The Effect of Product Differentiation Strategy on The Performance of Commercial Banks in Kenya

Abstract

Purpose: The study aimed to determine the effect of product differentiation strategy on the performance of commercial banks in Kenya. The study hypothesized that product differentiation had a statistically significant impact on Kenyan commercial banks' performance Methodology: The study used a quantitative research method targeting the branch managers of licensed commercial banks in Nairobi County. A sample of 227 branch managers was selected using stratified sampling. Data was collected using an online questionnaire. Data was checked for internal consistency using Cronbach's alpha. The alpha was within the acceptable rate level of 0.60 to 0.90 The ordinal logistic regression was used to analyze the relationship between the variables. Findings: The effect of product differentiation on performance was statistically significant (Wald = 7.768, df = 1, p = .005), with a 95% confidence interval of 0.442 to 2.535. Therefore, product differentiation statistically significantly affects commercial banks' performance. The results imply that banks need to increased focus on product differentiation strategies to increase performance. Unique contribution to theory, practice and policy: The study is significant to bank managers because it provides them with information on one of the strategies (product differentiation) that managers can use to increase the performance of their banks. Implementing this strategy would result in increased performance and benefit the stakeholders due to the increased return on investment.