quantitative and qualitative (mixed research) approaches.
In its quantitative approach in general and inferential approach in particular, the study was
involved sample respondents and its determinants where findings would infer to the entire
population.

Besides, qualitative approaches also included to complement the findings of quantitative

analysis. The study mainly followed explanatory type of research, beyond describing what is
happening, the study also includes correlation and regression approaches to observe the
determination level of each variable keeping other variables constant as an assumption, to
address the research objective of analyze the relationship of factors on customer’s retention.

3.2. Study Design

A research design is a set of advance decisions that makes up the master plan specifying the
methods and procedures for collecting and analyzing the needed information. In order to
address the research objectives, the design of the study was explanatory type. Explanatory
design uses to identify any causal links between factors or variables. This research design

20 | P a g e
 determines how events occur and which ones may influence a particular outcomes
(Dawson.&.Bob, 2006).This design is characterized by research hypotheses that specify the
nature and direction of the relationships among variables being studied. Therefore, the study
was explanatory method in order to explain the determinant factors of customer’s retention in
Insurance Corporation.

3.4. Study Population

The population about analysis was made the total customers of non-life insurance in Batu town.
Since researchers cannot take an entire population, they select a sample from that population.
It is very important to select a sample that will provide results similar to those that would have
been obtained if the entire population had been surveyed (Ary, Jacobs, and Razavich 2002).

3.5. Sample Size Determination

Sample size is one of the most efficient method of achieving estimates that are provides precise
result for research. As the population is finite this study uses to determine the sample size (n)
required for the study, the researcher used the formula proposed by Yamane (1967:886). That
is, a 95% confidence level and P = 0.05 are

𝑁
n=
1 + 𝑁(𝑒)2

Where n is the sample size, N is the population size, and e is the level of precision. When this

formula is applied to the above sample, then the sample size (n) is estimated as: n=

=363

3.5. Data Type, Source, and Method of Data Collection

3.5.1. Type of Data Source

Primary and secondary sources was used to collect applicable data in the study. The primary
method of data collection will made through structured questionnaires from customers of non-
life insurance. Moreover, the secondary sources of data was collected from related books,
21 | P a g e
 publications, articles, journals, annual reported documents, online, and websites, etc. were
second-hand.

The English version of the questionnaire was carefully and accurately translate into Amharic.
The questionnaires were consisting of three parts. Division one will organize to group general
figures about the respondent's gender, age, education, occupation, types of account and for how
many years the customer using the insurance services. Part two and three will consists questions
that measure the determinants factor of customer retention.

3.5.2. Method of Data Collection

Primary data was collected through structured questionnaire adapted from previous researches
on the subject that prepare for the survey based on literature review and objective of the study.
According to Cohen (2011) questionnaire is a set of questions designed to produce statistical
information from the respondents to accomplish research objectives. A five-point Likert scale
was used by scoring from strongly disagree=1 to strongly agree=5 for measuring opinions,
attitude, and behavioral tendencies of customers are used in the study and the Likert scale was
used to measure the determinant factors for customer’s retention. These responses were easily
quantified, and thus get equipped for any mathematical analysis. The secondary data sources
was collected from different published and unpublished material like journals, articles, text
book, organization manuals, reports and any other secondary source which support the study
area.

3.6. Methods of data Analysis

Both descriptive and inferential statistical analysis was made in throughout the analysis process.
The study would use SPSS v.20 software package to analyze factors determining customer
retention. The data gathered through questionnaires was coded, enter into computer, analyze
and present in the form of tables using SPSS v.20 software package. The questionnaire was
structured in close ended type and responses were measured on a five-liker rating scale. Where;
strongly agree weights 5(five), agree 4(four), neutral 3(three), disagree 2(two) and strongly
disagree weights 1(one). The relationship and extent of explanatory variables was determined
by using results from regression models, analyzed and interpreted based on the significance
level of explanatory variables. Pearson Correlation analysis was utilized to measure the degree
of relationship among the variables.

22 | P a g e
 3.6. Validity and Reliability Test

3.6.1. Validity
Validity is defined as how much any measuring tool measures what it is planned to measures
(Joppe, 2000) or whether an indicator (or set of indicators) that is devised to assess an idea
measure that perception. Pretesting on potential respondents and expert judgment are used for
content validity tests. Construct validity has focused on whether the scores serve a useful
purpose and have positive consequences when they are used in practice. In order to ensure the
quality of the research design, the content and construct validity of the study was checked.
Validity is the measure of the degree of validity or the validity of the research instrument.
Content Validity: Ndubisi & Wah (2005) standard questionnaire was used with minor
adjustment. Each attribute was derived from relevant literature to ensure the validity of the
questionnaire and content validity will verified by the advisor of this research, who looked into
the appropriateness of questions and the scales of measurement. In addition, all reference
materials was acknowledged with proper citation, and confidentiality of data is maintained
throughout the process.

3.6.2. Reliability Test

The most popular method used in research to test internal consistency is the determination of
the alpha coefficient. Reliability indicates the extent to which variables or a set of variables
were consistent in what they were supposed to measure (Hair, 2006). Reliability analysis was
used to measure the consistency of a questionnaire. It also explains the degree to which
observed scored are free from errors of measurement and indicate the extent to which the
different items, measures, or assessments are consistent with one another in measuring that
variable. Reliability is an essential pre-condition for validity. So as to ensure reliability of the
study Cranach’s alpha was used.

3.7. Ethical Consideration

Up on submission of final proposal, ethical clearance was obtained from the ethical review
committee of Madda Walabu University. A formal letter of cooperation would be written from
the District head to each selected branches in order to get permission to conduct the study.
Likewise, eligible Customers who was selected for the interview will informed about the
purposes and the procedures of the study and their response would be kept confidential and not

23 | P a g e
 used for purpose other than the objectives of the study and was considered for the study only if
they provided informed consent. To maintain confidentiality, the name of respondents was
avoided from the questionnaires. Respondents was informed that they have the full right to
discontinue or refuse to participate in the study. Thus, voluntary customers are encouraged to
participate in the study and questionnaires was administered to them based on their verbal
consent.

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 CHAPTER FOUR

4. DATA PRESENTATION, ANALYSIS, AND DISCUSSION

4.1. Introduction

This chapter presents the analysis of data and findings of the research in accordance with the
research objective and hypothesis focusing on demographic results to show the general
characteristics of the respondents, descriptive statistics of the response to described the basic
features of the data, and correlations and regression analysis to investigate the relationship of
the independent variables (Switching Barriers, Satisfaction and Customer Relationship) on
dependent variables Customer Retention. Determinants of Customer Retention in Ethiopia
Insurance Corporation was discussed. The primary aim of this study was to examine the extent
to which independent variables influences Customer Retention in Ethiopia Insurance
Corporation in the Case of Batu town.

To study Determinants of Customer Retention, a questioner was developed with a five-point

Likert scale and a value was assigned to express the extent to which a respondent agrees or
disagree with the specific statements given in the questioner. Hence a value of 1 was assigned
to state strong disagreement, 2 just their disagreement, 3 to be neutral about the statement, 4 to
agree with the specific statement in question and the higher value 5 is denote strongly
agreement.

4.1.1. Response Rate

Three hundred and fifteen (363) questionnaires were distributed to randomly selected
customers through their corresponding branches.

Out of the distributed questioner three hundred and fifteen (315) were found valid during
coding, and each cases were directly keyed into IBM© SPSS© version 25 software. However,
there were forty seven (48) cases which were not included in the analysis because these
questionnaires either not returned back on time or found useless during coding; and deliberately
removed so as these removed cases will not affect the research finding if they were included.
All successful responses almost cover 87.% of the sample.

25 | P a g e
 Response

13%

Response Rte
Non Response Rte

87%

Figure 4. 1 Response Rate

4.1.2. Data Analysis and Discussion

Data analysis have three objectives: getting a feel for the data, testing the goodness of data, and
testing the hypotheses developed for the research Sekaaran (2003), hence the feel for the data
will give preliminary ideas of how good the scales are, how well the coding and entering of
data have been done.

To make sure that cases were properly coded and/or entered into the application software,
descriptive statistics have been generated; and central tendencies and dispersions were
evaluated. Accordingly, the final result of the descriptive statistics preliminary was found and
any value out of the expected value were cleared and made at least free coding error (any outof-
range or missing responses, etc., are cleaned up), and the goodness of the measures is
established.

