Relationship banking, as exemplified by retail banks, is a valuable enablingstrategy that promotes competitiveness and provides sustainable success. Theutilisation of relationship banking as a business strategy to increase customerretention, create customer loyalty and ultimately increase long-term profits is arelative young tactic, originating in the 1980s and gathering pace during the1990s. The correct application of relationship banking could impact on the bottomlineof banks favourably. Hence the positioning of this research to investigate theeffect of the relationship banking offering on customer loyalty, and its use inrealising customer loyalty and long-term value from relationship bankinginitiatives.The retail banking industry in South Africa is a complex and very competitiveenvironment, which is dominated by the big four banks (ABSA, First NationalBank, Nedbank, and Standard Bank). It is a business imperative for themanagement of the banks to ensure that they establish, develop and improverelationships with their most important asset, their customers. Operating in such adynamic environment requires of banks to fully understand all the factors ofrelationship banking that affect their success and market share. What is theimpact of relationship banking on customer loyalty, and what are the possibleresults that can flow from a close relationship between bank and customer?The main research hypothesis states that business customers who receive therelationship banking offering from their retail bankers are more loyal towards theirbank than those business customers who do not receive the relationship bankingoffering. With this in mind the research seeks to clarify specific primary objectivesbased on the hypothesis:• To investigate the impact that relationship banking has on the loyalty ofbusiness banking customers in the retail banks in South Africa.ii• To identify the critical factors of relationship banking that can influencecustomer loyalty.• To identify the benefits of relationship banking and customer loyalty.The research composed of a field study in the retail banking industry, with asample of 80 business banking customers with a close business relationship withtheir banker or having a personal banker looking after the relationship, and 80business customers without a close business relationship with their banker or nopersonal banker looking after their relationship. The survey focused on the attitudeor perception of business customers based on relationship and loyaltydimensions.The research, in combination with the literature review provided valuable insightinto the factors influencing relationship banking, its value as part of a retailbusiness banking proposition, as well as the effect it has on customer loyalty. Italso provided insight into the importance of customer loyalty and its impact oncustomer retention and long-term profitability. It is clear from the literature reviewand research that a relationship banking offering adds value with regard tocustomer retention and loyalty. The results and findings from the research andliterature review represent a remarkable difference between the perceivedlevels of customer loyalty of the two groups. This is an indication thatrelationship banking affects customer loyalty positively.The critical factors of relationship banking that were found to influence customerloyalty included the value proposition, service and quality, employee competency(relationship banker), price, reward and recognition, and communication. Thebenefits of developing and building customer loyalty included: retention ofcustomers and staff, customer satisfaction, trust, word of mouth referrals andgrowth, cost reduction, cross-sales, profitability (relationship lifetime value) andenhancing the bank’s competitive advantage.iiiThe researcher recommends that retail banks must continue to implementrelationship banking offerings across all business customer segments. A possibleconsideration will be to divide the relationship banking offering on different levels:high-touch; medium-touch; and low-touch. These different value propositionsshould represent mutual (bank and customer) requirements and financialfeasibility for banks. Banks must place customer-centricity at the core of theirrelationship banking strategy.To support the relationship strategies banks need to understand the behaviour oftheir customers and their buying habits. Market segmentation is a critical aspect ofrelationship marketing and the segmentation of business customers must be inline with the different levels of relationship offerings. Segmentation should also bein line with customer value or customer profitability, complexity of financialdemands, annual turnover and industry. This segmentation will allow banks toprovide the correct relationship banking offering to the right customer. To supportthe segmentation process banks need to be able to determine the individualcustomer profitability. Management information systems must be developed andused to determine the customer’s profitability. Once the segmentation has beenconcluded banks must implement and use applicable CRM strategies and CRMsystems to complement the relationship banking offering. It’s about knowing theircustomers well enough to determine the kind of relationship they would like tohave. Banks must also try to extend their CRM strategy across all customers. Thesupport from top management and understanding of the relationship bankingoffering is critical as a lack of support can derail the success.The main recommendations for further study that transpired from the researchincluded:• Research on the calculation of relationship life time value.iv• Research on a model for appropriate market segmentation of businessbanking customers in South Africa.• Research on the importance of reward and recognition strategies to valuedcustomers, plus loyalty programmes.• Research on the key characteristics of relationship bankers.