THE EFFECT OF RELATIONSHIP MARKETING ON CUSTOMER SATISFACTION

THE EFFECT OF RELATIONSHIP MARKETING ON CUSTOMER SATISFACTION

(A CASE STUDY OF FIRST BANK ADO EKITI)

ABSTRACT

This study explores the relationship between relationship marketing practices and customer satisfaction, focusing on First Bank in Ado Ekiti. Through a mixed-methods approach involving surveys and data analysis, the study examines the implementation of relationship marketing practices by the bank and their impact on customer satisfaction levels. The findings highlight the importance of personalized communication, customer loyalty programs, and feedback mechanisms in driving higher levels of satisfaction among customers. Additionally, the study identifies opportunities for improvement in customized offerings and community engagement strategies. Based on the findings, recommendations are provided to enhance relationship marketing efforts and improve customer satisfaction levels. Overall, this research contributes to a better understanding of the dynamics between relationship marketing and customer satisfaction in the banking sector, offering insights for practitioners and academics alike.

CHAPTER ONE

INTRODUCTION

1.1       Background of the Study

In the dynamic and competitive banking industry, maintaining a loyal customer base is crucial for sustainable growth and profitability. One of the strategies that banks employ to achieve this is relationship marketing. Relationship marketing emphasizes building long-term, mutually beneficial relationships with customers by focusing on understanding their needs and preferences and delivering personalized services. In recent years, relationship marketing has gained significant attention as a key driver of customer satisfaction and loyalty in the banking sector.

In recent times, there has been a notable shift in marketing emphasis towards prioritizing customers. Within the last fifteen years, significant changes have occurred in how industrial companies engage with both their customers and suppliers. This transformation became apparent as companies recognized the necessity of establishing sustainable competitive advantages in the global economy, which increasingly relies on companies forming trusted relationships within various networks or strategic alliances (Morgan and Hunt, 2019). Consequently, relationship marketing has emerged as a dynamic domain within marketing, focusing on cultivating enduring relationships with customers and other stakeholders. The management of customer relationships is progressively evolving to become an integral component of marketing management practices (Aaltonen, 2018).

There is a widespread consensus that the quality of relationships between involved parties significantly influences the durability, depth, and subsequent success of relationship marketing practices (Gwinner et al., 1998). Consequently, relationship marketing has garnered increasing attention within both marketing theory and practical applications. This strategic approach holds particular relevance for service industries due to the intangible nature of services and the high level of interaction with customers. A fundamental aspect of relationship marketing strategy is its capacity not only to enhance customer retention and company profitability but also to confer a sustainable competitive advantage to service firms, as the intangible elements of relationships are challenging for competitors to replicate (Reichheld and Sasser, 2020).

This growing recognition has sparked heightened interest in relationship marketing, with an increasing number of firms prioritizing the cultivation of strong firm-customer relationships (Ndubisi, 2018). The emphasis on enhancing and focusing on customer relationship building yields numerous benefits for both firms and customers alike. Through the establishment of robust relationships with customers, firms can access valuable sources of marketing intelligence, enabling better planning and execution of marketing strategies. Additionally, fostering relationships with customers facilitates deeper understanding of their needs, preferences, and behaviors, which in turn allows firms to tailor their offerings and services more effectively to meet customer expectations (Gummesson, 2008).

With mounting evidence demonstrating a direct correlation between customer satisfaction and profitability, the imperative for banks to cultivate enduring, sustainable customer relationships has become increasingly apparent. As Kotler (2020) asserts, effective implementation of a relationship marketing program prompts the firm to prioritize customer management with the same level of diligence as product management. This shift in focus underscores the recognition that fostering strong relationships with customers is integral to long-term success and competitiveness in the banking sector.

In today’s highly competitive banking landscape, where customers are inundated with choices, the ability to retain existing customers and attract new ones hinges on the quality of relationships maintained by the bank (Peppers & Rogers, 2016). By prioritizing relationship marketing, banks can move beyond transactional interactions and adopt a more holistic approach to customer management. This entails understanding customers’ individual needs, preferences, and behaviors and tailoring products, services, and experiences accordingly.

Moreover, a customer-centric approach to banking not only enhances customer satisfaction but also drives profitability through increased customer retention, higher levels of engagement, and expanded lifetime customer value (Ryals & Payne, 2018). By investing in building and nurturing long-term relationships with customers, banks can achieve sustainable competitive advantages in the marketplace. This entails leveraging customer insights to anticipate and address their evolving needs, thereby fostering loyalty and reducing churn. The adoption of relationship marketing principles enables banks to transcend traditional transactional approaches and adopt a more strategic, customer-centric mindset. By focusing on managing customer relationships as diligently as product management, banks can cultivate loyalty, drive profitability, and position themselves for long-term success in an increasingly competitive banking landscape.