4.2. Demographic, Social and Economic Characteristics of Respondents

There were no missing item out of the 315 respondents. The mean, median and mode age of
the respondents was 45.07, 44, and 42 respectively with a standard deviation of 6.782 with a
variance of 45.995 which indicate that there was a high variation in terms of age mix of the
respondent which will give the research out put that include the possible age groups in this
research. The minimum age was 29 while the maximum age value was 64. Out of the 315
26 | P a g e
 successful responses 75 percentile were those respondents whose age is up to 50 years old. A
very high variation is seen in the age citatory as it is evidenced by the standard deviation of
6.782 and variance of 45.995. Similarly for the total number of year stay with the insurer there
is a very high standard deviation and variance among respondents with a value of 4.182 and
17.488 respectively. But for the remaining of the variables the standard deviation and the
variance are very minimal which are both under 0.5.

Table 4. 1 Statistics for Respondents Age, Educational Level, Gender, Insurance Type, and Business
Category

Age Category Frequency Percent Valid Percent Cumulative

Percent

Valid 1. Age less than or equal 1.1 1.1 1.1

to 30 4

2. Age from 31 to 40 77 24.6 24.6 25.7

3. Age from 41 to 50 161 51.1 51.1 76.9

4. Age from 51 to 60 67 21.3 21.3 98.1

5. Age above 61 years 1.9 1.9 100.0

6
of age

Total 315 100 100

Education Status Frequenc Percent Valid Cumulative

Percent Percent
y

Valid Diploma 3 1.1 1.1 1.1

Degree 232 86.6 86.6 87.7

Masters 33 12.3 12.3 100.0

Valid Male 186 69.4 69.4 69.4

Female 82 30.6 30.6 100.0

Total 315 100.0 100.0

27 | P a g e
 Insurance Type, and Business Frequenc Percent Valid Cumulative
Category Percent Percent
y

Valid General 229 85.45 85.4 85.4

Life and Health 22 8.21 8.2 93.6

Micro 17 6.34 6.3 100.0

Valid Governmental Organization 25 9.3 9.3 9.3

International NGO 22 8.2 8.2 17.5

Local NGO 27 10.1 10.1 27.6

Private Business 193 72.0 72.0 99.6

Religious Organization 1 .4 .4 100.0

Total 315 100.0 100.0

4.2.1 Respondents Demographic Characteristics

Age Categories; As shown in the above table 4.2.1, 1.1% of the respondents were under the
age of 30 years, and 24.6% were between the age of 31 years and 40 years. 51.1% of the
respondents were between the age between 41 and 50 years. 21.3% were between the age
category between 41 and 50. And 1.9% of the respondents were above the age of 61. The age
category was normally distributed as shown in the chart below.

Respondent educational level; As it can be viewed from the above table 4.2.1, 12.3% of the
respondents have master degree, and the majority of the respondents, 86.6%, have their first
degree, and the remaining 1.1% of the respondents were diploma holder.

Respondent Gender; From the above table 4.2.1., 69.4% of the respondents were male. And
there were 30.6% were female respondents. 4.3.4

Respondent Insurance service user; 85.40% of the respondents were general insurance
service users, while there were 8.21% and 6.3% life & health and micro insurance product users
as shown in the table 4.2.1.

28 | P a g e
 Customer’s Business Category (Classification); The majority of the respondents were
classified under private owned business companies which covers 72% of the whole
respondents. 8.2% of the respondents were international organizations, and 9.3 were
government owned institutions. 10.1% of the respondents were local NGOs, and there found
only 0.4% respondents who falls under religious organizations as shown in table 4.2.1.

4.3. Descriptive Analysis

According to Hair et al. (2003) once the data have been collected and prepared for analysis,
there are some basic statistical analysis procedures to perform. The descriptive analysis helps
to find out what the entire set of responses are which were obtained in the form of numbers;
that is, respondents provide their agreement and disagreement level in the form of numbers and
these numbers are entered into the computer system to generate more meaningful statistics. The
descriptive statistics employed in this study include frequency distribution, percentage, mean
and Standard deviation with the aim of providing on the whole view of the respondents’
awareness concerning each construct/item listed in the Likert scale. The researcher has
interpreted the Likert scale based on the standardized agreed listed range described below:
Table 4. 2 Standardized Agreed List Range
Range Members Perception
1.0 to 1.8 Strongly Disagree
1.9 to 2.6 Disagree
2.7 to 3.4 Neutral or Undecided
3.5 to 4.2 Agree
4.3 to 5.00 Strongly agree
Source: adopted from Melaku (2013)

4.3.1. Measures of Central Tendency and Dispersion of Determinants Of

Customers Retention

There are a number of marketing factors that affect customers' retention at insurance service.
This part explains the descriptive statistics calculated on the basis of the relationship marketing,
customers satisfaction and switching cost factors that affect the customer retention of insurance
customers. The results for measures of central tendency and dispersion were obtained from the
sample of respondents of customers are shown in the following tables: -
29 | P a g e
 4.3.1. Satisfaction Dimension
Table 4. 3 Descriptive statics for Satisfaction
Items Mean Std.
Satisfaction factors Deviation

I am pleased that I purchased insurance from 3.82 .510

the company.

My decision to purchase insurance from the 3.51 .800

company was a wise one.

I feel good about my decision to purchase the 3.70 .490

company’s insurance.

I am satisfied with the overall service quality 3.68 .626

offered by the company.

I am satisfied with the professional 3.62 .558

competence of the company’s employees.

I am satisfied on my relationship with 3.60 .556

frontline employees of the company

Given my experience the Company can 3.65 .566

trusted completely

Cumulative Mean 3.6032 0.51240

All mean values of the six measurement items lies in the range of 3.51 to 4.5 which indicates
that respondents have good perception for all items. The standard deviations of each variable
are relatively low which is below one. Low standard deviation means that the data are narrow
spread, which tells that customers gave close opinion on each item.
As is indicated in table 4.3.1, the mean and standard deviation for the Satisfaction factors were
calculated. The table shows that they feel pleased that they purchased insurance from the
company has a cumulative mean score of 3.6032 and a standard deviation of 0.91240.
With this, the highest score is the Company’s feel safe in all of their transactions which is mean
score of 3.82, and the minimum score the respondent record is they decision to purchase
insurance from the company was a wise one which is 3.51. Therefore, it may concluded that
customers of insurance campany satisfaied in all of their transactions with the campany.
Regarding addressing the need of customers by the insurance campany, all the participants

30 | P a g e
 agreed with the idea of the campany makes every effort to address the need of customers of the
respondents felt the campany was trustworthy.

4.3.2. Switching Barriers Dimension

Table 4. 4 Descriptive statistics of Switching Barriers

Items
Switching Barriers factors Mean Std.
Deviation

It would cost me a lot of money to switch from 3.59 1.077

my current insurance company to another
insurance company.

It would cost me a lot of time to switch from 3.62 1.074

my current insurance company to another
insurance company.

It would cost me a lot of effort to switch from 3.69 1.079

my current insurance company to another
insurance company.

In general switching to a new insurance 3.70 1.083

company would be a hassle.

I feel there is an interpersonal bond with the 3.65 1.052

people working for the company.

I have developed a friendly relationship with 3.62 1.083

the people working for the company.

I am more comfortable interacting with the 3.68 1.078

people working for the company.

I will lose a friendly and comfortable 3.65 1.117

relationship if I shift to another insurance
company.

Cumulative Mean 3.6413 0.94509

As in table 4.3.2. describes that the mean and standard deviation for the Switching Barriers
factors were premeditated. All mean values of measurement items lie in the range of 3.51 –

31 | P a g e
 4.5 which indicate that respondents have good perception for these items. The table shows that
the highest mean score recorded for the variable is the general switching to a new insurance
company would be a hassle is that 3.70 and the smallest score is documented with 3.59 is the
cost of money to switch from current insurance company to another insurance company. Again
the table shows that they feel swithing barriers in all of their relations with the Insurance has a
cumulative mean score of 3.6413 and a standard deviation of 0.94509. Therefore, it may be
concluded that customers of insurance company feel cost to switch from insurance campany.

