CUSTOMER RELATIONSHIP MARKETING AND CUSTOMER RETENTION
(A STUDY OF GUARANTY TRUST BANK PLC, IKORODU, LAGOS)
1.1 Background to the Study
The financial system consists of institutional arrangements embracing payment mechanisms, and the borrowing and lending of funds. Hassan (2000) posits that it consists of conglomerate of various institutions, markets instruments and operatives that interact within an economy to provide financial services. He stated that financial system is a complex network that brings financial intermediaries in a close touch with one another to channel funds from those with income in excess of needs to those wishing to borrow and it exists forthe mobilization and intermediation of funds which can be on a short, medium, or long term as is depending on the category of participation and the instruments being traded. He further defined Commercial bank as a profit making oriented financial institutions set up for keeping and lending money (and other valued items) for the purpose of making profits.
Commercial banks are joint stock establishments structured to conduct banking business, that includes the business of receiving deposits on current account, savings account or other similar account, paying or collecting cheque drawn by or other business as the governor of central bank of Nigeria may include as the functions of the commercial bank. In carrying out its basic functions a lot of marketing strategies are adopted by the commercial banks, not only in attracting the customers but in customer retention. According to Ayozie (2012), banking service is mostly intangible and a lot of creative marketing is required to retain the customers. Within the recent consolidation of the Nigerian banking sector and subsequent merger of some banks and transfer of ownership to new creditors, bank customer acquisition is no longer a vogue.
Bank officials not only acquire new customers but adopt some basic strategies to retain them which will lead to greater customer satisfaction, profit, increase in market share and most importantly customer loyalty. Some basic marketing strategies as Customer Relationship Marketing will go a long way in assisting commercial banks to maintain a major competitive advantage and customer retention.
Customer Relationship marketing, according to Gordon (2008) is not a wholly independent philosophy but draws on traditional marketing principles. This view suggests that the basic focus up on customer needs still applies, but that it is the way marketing is practiced that is changing, with a greater emphasis on customer value, establishing and maintaining a relationship over along period of time (Christopher et al 2006). Since Customer Relationship Marketing is a descendant of traditional marketing then a good starting point in developing a definition of customer relationship marketing would be to look at how marketing has traditionally been perceived.
1.2 Statement of the Problem
The banking sector in Nigeria has been besieged by myriads of challenges in recent times. The recapitalization imposed on banks in Nigeria by the Apex bank (Central Bank of Nigeria) forced many banks to either merge with stronger ones or be out rightly acquired by others. The post consolidation era has again thrown another dimension of problems to the banking industry in Nigeria; that is the problem of customer acquisition and retention. The industry has become so competitive and bank users now go out for banks with better service delivery and state-of €“the art equipment, thus posing a great threat to the survival of banks in Nigeria.
In order to be relevant to customers in the competitive banking business environment, banks have formulated different strategies to market their products and services. Among such strategies is Customer Relationship Marketing. This strategy ensures the acquisition and retention of profitable customers, using the most effective methods. It is, therefore on this premise that this study critically examines the role of customer relationship marketing on customer retention with emphasis on Guaranty Trust Bank plc.
1.3 Aim and objectives of the Study
The aim of the study is to examine customer relationship marketing and to be able to sustain customer retention in the organization.
The study was set to achieve the following objectives?
- To determine the relationship between customer relationship marketing and customer retention.
- To examine the cost implications of poor customer relationship.
- To critically examine the various approaches adopted by Guaranty Trust Bank in retaining customers; and
- To identify causes of customer purchase switch decisions.
1.4 Relevant Research Questions
In studying the role of customer relationship marketing and customer retention, the following questions would be pertinent.
- Is there a relationship between customer relationship marketing and customer retention in Nigerian banking sector?
- Are there cost implications for poor customer relationship strategies?
- Does Guaranty Trust Bank have a policy on customer relationship and retention?
- Are there factors that influence customer purchase decision and loyalty?
1.5 Research hypotheses
The following hypothesis guides the study:
H01: Cost is not significantly related to poor customer relationship marketing strategies.
H02: Customer relationship marketing is not significantly related to customer purchase decision.
H03:Management strategy of GTBank is not significantly related to its customer relationship practice.
H04: Customer relationship marketing is not significantly related to customer retention.
1.6 Scope of the study
This research studies the role of customer relationship marketing on customer retention. Since it will be difficult and cumbersome in terms of time, financial resources and other logistics to study the entire banks in Nigeria, Guaranty Trust Bank would be used as a study Lagos Region.
1.7 Significance of the Study
This study shall serve as a wakeup call to Guaranty Trust Bank to look into their strategies for customer relationship and retention. It will also serve as a resource material for undergraduate students, researchers and others who may want to carry out investigations on customer relationship marketing in the future.
1.8 Definition of Terms
The following terms have been defined operationally as defined :
- Customer: An individual, group of persons or an organization that buys or uses the product or service of another organization.
- Customer Relationship: The marketing strategy that does not only seek to satisfy customers but to retain them.
- Marketing: The management process of identifying, anticipating and satisfying customer requirements profitably
- Customer Retention: the management strategy of keeping customers with the organization.
- Banking sector consolidation: The restructuring process or recapitalization that took place in Nigerian banking sector where commercial banks were required by CBN to have a capital base of not less than N 25,000,000.
- Brand switching: The marketing process whereby a customer moves his choice of purchase of a particular product to another product, especially from another organization.
- Brand loyalty: This occurs when a customer sticks to a particular product despite the options of alternatives.
Ayozie, D. O. (2012). Is relationship marketing an acceptable marketing strategy to be used by Nigerian commercial banks? Universal journal of management and social sciences.Vol.2, No. 1.
Christopher, A. (2006) Relationship Marketing, Bringing Quality Customer Service and Marketing Together. Butterworth Heinemann, Oxford England, UK.
Chartered Institute Of Marketing (2000), Moor Hall Cookham Maidenhead Berkshire UK.
Gordon, I. H. (2008) Relationship Marketing. Etobicoke Onatano Canada, John Wiley and Sons.
Hassan K. (2000) Elements of Banking, Abiodun Enterprise Published, Yaba, Lagos, Nigeria
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