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THE INFLUENCE OF LOYALTY INDEX SCORE ON
CONSUMER CREDIT PROFITABILITY


Aditya Galih Prihartono
Bogor Agricultural University, Indonesia

Ujang Sumarwan
Bogor Agricultural University, Indonesia


Noer Azam Achsani
Bogor Agricultural University, Indonesia

Kirbrandoko
Bogor Agricultural University, Indonesia
 


ABSTRACT


The purpose of this research is to analyze and test the effect of loyalty on consumer credit profitability. The main theory used in this research were loyalty measurement by Churchill (2000) who states that there were three indicators could be used to measure loyalty i.e. customer retention, primary behavior and secondary behavior. Loyalty Index Score was then developed to determine the level of customer’s loyalty level through 4 main variables: Longevity, Depth, Breadth and Referrals. The effect of Loyalty Index Score to profitability was further tested by regression analysis to see the significance of loyalty on 3 main aspects: revenue collected, credit loss and profitability (revenue collected –balance saved).


Hypothesis testing result showed that loyalty has positive effect to all 3 aspects significantly. It was proven that customer with higher Loyalty Index Score resulted in lower credit loss rate, higher average revenue collected and higher average profitability. the conclusion could be made by using data from personal loan customers in one of the biggest multinational bank in Indonesia during October 2010 until March 2011.


Keywords: Loyalty, Consumer Credit, Credit Risk, Credit Loss,
Profitability