4.3.3. Relationship Dimension

4.3.3. 1 Trust Dimension

Table 4. 5 Descriptive statistics of Trust

Items Mean Std.
Trust factors deviation

I feel safe in all of my transactions with the insurance Company 3.72 1.084
The insurance Company always does what it promised to do 3.68 1.084
I am confident on the financial status of the insurance Company 3.66 1.004
The insurance Company is trustworthy on calculating charges 3.72 1.107
The insurance Company is trustworthy during the cash payment process 3.68 1.075

The insurance Company provides consistent quality services at 3.68 1.118

different time

Cumulative mean 3.6762 0.93238

As is indicated in table above, the mean and standard deviation for the trust factors were
calculated. The table shows that they feel safe in all of the transactions with the insurance
Company has a cumulative mean score of 3.6762 and a standard deviation of 0.93238. With
this, the highest score is the insurance Company two items feels safe in all of their transactions
and trustworthy during the cash payment process, followed by three items with mean score of
3.68 for insurance Company does what it promised to do, trustworthy during the cash payment
process and consistent quality services at different time.

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 Relatively the minimum score the respondent record is confident on the financial status of the
insurance Company which is 3.66. Therefore, it may conclude that customers of confident on
the financial status of the insurance Company safe in all of their transactions with the Company.
Regarding addressing the need of customers by the confident on the financial status of the
insurance Company, all the participants agreed with the idea of the Company makes every
effort to address the need of customers of the respondents felt the Insurance was trustworthy.

The study findings, therefore, support the point of view in the literature about the practice of
trust as a Customer relationship marketing in confident on the financial status of the insurance
Company to a reasonable extent. In the context of relationship marketing, trust is defined as the
dimension of a business relationship that determine the level to which each party feels they can
depend on the honesty of the promises obtained from other party(Callaghan et.al,1995)

4.3.3.2 Commitment Dimension

Table 4. 6 Descriptive statistics of Commitment

Items Mean Std.

Commitment Deviation

The insurance Company makes adjustment to 3.49 0.961

suit my needs

The insurance Company offers personalized 3.68 1.060

services to meet customers need

The insurance Company is flexible when its 3.76 1.187

service is changed

The insurance Company is flexible in serving 3.69 1.025

my needs

My relationship with the insurance Company is 3.69 0.967

one that I am very committed to continuing it

Grand total mean 3.65173 0.83889

As in the table above describes that the mean and standard deviation for the commitment factors
were premeditated. The above table shows that the highest mean score recorded for the variable

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 is the insurance Company’s flexibility when its service is changed is that 3.76 and the smallest
score is documented with 3.49 is the insurance Company makes an adjustment to suit needs.
Again the table shows that they feel committed in all of their relations with the Insurance has a
cumulative mean score of 3.6413 and a standard deviation of 0.94509. Therefore, it may be
concluded that customers of the insurance Company are committed to all of their transaction
relations with the Company. Regarding addressing the need of customers by the insurance
Company, all the participants agreed with the idea of the Company makes every effort to
address the need of the customer. This result was agreed with the result of Samuel Addis, 2017
Addis Ababa University. So most of the customers of the insurance Company are more
committed to use the Insurance.

4.3.3.3 Communication Dimension

Table 4. 7 Communication Dimension

Items Mean Std
Communication Factors Deviation

The insurance company provides timely 3.68 1.093

information

The insurance company provides accurate and 3.58 1.141

reliable information

The insurance company provides the 3.61 1.133

information if there is a new company service
My insurance company provides information 3.76 1.070
on my transactions to the extent I need to be
informed

Cumulative factors 3.7143 1.02249

According to the criterion set under table above, the mean value falls to the “agree on the level”
of the respondents. It has also the overall minimum mean value that rounds to 1 strongly
disagree level and a maximum of 5 strongly agree on level for these factors scale items of the
variable. This implies that in the study area retention activity was positively affected by those
communication factors, these results in the reduction of the benefits obtained from customer
retention in the insurance company.
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 As it can be seen in table, provides information on my transactions to the extent I need to be
informed with the mean score 3.76 has gone high which is the predominant getting Retention
and retain. Besides, the minimum mean score is laid on the variable stated in the prevalence
providing accurate and reliable information, the mean score is 3.58. This is the problem of most
organizations that needs clear supervision. The cumulative mean scores of 3.7143 and its
standard deviation of 1.02249 derived by the researcher from SPSS software.

When the above responses compared with the interview conducted with the concerned bodies,
it was confirmed that there are problems related to providing timely information to internal and
external needy bodies. This result was agreed with the result of Sintayeh Tesfaye, 2019
university of Gondar. Customers agree that they are satisfied with communication between
them and the organization.

4.4. Customer Retention Dimension

Table 4. 8 Customer Retension Dimension

Items Mean Std.
Customer Retension factors Deviation

I consider the insurance company as my first 3.81 0.942

choice between others company in the area

I will mention this company to friends and 3.86 0.962

family members

It is extremely likely that I will be the 3.88 0.997

customer of this company in long run.

I am self-confident of giving positive word of 3.84 0.897

mouth testimonies to others about this
company.

I am satisfied with the company service 3.73 0.878

provided.

I would not change this company; even close 3.87 0.967

friends Suggests to shift to another Insurance

I am a loyal customer to the company 3.90 0.969

Grand total mean 3.8317 0.82184

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 The mean and standard deviation 3.8317 and 0.82184 respectively for the retension factors were
seen in the above table. All mean values of the four measurement items are around 3.8 which
indicate that respondents have very good perception for all items. The standard deviations of
each variable are relatively low which is below one. Low standard deviation means that the
data are narrow spread, which tells that customers gave close opinion on each item.
The table displays that they feel retension in all transactions with the Company while the
factors of independent variables are impacted positively. Therefore, it may be clinched that
customers of the company are loyal in all of their transactions with the company. Addressing
the need of customers by the company, all the participants agreed with the idea of the insurance
company makes every effort to address the need of customers of the respondents felt the
company was loyal in all way.
This result was agreed with the result of Meskerem Buzuwork June 2017 Addis Ababa
University and Fikret Mamo March 2017 St Marry University that the retension factors fall in
agreed level. So most of the customers of the company are more loyal than any other business
this may be due to the skilled man and trained man power with high competition resistance
strategy to save their customers loyal to their institute. As a result, most company customers
are loyal which makes their shifting decision difficult than other business sectors.

4.5. Results and Discussions of Descriptive Statistics

This discussion is very significant to give more explanation on the descriptive statistics above
results. The objective of this study was to explore determinants of customer’s retention in
insurance company

According to the descriptive result in insurance corporation communication items scored the
highest mean (3.7143). This revealed that customers of Ethiopian Insurance Corporation were
loyal to the provided timely information, accurate and reliable information and information if
there is a new company service. The second highest mean score value was 3.6762 for trust
items (feel safe with the insurance Company, Company always does what it promised to do,
consistent quality services at different time, trustworthy on calculating charges, trustworthy
during the cash payment process and confident on the financial status of the insurance
Company)

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 The third highest mean value is an commitment item (3.65173) which reveals the company’s‟
ability and services (making adjustment to suit customer needs, offering personalized services
to meet customers need, flexibility when its service is changed and in serving customer’s needs)
The fourth highest average means score value was (3.6413) for Switching Barriers items (cost
of money to switch, cost of time to switch, cost lot of effort to switch, interpersonal bond with
the people working for the company, a friendly relationship with the people and comfortable
interacting with the people) The last dimension of satisfaction items has scored relatively the
least mean value (3.6032). However the result shows that customers of insurance company
satisfied in all of their transactions with the company. Regarding addressing the need of
customers by the insurance company, all the participants agreed with the idea of the company
makes every effort to address the need of customers of the respondents felt satisfied. The data
shows that customer relationship ( Communication, Trust and Commitment) pave the ways for
customers retention.