Customer satisfaction is a concept that has been extensively explored and integrated into various theoretical and conceptual frameworks and models (Chan et al., 2017). These frameworks typically encompass measurements of customer satisfaction, its determinants, and related variables (Bruce, 2019). At its core, customer satisfaction arises from the comparison between a customer’s experiences with a product or service and their initial expectations (Oliver, 2020). The definition of customer satisfaction has been articulated in diverse ways within scholarly literature. For instance, it has been described as an overall sentiment or attitude a person holds about a product or service following its acquisition (Solomon, 2019). Alternatively, it has been conceptualized as a comprehensive, affective response that varies in intensity and is focused on specific aspects of acquisition or consumption, occurring precisely when the individual evaluates the product or service (Giese and Cote, 2020).

Customer satisfaction, as a multidimensional construct, encompasses various facets and dimensions that collectively contribute to an individual’s overall assessment of their experience with a product or service (Oliver, 2017). These dimensions often include aspects such as product quality, service quality, price, convenience, and perceived value (Zeithaml et al., 2016). Furthermore, customer satisfaction is not solely influenced by the functional attributes of a product or service but also by emotional and psychological factors (Westbrook, 2017). Consequently, achieving and maintaining high levels of customer satisfaction necessitates a comprehensive understanding of customer expectations, preferences, and perceptions, as well as a commitment to consistently delivering superior value and experiences (Fornell et al., 2016).

In the context of relationship marketing, customer satisfaction assumes heightened significance as it serves as a critical determinant of customer loyalty, retention, and advocacy (Reichheld, 2016). Satisfied customers are more likely to exhibit repeat purchase behavior, engage in positive word-of-mouth communication, and withstand competitive pressures (Anderson et al., 2019). Therefore, organizations across various industries, including banking, prioritize the measurement and enhancement of customer satisfaction as a strategic imperative for achieving sustainable business success (Parasuraman et al., 1988). In essence, understanding the multifaceted nature of customer satisfaction and its pivotal role in shaping customer behavior is fundamental for organizations seeking to build enduring customer relationships and maintain competitive advantages in today’s dynamic marketplace.

First Bank, Ado Ekiti, as one of the leading financial institutions in Nigeria, recognizes the importance of relationship marketing in enhancing customer satisfaction and retaining customers. The bank operates in a highly competitive environment where customers have various options to choose from. Therefore, understanding the impact of relationship marketing on customer satisfaction is essential for First Bank to maintain its market position and sustain growth.

1.2       Statement of the Problem

In the dynamic and competitive landscape of the banking industry, maintaining a loyal customer base is imperative for sustainable growth and profitability. First Bank, Ado Ekiti, operates in an environment where customers have numerous options and expectations regarding banking services. While the bank has been implementing various strategies to enhance customer satisfaction, the effectiveness of its relationship marketing efforts remains uncertain.

Despite the recognized importance of relationship marketing in fostering customer loyalty and satisfaction, there exists a gap in understanding its specific impact on customer satisfaction within the context of First Bank, Ado Ekiti. This gap presents several key issues and challenges:

Inadequate Understanding of Customer Needs: Without a comprehensive understanding of customer needs, preferences, and expectations, First Bank may struggle to deliver tailored products, services, and experiences that meet or exceed customer expectations.

Limited Personalization of Services: Relationship marketing emphasizes personalized interactions and offerings based on individual customer characteristics and behaviors. However, if First Bank’s relationship marketing practices lack personalization, it may lead to dissatisfaction and reduced customer loyalty.

Intensity of Competition: The banking industry in Ado Ekiti is highly competitive, with numerous banks vying for market share and customer loyalty. In this context, the effectiveness of First Bank’s relationship marketing efforts in differentiating itself from competitors and retaining customers becomes critical.

Customer Retention Challenges: High customer churn rates can have significant financial implications for First Bank, including increased customer acquisition costs and reduced revenue. Relationship marketing strategies are essential for fostering customer loyalty and reducing churn, but their impact on customer retention within the specific context of First Bank, Ado Ekiti, needs to be explored.

Measurement of Customer Satisfaction: While First Bank may collect customer feedback through various channels, including surveys and complaints, determining the effectiveness of relationship marketing in influencing customer satisfaction requires a structured analysis of the relationship between relationship marketing practices and customer satisfaction levels.

