ABSTRACT
In today‟s high competitive and globalized banking
environment, increasing customer satisfaction and loyalty for their retention
and gain competitive advantage as a result, emerges as the most important
challenges faced by marketers. Cultivating satisfied and loyal customers is
frequently argued to be the most important driver of organizations‟ long-term
financial performance, which can lead to increased sales and customer share,
lower cost, and higher profit. Therefore marketing scholars emphasize the influence
of relationship marketing as a strategically important tool from which customer
satisfaction and loyalty can be secured and, as a result, the attainment of
higher competitive advantage. The purpose of this study was to explore
relationship marketing strategy as a source of competitive advantage in the
Ghanaian banking industry using Ghana Commercial Bank as a case study. The
study also aimed to investigate the influence relationship marketing strategy
has on customer satisfaction and loyalty and in turn on competitive advantage.
The study was carried out in 2013 on a convenience sample of sixty Ghana
Commercial Bank customers and six bank officials. Structured questionnaires and
interview guides were administered to bank customers and bank officials respectfully,
on a face to face interview in three selected branches of the bank in the
Ashanti Region. The data were analyzed to determine the key dimensions of
relationship marketing strategies. Findings indicated that trust, commitment,
communication, satisfaction, quality, loyalty and complaint handling are key
dimensions of relationship marketing strategy construct. The findings from this
exploratory study contributed to understanding the relationships between
different variable dimensions of relationship marketing strategy, and provide
critical implications for bank managers, and highlight directions for future
research.
CHAPTER
ONE
1.0 Introduction
This chapter sets the overview of what the research is all
about, how and where it was conducted. It includes the background to the study,
problem statement, objectives of the study and research questions, purpose of
the study, and scope of the study, significance of the study, limitations, as well
as organization of the study.
1.1 Background to
the Study
In today‟s business world customers of all industry sectors
are becoming more informed as to the level of choice and competition for their
custom. This has led to the requirement for businesses to develop and maintain
marketing strategies that increase their competitiveness within their
respective sector. Relationship Marketing is a marketing theory, which has
benefited businesses across industry sectors (Sarshar et al. 2010).
According to Berry (1995), relationship marketing is an old
idea but a new focus now at the forefront of services marketing practice. The
impetus for its development has come from the maturing of services marketing
with emphasis on quality, increased recognition of potential benefits for the
firm and the customer, and technology advances (Berry 1995). And according to
Morgan and Hunt (1994), the need for relationship marketing stems from the
changing dynamics of the global marketplace and changing requirements for
competitive success. Its focus includes targeting profitable customers, using
the strongest possible strategies for customer bonding, marketing to employees
and other stakeholders, and building trust as a marketing tool (Berry 1995).
The global banking sector is currently facing higher and
stronger competition from new entrants and for market share by existing
players, customer control and declining customer confidence (Ernst & Young,
2012). Increased competition, greater choice and customer sophistication, has
forced all banks to adapt their business models to be responsive to customer
needs, whilst they strive to grow to achieve better positions and to exceed
their performance standards by meeting the needs of the customer (Ernst & Young,
2012). Customer retention through relationship marketing strategy has assumed
critical importance for business survival and growth today.
With the current business environment characterized by
increasingly saturated market, caused by changes in the nature of competition
and an ever-growing imperative to attain a comprehensive appreciation of
customer needs, matching the growing complexity of the business environment has
led to an ever-more diversified and demanding customer base (Barnes et al.,
2004).
In such expanding and rapidly changing environment,
companies cannot maintain attitudes characterized by attracting customers or
expanding in new markets. The key success factor to survival and growth in
mature markets relies on sustaining long-term relationships with stakeholders
(De madariaga and Valor, 2007). Transforming indifferent customers into
satisfied, loyal, committed and trusted ones and establishing a long term
relationship with customers is critical for organizational success (Bhardwaj,
2007).
Behind this changing trend apart from those factors
indicated above, lie globalization, technological advances, and the
deregulation of markets, creating intensified global competition in the banking
sector. Globalization of banking service market and the proliferation of new
banks are both the result of technological developments and the loosening of
administrative and monetary interventions, which has led to stronger
competition and the risk of reducing market shares for each banking institution
globally (Mylonakis, 2009).
