CHAPTER
1
INTRODUCTION
1.1 Background of the Study
Nigerian banks in the face of
increasing competition are currently facing enormous challenges which have made
survival increasingly difficult. To survive and be successful providers of
financial services, it is extremely important that the present environment
should go with a new management order which will offer the customer
satisfaction and make better business performance. It is evident that today
customers have increasingly become so enlightened and aware of their importance
that ignoring them in search for competitive advantage can be suicidal for
banks. Therefore, banks must brace up to the challenges in a bid to provide an
effective customer service.
Banking operations in Nigeria started
in 1892 when African Banking Corporation opened its first branch in Lagos to
finance the shipping business of Elder Dumpster and Company which was operating
steamship services between Liverpool and the West African coast. The Bank of
British West Africa took over the activities of the African Banking Corporation
in 1893 (now First Bank of Nigeria Plc). In 1917, Barclays Bank (now Union Bank
of Nigeria Plc) was established. Shortly year, many more Banks were
established; some of which are the British and French Bank (now United Bank for
Africa Plc) established in 1949, the Industrial and Commercial Bank established
in 1929, National Bank of Nigeria Plc established in 1933, the Agbonmagbe Ban
(now Wema Bank) established in 1945, Nigeria Penny Bank established in 1940,
Nigeria Farmer and Co-operative Bank Plc established in 1947 and so on. (Okoh,
S. E. and Unugbro, A. O. 2003).
Since independence banking industry has
grown tremendously and serves the greater proportion of the general public.
With the liberalization of bank license in 1980, a more competitive environment
and efficiency in the banking system was promoted. Bank
is a customer oriented services industry. A bank depends upon the customers for
their survival in the market. The customer is the focus and customer service is
the differentiating factors (Guo et al., 2008). A bank can differentiate
itself from competitors by providing high quality customer service (Naeem &
Saif, 2009). Service quality is
undoubtedly an important input for customer satisfaction which in turn
influences customers’ behaviour in terms of loyalty (be it expressed in
customers’ repurchase intentions, positive word of mouth or an increase in the
number of performed banking operations), and thus enhance a bank’s image and
performance. Efficacy of customer service is related with
progressive operation.
In
the competitive banking industry, customer satisfaction is considered as the
essence of success. Organizations operating in service industries should
consider service quality a key strategic issue for the business success
(Spathis et al., 2004). Those service providers who establish a high
level of service quality retain a high level of customer satisfaction; they
also obtained a sustainable competitive advantage. Research indicates that
companies with an excellent customer service record reported a 72% increase in
profit per employee, compared to similar organizations that have demonstrated
poor customer service; it is also five times costlier to attract new customers
than to retain existing customers (Duncan, 2004). In some earlier studies,
service quality has been referred as the extent to which a service meets
customer’s needs or expectations (Lewis & Mitchell, 2000). Bank should be
known about the expectation and perception of the customer. Measuring
customer’s expectation is the key to being able to serve the customer
satisfactorily. On the other hand, with better understanding of customer’s
perceptions, bank can determine the actions required to meet the customer’s
needs. In this way they can easily satisfied the customer which is directly
impact on the overall performance of the bank. Customer satisfaction is one of
the important tools to run a business and to achieve the mission statement.
Indeed, customer satisfaction has great significance for the future of an
institution and it is seen as a basis for securing market position and
achieving other objectives of the institution. Therefore, achieving high levels
of service is one method to keep customers both satisfied and loyal (Perng,
2007).
Customers
in the banking sector are in a strong bargaining position due to the
significant growth of banks. Therefore, banks have to provide service carefully
because of the availability of banks. Service quality has been a vital issue of
discussion and research over the past three decades. Research on service
quality has well established that the customer perception of the quality of a
service depends on customer’s pre-service expectations. Studies by Parasuraman et
al. (2005), Zeithmal et al. (2000), noted that the key strategy for
the success and survival of any business institution is the deliverance of
quality services to customers. Accordingly, Chang (2008) deemed that excellent
service quality is vital to business success and survival. Hence, delivering
quality service to clients is a necessity for success and survival in today’s
competitive world (Kheng et al., 2010). Banks do business with
customer’s money. So, the more satisfied customers are involved in a bank’s
row, the more secure business and profitability. If a bank cannot provide
proper customer service, then the bank would be losing its customers. The
profitability would also be decreasing because of the poor customer service.
According to Kang (2004) many service delivery errors and problems can occur
and that is not beneficial for the reputation of the organization. Ha and Jang
(2009) argued that service failure occurs when customer perceptions do not meet
customer expectations. The problem with service failure is that it may lead to
a destroyed relationship between the customer and the organization. Thus the
importance of customer satisfaction in today’s dynamic corporate environment is
obvious as it greatly influences customer’s repurchase intensions whereas
dissatisfaction has been seen as a primary reason for customer’s intentions to
switch. Satisfied customers are most likely to share their experiences with
other five or six people around them. Equally well, dissatisfied customers are
more likely to tell another ten people about their unfortunate experiences with
a particular organization. In order to achieve customer satisfaction,
organizations must be able to build and maintain long lasting relationships
with customers through satisfying various customers needs and demands (Pizam
& Ellis, 2009). Otherwise, the combined effect of negative word-of-mouth,
switching and reduced consumption will affect the productivity and
profitability of the bank.
1.2 Statement
of the Problem
The
relevance of the customer in every business organization cannot be
overemphasized having known that the customer is the lifeblood of every
business survival.
Nigeria Banks have fall short of the expectations of their customers in recent
time. Customers have experienced challenges ranging from delayment, stock out,
non-availability of staff at service points, unprofessional conduct or rudeness
by the staff of the bank, poor standard of records or improper information,
failed promises among others.
Customers’
satisfaction and service quality are interlinked and this creates value for
customer. If customers are offered services that they expect or that exceed
their expectation, they will have a positive view about a firm. On the other
hand if customers feel they got less value than what they expected, their
attitude towards a given firm will be negative and they may pass this attitude
to potential customers (Chau & Kao, 2009). If satisfaction is there, then
customers will become loyal but if customers are dissatisfied their loyalty is
not guaranteed. Hence management should pay special focus on the satisfaction
and this starts with offering quality service (Mohsan et al., 2011).
In the words of Ogunnaike and Ogbari
(2008), customer service in our money deposit bank can be mistaken to mean
customer delay and frustration. According to the authors almost every Nigeria
bank encounters similar problem in meeting customers’ expectation of services
and customer satisfaction. The issue of money transfer in banks is one major
problem that customers of certain banks have been made to experience. In most
cases, the customer hardly receives the payment of the money transferred in his
account immediately.
1.3 Purpose of the Study
The
main aim of the study is to examine Service Quality and Customer Satisfaction
of Selected Money Deposit Banks in Port Harcourt. Specific objectives of the
study are:
1. To examine the association between service
quality Reliabilityand Customer satisfaction of money deposit bank in Port
Harcourt
2. To examine the relationship between service
quality Assurance and Customer satisfaction of money deposit bank in Port
Harcourt.
1.4 Research Questions
In-order
to guide the study and achieve the above objectives, the following research
questions was formulated:
1.
To
what extent does Reliability enhances Customer satisfaction?
2.
To
what extent does Assurance enhances Customer satisfaction?
1.5 Conceptual Framework
CONCEPTUAL
FRAMEWORK OF SERVICE QUALITY AND CUSTOMER
SATISFACTION OF SELECTED MONEY DEPOSIT BANKS IN PORT HARCOURT.