EFFECT OF RELATIONSHIP MARKETING PRACTICE ON BANK PERFORMANCE (A STUDY OF MOUAU MICROFINANCE BANK)

ABSTRACT

This research examines the effect of relationship marketing practice on bank performance. The objective is to ascertain the effect of relationship marketing practice in MOUAU micro-finance bank. The researcher used Taro Yahmen sample determination and primary data were adopted in getting the required information. In testing hypothesis probit regression analysis and correlation coefficient were used for they study data were obtained from 20 respondents of the marketing practice on bank performance. Based on findings, the researcher recommends that the implication of goods is moderately positive and direct relationship customer loyalty and market share. Also it can be concluded that the customer loyalty within the banking industry play a major role in improving the market share.

TABLE OF CONTENTS

Title page                                                                                                        i 

Declaration                                                                                                     ii                                                                                        

Certification                                                                                                   iii

Dedication                                                                                                       iv

Acknowledgement                                                                                          v         

Table of Content                                                                                             vi

List of Tables                                                                                                  ix

List of Figures                                                                                                x

Abstract                                                                                                           xi                                                                                               

CHAPTER ONE

 1.0 INTRODUCTION                                                                                 1

1.1   Background of the Study                                                                   1

1.2 Statement of the Problem                                                                         4

1.3 Objectives of the Study                                                                            5

1.4 Research Questions                                                                                  6

1.5 Research Hypotheses                                                                                6

1.6 Significance of the Study                                                                         7

1.7 Scope of the Study                                                                                    8

CHAPTER TWO

 2.0   REVIEW OF RELATED LITERATURE                            9

2.1 Conceptual Framework                                                                            9

2.1.1 The effects of relationship marketing on consumer satisfaction:             11

2.1.2 Essential measures of controlling consumers behavior                         12

2.1.3 Benefits of Relationship Marketing to Bank                                        15

2.1.4 Relationship Quality                                                                              16

2.2 Theoretical Framework                                                                            16

2.2 Empirical Review                                                                                                 20

CHAPTER THREE

RESEARCH METHODOLOGY                                                                24

3.1 Research Design                                                                                       24

3.2 Area of the Study                                                                                      24

3.3 Population of the Study                                                                            25

3.4 Sampling Size and Sample Procedure                                                      25

3.5 Source of Data and Method of Data Collection                                       27

3.6 Validity of the Instrument                                                                        27

3.7 Reliability of the Instrument                                                                    27

3.8 Method of Data Analysis                                                                          27

3.9 Model Specification                                                                                 28

CHAPTER FOUR                           

PRESENTATION AND ANALYSIS OF DATA

4.1 Extent of relationship marketing practices in MOUAU

Micro Finance Bank                                                                                       30

4.2 Extent to which marketing research influences the

Profitability of MOUAU Micro Finance Bank                                              31

4.3 Effect of Customer Satisfaction on Profitability                                        32

4.4 Effect of Customer Retention on Return on Investment (ROI)                     33

4.5 Relationship Between Customer Loyalty and Market Share                   35

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS                38

5.1 Summary of finding                                                                                                                                38

5.2 Conclusion                                                                                                40

Recommendations                                                                                          41

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Banking industry is an important sector in the business world which has a growing impact on all other sectors of the economy because it render financial services. At this age of competition financial institutions were not left out as they are seriously affected by the level of competition both locally and internationally (Adekunle, 2014).

The business environment for banking industry today is highly volatile; Nigerian banks therefore needs to develop effective technique relationship management to enhance the interaction of customers and the bank staff. The complexity in the banking industry has made bank managers to focus on how to create close affiliation with their customers. No wonder why Nigeria banks now create a separate department in the bank known as customers care unit to address customer issues and complaint in order to ensure that customers get value for their money thereby enhancing customer loyalty, building and maintaining customer’s cordial relationship in order to achieve an advantage that can lead to customer retention and increase profitability. According to Doyle (2012) it is more profitable to have a long term relationship between a customer and a company rather than a one off transaction.

Furthermore, loyal customers can provide the foundation for growth which leads to competitiveness in the industry. Also, the belief that relationship marketing (RM) investment builds stronger, more trusting customers relationship and improves financial performance has led to massive spending on customer relationship programme (Morgan and Hunt,  2013)

Relationship marketing is all about acquiring new customers and retaining existing customers. The concept of relationship marketing has received a great deal of attention from Scholars in the field of marketing. The concept has been investigated from many perspectives and examined in many ways indicating its conceptual and practical importance. Relationship marketing concept is based on the paradigm of a true balance between "giving and getting" as a key benefit to encourage an active role and is conducive in delivering two- way value, where loyalty is based on trust and partnership, will prove to be one of the most significant policies to be pursued in development and sustenance of competitive advantage (Ismail, 2013, Gronroos, 2014).