Therefore, it is essential to investigate the effect of relationship marketing on customer satisfaction in First Bank, Ado Ekiti, to address these challenges and optimize the bank’s customer relationship management strategies for improved performance and competitiveness in the market.

1.3       Objectives of the Study

The main objective of this study is to investigate the effect of relationship marketing on customer satisfaction in First Bank, Ado Ekiti. Specifically, the study aims to:

1. Examine the relationship marketing practices employed by First Bank in Ado Ekiti.
2. Assess the level of customer satisfaction among First Bank’s customers in Ado Ekiti.
3. Determine the impact of relationship marketing on customer satisfaction in First Bank, Ado Ekiti.

1.4       Research Questions

To achieve the objectives of the study, the following research questions will guide the investigation:

1. What relationship marketing practices are implemented by First Bank in Ado Ekiti?
2. What is the level of customer satisfaction among First Bank’s customers in Ado Ekiti?
3. What is the relationship between relationship marketing and customer satisfaction in First Bank, Ado Ekiti?

1.5       Significance of the Study

This study holds several implications for various stakeholders, including First Bank, Ado Ekiti, the banking industry, researchers, and policymakers.

For First Bank, the findings of this study will provide insights into the effectiveness of its relationship marketing strategies and help identify areas for improvement in enhancing customer satisfaction.

For the banking industry, the study will contribute to the existing body of knowledge on relationship marketing and customer satisfaction, providing valuable insights for other banks to enhance their customer relationship management practices.

For researchers, the study will serve as a reference point for further exploration of relationship marketing in different contexts and its implications for customer satisfaction.

For policymakers, the study findings may inform the development of policies aimed at promoting customer-centric practices in the banking sector to enhance customer satisfaction and loyalty.

1.       Scope of the study

This study focuses on examining the effect of relationship marketing on customer satisfaction in First Bank, Ado Ekiti. The study will be conducted specifically in Ado Ekiti, Nigeria, where First Bank operates. It will involve customers of First Bank branches located within Ado Ekiti. The study will primarily focus on relationship marketing practices and their impact on customer satisfaction within the banking sector. It will explore various dimensions of relationship marketing, including customer engagement, trust-building, personalized services, and communication strategies employed by First Bank.

1.7       Definition of Terms

To ensure clarity and understanding, the following key terms used throughout the study are defined:

1. Relationship Marketing: Relationship marketing is a strategic approach focused on building and maintaining long-term, mutually beneficial relationships with customers. It involves understanding customer needs, preferences, and behaviors to deliver personalized products, services, and experiences that foster loyalty and satisfaction.
2. Customer Satisfaction: Customer satisfaction refers to the extent to which customers’ expectations are met or exceeded by the products, services, or experiences provided by an organization. It reflects the overall positive evaluation of a customer’s interaction with a company and influences their likelihood to repurchase, recommend, or remain loyal to the brand.
3. Banking Sector: The banking sector encompasses financial institutions that provide various financial services, including deposit-taking, lending, investment, and payment services. It includes commercial banks, savings and loan associations, credit unions, and other financial intermediaries.
4. First Bank: First Bank refers to First Bank of Nigeria Limited, one of the leading commercial banks in Nigeria. Established in 1894, First Bank offers a wide range of banking products and services to individuals, businesses, and government entities across Nigeria and internationally.
5. Quantitative Research: Quantitative research is a systematic empirical investigation that uses numerical data and statistical analysis to examine relationships, patterns, and trends. It focuses on quantifying variables and testing hypotheses to draw objective conclusions about the phenomena under study.
6. Survey: A survey is a research method used to collect data from a sample of individuals or organizations through structured questionnaires or interviews. Surveys are commonly employed in quantitative research to gather information about attitudes, behaviors, preferences, and opinions.
7. Sample: In research, a sample refers to a subset of the population selected for study. The sample is representative of the larger population and allows researchers to draw inferences and make generalizations about the population based on the sample data.
8. Data Analysis: Data analysis involves the systematic examination and interpretation of collected data to identify patterns, relationships, and trends. It includes various techniques such as descriptive statistics, inferential statistics, and multivariate analysis to derive meaningful insights from the data.
9. Relationship Management: Relationship management refers to the strategies, processes, and practices aimed at effectively managing interactions and relationships with customers, stakeholders, and other relevant parties. It involves building trust, fostering communication, and delivering value to enhance mutual satisfaction and loyalty.