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THE EFFECT OF RELATIONSHIP MARKETING ON CUSTOMERS RETENTION IN ECOBANK NIGERIA (A CASE STUDY OF ENUGU METROPOLIS)
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
After metamorphosis of ancient promoting to up to date competitions, client is that the most crucial pillar in companies activities. Establishing relationship with new customers and maintaining existing customer’s area unit very important factors for firms to stay their business alive. Evaluating the results of selling methods on client behaviour is one amongst the necessary considerations for firms to extend their sales and making future relationship with customers. However it’s disgraceful to keep up shut relationship with all customers. Some of them are not compatible with mission of the company due to the changes in their needs and behaviours. Therefore cost of keeping relationships is higher than the profit which is gained from these customers. Thus the companies must re-evaluate their investment on customers and close unsuccessful relationships. Most of companies are trying to find the best relationship marketing strategies to increase the loyalty of customers. One of the main outcomes of strong relationship between buyer and seller is customer retention (Crosby et al., 2007). Cost saving and increasing profitability has priority for all businesses and customer retention can be considered as a key element to achieve these goals. Relationship marketing has been found to be successful at building trust and commitment with external stakeholders to create those loyal customer relationships (Morgan & Hunt, 2011). Several studies in the past decade have indicated that relationship marketing has a positive impact on firms’ business performance. Halimi et.al (2011) for example, suggest that companies should manage their customer relationship strategies with their customers by considering factors that affect their relationships in order to create more beneficial buyer- seller relationships and make more profit. Raza & Rehman (2012) found that relationship marketing helps decision makers and marketers take accurate decisions to enhance customer loyalty. It also proves the importance of relationship marketing in a long term relationship. In the face of slowing industry growth and the new increased competition, today’s retail banks are under tremendous pressure to grow organically. The terrifying competition from both traditional brick and mortar operations and emerging internet banks has made a large number of banks to have trouble meeting performance expectations due to difficulties in differentiating their businesses, difficulties in reaching customers likely to respond positively to new sales opportunities and difficulties in making the most of their valued staff. Banks that define and implement solutions to such problems as identified above are those that will successfully compete and thrive into the future. These are the banks that can be able to keep their main asset – customers in place. Such banks therefore need to establish good relationships with their customers so as to create a customer loyalty image that in turn will lead to their sustenance (Huber and O’Gorman, 2008). In this relation, the American Marketing Association (2006) notes that marketing is very vital. The association, in defining what marketing is, further explains marketing as an organisational function that comprises a set of processes that create, communicate and deliver value to customers and manage customer relationships in ways that are beneficial to the organisation and its stakeholders (American Marketing Association, (AMA), 2006). This view establishes marketing as a very vital factor in the success of banks. Berry (2007) opines that the intangible nature of products in the service industry – banks comprising this service industry – makes it difficult for customers to evaluate them. He adds that customer centred marketing eases this process. Since many banking products are undifferentiated commodities, retail banks are constantly looking for ways to set themselves apart from the competition to help them win and retain customers and to improve the banks bottom line. As customers begin to view all banks as the same and make their product selections based solely on the best price, one method that retail banks can employ to differentiate themselves is to optimize their customer service (Genesys, 2010). Wright (2014), in concurrence with Genesys, notes that the best way to keep up with the high competition in the banking industry is to hold on to the existing customers as well as acquire many more customers as possible. Abratt and Russell (2014) explain that keeping clients through development of relationships with them is crucial to establishing and maintaining a competitive advantage in the market. The key component of marketing in the 21st century is to establish relationship between an organization and its customers. Customer service, quality, and marketing correlate with one another (Gillemo et al., 2014). However, organizations have always faced hardships in aligning these concepts together although relationship marketing places great emphasis on customer value rather than simply ‘getting the customers’ (Christopher et al., 2014). Relationship marketing is not a completely new concept rather a paradigm developed over time through overlapping traditional marketing practices. According to Berry (2006), there are five strategies of relationship marketing that need to be sufficiently developed to create effectiveness in the marketing scheme. Relationship marketing strategy, therefore, suggests that a service provider should know the characteristics and requirements of the individual customer and then should provide the services accordingly (Berry, 2006).
