RELATIONSHIP MARKETING STRATEGY AS A SOURCE OF COMPETITIVE ADVANTAGE IN THE GHANAIAN BANKING INDUSTRY: A CASE STUDY OF GHANA COMMERCIAL BANK LIMITED

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.

1.2 Statement of the Problem
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.

1.8 Organization of Chapters
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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Item Type: Ghanaian Project Material  |  Attribute: 95 pages  |  Chapters: 1-5
Format: MS Word  |  Price: GH50  |  Delivery: Within 30Mins.
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