The Ghanaian banking sector is currently facing higher and
stronger foreign competition. With 25 universal banks and about 120 financial
institutions, it is believed this sector is in a strong position to meet the
economic fortunes of the country. However, the banking industry in Ghana is now
opened to stiff competition as a result of government policy of deregulation
and liberalization of the sector since 1983 for efficiency and competition. In
February 2003, Bank of Ghana formally introduced the universal banking law,
which has brought more competition and efficiency within the industry (Sector
Profile of Ghana‟s Financial Services Industry, 2008).
This study considers the
importance and the shift towards relationship marketing principles in the
Ghanaian banking industry in line with global trend. Players offering personal
banking and related products have now bought in the concept behind relationship
marketing and are investing in the new information technology to enhance customer
relationships and improve retention rate (Dibb and Meadows 2004).
Thus, to remain competitive in the banking industry, banks
should attract and retain customers, create customer satisfaction, encourage
customer loyalty and build strong customer relationships by employing
relationship marketing strategy. This is because it costs three to five times
less to keep a customer than to get a new one (Farber and Wycoff, 1991).
Companies can improve profits anywhere from 25% to 85% by reducing customer defections
by 5% (Reichheld and Sasser 1990).
By having a customer
relationship marketing strategy, Ghana Commercial Bank the case study
organization‟s management can build strong customer relationships that satisfy
and improve retention rate of existing customers, as well as attracting new
custom for the competitive advantage it would create.
The rules for business success are changing fundamentally.
Forces such as globalization, competition, technological change and the rising
power of the customer are stimulating businesses to find new ways of
satisfying, retaining and working with customers so that their needs can be
anticipated and products and services more customized (Phipps and Simmons
2002).
Customer satisfaction and loyalty is an important strategic
objective of managers around the world. A worldwide survey of chief executive
officers conducted by Conference Board (Bell 2002) found that customer loyalty
and retention was the most important challenge that chief executive officers
believed they faced. Despite managers‟ emphasis on loyalty, however, brand
loyalty is widely reported to be declining (Chancy 2001).
This trend is again confirmed in a worldwide survey of
retail consumers in the banking industry by Ernst & Young (2012). According
to the report behavior of banking customers continues to evolve rapidly.
Customers are becoming more assertive and taking greater control of their
banking relationships. They are increasingly demanding quality service from
their banking relationships and are less loyal and are likely to try new banks.
They are also demanding frequent interactions, rewards for loyalty, prompt
service, respect, greater personalization and flexibility (Ernst & Young,
2012).
The challenge confronting banks now is how to acquire and
retain customers, who are satisfied and loyal who are ready to give the
business the long-term value it needs.
The assumption is that
satisfied and loyal customers are more likely to remain with the business and
give the firm the competitive advantage it needs through repeat purchase. It is
estimated that it costs between five to fifteen times as much to acquire a new
customer as it does to keep a current one (Phipps and Simmons 2002).
Since the global economic crisis in 2008, banking
institutions both locally and globally now face increased competition from each
other and from non-traditional new entrants. In such environment, the challenge
for banks is understanding customer behavior, attitudes and requirements
through banks‟ strategic thinking, operational planning and day-to-day customer
treatment (Ernst & Young 2012).
The current business environments is characterized by
customers who are smarter, more informed, and have access to many channels and
choices which they take little time to exercise. Customer can easily switch to
competitors who promise better offerings at lower prices (Bhardwaj, 2007).
The Ghanaian banking sector has
traditionally been dominated by few market players. However, with 25 universal
banks across the country presently and over 120 financial institutions (PwC
2012), the Ghanaian banking customer now has choice, power and control making
customer switching to the competitor more easily. This has brought banks in
Ghana to the competitive arena creating great challenge for banks in terms of
survival and growth.
The challenge facing banks
today is how to evaluate their marketing strategies and establish strategies
that are more focused and intended with specific attention to the customer.
This study therefore examines relationship marketing strategy as a source of
competitive advantage in the Ghanaian banking sector using Ghana Commercial
Bank (GCB) as case study.
1.3 Objective of
the Study
This study examined relationship marketing strategy as a
source of competitive advantage in the Ghanaian banking industry using Ghana
Commercial Bank Ltd as case study. The objective was to find out Ghana
Commercial Bank‟s relationship marketing strategies, and how it is implementing
them in its day-to-day practices that improve customer satisfaction, loyalty
and retention rate,
that leads to competitive advantage. To achieve this, the specific objectives
of the study sought to satisfy the following;
1.
