Understanding the nature and effects of cognitive dissonance in demarketing contexts in the South African banking industry

Purpose This study aims to investigate the nature and effects of cognitive dissonance among customers who experience loan rejections in the South African banking sector. It examines how cognitive dissonance influences customer satisfaction and loyalty within a demarketing context and explores the extent to which customers maintain loyalty despite transaction-specific dissatisfaction. Design/methodology/approach A quantitative research design was employed using a vignette-based scenario followed by a structured survey. After data screening, 505 usable responses were analysed using structural equation modelling (SEM) to test the proposed relationships among cognitive dissonance, satisfaction and loyalty. Findings The results indicate that loan rejections evoke moderate cognitive dissonance, which negatively impacts satisfaction. However, the influence on loyalty is less direct, as many customers remain with their bank despite experiencing dissatisfaction. This suggests a complex relationship between dissonance, satisfaction and loyalty in demarketing situations. Practical implications Banks can enhance customer satisfaction and loyalty by providing clearer explanations for loan decisions and offering supportive alternatives to rejected customers. This will assist in mitigating cognitive dissonance, fostering positive customer experiences and enhancing loyalty levels. Therefore, by strengthening transparency and post-decision engagement, cognitive dissonance may be reduced and result in more positive customer experiences. Social implications The results from this study provide financial institutions with insights into how they can implement consumer support mechanisms. A clearer understanding of consumer responses to loan rejections can contribute to improved financial resilience and well-being among banking customers. Originality/value This study contributes to the limited literature on cognitive dissonance within demarketing contexts in the South African banking sector. It examines behavioural responses to loan declines and advances the understanding of how customers deal with cognitive dissonance when their loans are declined. It further responds to calls for deeper insights into how demarketing affects customer relationships with banks.