Integration of knowledge and cue utilization on consumer purchase decision process towards Islamic Banking in Pakistan

Abstract

Financial growth has been increasing during past years and conventional banks are considerably the predominant market players of the banking sector. The current development and growth of Islamic banking in the financial market is not sufficient to raise the confidence of customers and attract them towards Islamic Banking compared to conventional banking. To address the problem, this study aimed to empirically test the effect of non-functional cues i.e. country of origin, brand name, advertising, and price on the consumer purchase decision process of the Islamic banking sector of Pakistan. A research model was developed, based on cue utilization theory and the theory of consumer behavior. The methodology for the study was quantitative, involving a sample of N=415 respondents broadly representative of Pakistan’s Islamic banking sector. Multistage cluster sampling technique was utilized and the two most dominant cities i.e. Lahore and Karachi were selected to collect the data from the respondents. A self-administered questionnaire was used as a research instrument to collect the data. Descriptive statistics and relationships between latent variables were calculated by Partial Least Square Structural Equation Modeling (SEM-PLS). The results indicated that non-functional cues have a significant positive effect on the consumer purchase decision process of the Islamic banking sector of Pakistan. The findings of the study also revealed that consumer knowledge has a significant strong relationship with the consumer purchase decision process. Moreover, this study confirmed that the relationship between non-functional cues and the consumer purchase decision process is moderated by consumer knowledge. The theoretical contribution of this study was the integration of two existing theories; cue utilization theory and consumer decision-making model for financial services, based on consumer behavior theory. Based on these theories, this study provides an integrated model of non-functional cues and the consumer purchase decision process for financial services. The final model of the study provides an opportunity for the managers to recognize the underlying quality factors that customers consider most while dealing with Islamic banks. Moreover, it facilitates the extension of the existing body of knowledge related to the consumer buying behavior in the Third World Countries by using a variety of national settings. Since the aim of this study was to investigate the influence of non-functional cues on Islamic banking consumer’s purchase decision, functional cues were not being considered for this research. Thus, it is recommended that future research measure the effect of functional cues on the consumer purchase decision process with the moderation effect of consumer knowledge.