4.6. Summary Mean and Standard Deviation of Determinants Of Customers

Retention Dimension

Table 4. 9 Summary Mean and Standard Deviation of determinants of customers retention Dimension
S/N Variable Mean Std.dev.
Dimensions
1 Customer 3.6032 0.91240
Satisfaction
2 Switching 3.6413 0.9409
Barriers
3 Trust 3.6762 0.93238
4 Commitment 3.6571 0.83889
5 Communication 3.7143 1.02249
6 Customer 3.8317 0.82184
Retension

As shown from table 4.6 depicts the summarized total average mean values of customers’
responses on the five dimensions of determinants of customer Retension. In Ethiopian
Insurance Corporation in batu city branches, the communication dimension was carried out

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 superior to the other four dimensions with a mean score of 3.7143. This indicates that the
majority of the respondents agreed that the performance of Ethiopian Insurance Corporation on
the items included in this dimension is very good. The dimensions that customers gave high
scores next to the Communication dimension are trust and commitment with a mean value of
3.6762 and 3.6571 respectively. The result indicates that large numbers of customers agree on
the performance of the insurance campany concerning the items included in these dimensions
which is customers relationship variables. However, the remaining two dimensions (Switching
barriers and Satisfaction) scored the least average mean value of 3.6413 and 3.6032
respectively. This indicates that the majority of the customers of insurance company in city
branches' performance are good on the items included in these dimensions. The customers of
insurance companies are agreed with all selected determinant dimensions.
According to table 4.6; Customer Retension makes a cumulative mean score of 3.8317 in
Ethiopian Insurance Corporation. This implies that customers of the company’s branch are
determined to recommend the company to their friends and acquaintances, consider them to be
loyal, do not think of changing their company easily, intend using other services and products
of their Insurance and the services and products offered by their company meet their needs.
Therefore, the company tries to add new services to have more new customers.

4.7. Inferential Statistics

In this section, the results of inferential statistics are presented. To assess the objectives of the
study, Pearson’s Product Moment Correlation Coefficient, and regression analyses were
performed. With the aid of these statistical techniques, conclusions are drawn concerning the
sample, and decisions are made concerning the research hypothesis.

4.7.1. Correlation Analysis

The researcher uses Karl Pearson’s coefficient of correlation (or simple correlation) because it
is the most widely used method of measuring the degree of relationship between two variables.
This coefficient assumes the following: that there is a linear relationship between the two
variables, and variables are causally related which means that one of the variables is in
dependent and the other one is dependent (Kothari, 2004).To know the strength and type of
correlation between variables, the following table is set as a rule of thumb for the discussion of
this thesis.
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Table 4. 10 Rule of Thumb For About the Strength of Correlation of Coefficients

of Description of strength
Range
coefficient

±.81 to ±1.00 Very strong

± .61 to ± .80 Strong

± .41 to ± .60 Moderate

± .21 to ±.40 Weak

± .00 to ± .20 None

Source; Bhattacherjee (2012) cited in Demis, 2016)

In this study Pearson’s product, moment correlation coefficient was used to determine whether
is a significant relationship between satisfaction, switching barriers, trust, commitment and
communication with customer retention. The following section presents the results of Pearson’s
product moment correlation on the relationship between independent variables, and dependent
variables. The table below indicates that the correlation coefficients for the relationships
between customer retention and its independent variables are linear and positive ranging from
substantial to strong correlation coefficients.
Correlation analysis is used to measure the relationship between independent and dependent
variables. In this section, the correlation matrix of the constructs is computed which provides
the preliminary evidence of the relationship between variables. Pearson coefficient of
correlation is the most widely used for summarizing the degree of relationship and directions
between two variables. The values of correlation always lie between -1 and +1. The value of 1
indicates a perfect negative correlation between the dependent, and independent variables
(determinants of customer retention and customer retention dimension), a value of 0 indicates
no correlation between dependent and independent variables and +1 perfect positive

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 relationship between a dependent variable and independent variables. This correlation
procedure is two-tailed tests of statistical significance at two different levels, highly significant
(p < 0.01) and significant (p < 0.05).
Table 4. 11 Relationship between Dimension of relationship marketing and customer Retention
Correlations

Determinants of Satisfa Switching Trust Commitm Communication Customer

Customer ction barriers ent Retention
Retention

Dimensions

Satisfaction 1 .525** .489** .346** .438** .552**

Switching .525** 1 .612** .407** .566** .627**

barriers

Trust .489** .612** 1 .432** .661** .673**

Commitment .346** .407** .432** 1 .543** .595**

Communication .438** .566** .661** .543** 1 .670**

Customer .552** .627** .673** .595** .670** 1

Retention

**. Correlation is significant at the 0.01 level (2-tailed).

Source .2022 spss output

According to table 4.12 correlation matrix, we can see that all the five independent variables
(Satisfaction, Switching barriers, Trust, Commitment, and communication) have a positive &
significant relationship with (dependent variables) customer retention in insurance cooperation.
The result of Pearson correlation test between the dependent variable Customer retention and
the independent variable Satisfaction showed that, there is a positive relationship between the
two variables at the significance level of (R=0.552**), (P<0.01). As compared to other
relationship dimensions considered in this study, Satisfaction is ranked the least correlation
between customer retention but is shows positive relationship with customer’s retention.
Therefore, H1: There is a significant positive relationship between Satisfaction and customer
Retention. Based on the result obtained from Pearson correlation, there is a positive association

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 between the dependent variable Customer retention and independent variable Customer
satisfaction.
The result of Pearson correlation test between the dependent variable Customer retention and
the independent variable Switching barriers showed that, there is a positive relationship
between the two variables at the significance level of (R=0.627**), (P<0.01). When compared
to other relationship dimensions measured in this study, switching barriers is ranked third and
it shows positive correlation with dependent variable. Therefore, H2: There is a significant
positive relationship between Switching barriers and customer retention. The Pearson
correlation result of the study table above, between the predicted variable of customer retention
and the predictor variable of trust showed that, there is significant positive relationship between
the two variable at a statistical level of (R=0.673**), (P<0.01). From the relationship marketing
constructs observed so far, Trust is ranked first in its magnitude of correlation, which means
highly correlated variable with customer Retention in this study. Therefore, H3: There is a
significant positive relationship between Relationship Marketing and Customer Retention;
the result of relationship marketing variables shows there is positive relationship between all
marketing relationship dimension and customer Retension.
Detail result shows that;
H31: There is a significant positive relationship between trust and customer retention. Based
on the result obtained from Pearson correlation, this correlation is the strongest correlation
between Customer retention and Trust.
As usual, Pearson correlation test was conducted to check the degree of association between
the dependent variable customer retention and the independent variable Commitment, which
the fourth construct dimension of determinants of customer retention considered under this
study. Accordingly, the test result of the study showed that, there is a significant positive
relationship between the two variables at a level of (R=0.595**), (P<0.01). When compared
to the rest of the variables considered under this study, Commitment is proved to be the last in
terms of its degree of correlativity with the dependent variable customer retention.
H32: There is a significant positive relationship between Commitment and customer
retention. Armed with correlation result obtained, between the predicted variable of customer
retention and the predictor variable of commitment, we proved that there is positive relationship
between them.
The Pearson correlation result of the study, between the independent variable of customer
retention, and the factor variable of communication showed that, there is significant positive
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 relationship between the two variable at a statistical level of (R=0.670**), (P<0.01). From the
variable constructs observed so far, communication is the second highly correlated variable
with customer retention in this study. Therefore, H33: There is a significant positive
relationship between Communication and customer Retention. Based on the result obtained
from Pearson correlation, there is a strong correlation between Customer retention and
communication, and the second high correlated between dependent and independent variable.
The above results were matched with finding of the study conducted by Koskei, Noah Kiprop
et.al, (2014); Evidence from Petrol Service Stations in Uasin-Gishu County Kenya.

4.7.2. Results and Discussions of Correlation

This discussion is very essential to give more clarification on the descriptive statistics above
results. The objective of this study was to investigate the Determinants of Customer Retention
in Ethiopia Insurance Corporation in the Case of Batu town.
According to the correlation results of Ethiopia Insurance Corporation indicated that overall
constructed variable dimensions have a positive and significant correlation with customer
retention. The correlation results of Ethiopia Insurance Corporation the highest and positive
correlation was recorded between Trust dimension and customer retention (r = 0.673, p=
0.000), followed by the correlation between communication and customer retention (r = 0.670,
p= 0.000) and commitment (r=0.627, p=0.000) and the value of correlation between
commitment and customer retention was (r =0.595, p=0.000), which implies that there is the
strongest correlation between satisfaction, communication, commitment, trust, and customer
Retention. The least, moderate, positive, and significant correlation existed between
Satisfaction and customer retention (r = 0.552, p= 0.000). Therefore, the most important
dimension that determines customer retention in Ethiopia Insurance Corporation is Trust. This
indicates improvement in keeping clients informed about matters that concern them, working
for mutual benefit, providing adequate service, and working to solve difficulties and problems
of their clients have a significant relationship on customer’s Retention level. Though,
satisfaction has a moderate correlation improving these dimensions has also an effect on
customer retention of clients of Ethiopian insurance corporation.

