CHAPTER 1: INTRODUCTION
1.1 Background to the study
Banks are key players in the operations of financial markets and are important in maintaining the smooth running of a country’s economy. In an increasingly modest environment, the ‘quality service’ is a key measure of a company’s success that continues to impress the consideration of banking organizations, and remains a highlight of the service maritime sector throughout the world. Greater profits and greater market share are the key factors in the enhancement of performance of banking services and in determining their success. The banking sector has been greatly changed by technology, regulation, and structural aspects over the last two decades of the 21st century. The importance of service quality isprimarily due to demands of higher quality of services, which ultimately resulted in higher customer satisfaction, loyalty and trustworthiness, better readiness for offering to others, reduced objections and complaints, and a greater customer retention rate(Ahmed, Khaliq, & Jan, 2016). In the context of banking services, it is pointed out that the quality of the service is of primary importance as it offers a higher customer satisfaction level and thus proved to be a vital competitive advantage (Culiberg, & Rojšek, 2010). The worldwide economic recession and financial turbulence have seriously affected consumer confidence in the banking and financial sector globally. In the existing business environment, the banking industry has become very competitive. Banks are extremely aware of the need for competitors to distinguish themselves against various criteria that can boost customer satisfaction and loyalty, because banks supply customers with nearly homogenous products. The result demonstrated that customer satisfaction and loyalty are vital to an organization’s long-term improved performance. Customer satisfaction and customer loyalty are the essential factors in the current literature with the goal to strengthen customers’ confidence in the capabilities of service providers.
Every organization believes that their objective is to satisfy its customer’s needs and demands. The satisfaction of customer needs and requirements will not only ensure the organization’s survival, but will also ensure its prosperity. Customers are supposed to be one of the main players in any organization, because organizations are unlikely to succeed without them. Marketers therefore emphasize research in the field of consumer behavior, and behavioral intent. Knowledge about consumer behavior, which ultimately facilitates positive customer attitudes towards organization, will lead to effective marketing policies in the interests of customers. Because the intention of the customer is a strong indicator of their actual behavior. In 1980, the banking industry underwent a boom following the financial sector liberalization in Nigeria. The regulatory body’s low admission requirements and high prices earned from foreign exchange business led to new players quickly entering the profitable banking sector. Between 1985 and 1993, there was an astronomical increase in the number of licensed banks from 41 to 120 (Central Bank of Nigeria, 2009) which led to an increase in the contribution of the sector to GDP and jobs and careers. Since banks are important components of the sector, it could therefore be argued that recently banks in Nigeria have contributed significantly to the country’s GDP (Kolawole, 2012). For example, sectoral contribution of service industries in the year 2004, 2005, 2006, 2007 and 2008 to the growth of GDP were correspondingly 8.8, 8.0 and 9.2, 9.9 and 10.5 (Central Bank of Nigeria, 2009). The importance of its banking industry is not limited to Nigeria alone, but also to many African countries; any problem in the banking sector of Nigeria could, therefore, have a negative impact on other African nations as well (Adeoye, & Lawanson, 2012).
In recent decades, the privatization of banks has led to higher expectations for customers. Now customers require financial institutions to provide better quality services. It has boosted competitiveness among different business banks, especially private banks. Therefore, researchers all over the world claim that the provision of quality services offers a sustainable competitive advantage to any business, thus offering their clients high quality services. It allows them to meet not only their customers ‘ needs but also their future needs satisfactorily. This ability to anticipate customers ‘ future needs enables them to consistently enjoy their customers with quality services. It further enhances customer satisfaction and loyalty to such companies. To satisfy customers and to improve customer performance and profitability, banks must consider various credentials (tangible, reliability, assurance, and empathy) of service quality. Although many empirical proofs of the relationship between service quality and customer loyalty could be found worldwide in literature, this field was hardly considered in the context of Nigeria. Many researches have been carried out in developed countries on service quality and customer satisfaction and loyalty. Therefore, by studying this in the banking sector of a developing country i.e. Nigeria, this study will highly contribute to the existing literature.
1.2 Issues of Concern
The Nigerian banking sector has an extremely high expectation of customers in the post-consolidation era. This is justified by the conviction that inability to compete in both domestic and global markets was crowded up by incompetent banks. But most Nigerian banks have been below this expectation in recent times. Customers have faced challenges ranging from delayed notification transactions, inventories, and unavailability in service points of personnel, unprofessional behaviors and rude behavior of banks staff, poor record standards or incorrect information, failed promises, etc. Ogunnaike and Ogbari (2008) discoursed that in the Nigerian banking industry customer services can make mistake as customer delay and frustrations. Far from every Nigerian bank, customer satisfaction and service expectations are encountered by a similar problem. For example, a big problem for customers of Nigerian banks is the issue of delays in postal transactions such as cash transfer and payments between customers. In most cases, customers are not notified of immediate crediting or debiting of an account. The account holder might have to wait indefinitely before viewing the notification or, if not, he or she must visit the bank to confirm the transaction (Farayibi, 2016).