To investigate the level of
understanding present in Ghana Commercial Bank with regards to relationship
marketing philosophy.
2.
To examine the available structures
and measures in Ghana Commercial Bank that facilitates effective design and
implementation of relationship marketing strategies.
3.
To ascertain the benefits (in terms
of customer satisfaction, loyalty, retention and competitive advantage) that
accrues for the bank for employing relationship marketing strategy.
4.
To find out the views of current
customers of Ghana Commercial Bank about their level of satisfaction and
loyalty.
1.4 Research
Questions
1.
What level of understanding is
present in Ghana Commercial Bank with regards to relationship marketing
philosophy?
2.
What are the available structures
and measures in Ghana Commercial Bank that facilitate effective design and
implementation of relationship marketing strategies?
3. What
benefits (in terms of customer satisfaction, loyalty, retention and competitive
advantage) accrue for the bank for employing relationship marketing strategy?
4.
What are the views of the current
customers of Ghana Commercial Bank about their level of satisfaction and
loyalty?
1.5 Scope of the
Study
The business under
study is Ghana Commercial Bank the largest and one of the oldest and leading indigenous
banks in Ghana. The choice was made on the premise that the bank has been operating long enough and as the largest bank, how it is
coping with the current competition in the banking industry in terms of
customer retention, would give the kind of academic insight the study seeks to
offer. Besides, the bank has 158 branches throughout Ghana and relates to quite
large number of banking customers and as such building relationship marketing
strategy becomes imperative.
Customers and competitors used
were in the context of the banking sector. This study was limited to three
selected branches of Ghana Commercial Bank branches in the Ashanti Region.
1.6 Significance of
the Study
The significance of
the study stems from the following assumptions:
The academic importance of the study, since relationship
marketing study in the Ghanaian banking industry was found to be limited. The
importance of the study‟s findings would guide the bank‟s management in its
focus on maximizing customers‟ value in more cooperative and long-lasting
relationships by enhancing its competitive attributes to achieve business
success and better strategic position through the application of relationship
marketing strategy.
The significance was again highlighted in view of the
increasing managerial focus on maximizing customer contribution in terms of
profit. Customer satisfaction, loyalty, and retention are the most significant
challenges faced by most Chief Executive Officers across the world (Ball,
2004).
At the same time, it was also
found that effective relationship marketing strategy would help the
organization to understand customers‟ needs, so that GCB can serve their
customers better than their competitors, which finally leads to cost reduction,
customer loyalty and generate competitive advantage for the bank.
The findings of this study
could be seen as a contribution to existing works on how businesses can build
relationships with their customers. The study would also play a significant
role of engineering further research into other aspects of the topic under
consideration. This study could serve as a reference for GCB in its quest to
adopt strategies for competitive advantage in the banking industry of Ghana.
1.7 Limitations
Most of the limitations that was encountered in conducting
this research had to do with sourcing data and time. Primary data sourcing was
difficult as bank managers were unwilling to share information bordering on
competitive strategies whilst most bank customers were reluctant to respond to
questionnaires. Perceived bias on the part of both customers and managers was
also evident. Secondary data relevant to the topic in Ghanaian context was also
limited. Again limiting resources in terms of time, human and money means enough
information could not be gathered looking at the geographical spread of GCB
branches across the country. As a result the research was limited to only three
selected branches of the bank in the Ashanti Region.
Another critical issue had to
do with respondents` reluctance to give out information because they felt that
their privacy could be invaded. Information on this sector was again difficult
to obtain looking at the competitive nature as well as the red-tape and
authorizations that were required to have access to data from the bank.
Another limiting factor was the use of convenience sample,
the use of which might be quite different from a representative sample of the
population. Again, since it is an exploratory study, it raises more questions
than answers for marketing scholars regarding insights into seller-buyer
relationships.
The study was organized into five chapters. Chapter one
dealt with the introduction of the study including the background to the study,
the statement of the problem of the study, research objectives and questions,
scope of the study, significance of the study and the limitations associated
with the study.
Chapter two focused on review of related literature of
previous works on relationship marketing. Chapter three focused on the research
methodology and organizational profile. Chapter four, entailed data
presentation and analysis. The last chapter covered summary of findings,
conclusion and recommendations of the study.
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