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 4.8. Multiple Regressions Analysis

Multiple regressions are statistical techniques that can be used to analyze the association
between a single dependent variable and several independent variables (Anderson et.al, 2008).
This is to means that multiple regressions are used to investigate the determinants of customer
retention in Ethiopian Insurance Corporation. As such the sole dependent variable in this
investigation was customer retention and independent variables were determinants of customer
retention dimensions (satisfaction, Switching barriers, trust, commitment, and
Communication).
To determine the extent to which the predictors explain the variance in the explained variable,
multiple regression analysis was employed, because, it is usually used in the research where
there are two or more independent variables that are hypothesized to influence one or more
dependent variables (Baker, 2006). The results of such analysis are narrated under. The
regression analysis can be determined whether the independent variables explain a significant
variation in the dependent variable, including whether a relationship exists. Regression analysis
also determines how much of the variation in the dependent variable can be explained by the
independent variables. That is the strength of the relationship. In regression analysis, this is
measured by Adjusted R Square, R². The dependent variable for this study is employees’
performance whereas the four independent variables are employees’ involvement, consistency,
adaptability, and mission.

4.8.1.1 Assumptions of Multiple Regression Model: -

The assumption of regression analysis is important to confirm the data truly show the sample
and the researcher has obtained the best result (Hair et.al, 1998).

4.8.1.1 Normality Test

The variables in the multiple regressions models must follow normal distributions. To confirm
the normality of the data collected, descriptive statistics were formed. Normal distribution takes
the form of an asymmetric ball-shaped curve. The standard normal distribution is one with a
mean 0 and a standard deviation of 1 (Garson, 2012). According to him, skew and kurtosis with
ranges -3 to +3 were used to measure normal distribution. The skew and kurtosis result show
that there were normally distributed.

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 The result is presented in table above and the researcher uses the histograms with a normal
curve imposed and as is shown in figure below of Ethiopian insurance corporation the variables
in the multiple linear regression models followed a normal distribution.
Table 4. 12 Normality Test

Model Skewness Kurtosis

Statistic Std. Error Statistic Std. Error

Customer Retention -.615 .137 .081 .274
Satisfaction -.726 .137 .845 .274
Switching Barriers -.845 .137 .616 .274
Trust -.807 .137 .366 .274
Commitment -.586 .137 -.055 .274
Communication -.753 .137 -.071 .274

Source, own survey 2022

To determine how extreme either the Skewness or Kurtosis value must be there a simple rule
of thumb to be applied, if you divide either score by its standard error and the result is greater
than ±1.96; it suggests that your data are not normal with respect to that statistic. Hence the
result on table above indicates that dividing each value by its standard error gives for Skewness
and for Kurtosis, both healthy within ±1.96 which indicates that the data is normal with respect
to the statistics.

4.8.1.2. Test for Linearity

Multiple linear regression models assume there is a linear relationship between the independent
variables and the dependent variable. It refers to the degree to which the change in the
dependent variable is related to the change in the independent variable. To determine whether
the relationship between the dependent variable and the independent variables is linear; plots
of the regression residuals through SPSS software had been used.

There is another useful graph that the researcher can inspect to see if a distribution is normally
distributed is called a P–P plot (probability–probability plot). According to Hair et al. (1998),
the plots are different from residuals plots in that the standardized residuals are compared with

44 | P a g e
 the normal distribution. In general, the normal distribution makes a straight diagonal line, and
the plotted residuals are compared with the diagonal. If a distribution is normal, the residual
line will closely follow the diagonal (Hair et al., 1998). Therefore, as indicated in the figure
below, the data were normally distributed.

Figure 4. 2 Normal P-P Plot of regression

From the above figure, we can see that residuals of the model are approximately linear
distributed, because a straight line seems to fit the data reasonably well.

Hair et al. (2006) also suggest that histogram is another method to use for comparing the
observed data values with a distribution approximating the normal distribution. It is argued that
the histogram of the research variables supports the expectation for the normal shape
distribution of data. The following figure shows the histogram generated for the study variables.

Figure 4. 3 Histogram

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 Figure 4.3 Histogram with normal curves plotted (SPSS Output)

From the above figure, we can see that residuals of the model are approximately normally
distributed.

4.8.2. Multicolinearity Test

Co linearity (also called multicollinearity) refers to the assumption that the independent variables
are uncorrelated (Darlington, 1968; Keith, 2006). The researcher is able to interpret regression
coefficients as the effects of the independent variables on the dependent variables when co linearity
is low.

Multicollinearity exists when there is strong correlation between two or more predictors in a
regression model. Perfect multicollinearity exists when there is at least one predictor is a perfect
linear combination of the others (Field, 2015). He also stated that perfect co-linearity exists
when at least one predictor is a perfect linear combination of the others. If the perfect there is
perfect co linearity between predictors it becomes impossible to obtain unique estimates of

46 | P a g e
 regression coefficients because there are an infinite number of combinations of coefficients that
would work equally well. The regression coefficient becomes less reliable as the degree of
correlation between the independent variables increases. If there is a high degree of correlation
between independent variables, there is a problem of multicollinearity and variance inflation
factors (VIF) tests the most common methods of testing the fitness of survey data to regression
analysis.

Table 4. 13 Multicollinearity Test

Multicollinearity test
Collinearity statistics
Model 1
Tolerance VIF
Satisfaction 0.668 1.496
Switching 0.525 1.904
Barriers
Trust 0.464 2.157

Commitment 0.863 1.165

Communication 0.458 1.185
Source:
Computed from SPSS 24, 2022
The Variance Inflation Factor (VIF) statistics of co-linearity test results also show that models
have a tolerance value greater than 0.2, and variance inflation factor (VIF) less than 10 (Hair et
al. 2006). The above table 4.14 All independent variables VIF was found between 1and 10,
which means that there are no multicollinearity problems because VIF were lies between 1 and
10
From table 4.14 VIF Value ranges from 1.498 to 2.157. The tolerance value ranges within the
value of 0.458 to 0.863. In this study, these values (both VIF and tolerance level) indicate that
for this analysis, there is no serious multicollinearity problem. The above table result of
multicollinearity is agreed with S.Sivesan 2016, The Impact of Relationship Marketing on
Customer Retention on Insuranceing Sectors, University of Jaffna, and SriLanka.

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 4.8.4. Homoscedasticity

Hair, Anderson, and Tatham (1996) identified Homoscedasticity as homogeneity of variance.

The scatter plots result show between each of the independent variables and dependent variable
the scatter plots of the residuals predicted values (ZPRED) and (ZRESID) were checked and as
it is shown in appendix 2.3 Ethiopian insurance company. The results indicate that the variances
along the line of best fit remain similar as we move along the line.

4.9. Coefficient Model

The standardized coefficient results that are explained the relative importance weight of
explanatory variables. The coefficients result also obtained from regression after the
explanatory variables are all standardized, the coefficients of explanatory variables can be more
easily compared with each other.

In this study, regression results are found as per the objectives. The five dimensions of
constructed collectively form the constituents that determine the customers retention; all five
dimensions were taken as predictors while customer retention was taken as the criterion. Step
Wise Multiple Regression Analysis of performance Y- customer retention score was performed
with an overall score of the variables X1=SATISFACTION, X2= SWITCHING
BARRIERS X3=TRUST, X4=COMMITMENT X5=COMMUNICATION and the following
model is fitted for customer retention.

Y= 𝐵0 + 𝐵1𝑥1 + 𝐵2𝑥 + 𝐵3𝑥3 + 𝐵4𝑥4 … … …

Where 𝐵1𝑥1, 𝐵2𝑥, 𝐵3𝑥3 𝑎𝑛𝑑 𝐵4𝑥4 are partial regression coefficients; 𝐵𝑜 -constant the results
are presented in the table below.

