Building and maintaining successful, long-term relationships is one of the crucial tasks in today’s financial sector, the idea being that loyal customers purchase more, demonstrate a higher willingness to spend, and act as advocates for the company. However, there is also some controversy on whether profitability indeed increases with customer loyalty. We will analyze the process of loyalty development and evaluate if and how customer loyalty (positively) affects profitability. We will do so with reference to a four stage sequential loyalty model that grounds on a chain of effects from cognitive loyalty, affective loyalty, conative loyalty to action loyalty. We will make use of PLS structural equation modeling and analyze data of almost 7000 customers of a German bank surveyed by telephone. These analyses will support practitioners in the banking and financial sector in setting-up and steering their customer retention strategies and will provide a theoretical contribution to validating one of the most prominent customer loyalty models.