Huge crowd and long queues in the banking areas, can be extremely overwhelming and discouraging. The disintegration of the networks on the computers used is often the consequence of these long queues. Sometimes, it happens because of cash officers’ duties to each other, whether they are to take care of the customer or not. The customer loyalty and profitability problem of the bank therefore exists. One of the key requirements for the efficiency of banks is that they quickly match their services with customer needs. However, Nigerian’s common experience is that most banking companies do not provide customer service facilities and capacities without great delay. This has led to low efficiency in the supply of banking services in Nigeria and has caused low satisfaction for customers. Many Nigerian bankers have been wondering whether banks in the country are fulfilling their endless desires to spend the minimum amount of time on banking transactions. While the banks’ major goal is to attract, retain and optimize profit.Though, profit maximization in the banking industry is a function of the capacity of management to deliver efficient customer services on a small or no time-consuming basis (Agbadudu, 1996).
1.3Aims and Objectives
The aim of this research is to explore the connection between service quality and customer satisfaction, and how the Nigerian banking industry can improve and manage the quality standards delivery process for its customers. It also points out and discusses those factors, which can influence both variables. In addition, some techniques to improve the quality of services in the organization are examined. To fulfil the purpose of the study, the researcher will analyze by discussing their relationship and the impact of quality services on customer satisfaction. The specific goals are:
1) To review the impact of service quality on customer satisfaction;
2) To analyze the impact of customer satisfaction on customer loyalty;
3) To examine the impact of service quality on customer loyalty.
4) To review the influence of poor customer service on customer satisfaction.
5) The rate of customer switch due to from one bank to another
6) Impact of customer satisfaction on customer retention in the Nigerian bank
Above mentioned aims and objective of this research can be achieved by answering following research questions.
1.4 Research questions
Question1: At what extent present services of Nigerian banking industry are enjoyed by customers? and what are expected to be improved?
Question 2: What factors in general dissatisfy customers with their banking services?
Question 3: What is the impact of customer behaviors on banking performances and on market share in Nigerian banking industry?
1.5 Relevance of the study
Firstly, by increasing a broad range of literature in the field of customer satisfaction, this research will contribute to the field of service marketing in academic world. Secondly, the results of this study also stress the need for banks, to recurrently improve the quality of delivering customer services in terms of their products, technology, employees, interest rates, and swiftness in services. For students, scholars and prospective researchers the outcomes of this study are useful. It will also promote appreciating the need for customer relationship management, which will enhance the bank market share and positively impact on the achievement of the organization goals, by employers and employees and other stakeholders. The importance of this study for banks in Nigeria will be immense because it provides a quickpicture of service quality and customer satisfaction level that they receive from their banks.
1.6 Scope and Restrictions
The scope of this research is that it focuses on the approach used by bank officials to provide quality services to their customers. It will examine the quality services of bank staff in terms of speed, reliability, trustworthiness, courtesy and everything that makes their customer happy. It covers the opinions of the customers as to how well their banks satisfy their needs and the quality of the service, they receive by using technical and testing questions to bring about the suitable answers. Customers views of how they expect to be served additionally would also be gathered. This will enable the researcher to know what new expectation customers want from their bankers and specific little treatment that are earned over now and then.
The study is limited and will concentrate on Nigerian banks’ main branches. Not all the banks would be partaking in the research because it will take time. The primary data will be gathered from one bank selected, ECOBANK, for representation of the entire system. Customer as respondents were selected for responding to questionnaire. If there is enough time and financial assistance, the research can be replicate on a broader scale. Research for all Nigerian banks is not easy due to limited time and resources, and covering the entire country is also highly impossible.
1.7 Outline of the study
This research work is divided into five chapters. The first section covers the background of the study, the problem statement, research issues, goals and objectives, study relevance, scope and restrictions and the outline of the study. Chapter two emphasize on literature review, covering reviews and drawing meaningful conclusions in terms of literature already available on the subject. Chapter three deals with the methodology part, used for this research considering the need and accuracy of the information provided by the respondents to achieve a representative population sample. It also illustrates the adopted research design, sampling methods and the methods of data collection and data analysis. Chapter four gives explicit findings that focus on the research objectives in tables and graphs. While the last chapter, chapter five, presents the conclusionand recommendations of the study. Following these chapter is the reference to all the persons and institutions mentioned in this dissertation.
The introductory chapter consists of five main sections. Where, the first section provides an overview of the background of the study. Second part discusses the basis of research problems for constructing the concept of the research. The third section presents the purpose of the research, aims and objectives of the study, with three questions of research. The fourth section contains the relevance, scope, and limitations of this investigation. In last partthe structure and outline of the study are illustrated.