Customer- and Employee-Related Variables Affecting Customer Retention: A Study of Eghtesad Novin Bank Branches in Tehran

Mojgan  Hajheidary; Bijan Safavi; Mohammad  Khezri; Katayoun  Jalalian

Authors

Mojgan Hajheidary Ph.D. Student in Public Economics, Department of Economics and Accounting, ST.C., Islamic Azad University, Tehran, Iran Author https://orcid.org/0009-0009-9462-0596
Bijan Safavi Department of Economics, ST.C., Islamic Azad University, Tehran, Iran https://orcid.org/0009-0008-7005-799X
Mohammad Khezri Department of Economics, ST.C., Islamic Azad University, Tehran, Iran Author https://orcid.org/0000-0002-6105-0242
Katayoun Jalalian Department of Economics, ST.C., Islamic Azad University, Tehran, Iran Author https://orcid.org/0009-0009-4677-3029

Keywords:

customer retention, bank performance, employee loyalty, customer orientation, Eghtesad Novin Bank

Abstract

This study aimed to explain and analyze the structural relationships between intra-organizational variables and external outcomes within the banking system by examining branches of Eghtesad Novin Bank in Tehran. The conceptual framework of the study was developed based on service-profit chain theory, the resource-based view, and social exchange theory to assess the causal relationships among employee loyalty, customer orientation at both behavioral and perceptual levels, perceived bank performance, and customer retention. Using structural equation modeling (SEM) and data obtained from two statistical populations comprising employees and customers, the findings showed that employee loyalty, with an effect coefficient of 0.58, serves as a key driver of enhanced customer orientation. Furthermore, employee loyalty and employees’ customer-oriented behaviors exerted positive and statistically significant effects on perceived bank performance, with coefficients of 0.24 and 0.35, respectively. Analysis of the customer sample also indicated that perceived customer orientation, with a path coefficient of 0.67, was the strongest predictor of customer retention. In addition to confirming the pivotal role of human capital in competitive markets, the findings emphasize that aligning human resource policies with customer needs constitutes a key strategy for ensuring sustainable performance and maintaining competitive advantage in commercial banking.

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