THE SIGNIFICANCE OF LOYALTY ON CONSUMER CREDIT RISK PROFITABILITY

Abstract

The purpose of this research is to analyze and to test the effect of loyalty on consumer credit profitability. Loyalty Score was developed to determine the level of customer’s loyalty level through 4 main variables; Longevity, Depth, Breadth and Referrals. Cluster develop- ment by K means algorithm was then developed to segment the sample into its similar characteristics. The effect of Loyalty to profitability was further tested by ANOVA analysis to see the signifi- cance of loyalty on profitability. The result showed that loyalty significantly influences profitability where ANOVA result to the 3 loyalty cluters shows a significant value even when the custo- mers were under pressured due to capacity to pay issue. It was proven that customer in a different clusters has lower 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.