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Table 4. 14 Multiple Regression Results of Determinants Customers Retention Dimensions
Model 1 Unstandardized Standardized T Sig.
Coefficients Coefficients

B Std. Error Beta

(Constant) .447 .149 2.994 .003

Satisfaction .150 .037 .166 4.036 .000

Switching barriers .152 .040 .175 3.770 .000

Trust .213 .044 .242 4.895 .000

Commitment .248 .040 .253 6.200 .000

Communication .162 .040 .201 4.044 .000

Dependent Variable: Customer retention

Source - computed from SPSS and survey data, 2022

Table 4.15, indicated how much the dependent variable (customer retention) varies with an
independent variable (Satisfaction, Switching Barriers, Trust, Commitment, and
Communication) when all other independent variables are held constant. The beta coefficients
indicated that how and the degree to which the dependent variables affect customer retention.
Standardized Beta Coefficient:

From table above we can infer that Commitment is found to be the most important dimension
of customer retention determinants construct in Insurance Corporation in determining the
variation in customer retention which accounted for 25.3% of the beta coefficient. The second
most important element of variables that contributed most, to the positive variation in the
dependent variable customer retention is Trust, which accounted for 24.2% of the beta
coefficient, followed by, Communication and Switching barriers, which had a beta coefficient

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 share of 20.1%% and 17.5% respectively. The least variable that contributes to determinant
variable on customer retention is satisfaction, which had a beta coefficient of 16.6%.

Unstandardized Beta Coefficient:

As indicated in the above table above, Ethiopian insurance corporate Customer retention
determinant dimensions were regressed against customer retention. According to the result in
table, the five independent variables (Satisfaction, Switching Barriers, Trust, Commitment, and
communication) have positive β values which imply all independent variables have a positive
relationship with customer retention. The Unstandardized coefficients β values imply that the
degree of effect of each independent variable on customer retention. Thus, as per coefficient
table, the Ethiopian insurance corporation Commitment has the highest β values 0.248, which
implies that out of all independent variables commitment has the highest effect on customer
retention. When the other independent variables remain constant, one unit increases in
commitment can increase customer retention by 0.248 values. The second β values (0.213)
Trust, one unit increases Trust other independent variables stay constant customer retention by
0.213 values, followed by communication (0.162), switching barriers (.152), and Satisfaction
(0.150). Therefore, the higher the standardized coefficient value, the higher relative importance
and it will have a large effect in insurance customer retention. The result of this study is
supported by Kasaye Eshetu, 2015 St. Mary’s University.

Table 4. 15 Coefficients of Customer Retention Determinants Dimensions in Regression Analysis

Dependent Independent Coefficients
Satisfaction Y = 0.447+0.150x1
Customer Switching +0. 152x2
Trust + 0.213x3
Retention
Commitment +0.248x4
Communication +0.162x5
Source: Computed from survey data, 2022

In the regression test shown in equation Yi=a + β1X1 + β2X2 + β3X3 + β4X4 +β5X5; Y, is
dependent variable (customers retention) is y intercept, i.e. the value of y when X= ß1, ß2, ß3,
ß4, & ß5 is the regression coefficient of Satisfaction, Switching Barriers, Trust, Commitment
and Communication respectively, which indicates the amount of change in Yi given a unit
change in X and finally X is the value of independent variable. Therefore, the estimated Y
(customer retention) =0.447constant+0.150 Satisfaction +0.152 Switching Barriers +0.213

50 | P a g e
 Trust +0.248 Commitment +0.162 communication. The Ethiopian insurance corporation
formulation of regression result indicates that all five determinant dimensions (Satisfaction,
Switching Barriers, Trust, Commitment and Communication) combined together positive and
has significant influence on customer retention.

Table 4. 16 Model Summaries Multiple Regression Of Customer Retention Determinants

Model R R Square Adjusted R Square Std. Error of the Estimate Durbin Watson
1 0.806a 0.650 0.644 0 .49034 1.498

a. Predictors: (Constant) Satisfaction, Switching Barriers, Trust, Commitment and

Communication
b. Dependent variable; customer retention
Source - own survey data, 2022

According the above table above company model summary result implies the strength of
relationship between the independent variable (Satisfaction, Switching Barriers, Trust,
Commitment and Communication) and the dependent variable (customer retention). The result
values of 0.806(R) it indicate that the good level of predication. The coefficient of
determination (R2) was 0.650 demonstrated the company and the Adjusted (R2), the five
variable dimensions (Satisfaction, Switching Barriers, Trust, Commitment and
Communication) explain the customer retention by 65%. The rest (35%) of independent
variables were not included from this study as a result, which was not explained by these
factors.

Durbin-Watson: The Durbin–Watson statistic expresses that whether the assumption of

independent errors is acceptable or not. As the conservative rule suggested that, values less than
1 or greater than 3 should definitely increase fear (Field, 2005). Durbin- Watson test is a
statistical test used to determine the presence of auto-correlation in data set. If the value of
Durbin-Watson test is less than 1, it means data has Collinearity problem. Value of Durbin
Watson test is satisfactory and above 1, which mean that model has no auto-correlation
problem. So that the desired result is data, the value is 1.498, that the assumption has almost
certainly been achieved.

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 The ANOVA show about the story of how the regression equation accounts for variability
in the response variable, which is the dependent variable “customer retension ” for this
study due to a change in the independent variables (Satisfaction, Switching Barriers, Trust,
Commitment and Communication).

Table 4. 17 ANOVA
ANOVAa

Model 1 Sum of Squares Df Mean Square F Sig.

Regression 137.788 5 27.558 114.615 .000b
Residual 74.295 309 .240
Total 212.083 314

a. Dependent Variable: Customer Retension

b. Predictors: (Constant), Satisfaction, Switching Barriers, Trust, Commitment,

Communication

Source; Field survey 2022

The ANOVA Result is used to address the general objective of the study in table above. In
addition to this analysis is also used to identify the appropriateness of the model to conduct the
study. The insurance company ANOVA table tells us whether the model, overall, results is a
significantly good degree of prediction of the outcome variable. The proposed model is
adequate as the F-static was 114.615 significant at 1 percent level (p= 0.000).This indicated
that the model was reasonable fit and there was statistically significant association between
construct variable dimensions and customer retention.

4.10. Results and Discussions of Regression

This discussion is very important to give more clarification on the above results. The objective
of this study was to investigate Determinants of Customer Retention in Ethiopia Insurance
Corporation in the Case of Batu town. According to regression results of Ethiopia Insurance
Corporation in the Case of Batu town branches, the regression result indicates that all the five
construct variable dimensions (Satisfaction, Switching Barriers, Trust, Commitment, and
52 | P a g e
 Communication) combined positive and has a significant influence on customer retention. The
commitment dimension is the dominant determinant of customer retention followed by trust,
communication, Switching Barriers, and Satisfaction dimensions. The coefficient of
determination (R2)was 0.650 demonstrated that in Ethiopia Insurance Corporation, the five
variable dimensions (Satisfaction, Switching Barriers, Trust, Commitment, and
Communication) explain the variance in customer retention by 65%. The rest (35%) of
customer retention was derived from other factors, which was not explained by these factors.
The ANOVA table tells us the model, overall, results is a significantly good degree of
prediction of the outcome variable. The coefficients β in Ethiopia Insurance
Corporation Commitment has the highest β values 0.248, which implies that out of all
independent variables commitment has the highest effect on customer retension. When the
other independent variables remain constant, one unit increases in commitment can increase
customer Retention by 0.248 values. The second β values (0.213) Trust, one unit increases Trust
other independent variables remain constant customer retention by (0.213) values, followed by
(0.162) communication, (0.152) Satisfaction, and (0.150) Switching Barriers. In the general
current study, the result indicates that the five customer retention determinant variable
dimensions have a significant effect on customer retention. In conformity with the current study
Webalem (2012) investigates the practical application of CRM in one of the leading state-
owned commercial Insurances in Ethiopia. This empirical study indicates that CRM application
effectiveness from the four behavioral dimensions of CRM which are Customer focus,
Organizational dimension; Technology-based dimension, and Knowledge management can
significantly lead to improvement of commercial Insurance performance concerning customer
satisfaction, and customer Retention.
Incoherent with the current study Callaghan, et al. (1995), the empirical study indicates that
customer relationship marketing practices can significantly lead to improvement of commercial
Insurance performance in respect to customer attraction, customer satisfaction, and customer
retention. The findings of Callaghan cited by Kojo disclosed that trust, commitment, conflict
handling, empathy, and communication are the dimension of customer relationship marketing.