 Christopher  (2012), opined that the real purpose of business is to create and sustain mutually beneficial relationships, especially with selected customers. With the main proposition which assume that successful relationships is the two-way flow of value.

Relationship marketing usually results in strong economic, technical and social ties among the stakeholders parties thereby reducing their transactions costs and increasing exchange efficiencies included in relationship marketing which are not only buyers or sellers exchanges but also business partnerships, strategic alliances, and cooperative marketing networks. The relationship typically involves seller- customer exchange, but it could involve any stakeholder's relationship (Morgan and Hunt, 2012 Gronroos 2014).

Ismail (2014) opines that relationship marketing emphasizes that relationships are partnerships with emphasis on social bonding, co-operation, and joint problem solving, sharing resources and activities, and basing relationship on common goals. He, however, challenged that the benefit should be relational and dyadic too. Most of the studies have been emphasizing the effect of relationship marketing on organization performance neglecting customer benefits.

 Moreover, relationship marketing emphasizes that long-term relationships are mutually beneficial. In any genuine relationship, both parties involves should be beneficiaries of the outcome of such relationship. Ismail (2009) observed that if genuine partnerships, as relationship marketing suggests exist, relational quality and relational benefits must be of great value

1.2 Statement of the Problem

Severe competition experienced in banking industry today makes bank managers to be desperate such that ‘Bank A’ manager does not only see ‘Bank B’ manager as competitor but a branch manager of the same Bank sees each other as a competitor. This increased level of competition has made bank managers to focus on how to be in a close contact with their customers in order not to lose their active customer to their presupposed competitors (Adekunle, 2014).

Bank services are increasing in Nigeria, yet the level of failure in their services indicate that ineffective relationship with customers seems to be pronounced. This gap indicates that there is much to learn about how to develop close contact with customer using the appropriate relationship strategies (Adekunle, 2014).

Banks generally today has become a chameleon in nature thereby changing from one service provision to the other, most time combining many services together relocating or establishing another branch so as to meet the needs of their customers and to show to the generality of public that their services are unique and better than the others.

However, these services or branches established have not translated to customer satisfaction as customers’ experienced human traffic while trying to access these services. This has destabilized customers thereby forcing them to open more than one account across the banking industry in order to satisfy their financial need. This movement of customers from one bank to the other has created serious apprehension among the banks executives thereby leading to the provision of customers’ service point in most bank branches across the country for the purpose of having a relationship that can lead to a consistent patronage by their customers (Udoh, 2012).

It is on the basis of the inability of Nigerian bank managers to take cognizance of the impact of  relationship marketing orientation  on bank performance that this study will be carry out.

1.3 Objectives of the Study

The broad objective of this study will be to examine the effect of relationship marketing on bank performance of Microfinance banks in Michael Okpara university of Agriculture, Abia state.

The specific objectives are;

i. To ascertain the effect of relationship marketing on the profitability of the selected bank.

ii. To determine the effect of relationship marketing on the return of asset of the bank.

iii. To empirically investigate the effect of relationship marketing on the return of investment of the bank.

iv. To evaluate the  effect  of relationship marketing on the market share of the bank.

1.4 Research Questions

1. What are the effect of relationship marketing on the profitability of the bank?

2. To what extent does relationship marketing affect return of asset of the bank?

3. How does relationship marketing affect the return of investment of the bank?

4. What are the effects of relationship marketing on the market share of the bank?

1.5 Research Hypotheses

The following hypotheses will be stated in null form;

H0₁: Relationship marketing has no significant effect  on  profitability of the bank

H0₂: Relationship marketing has no significant effect  on  return of asset of the bank

H0₃: Relationship marketing has no significant effect  on return of investment of the bank

H0₄:  Relationship marketing has no significant effect  on  market share of the bank.

1.6 Significance of the Study

The research work will focus on the impact of relationship marketing orientation on bank performance with reference to mouau microfinance bank. The research will be immense benefit to the following group;

Management of bank will find this work useful, on  how to related well with their customers

Policy maker will also benefit from the work in that, it will recommend ways in which bank will relate with their customers..

Finally, Researchers and students interested in a similar field of study in future will find this work useful conceptual guide and reference material.

1.7 Scope of the Study

The research work will focus on the impact of relationship marketing orientation on bank performance in selected commercial banks in Abia state.

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