STATEMENT OF PROBLEM
The success of commercial banks is largely determined by their capitalization and market share. Banks with relatively huge capital base and large market share are arguably more successful than the rest in that they are more likely to enjoy higher profits. In tandem with the foregoing argument, customer retention is paramount to the overall success of commercial banks. The ever increasing numbers of already banked people opening accounts with new banks while closing accounts with other banks implies that, many commercial banks are currently facing a problem of losing customers to their competitors. This, coupled with other factors, has led to collapse of certain banks or bank branches. More so, as Kuria (2010) observed little attention has been paid to the practices of relationship marketing in commercial banks in Nigeria, The implication of this is far reaching since it is likely to result in downsizing of affected banks employees and consequently disadvantage their dependants. Explicably, financial institutions devote much of their resources in attracting prospective customers while they simultaneously fail to address the issues of how to retain the existing ones. Presumably, these firms fail to create long-term relationships with their customers; a situation that negates customer retention. It is against this backdrop that this study was necessitated with the aim of assessing how customer relationship affects customer retention in Ecobank Nigeria.
1.3 AIMS OF THE STUDY
The major purpose of this study is to examine the effect of relationship marketing on customer’s retention. Other general objectives of the study are:
1. To assess the influence of Relationship Quality on Customer retention in Ecobank Nigeria
2. To examine the relationship marketing practices adopted by Ecobank Nigeria.
3. To examine the effect of relationship marketing on customer retention in Ecobank Nigeria.
4. To examine the elements of customer relationship marketing that influence customer retention.
5. To examine the relationship between customer relationship marketing and customer retention the banking industry
6. To examine the strategies that may lead to improved client relationships and higher customer retention levels in Nigerian banks.
1.4 RESEARCH QUESTIONS
1. How is the influence of Relationship Quality on Customer retention in Ecobank Nigeria?
2. How is the relationship marketing practices adopted by Ecobank Nigeria?
3. What are the effects of relationship marketing on customer retention in Ecobank Nigeria?
4. What are the elements of customer relationship marketing that influence customer retention?
5. What is the relationship between customer relationship marketing and customer retention the banking industry?
6. What are the strategies that may lead to improved client relationships and higher customer retention levels in Nigerian banks?
1.5 RESEARCH HYPOTHESES
H01: There is no effect of relationship marketing on customer retention in Ecobank Nigeria.
H02: There is no significant relationship between customer relationship marketing and customer retention the banking industry.
1.6 SIGNIFICANCE OF THE STUDY
This study will help life banking institutions to understand how best to implement the relationship marketing strategies. It will also help the central banking regulatory body to understand the effect of relationship marketing practices on customer retention among the Banking institutions in Nigeria. This study will increase the level of literature available in understanding how Banking institutions go about implementing relationship-marketing strategies. Finally, the study will increase literature available on banking firms in Nigeria, which may be used by all the stakeholders.
1.7 SCOPE OF THE STUDY
The study is based on the effect of relationship marketing on customer’s retention in Ecobank Nigeria in Enugu Metropolis.
1.8 LIMITATION OF STUDY
Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
1.8 DEFINITION OF TERMS
Relationship marketing: Relationship marketing is the process of attracting, maintaining, and enhancing long-term relationships with key people in a firm or organization (DeYoung, 1988). According to Grönroos (2007), relationship marketing is “to establish, maintain and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties are met. This is achieved by a mutual exchange and fulfilment of promises
Bank marketing: This is the creation and delivering of want satisfying services to the present and prospective customers at a profit to the bank by integrating all the banking activities effectively (Rao, 2014).
Strategic Pricing: Strategic pricing clarifies the relationship between market segmentation and price, and delivers the tools an organization needs to stay focused on value as it determines break-even, defines price elasticity, and analyzes trade offs between features and price points. Using strategic pricing tools yields a better positioning approach (Industrial Relations Center (IRC), 2011).
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