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 4.11. Hypothesis Testing and Discussions

As the researcher stated on hypotheses part from the beginning this is also the point that we
checked all the hypotheses points by using the mathematical results of significant and other
hypotheses test models. Therefore, the researcher summarized the study with the hypotheses
and research questions based on the above table result of p-values / significant.

Table 4. 18 Hypotheses Summary

Variables Hypothesis Sig Decision
Satisfaction β=0.150,p<0.05 .000 Accepted
Switching β=0.152,p<0.05 000 Accepted
Barriers
Trust β=0.213,p<0.05 000 Accepted
Commitment β=0.248,p<0.05 000 Accepted
Communication β=0.162,p<0.05 000 Accepted
Source: Own computations, 2022

Satisfaction had a positive effect on customer retention statistically significant at a significance

level of (ß=0.150, P=.000). This positive effect of satisfaction result is supported by descriptive
statistics that Ethiopian insurance corporation adopted satisfaction practices that enable
retaining the customer of the company. The result of Ndubisi (2007) suggested that the greater
the satisfaction in the insurance company, the higher the level of the
Company’s commitment, the more reliable and timelier its communications, and the more
satisfactorily it handles conflicts, the more loyal its customers will tend to be. Therefore, the
result of this research is consistent with the findings of Patrick, Limo K (2014) Effects of
relationship marketing on customer Retention: Evidence from Petrol Service stations in Uasin-
Gishu Country Kenya.
The switching barriers dimension has, p-value significant at (p <0.05), and the beta value is
positive. Therefore, the study accepted the alternate hypothesis that switching barriers has a
positive and significant effect on customer retention in Ethiopian insurance corporation
(ß=0.152, P=.000). This represents that when customer retention is raised by one unit, switching
barriers could also be increased by 0.152 to keep other variables constant. This implies that the
hypothesis was accepted. The switching barriers of the Company will help to retain customers
by improving the services of the insurance company. The result of this research is reliable with
54 | P a g e
 the findings of Patrick, Limo K (2014) Effects of Relationship Marketing on Customer
Retention: Evidence from Petrol Service Stations in Uasin-Gishu County Kenya.
The Trust dimension has, p-value significant at (p < 0.05), and the beta value is positive.
Therefore, the study accepted the alternate hypothesis that Trust has a positive and significant
effect on customer retention in Ethiopian insurance corporation (ß=0.213, P=.000). This
represents that when customer retention increased by one unit, Trust could also be increased by
0.213 to keep other variables constant. This implies that the hypothesis was accepted.
Therefore, the result of this research is consistent with the findings of Freyedon Ahmadi (2013).
As shown from table 4.19, the Commitment dimension has, p-value significant at (p < 0.05),
and the beta value is positive. Therefore, the study accepted the alternate hypothesis that
Commitment has a positive and significant effect on customer retention in Ethiopian insurance
corporation (ß=0.248, P=.000). This represents that when customer retention is raised by one
unit, Commitment could also be increased by 0.248 to keep other variables constant. This
implies that the hypothesis was accepted.
Lastly, the Communication dimension has, p-value significant at (p < 0.05), and the beta value
is positive. The study accepted the alternate hypothesis that Communication has a positive and
significant effect on customer retention in Ethiopian insurance corporation (ß=0.162, P=.000).
This represents that when customer retention is raised by one unit, communication could also
be increased by 0.162 to keep other variables constant. This implies that the hypothesis was
accepted. This is consistent with the result of the study conducted by S.SIVESAN (2012)
Impact of Relationship Marketing on Customer retention on Insuranceing Sectors University
of Jaffna, Sri Lanka.
Therefore, as it’s presented in table 4.19, all constructed independent variables have a positive
and statically significant effect on predicting variables of customer retention in the insurance
business movement. The insurance members also adopted and practiced the customer retention
determinant variables properly. As a result of this, there is a good relationship between service
providers and service users.
Moreover, without considering the value of the coefficients models all constructed variables
has a strongly positive effect on customer’s trends this is also similar to the hypotheses part of
the study. Because as we show that before the coefficients models more than two testing models
it shows that the variables are strongly and statically significant effect on customer retention.

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 CHAPTER FIVE

5. SUMMARIES, CONCLUSIONS, AND RECOMMENDATIONS

This chapter provides Summary, conclusions, recommendations and future research

directions.

5.1. Summary of the Findings

❖ Based on the data collected from customers of Ethiopian Insurance Corporation and the
analysis made so far, the following important summary of the finding was obtained.
❖ The reliability test conducted to check the dependability and consistency of the instrument
showed, a Cronbach Alpha of 0.964.
❖ Pearson correlation is used to examine the relationship between construct variable dimension
and Customer retention in Ethiopian Insurance Corporation. According to the correlation
matrix, we can see that the entire five dimensions of construct variable have a positive &
significant relationship with customer retention with the values of coefficients correlation
range from 0.552 to 0.673. Ethiopian Insurance Corporation, which indicate that the variable
dimensions and customer retention function better relationship.
❖ Multiple regression results indicate that all variable dimensions have a positive and significant
effect on customer retention in Ethiopian Insurance Corporation. The coefficients β in
Ethiopian Insurance Corporation commitment has the highest β values 0.248, which implies
that out of all independent variables commitment has the highest effect on customer retention.
When the other independent variables remain constant, one unit increases in commitment can
increase customer Retention by 0.248 values. The coefficients β values imply that the degree
of effect of each independent variable on customer retention.

5.2. Conclusions
The study revealed that Satisfaction, Switching barriers, Trust, Commitment and
communication are primary factors to be considered in building a strategically long term
customers retension. These underpinnings of marketing variables had a great effect on
marketing strategies This study has pointed out the determinant factors of customer retention
in the financial institution sector in the case of Ethiopian Insurance corporation the studies
considered five marketing variables constructs such as Satisfaction, Switching barriers, Trust,
Commitment and communication, are as independent variables and witnessed their effect on

56 | P a g e
 the response variable customer retention. The data collection instruments were adopted from
previous studies conducted by Ndubisi and Wah (2005). A reliability test was also conducted
to check the consistency and dependability of the instruments and accordingly, the Cronbach
Alpha value obtained from the respondents helped the researcher to conclude that the
instruments were proven to be dependable.
In terms of customer retention, the research has shown that the level of retention of the
respondents was high to the customers will transact services again to Ethiopian insurance
corporation, and at the same time recommend it to their family, friends, relatives and
colleagues.
Marketing is the heart of all successful Financial Service Institutions. It can help to develop a
satisfied customer base and improve customer retension. To succeed, every business needs to
take a customer-centric approach and build a long-lasting relationship with customers. The need
to understand the customer perception about the relationship marketing activities of Ethiopian
Insurance Corporation is proved through this study. It is evident from the study that, building
trust, showing perceived value to customers, developing service quality, to minimize switch
customer activities would help Ethiopian Insurance Corporation. to serve customers according
to their expectations and thereby build customer satisfaction and Retention. Therefore, from
the findings of the present study, the researcher concluded that: All constructed marketing
marketing variable considered under the present study was positively correlated with the
response variable customer retension using Pearson correlation test and hence, we concluded
that, for every unit increase in the independent variables, the dependent variable customer
retention will increase in Ethiopian Insurance Corporation. Since there was a significant
positive association between components of marketing factors and the response variable
customer retention, the researcher concluded that all the hypotheses presumed were well
accepted.
Marketing Variable and customer retention were interconnected with one another and this study
confirmed that marketing variable had a significant effect on customers’ retention. Hence,
Satisfaction, Switching barriers, Trust, Commitment and communication had an effective and
efficient effect on having a loyal customers.
Thus, create a good relationship with the customer is important in developing a loyal customer.
It is supported as; close relationship with customers will require strong coordination between
company and their marketing departments to provide a long-term retention of selected

57 | P a g e
 customers (Chary and Ramesh, 2012). Therefore, Ethiopian insurance corporation branches
should always struggle to ensure the need and want customers to its services through continual
improvement on all marketing variable dimension

5.3. Recommendations
Based on the research findings, the following recommendations were made. The findings of this
research also important evidence for managers who take charge of marketing variables. It is
helpful for marketers to understand the effectiveness of marketing strategies. In light of the
findings and conclusions made above, the following possible recommendations are suggested as
being valuable to the Ethiopian insurance corporation for improving marketing activities to
assure customer Retention. Financial institutions especially Insurance Corporation personnel
should create a more friendly relationship with their customers. The environment should be
conducive and enabling. Moreover, it should be fully clad:

❖ As the study results showed, the company can improve marketing dimensions’ attitude
towards Satisfaction, Switching Barriers, Trust, Commitment, and communication.
Managerial efforts better aim at boosting customer retention by improving these five
marketing dimensions in all branches. Therefore, to make the marketing strategy attractive
to customers, all branches should highly focus on improving their efforts towards
addressing all the customer focused marketing practices for gaining a competitive
advantage in the insurance business.
❖ There should be continuous high-quality delivery service. This will add to the value of
satisfaction received by customers. Personnel in the customer care service section of the
financial institution should be creating a friendly relationship with their customers.
❖ There should be seminars for members of staff on the need to improve their relationship
with customers, and also on the importance of customer satisfaction as a vital tool for
creating and improving customer retention.
❖ The Insurance Corporation should consider offering personalized services to its customers,
where they are served based on their will and interest. In doing so, insurance company needs
to consider knowing who is his customers and at the same time identify what is important
to them than, simply offering mass services.
❖ The data obtained from customers of Ethiopian Insurance Corporation. showed that
the majority of them were not agreed on the fact that, the company helped them in planning

58 | P a g e
 and investing their money by the time they evaluate the Company's competence. So in order
for the Ethiopian Insurance Corporation to capacitate its incapacitation related to the captioned
case, mechanisms have to be stretched in extending advisory services at least for customers
with a very important transaction.
❖ Respondents were also replied that the insurance could not manage to provide effective
sales promotions. To come up with this problem, Ethiopian Insurance Corporation should have
to provide its customers with different kinds of gifts for their transaction with the Company, in
order to stimulate their purchase intentions. One way of doing this is through conducting a
Retention campaign.
❖ It is obvious that today's customers were very demanding than ever. So, Ethiopian
Insurance Corporation has to work hard towards providing consistent and quality services than
players in the industry, in order to further develop trust in the minds of its customers, which
otherwise costs the Company in losing its loyal retention.
❖ The Company should conduct a regular training session for all members of staff on
proper customer relations so that customers are well treated and respected at any point in time
and hence develop a sense of trust in the company. Ethiopian Insurance Corporation should put
more effort to attract more customers especially in dimensions related to trust, switching cost,
perceived value, perceived quality, and satisfaction. In order to create and maintain Retention,
the corporation must recognize that many of the score product attributes are necessary, but not
sufficient for Retention. On the other hand, it is a must to have a strong connection with its
customers in order to create and maintain customer retention. By having a strong relationship
with customers it is possible to keep the customer from switching to another competitor.
❖ As the result of the study indicate Commitment dimension has the highest β values
(β=0.248) Ethiopian Insurance Corporation effect on customer Retention. Hence Ethiopian
Insurance Corporation should be very well-informed in strengthen empathy with their clients;
keep in touch constantly, good long-term relationships with their customers, and work
cooperatively.
❖ This study is conducted only from the side of the customers. It is also recommended
to include responsible organs of the company.

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 5.4. Direction for Further Research
In general, Ethiopian Insurance Corporation should focus their attention on the proper
implementation of customer focused marketing dimensions because the dimensions associated
with customer Retention are significant. The Corporation have to improve practice on all the
dimensions of marketing strategy in order to increase customer satisfaction and in making the
customers retention and attract new customers. Since consumers expect more than what is
offered by other company. This will enable them to maintain a high level of competitiveness in
the insurance industry. As researcher since this study is focused on the evaluation of identifying
the effect of customer focused marketing on customer retention particularly in Ethiopian
Insurance Corporation customers, therefore interested researchers in the field can take up this
issue to reach a better generalization to include customers in another part of the country and
Insurance Corporation.
While trying to accomplish the objective of the study, some limitations were faced by the
researcher. Based on these limitations the researcher suggests further studies on the subject to
including additional marketing strategy factors using a sample drawn from the different
geographic areas of Ethiopia. So, this research can be further explored by adding more
marketing strategy dimensions like other relationship marketing variables, empathy,
cooperation, and others that could influence customer retention. Future researches also can
survey by applying longitudinal design.

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 Appendix 1:- Questionnaires
MADDA WALABU UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MARKETING MANAGEMENT

Questionnaires to be filled by customers of insurance campany:

 Researcher: Ayano Bedeso
 Address: Tel. +2519  E-mail:

Dear Respondents;

I would like to thanks you in advance for taking your time to fill my questionnaire and your input will be a
key in developing my research on “Determinants of Customer Retention in Ethiopia Insurance Corporation
in the Case of Batu town in partial fulfillment of the requirement of Master of Art degree in Marketing
Management at Madda Walabu University college of Business and economics.

Any information which you provide will be kept confidential, and your genuine response is highly
appreciated for the outcome of the research project.

Your assistance will be highly appreciated and thank you in advance!

Ayano Bedeso

General Instructions
 There is no need to write your name
 In all cases where the options are available, please tick (√) in the appropriate box

PART I. Demographic profile of the respondents

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 1. How old are you? (Please, write your age in terms of years only). (Years).
2. What is your maximum education level?

□ Elementary School □ Diploma □ Doctoral

□ High School □ Degree □ Professor
□ Vocational School Certificate □ Masters □ Other
3. What is your gender?
□ Male

□ Female

4. What policy covers do you purchased from the insurer? (Please tick all that apply)
□ General Insurance (Motor, Workmen Compensation, Fire and Lightning, etc.)

□ Life Insurance
□ Micro-Insurance

5. In which business classification can your organization be categorized?

□ Governmental Organization

□ International NGO

□ Local NGO

□ Private Business

□ Religious Organization
□ Other

Part II: Factors Affecting Customer Retention

Direction: Please answer each statement below by putting a circle around the number that best
reflects your degree of agreement or disagreement with that statement.
1 = SD - Strongly Disagree, 2 = D - Disagree, 3 = N - Neutral, 4 = A - Agree, 5 = SA - Strongly
Agree

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 A. Customer Retention related Factors

Items Response Rate

Customer Retention factors 4 3 2 1

I consider the insurance company as 7

my first choice between others
company in the area
I will mention this company to
friends and family members

It is extremely likely that I will

be the customer of this company
in long run.
I am self-confident of giving
positive word of mouth
testimonies to others about this
company.
I am satisfied with the company
service provided.

I would not change this company;

even close friends Suggests to shift
to another Insurance
I am a loyal customer to the company
Grand total mean

B. Communication Related Factors

Items Response Rate

Communication Factors 5 4 3 2 1

The insurance company provides

timely information
The insurance company provides
accurate and reliable information
The insurance company provides
the information if there is a new
company service

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 My insurance company provides
information on my transactions to
the extent I need to be informed

C. Commitment related Factor

Items Response Rate

Commitment 5 4 3 2 1

The insurance Company makes

adjustment to suit my needs
The insurance Company offers
personalized services to meet
customers need
The insurance Company is flexible
when its service is changed

The insurance Company is flexible

in serving my needs

My relationship with the insurance

Company is one that I am very
committed to continuing it

D. Trust Related factors

Items Response Rate

Trust factors 5 4 3 2 1

I feel safe in all of my transactions with the

insurance Company
The insurance Company always does what it
promised to do
I am confident on the financial status of the
insurance Company

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 The insurance Company is trustworthy on
calculating charges

E. Switching Barriers factors

Items Response Rate

Switching Barriers factors 5 4 3 2 1

It would cost me a lot of money to switch from

my current insurance company to another
insurance company.
It would cost me a lot of time to switch from
my current insurance company to another
insurance company.
It would cost me a lot of effort to switch from
my current insurance company to another
insurance company.

In general switching to a new insurance

company would be a hassle.

I feel there is an interpersonal bond with the

people working for the company.

I have developed a friendly relationship with

the people working for the company.

I am more comfortable interacting with the

people working for the company.
I will lose a friendly and comfortable
relationship if I shift to another insurance
company.

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 F. Satisfaction Related factors

Items Response Rate

Satisfaction factors 5 4 3 2 1

I am pleased that I purchased insurance

from the company.
My decision to purchase insurance
from the company was a wise one.
I feel good about my decision to purchase
the company’s insurance.

I am satisfied with the overall service

quality offered by the company.

I am satisfied with the professional

competence of the company’s
employees.
I am satisfied on my relationship with
frontline employees of the company

Given my experience the Company can

trusted completely

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